Moody's Corporation (MCO) Earnings Call Transcript & Summary

Climate change, such a big topic for today. So is that also one of the major capabilities that RMS has to offer for Moody's in terms of analytical tools?

At the very core of RMS' business. They have over 400 models that look at a wide range of extreme weather events and natural catastrophes, cyberattacks and other kinds of perils. And so there's an enormous amount of data and analytical capability that we think we can bring to bear. Let me give you an example. We have a business helping our customers assess the risk around commercial properties. We have a very large customer base with global banks. And as banks are underwriting loans, they're taking real estate as collateral. Here's a wonderful opportunity for us to serve the needs of those banks to better understand the potential impact of climate change on the collateral that they're taking in a loan. Same with fixed-income instruments and bonds. Our fixed-income investor customers are wanting to better understand the potential impact of climate change as it relates to the credit profile of a bond issuer.

It seems that RMS' employees are a significant component of the transaction's value. They're so much tied to the capabilities that RMS will bring to Moody's. What does this transaction mean for them?

Well, I think this is going to be a wonderful opportunity for the RMS employees. And you're right, an important part of the value in this transaction is about the people. You think about what we're acquiring here, we're acquiring an enormous amount of intellectual property and modeling capability. RMS has over 300 PhDs on staff. A lot of this talent is scarce talent that the markets need to help understand a range of emerging risks. I think the RMS employees are going to find that Moody's is a wonderful home and a very complementary culture to what they're used to.

So we've talked about what the transaction does from Moody's strategy as a corporation. How does it benefit the industry as a whole?

Yes, I think this is a significant move in the industry, right? What we're seeing here, we've been talking for a while about integrated risk assessment. And that's really what this transaction is about. It's about building out our capabilities around a wider range of risks that are increasingly interconnected and integrating the data, the models, the analytics, the insights into everything we're doing at Moody's. That goes from how we think about looking at credit risk within the rating agency to how we're helping our banking customers as their underwriting commercial loans secured by real estate to better informing our macro and credit models.

So how does this transaction support Moody's strategy as a leading global risk assessment firm?

Yes. We've talked about our evolution as an integrated risk assessment business over the last few years. And I've met with many customers over the last 6 months since I've been CEO. And one of the things I hear very clearly from them is about a desire to help them manage a wider range of risks than ever before. We've done a wonderful job of helping our customers with credit risk. But increasingly, our customers want us to help them with things like understanding financial crime, cybersecurity and the impact of climate change. And so RMS brings those capabilities to us, and we'll be able to integrate those across a wide range of our product offerings to better help our customers identify, measure and manage a wider range of interconnected risks than ever before.

Thank you, Rob.

Thank you.