Good morning, and thank you for holding. Welcome to Aon plc's third quarter earnings conference call. At this time, all participants will be in a listen-only mode until the question and answer portion of today's call. If anyone has any objections, you may disconnect your line at this time. I would also like to remind all parties that this call is being recorded and that it is important to note that some of the comments in today's call may constitute certain statements that are forward-looking in nature as defined by the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. Information concerning risk factors that could cause such differences are described in the press release covering our third quarter results as well as have been posted to our website.
It is my pleasure to turn the call over to Greg Case, President and CEO of Aon plc. Thank you. You may begin.
Thanks very much. Good morning, everyone, and welcome to our third quarter 2014 conference call. Joining me here today is our CFO, Christa Davies. I would note that there are slides available on our website for you to follow along with our commentary today, and consistent with previous quarters, I'd like to cover three areas before turning the call over to Christa for further financial review. First is our performance against key metrics we communicate to shareholders. Second is overall organic growth performance. Third, continued areas of strategic investment across Aon. On the first topic, our performance versus key metrics. Each quarter, we measure our performance against the key metrics we focus on achieving over the course of the year. Grow organically, expand margins, increase earnings per share, and deliver free cash flow growth.
Turning to Slide three, in the third quarter, organic revenue growth was 3% overall, driven by strong growth in HR Solutions. Operating margin was flat as strong margin improvement in HR Solutions was offset by an unfavorable impact from both revenue timing and foreign currency translation and Risk Solutions. EPS increased 14% to $1.29, reflecting underlying operational improvement, a lower effective tax rate, and strong share repurchase. Finally, free cash flow was $704 million on a year-to-date basis as we head into our strongest cash flow quarter. Overall, in our seasonally weakest quarter, results reflect double-digit earnings growth driven by underlying operational improvement and effective capital management. In addition, we've returned a record $2 billion of capital to shareholders through the first nine months of 2014. Turning to Slide four, on the second topic of growth.
I want to spend the next few minutes discussing the quarter for both of our segments. In Risk Solutions, organic revenue growth was 1%, reflecting growth across retail brokerage, partially offset by an anticipated decline in reinsurance and a $15 million unfavorable impact from timing. As we discussed previously, we're driving a set of initiatives that are strengthening underlying performance and positioning our Risk Solutions segment for long-term growth and improved operating leverage with management of our renewal book through Aon Client Promise and retention rates of more than 90% on average, highlighting strong client satisfaction in our retail business. New business generation of $260 million across our retail business, highlighted by another quarter of strong new business in U.S. retail and double-digit new business growth in many markets across Asia and the EMEA region.
Increased operating leverage from our investments in innovative technology and client service capabilities with the growth of GRIP and Aon Broking. In our core treaty reinsurance business, net new business trends have now been positive for 14 consecutive quarters, an outstanding performance in today's changing marketplace that reflects Aon Benfield's long-term value proposition for clients, focusing on data, analytics, and the application of excess capital in the industry to previously uninsured risks. Reflecting on the individual businesses within Risk Solutions. In the Americas, organic revenue growth was 2% against a strong comparable of 5% in the prior year quarter. Exposures continue to be positive across the region. While the impact from pricing was flat, resulting in continued stable market impact. We saw strong growth across Latin America and in our U.S. affinity business. New business continues to be strong across the region, specifically in U.S. retail.
Results in the quarter were partially offset by an $8 million of unfavorable timing across U.S. retail and Canada, that we expect to largely reverse itself as a benefit in Q4. In international, organic revenue growth was 2%, similar to the prior year quarter. Exposures were stable, and the impact from pricing was modestly negative on average, driven by fragile market conditions in many regions across Europe. Results reflect strong growth across Asia, driven by double-digit new business generation in many countries, with solid growth in a number of other markets, New Zealand, Italy, and France, to name a few. In continental Europe, we continue to deliver solid growth against sustained economic and market headwinds driven by strong management of our renewal book portfolio. Results in the quarter were partially offset by $4 million of unfavorable timing. Macro conditions remain relatively fragile across many core markets in Europe.
Despite uncertainty around economic recovery, we continue to see signs of stabilization throughout this region in Q3. In reinsurance, as we noted on previous calls, we expect macro factors to be a headwind in 2014. Overall, organic revenue growth was -4% against a strong comparable of 5% in the prior year quarter. Results reflect a significant unfavorable market impact in treaty, a decline in capital markets transactions and advisory business closing in the quarter, and $3 million of unfavorable impact from timing. We saw solid growth in facultative placements and, as I mentioned earlier, positive net new business for the 14th consecutive quarter in treaty placements. In Q4, we expect organic revenue to improve modestly from Q3, driven by growth in our capital markets transactions and advisory business, and a modest benefit from timing, while treaty will continue to be pressured by negative market impact.
Overall, across total Risk Solutions, we are generating new business across the portfolio while absorbing market pressure in reinsurance and unfavorable timing in Q3. We expect stronger organic growth in the fourth quarter driven by new business growth in the Americas and a modest improvement in reinsurance. Turning to HR Solutions. Organic revenue growth was 7%, with growth in both consulting and outsourcing. Included in third quarter results was an anticipated favorable impact from timing of revenue and compensation consulting. This timing unfavorably impacted results in the first half of 2014. Excluding this benefit, underlying organic revenue for HR Solutions was 4% compared to flat in the prior year quarter. Underlying performance in the third quarter reflects growth in areas where we're making investments in the business, including pension risk and delegated investment solutions.
These investments reflect Aon Hewitt's client leadership, understanding and influence of market trends, and solutions to sustainably address the long-term issues that face our clients. As healthcare reform, healthcare costs, and the associated financial risk continue to rise at a time when overall health and wellness is not improving. Multinational clients are increasingly looking for global benefit solutions that support their global organizations delivered at the local level. Managing and transferring risk against pension schemes that are increasingly frozen, largely underfunded, and facing regulatory changes. Turning to the individual businesses within HR Solutions. In consulting, organic revenue growth was 14%. As previously noted, the quarter includes an anticipated favorable impact from timing of revenue and compensation consulting. Excluding this benefit, underlying organic revenue growth for consulting was 6% compared to 3% in the prior year quarter. Underlying results reflect strong growth in U.S. retirement, primarily for investment consulting.
We saw an increase in demand for project work to help clients address lump sum windows and for actuarial services on defined benefit plans to support clients facing regulatory changes, specifically the recently passed Highway Bill. For the full year, we continue to expect mid-single-digit organic growth across consulting services. In outsourcing, organic revenue growth was 3% compared to -1% in the prior year quarter. Growth primarily reflects new client wins in benefits administration and project-related revenue driven by demand for discretionary services. For the full year, we expect stronger organic growth in outsourcing when taking into consideration the seasonality of revenue recognition and healthcare exchanges in Q4. Slide five highlights the third topic, areas of investment. Aon has a unique and strong track record of developing innovative solutions to help solve problems in response to specific client needs.
Solid long-term operating performance, combined with expense discipline and strong free cash flow generation, continues to enable substantial investment in colleagues and capabilities around the globe. A few examples include in Risk Solutions, we're investing in client leadership with the international rollout of Client Promise to drive greater productivity and efficiency. We're investing in innovative technology such as the Global Risk Insight Platform. GRIP is the world's leading global database of risk and insurance placement information, now capturing 2.2 million trades and $113 billion of bound premium. We continue to have a growing list of more than 35 insurance carriers utilizing the platform for its analytics and services capabilities. Nearly half of the clients have signed multi-year contracts, and an increasing number of clients are also adding strategic consulting services.
In addition, we're driving our Aon Broking initiative to better match client needs with insurer appetite for risk and to identify structured portfolio solutions. We continue to align our global health and benefits platform to better capitalize on our global distribution channel and deep brokerage capabilities. Further, we're developing analytics to create globally consistent actuarial evaluation and benchmarking models for health and other employer-sponsored benefits. We're also investing in the continued development of data and analytics capability at Aon Benfield to strengthen an already industry-leading value proposition and client-serving capability. A great example of this is Aon Benfield's ReView, a reinsurer dashboard, implementation support, and strategic consulting to help insurers be more effective markets for ceding company clients.
Finally, we're expanding our footprint through over $500 million of tuck-in acquisitions so far in 2014 that have increased scale in emerging markets or expanded capability to better serve clients such as the National Flood Services and Lorica. In HR Solutions, we're invested in innovative solutions to address high-growth areas. We're expanding solutions to de-risk pension plans and are seeing tremendous growth in our delegated investment solutions, which fulfill our clients' needs for faster execution of their investment strategies. Aon Hewitt is able to offer differentiated strategy based on our strong three pillars of actuarial expertise, investment solutions, and pension administration. We're also providing a broader set of advisory and advocacy solutions to our clients' employees to enable greater choice and improved decision-making on their retirement options. Especially important, as recent regulatory changes require more involvement from individuals.
Further, we continue to make investments to support future growth and strengthen our industry-leading position in health exchanges for active employees and retirees as part of our comprehensive portfolio of health solutions, covering the full spectrum of benefit strategies. Across Aon's suite of private health exchanges, covered lives will increase by 60% to more than $1.2 million employees, retirees, and eligible dependents from more than 100 companies across 19 industries. An outstanding result as we saw 100% renewal rates as well as over half of the clients continuing to be new. We continue to expand the number of industries and increase the number of carriers participating. Our model is bending the cost of healthcare and eliminating volatility for clients while delivering more choice and strong satisfaction to employees.
We feel good about our progress to date, the sustainability of the value proposition, and our ability as a market leader to offer the most robust set of exchange solutions to clients. We also continue to invest in our industry-leading benefits administration solutions and technology platforms, including extensive mobile solutions and cloud-based outsourcing solutions. Finally, we're strengthening our international footprint to support a global workforce with investments in key talent and capabilities across emerging markets. In summary, we delivered strong earnings growth of 14% despite a number of headwinds impacting results. Looking forward, we expect to deliver strong operating performance across both Risk Solutions and HR Solutions in the fourth quarter, benefiting from our investments in client-serving capabilities and resulting in a solid year of operational improvement and record-free cash flow generation. With that said, I'm now pleased to turn the call over to Christa for further financial review. Christa?
Thank you very much, Greg. Good morning, everyone. As Greg noted, our third quarter results reflect strong earnings growth in our seasonally weakest quarter, driven by underlying operational improvement and effective allocation of capital, highlighted by the repurchase of $500 million of ordinary shares in Q3. Let me turn to the financial results for the quarter on page six of the presentation. Our core EPS performance, excluding non-cash intangible asset amortization, increased 14% to $1.29 per share for the third quarter, compared to $1.13 in the prior year quarter. Results from the quarter reflect operational improvement, a lower effective tax rate, and strong share repurchase. In addition, foreign currency translation had a $0.01 unfavorable impact on EPS in the quarter, due primarily to a weaker dollar versus the GBP and a stronger dollar versus the ARS.
If currency were to remain stable at today's rates, we would expect a modestly higher unfavorable impact in the fourth quarter than we experienced in the current quarter. Let me turn to each of the segments on the next slide. In our Risk Solutions segment, organic revenue growth was 1%. Operating margin decreased -80 basis points to 20.3%, and operating income decreased -3% versus the prior year quarter. As Greg previously noted, timing impacted revenue unfavorably by approximately $15 million, which we expect will largely reverse as a benefit in Q4. In addition to unfavorable revenue timing, operating results in the third quarter include an $8 million, or -40 basis point unfavorable impact from FX and $4 million of one-time costs related to closing the NFS acquisition. Together, these headwinds totaling -120 basis points more than offset underlying operational improvement in the quarter.
Let me spend a moment on the Aon Hewitt restructuring program. Approximately $99 million of estimated savings will be achieved in Risk Solutions. Approximately $94 million of accumulated savings have been achieved under the program to date, with the remaining $5 million to be achieved in the fourth quarter. We have incurred 100% of the charges necessary to deliver the remaining savings and expect to complete the Aon Hewitt restructuring program by the end of 2014. Overall, results in the third quarter were challenged by unfavorable impacts from revenue timing, foreign currency translation, reinsurance market impact, and certain one-time transaction costs, which offset solid underlying operational progress as we generate return on our investments and manage expenses. Year to date, Risk Solutions margins are up 10 basis points, including a -40 basis point unfavorable impact from foreign currency.
We expect to deliver strong operating margin performance in Q4, resulting in solid margin improvement for the full year, placing us firmly on track for continued progress towards our long-term target of 26%. Turning to the HR Solutions segment, organic revenue growth was 7%. Operating margin increased 110 basis points to 16.5%, and operating income increased 15% versus the prior year quarter. Strong organic revenue growth and anticipated favorable impact from timing of revenue and a $9 million benefit from timing of certain expenses was partially offset by an anticipated increase in expenses related to future growth in healthcare exchanges. With respect to the Aon Hewitt restructuring program, approximately $301 million of the $303 million in total cumulative savings have been achieved under the program, with the remaining $2 million to be achieved in the fourth quarter. As discussed previously, we provided guidance for Q3 to be relatively flat.
This included favorable revenue timing and compensation consulting that negatively impacted the first half of 2014 and increased expense to support future growth in healthcare exchanges. Our third-quarter results were modestly better than previous guidance, primarily reflecting some incremental demand for project work in retirement consulting and a $9 million benefit from timing of certain expenses. We expect the $9 million to unfavorably impact Q4 compared to our original expectations but have no impact on our full-year outlook. Throughout the year, we have provided commentary regarding the full-year outlook for HR Solutions segments, and this remains unchanged. HR Solutions in 2014, we expect to, number 1, deliver organic growth. Number 2, generate greater scale and improve return from investments. Number 3, deliver remaining savings related to the restructuring program.
Number 4, and lastly, deliver greater than mid-single digit operating income growth and further margin expansion toward our long-term target of 22%. Overall, the outlook is unchanged, and we are firmly on track for greater than mid-single digit operating income growth in 2014, with Q3 modestly better than anticipated and Q4 up substantially in our seasonally strongest quarter, including strong organic growth in our healthcare exchanges. Now let me discuss a few of the line items outside the operating segments on slide nine. Unallocated expenses decreased $4 million to $39 million, primarily driven by expense discipline in the quarter. Interest income was similar at $3 million. Interest expense increased $12 million due to an increase in total debt outstanding and costs associated with certain derivative hedging programs. Other income of $35 million primarily includes a gain on the sale of our e-solutions business and gains on certain long-term investments.
These gains reflect our intent to optimize the portfolio around highest return capital, as well as monetize unproductive capital. Going forward, we expect a run rate of approximately $1 million per quarter of interest income, $45 million of unallocated expense, and $66 million of interest expense per quarter. Turning to taxes, the effective tax rate on net income from continuing operations was 19.1% compared to 25.1% in the prior year quarter. The effective tax rate in the third quarter of 2014 was favorably impacted by changes in the geographic distribution of income, partially offset by an unfavorable impact from certain discrete tax items. Lastly, average diluted shares outstanding decreased to 296.1 million in the third quarter, compared to 312.9 million in the prior year quarter. The company repurchased 5.8 million Class A ordinary shares for approximately $500 million in the third quarter.
The company has $1.1 billion of remaining authorization under its share repurchase program. Actual shares outstanding on September 30th were 285 million, and there are approximately 10 million additional dilutive equivalents. Estimated Q4 2014 beginning dilutive share count is approximately 295 million, subject to share price movement, share issuance, and share repurchase. Now let me turn to the next slide to highlight our strong balance sheet and cash flow on page 10. At September 30th, 2014, cash and short-term investments were $599 million. Total debt outstanding was approximately $5.5 billion and overall debt to capital decreased modestly to 43.3% at September 30th compared to 43.6% at June 30th, driven by a decrease in total debt outstanding.
For the first nine months of 2014, cash flow from operations decreased 10% to $883 million, driven primarily by significant receivable collections in the prior year period and higher than normal tax payments, partially offset by decline in pension contributions. Free cash flow, as defined by cash flow from operations less CapEx, was $704 million, reflecting lower cash flow from operations and a $5 million increase in CapEx. Looking forward, the fourth quarter is our seasonally strongest cash flow quarter, and we are on track to deliver cash flow growth for the full year. Turning to the next slide to discuss our significant financial flexibility. We value the firm based on free cash flow and allocate capital to maximize free cash flow returns. There are three primary areas that will contribute to our goal of doubling free cash flow to more than $2.3 billion annually by the end of 2017.
From the graph in the presentation, based on current assumptions, we expect annual free cash flow to increase by over $600 million based only on a reduction in cash used for pensions and restructuring. Combined with growth in the core business, further margin expansion, and a reduction in the overall effective tax rate, we are well on track to achieve our expectations for substantial cash flow generation. Regarding our underfunded pension plans, we have taken significant steps to reduce volatility and liability as we've closed plans to new entrants, frozen plans from accruing additional benefits, and continue to de-risk certain plan assets. We currently expect contributions to decline by roughly $138 million to $385 million in 2014 and continue to decline thereafter. Regarding our restructuring program, cash payments were $152 million in 2013.
As all charges related to the restructuring program have now been incurred, we would expect cash payments to decline by $65 million to approximately $87 million in 2014 and continue to decline significantly each year thereafter. In summary, we delivered double-digit earnings growth in the third quarter and have returned a record amount of capital to shareholders year to date. We expect strong performance in the fourth quarter, placing us firmly on track for growth, margin expansion in both segments, and record free cash flow generation for the full year. With a strong balance sheet and significant financial flexibility, we expect to generate more than $2.3 billion of annual free cash flow by the end of 2017. We have positioned the firm for significant shareholder value creation in 2014 and beyond. With that, I'd like to turn the call back over to the operator for questions.
Thank you. At this time to ask a question, press star one, please. Our first question comes from Adam Klauber of William Blair.
Thanks. Good morning. Just one or two questions. In HR Solutions, could you talk about the pension transfer opportunity? You had one big win. How does the pipeline look? Was this quarter helped by that one good-sized win?
Adam, the pension opportunity as the laws have sort of shifted and changed a bit, particularly the Highway bill, as I mentioned, created a number of different opportunities to support clients with demand. There was some influence on the quarter, it will happen over time, as we help clients sort of react to the situation. Overall, the business has just done very, very well. It is on a very, very good trajectory, not an undue influence in the quarter, just will happen over time.
Do you think that will be a good driver of growth as we look in 2015 and 2016 for that segment?
Yeah, I think it really is an indication of just the change that happens in this segment and just continues to happen. As you think about sort of the whole world around pensions and sort of what's going on, sort of in that context, clients continue to have to react to different regulatory changes. Whether it's the Highway bill we described before, in Montreal, there was a change in regulation that also impacted overall. This is basically U.S., Canada, the U.K. has also seen regulatory change. These sorts of changes are exactly what our clients have to react to and what we're very well equipped to help them support, that drives fundamental demand in the business, that will actually influence and help us, and help our clients, not only in 2014, but 2015 and 2016 and beyond.
Okay. As far as health exchanges, you had a good selling season, added a fair amount of clients there. From what we can see, there was not one large jumbo client. Could you talk about maybe the mindset of some of the large jumbo clients in the pipeline as you think about the larger clients for the next couple of years?
Well, we would say, look, Adam, fundamentally, we are very pleased with the progress we made around What is our mission here is a health solution. That's really what we're trying to bring to the table, and an objective and a mission we have on behalf of our clients. Against that, when you think about it, we have a base that's 23 million strong in terms of who we serve sort of in the health category, where it's nine and a half million in health and benefits alone. It was really against that backdrop we brought forward what was the first of its kind, which is the fully insured multi-carrier exchange. As we've reported, the results have been very, very strong. 1.2 million lives, 100 plus companies, in that context, 60% growth. The pipeline we've got is exceptionally strong.
Stronger this year than it was last year, as clients have sort of seen this come online. It's resulted in a fundamental bending of the cost curve, which is what we had hoped and anticipated. That includes, by the way, everything thrown in there, taxes, fees, everything else, and a real meaningful cost per employee savings around that. We've also seen carriers come on board. On the active side, 30 plus national and regional carriers. We've expanded coverage, over 10 elected benefits. On the retiree side, 90 plus health insurance carriers with over 3,700 clients. The fundamental chassis, the basis, the foundation is exactly what we hoped it would be. Even the industries, frankly, 19 different industries represented, finance, manufacturing, retail, healthcare technology.
I would say fundamentally, the thing that's driven this more than anything else from our standpoint we're excited about is the impact on the employee. In the end, that's really what the whole focus of the mission is about. I think the numbers, as we've seen them to date, over 85% of employees, 87%, in fact, love the ability to have choice, transparency, and to really have a greater accountability. A large percentage, three-quarters of them really feel good about they're choosing the right healthcare plan for them, for their families, for their situation. For us, we really have appreciated the trajectory that our colleagues have been able to build sort of in the category of exchanges. Remember, exchanges are part of our overall strategy, one piece of it, an important piece of it.
Fully insured multi-carrier has just gone exceptionally well. We anticipate that will happen over time. This was never about a quarter or a year for us. This is about over a period of time, developing a meaningful business that will help serve our clients. That's exactly where we think we are.
Thanks. Just one follow-up on exchanges. I know you have a partnership with eHealth. They actually talked about it, that they have, sounds like a fair amount of companies are going to be looking at helping their part-time employees potentially find coverage on the federal exchange. If that takes off, will that revenue hit more in the first quarter and second quarter versus all in the fourth quarter?
It's going to really be over time, as you sort of think about how this evolves. Sort of depending on how it plays out, it's going to have a modest impact. I would just want to emphasize that overall. Again, as we think about the conversation around exchanges overall, when you think about sort of the impact in 2014, have really been an investment for us and will continue to be as we start to see benefit in 2015 and 2016. The category you're describing is important because it affects individuals, from a financial standpoint, will have minimal overall impact on us.
Okay. Thank you very much.
Sure.
Thank you. Next question, Dan Farrell, Sterne Agee.
Hi, good morning.
Good morning.
Tax rate again, came in at a pretty low rate, and you've talked about some of the geographic things going on, but also some negative discrete items. I'm just wondering, within the geographic items, is health exchange accounting leading to some seasonality there, where there's some losses booked early in the year and then obviously a lot of gain in the back half?
No. As we think about the effective tax rate, it's really a full year estimate. That's the way effective tax rates always work. As we think about our tax rate going forward, the year to date rate of 18.5% is really the best indicator of our underlying effective tax rate. As we think about the tax rate going forward for full year 2014 or 2015, it's really looking at this underlying operating rate of 18.5%, then that could change in any quarter or year based on discrete tax adjustments, which as we described, were negatively impacted it in Q3, positively impacted in Q2, and obviously can be positive and negative going forward.
Okay. There's also just been a lot of talk around the double Irish, and I was wondering if you could just give any thoughts if there's any impact with regard to any businesses that you have there.
There's no impact on us from that. We are a U.K. company with a global business operating in 120 countries, and we don't comment on changes in local regulations or statutory changes.
Okay. All right. Well, thank you very much.
Sure.
Thank you. Next question is Elyse Greenspan, Wells Fargo.
Hi, good morning.
Hi.
I was hoping to spend a little bit more time on your private healthcare exchange. I know you provided your enrollment figures and did speak positively, I guess, going forward about the pipeline. Just in terms of looking at your active exchange, if we look at the incremental number of companies this year, it's about 15, which is the same that did join your exchange last year. Have you seen maybe some companies taking longer to make their decision? If so, why have some companies held off? Were you surprised, I guess, in terms of the 15 that joined this year versus last year? Also, if you can just tie in terms of your long-term view surrounding the financials of this business. I believe in the past you've said modest positive earnings in 2014. Is that still the same?
Should we think about this as kind of growing from there when we look to 2015?
Let me take those in turn. First, in terms of the ramp up, no, we weren't surprised. In fact, as we said before, the mission we have is truly a mission around health solutions, the best set of integrated health solutions on behalf of clients. The fully insured exchange on the active side, it's just been a great platform. The clients who've joined it, I want to remind, there's literally 100% renewal rates. Doesn't mean another client might not come off at some point in time, but right now, 100% renewal rates. Everybody who is on it has repeated, has seen tremendous benefits. Employees have really appreciated sort of the overall impact. When you think about sort of the growth, it's been substantial, 60% growth in participants, as we said before, substantial growth in clients.
Our view has always been we want to build this at the right pace and the right time. We may very likely say to a client, defer if we think it actually will help, from a communication or an employee standpoint more than anything else. This is about building this in the right way and the right time, and that's exactly what our colleagues have done. We feel very, very good about the platform. Again, from a standing start to go where we are now. Remember, as we did this, we served more employees than anyone in this space. We said for the fully insured multi-carrier, we were going to actually start this in the most sophisticated, largest market in the world. That's the large carrier. That's why our smallest is about the size of some of the others' largest sort of in this category.
We've gone against sort of that backdrop to make sure we're bringing the best capability to bear on behalf of our clients, and that's what we've done. We expect that's going to grow over time. As I said, the pipeline's exceptionally strong, we'll see how things play out over the next 24 months, but we feel very good about that.
In terms of the economics, Elyse, I think we did originally say that it'd be modestly profitable in 2014. As a result of a significant win we had this year and the scaling up to support that significant client, it is going to be modestly unprofitable this year. We don't think it'll have any impact on our greater than mid-single digit operating income growth, which is exactly where we said we would be for the full year.
That's why in the end, Christa described, we've been able to actually bring this online, develop truly a world-class platform with great capability. We're in the middle of the work, as Christa just alluded to the largest active and the largest retiree opportunity in the world by a substantial margin. Been able to fully do that in the context of delivering greater than mid-single digit operating income. That's exactly where we are for the year.
Okay, thank you. In terms of, just a little bit more time maybe on the reinsurance side. You did highlight improving trends in terms of organic growth going into the fourth quarter. Just is that partially a function of you seeing change in growth, but then also where it's a little bit of an easier comp when we looked at Q4 last year? How much does that come into play? Can we talk about the reinsurance markets, I guess, heading towards the January renewals when we're hearing still competition out there? What would be kind of your initial view when we're looking towards growth in 2015?
Well, if you step back first, think about sort of where we are reinsurance through the first nine months. We're down 2% on what literally is by far the largest book in the world in terms of what we do on behalf of clients, number one in treaty, number one in capital markets, number one in fact. Our treaty book is the most exposed to the area that's sort of most under pressure from a market standpoint, and that's the property cat world, both in the U.S., substantially greater, Japan, and other places around the world. Against that backdrop, through the first nine months, we're -2%. We're not excited about that, but when you think about that's a reasonable outcome given where we are. We continue to make substantial investments to build the business and data analytics, as I said.
We're going to see that benefit coming through. We've had record new business across risk overall, and we've been able to improve margins even in this environment. We think we're going to be able to continue that trend. Q4, we see the capital markets pipeline and what's going to close. It's stronger in Q4, less closed in Q3, a matter of timing. We'll see that in Q4. We'll see a marginally stronger benefit in Q4, which will help us deliver the year. Net-net, when you step back and think about Risk Solutions overall, which is how Christa teed this up, we have a 10 basis point improvement margin even against the headwinds with 40 basis points in FX. We're going to continue to sort of see that improving in the fourth quarter, which is the overall strongest quarter.
Okay. Thank you very much.
Thank you. Next question is Cliff Gallant of Nomura.
Hi, good morning. I'm sorry to look at this simplistically and sort of just, I think, building off of Elyse last question there. When we look at reinsurance from the outside, and granted, I realize this is simplistic, earlier this week, two of your competitors reported growth in reinsurance, We realize that, of course, it's a very difficult market, but it's hard not to think that there might be some share shift happening. Is that not happening? Is it something else that's going on?
We would say no. In fact, not at all, Cliff, from our standpoint. Again, net new business one, which is what we track, has been positive for 14 consecutive quarters. In fact, we are almost among our highest ever new business results for the quarter and year to date for the first nine months. The underlying piece of the business, our colleagues continue to do an exceptional job. Really to step back, again, we're the largest book, There's no excuse we need to grow, We anticipate growing over time in this business. We have the largest book in the world. It is most exposed around the property cat world, and that's in the U.S. In Japan, That actually creates pressure. That's what we have to deal with.
On the other hand, our clients have tremendous opportunity right now, and we're bringing more and more of that opportunity on behalf of our clients. We're doing it through capital markets. We're doing it through classic treaty and from other avenues as well. From our standpoint, we're going to continue to work, build the franchise, and feel good about capability in Q4 and what we're going to be able to do in 2015 and 2016. We have not seen share shift in any way, shape, or form.
Okay, thank you. If I could have a follow-up on the, when I think about buyback, your pace of buyback this year has been very strong, and it's exceeding both what you're making in terms of operating income or what you're reporting for cash flow. When we think of it going forward as a general rule, how should we think about what pace you can sustain in terms of share repurchases?
Yeah, it's a great question. As we think about buyback, we obviously allocate capital based on return on capital, and buyback is our highest return on capital activity. We have returned year to date $2 billion to shareholders, of which $1.75 billion was buyback. Included in this amount was $300 million of additional cash on the balance sheet at year-end 2013 and $800 million of additional capital from debt that we raised during the year. As we think about the amount of buyback going forward, it's unlikely to be as high as it was in 2014 due to those two additional activities. We don't give specific guidance, share repurchase continues to be the highest return on capital activity across the firm.
Given the substantial cash flow growth we see over time, we do see opportunities to deploy cash based on the cash flow growth. There's incremental leverage opportunities over time too.
Okay. All right. Thank you.
Thank you. Next question is Vinay Misquith of Evercore.
Hi, good morning. Just looking at the organic growth year-to-date in the Risk Solutions segment. That's around the 2%. How would you say that compares to what you would think that the company should do? Where do you think it's going forward? Just also attached to that, do you think that Aon can generate margin expansion in a 2% organic growth environment?
Well, if you step back and think about where we are year to date, as you described, we're at 2% for Risk Solutions overall, with the headwinds that have been described already on the call going into our strongest quarter. Through the first nine months at 2%, we expanded margin 10 basis points, including 40 basis points of negative FX. If you sort of think about can we expand margin against that growth rate? Yes. We think fourth quarter is going to be stronger than the sort of overall year to date. Remember, a lot of the investments we've made and continue to make are not just around revenue growth by itself. It really is revenue growth and associated operating leverage with that. I think we've been able to actually demonstrate very clearly our ability to grow margin with low single digit.
If you step back, there's low single-digit organic growth. If you think about what we described for the overall year, we'd said we'd be low to mid-single-digit organic growth for the year, and we deliver solid margin expansion both on a reported and underlying basis. What we're reporting through the first nine months is that's exactly what we're going to do for the year. We feel like through the first nine months, we've got more confidence in that now, having put nine months in the books than we had even at the beginning of the year, and it was strong then. To answer your question, we do feel like we can. Obviously, we're always going to go for higher and higher levels of growth. We want to make sure it sort of meets the criteria I just described.
Sure. Just as a follow-up to this, I mean, this year was helped by the restructuring savings. Next year, I don't think that's going to be there. Do you think you have anything else that can help your earnings next year?
As we think about our margin expansion and Risk Solutions, it's really driven by three things. The first and primary driver of our margin expansion across Risk Solutions is the investments we've made in data and analytics, both in our retail business in the GRIP platform, which has over $100 billion of premium. That is driving improved yield on every dollar of premium placed a la incremental operating leverage. Equally, the $120 million a year we are investing in Aon Benfield data and analytics. Those investments in GRIP and Aon Benfield data and analytics are really the primary driver of Risk Solutions margin expansion in calendar year 2013 and calendar year 2014. We'll continue to drive expense discipline and expense opportunities as we look at outsourcing and offshoring. We look at being more efficient around our IT investments and our real estate footprint.
We feel very good about the continued growth towards 26% Risk Solutions margin.
Many respects, two of the investments we've made over the last 24 months, 36 months around this idea, as Christa described, of really data and analytics to help clients make better decisions to improve their performance, also to increase yield per dollar premium placed, are literally just coming online. You're starting to see the impact of those. The fullness of those come online in 2015, 2016, and 2017. That's why, as we said and continue to say, we're on track to continue the march toward 26% from a margin standpoint in the Risk Solutions business.
Okay, that's helpful. Just on the tax rate, Christa, should we look at it at a 19% tax rate for next year? I mean, is that reasonable? That seems substantially lower than the 22% rate that you had in 2013, excluding the one-time adjustments.
Yes. We're no longer providing specific guidance. The year-to-date rate of 18.5% is the best indicator of our underlying effective tax rate. As I said previously, as we think about the tax rate going forward, 18.5% ± discrete tax adjustments, which can be positive as we saw in Q2 and negative as we saw in Q3, is really how you should think about it.
All right. Thank you.
Thank you. Next question is Brian Meredith of UBS.
Hey, yeah. two questions here for you. The first one, just going back to exchanges. Christa, when we think about you signed up a large client this year, that's one of the reasons that I guess now you think that the exchanges are going to have a loss for the year. Is every time you sign up a large client, you're going to have this kind of issue of expense pressure, or are some of the expenses you're putting on as a result of this large client leverageable as we go into the following years in exchanges?
Yeah. It's a great question, Brian, it's really the second. As we think about the scale we're adding in calendar year 2014, we're really building the infrastructure to run the business going forward. It's a fixed cost base we're building, which will then be leverageable across new clients going forward.
Great. Then the second question. I know as far as the 26% margin target in Risk Solutions, improving yield specifically through GRIP, as I know is a big part of getting there. I guess my question is, when you look at GRIP, where do you expect the revenues and the profits to come from as you get to that 26%? Is it signing up new insurance clients? Is it deals? Where is it going to come from?
Brian, it really is across the board. Again, the goal here is what is the Risk Insight Platform? It is as sophisticated or not as sophisticated, if you will, of just really giving insight to match capital to client need more effectively. It really provides insight into our distribution capability for our market partners so that they can apply their balance sheets in a more effective way. Against that goal, that means it actually helps them grow, more opportunity for them is more opportunity for our clients and more opportunity for us. It would give us the ability to bring on some additional insurers as they see that opportunity, it also dramatically expands the group we've got. We work with over 4,000 insurers overall. Really we said 30 to 35 we have sort of engaged in this.
It really requires the insurers, our market partners, to invest time and energy, too, because we're changing the way we apply capital into the marketplace on behalf of our clients. We see really the opportunity all of the above. More of them, more carriers involved, more opportunity with our existing carriers we think is quite substantial. Ultimately, even with our clients in terms of what we're doing at this point and helping them make better decisions. GRIP is really just the first step on a journey called using data and analytics to help clients make decisions to improve their operating performance, strengthen their financial position, or reduce their volatility. That's really what the data and analytics is all about.
It's more getting more penetration within your insurance clients is kind of where the revenue growth comes from.
Even more than that, more coverage with the existing clients we have. There's so much opportunity we have as they think about what they're doing. When we think about our overall portfolio of $60 billion or $70 billion, being able to actually package those risks and deliver them to these carriers in a way they can provide better value propositions for our clients is really powerful, too. This is the structured portfolio solutions. Tremendous set of opportunities there. It really benefits everyone. Benefits clients tremendously, benefits markets. We benefit in the process, too. It's greater penetration with our existing group, also other opportunities outside that. That's the second. Then the third is opportunities with clients.
Great. Thank you.
Thank you. Next question, Jay Cohen of Bank of America Merrill Lynch.
Yes, thank you. On the tax rate, one question. I thought the corporate tax rate in the U.K. was 21%. One, is that right? Then secondly, why is your rate below the corporate tax rate in the U.K.?
Jay, we operate in 120 countries, so our global effective tax rate is really a result of our profits that we generate in each of the 120 countries as opposed to the U.K. itself.
Okay. There's obviously other tax jurisdictions that are lower, and that's where you make some money. Obviously, it brings it overall down. Okay. Fourth quarter buybacks tend to be smaller seasonally. Should we expect that again this fourth quarter?
Jay, we don't give specific guidance on share repurchase. I have described why our year-to-date number that we've returned to shareholders of $2 billion is higher than it will be going forward because it included additional cash off the balance sheet of $300 million at year-end 2013, and the $800 million of additional capital we raised from debt during the year. As we think about share repurchase going forward, obviously it's based on our free cash flow growth, which is going to be strong, and it's allocated for highest use of capital. That's really our philosophy going forward.
Fine. Thank you.
Thank you. Next question is Kai Pan of Morgan Stanley.
Yes, thank you. Thank you for taking my call. First, just a little bit on the reinsurance side. I just want your opinion more on the expense side. If you think about pricing pressure as well as some secular change in the reinsurance marketplace, what property level of expense as well as where do you invest your money in that? Basically what we're trying to get is that we see in the near term some margin pressure in the business as you continue to invest, why the top line probably slower in the past.
Well, I'd step back. Think about what we're trying to do in this space. Again, we're the largest platform in the world, number one in treaty, number one in facultative, number one in capital markets. What we're trying to do is we're actually helping our clients actually improve their return on invested capital, reduce their volatility, strengthen their balance sheet. When you think about that opportunity, it is tremendous. We see that actually increasing over time. The 4,000 insurers out there, many of them, if not all of them, would love to actually have improved operating performance, stronger financial positions, less volatility, et cetera. That's fundamentally exactly what we do at Aon Benfield. We see that opportunity as substantial. By the way, we continue to invest very strongly behind that opportunity.
Christa highlighted, we're investing over $120 million a year in data and analytics in Aon Benfield alone, which we believe is substantially greater than anyone else in the overall industry. We're making substantial investments across the overall risk business, not just in the reinsurance business. That's really as we think about the business overall, we see tremendous opportunity. It is absolutely clear that currently there's tremendous price reduction that has happened, and it disproportionately affects books that have property cat, a la ours. Having said that, we think about this across overall Risk Solutions, and as we said before, we improved margins in Risk Solutions in the first nine months. We did it against FX headwinds in addition to the market headwinds. From our standpoint, we like our position a great deal on the reinsurance side.
We're going to continue to invest behind it, and it really is about how we grow that business through helping clients, and that's really what our focus is.
That's great. Second question on the acquisition front. You have been relatively quiet in the last few years, but now you describe it National Flood Services. I just wonder, do you see additional acquisition opportunities that could augment your organic growth?
We've done 12 acquisitions plus year-to-date. We've described NFS and we've described Lorica and a number of others as well. We've done in excess of $500 million for the first nine months. We see tremendous opportunities around the world and continue to invest in content capability, geographic expansion, particularly in the emerging markets. We see tremendous opportunity on the acquisition front to continue to strengthen global Aon. As we said, we're going to continue to invest behind that thesis.
All right. Thank you so much.
Sure.
Thank you. Next question, Michael Nannizzi of Goldman Sachs.
Thanks. A couple of questions here. One is, you called out the favorable compensation consulting impact on revenues. Did that have an impact on HR margins as well?
No, it didn't, because when we gave original guidance at the beginning of the year in terms of greater than mid-single-digit operating income growth and essentially flat in Q3, we were giving it in the context of knowing about this compensation consulting revenue timing change, and of course, knowing about the investments we're making in healthcare exchanges.
Got it. Okay. Thanks. Just on the exchanges a bit, obviously last year, large case employers saw a lot of movement. This year maybe a little bit more in the middle market. I was just wondering, do you think in the near term there are trends out there that may support more adoption in the middle market at a pace that's elevated relative to the larger case employers? If so, would you consider expanding your offering to kind of reach down to that segment of the market?
Again, would come back. Remember our mission and objective. Our mission is to bring the best health solutions to the marketplace, and we serve large market, middle market, small across the board. If you go back to sort of the baseline, 23 million strong, 9.5 million in health and benefits alone, that includes a huge amount of the middle market. We already have a disproportionate amount of business in the middle market, and a number of folks are sort of describing pieces of that in different ways as kind of self-insured exchanges. We don't do that. We're trying to bring a range of solutions, including a range of exchange solutions, to wherever they have impact. We happen to have tested our first set in the large market arena, and it's done exceptionally well. We think there's great applicability across large and across middle.
For the clients that would benefit from exchanges, we want to bring those solutions to them. If there are other ways we can serve them and help support their mission, we'll do that too. We see substantial growth across the board and substantial potential in the large market and in the middle market.
Got it. I guess we talked a lot about you've got growth and focused a lot about on enrollments, and the fact that we expect in the near term that you'll be reinvesting dollars back into the exchanges you continue to grow in anticipation of more scale down the road. Can you talk about how you think about this business from an operating leverage perspective? Do you expect that at scale should this business be able to deliver higher margins than your sort of traditional health and benefit business just because there's more technology and there should be more scalability?
Yeah. What we would say is, obviously, we're investing on behalf of our clients. We've been doing that for several years now, and we're doing that again in 2014. Long term, we absolutely expect this business to be higher than our target margins of 22% and therefore generate a terrific return on capital for shareholders.
Got it. Okay, just last question, I guess, on this topic is, how has the relationship with clients changed to the extent that you were a consultant, the largest on the benefit side. Now you are sort of straddling that line between consultant and vendor because you now have your solution that you're bringing to the table. Does that change the relationship at all? If it does, how, and if not, why not? Thank you.
It really doesn't. In fact, when this works well, we were able to provide a platform which creates transparency, choice, even greater accountability for individual employees. We've actually enabled companies sort of at the center of this to actually create better alignment, better choices for their employees. They also take risk off their balance sheet. They control volatility, we've created alignment very much with the actual carriers out there. That's the platform. Again, against that backdrop, 100% renewal and most important than anything else, 87% employee satisfaction. If you said to yourself, is everything done then? Is all the health issues, are they gone? The answer is no. This is an ongoing set of challenges for companies. It's an ongoing set of challenges for individual families.
Bringing advice and content and insight around that platform, when it goes well, that's the most powerful outcome we can bring to the table. A very clear platform that clients can utilize as well as advice and perspective that actually helps them take full advantage of it for the company and for the employees. We think when it works well, it's highly complementary.
Great. Thank you.
Thank you. Next question, Joshua Shanker of Deutsche Bank.
Yeah, good morning, everyone. Congratulations on the quarter.
Thanks, Joshua.
I'm not going to be the last person to ask a question about taxes, unfortunately. When I've asked in the past, I've gotten an answer like, "Well, the data analytics for our healthcare exchanges are located in Singapore," or, "The data and analytics for our reinsurance business is located in Singapore." When the client is buying a healthcare exchange, how much are they paying for the access to the healthcare, and how much are they paying for your data and analytics services, or similarly in reinsurance? How much are they paying for you to bind the business for them, and how much are they paying for your data and analytics? It seems like the data analytics is a small part and the access is the big part.
I'm wondering how much revenue is really being generated in Singapore that can effectively bring your tax rate significantly down below your domicile where you're located.
Yeah, I guess what I would say, Joshua, is really, as we think about delivering value to clients, we're trying to ensure that we're delivering the best value service to clients wherever they may be in the world. A core part of the value we're providing for clients is helping them make better decisions. The data analytics are a key part of making more informed and better choices in our reinsurance business, in our retail business, and obviously in our healthcare exchange business as employees make the right healthcare choice for them, which is why we've got 87% employee satisfaction. As we think about our business around the world, we're absolutely investing in data analytics because it's a huge part of helping us provide differentiated solutions for clients. I would separate that out from the tax rate. We are a U.K. company. We operate in 120 countries.
As we think about our tax rate and our effective tax rate going forward, the 18.5% is our underlying operating rate, and it's a mix of 120 countries in which we operate.
The healthcare exchange, for example, is a U.S. business that happens to record revenues in Singapore because that's where the data analytics is located. Yes?
That's not true.
it doesn't record revenue in Singapore?
No.
Okay, then I'm mistaken in terms of the information I've gotten in the past. There are not countries where you're booking revenue in one country, but recognizing the revenue in a tax-free domicile in order to get a better tax rate.
Joshua, what I would say is we have product development and innovation in analytic centers because to hub them in analytic centers is the best way to build deep analytic skill sets. GRIP. GRIP is based in Ireland. We have 110 people based in Ireland. They're PhDs, they're statisticians. They're building that GRIP database. Of course, we want them all in one location. That's absolutely right. We really think about delivering the value to clients using that data in the best way for the client.
if a U.S. client buys GRIP in the United States, is the revenue for the purchase of GRIP recorded as a U.S. revenue, or is it recorded as an Irish revenue?
Yeah, look, we have global carriers, therefore, the revenue is recognized wherever the service is delivered.
Okay. I think that's the same answer, but I'm not sure. It's a complicated issue. There's a lot of stuff going on in global tax. Obviously, I'm just concerned that you're doing a great job with tax, I want to know if I can forecast that in perpetuity.
What I said on that is the 18.5% operating rate is our underlying effective tax rate. As you think about the tax rate going forward, it's 18.5% ± discrete tax adjustments, which could be positive or negative in future years.
Thank you for the answers. I appreciate it, good luck.
Thank you. Next question, Meyer Shields of KBW.
Thanks. Good morning.
Morning.
Greg, one quick question just to clarify. When you talk about reinsurance organic looking better in the fourth quarter, are you expecting it to be positive?
Again, we don't give specific guidance. We said it'd be an improvement in the Q4 and as you reflect kind of its negative two year to date, we think Q4 will be a bit better.
Okay. That helps. Broadly speaking, when you look at the demand for cyber risk, I guess I'm wondering, one, is that something that's going to present a measurable opportunity for Aon? Second, is there any risk that clients that have gotten hacked look to the broker as maybe not pushing as hard on these coverages as they should have?
Well, if you step back and think about it, you're really hitting on cyber, you could talk about pandemic, you could talk about sustainability, a whole series of things. Our view and always has been, it's one of the reasons why we love this business so much on behalf of our clients, is our clients face a range of traditional risks. Globally it's true. It's true in every country of the world. As populations urbanize, it becomes even more true around property casualty, D&O, et cetera. Then you bring in all the non-traditional risks as you're starting to highlight, cyber being one. Again, you could add pandemic, Ebola, whatever you want to add to that, Meyer. Just a whole range of those sorts of opportunities and challenges for our clients.
We see that as a tremendous obligation to support them in that and opportunity for us to support them in that. We've invested and continue to invest very heavily. This is back to Christa's point around data and analytics, getting the insight and understanding so that you can begin to quantify that risk. Therefore, you can then understand how you can mitigate that risk and then price for it. Where there's opportunities, bring balance sheets into play a la place insurance. Oftentimes, it doesn't even involve insurance placement. It involves operations, and we're helping clients across the board on all of those pieces. Our clients are really looking for us to try to do that.
Okay. That's helpful. One last question, if I can. I think this is for Christa. The various revenue timing issues that you've talked about today, do those reverse in 2015?
In 2015? No. The revenue timing issues of $15 million will reverse itself in Q4 2014. Really, in terms of Risk Solutions, what you should really think about is putting $15 million of revenue in Q4 because we've absorbed the expense for it in Q3.
Right. No, I understand that. I'm just wondering, when we look forward a year, is the seasonal adjustment that we're seeing this year, does that go back to the way it was in 2013 or is this sort of the new reality?
No. This is the new pattern then going forward.
Okay, perfect. Thank you.
Thank you. Next question is Paul Newsome of Sandler O'Neill.
Good morning and congratulations on the quarter. I was hoping we could talk about just more broadly the organic growth year-to-date in the U.S., in international. I think reinsurance has been beaten dead. We've seen a modest deceleration, and in hindsight, could you talk about any reflections on whether or not you think that's more economic growth changes or rate changes?
Well, a little bit, as we said before, if you think about year-to-date in the Americas at 2%, year-to-date in the international at 3%, basically as we said, we're about to go into our fourth quarter, which is the strongest quarter we have across the firm. We see exceptionally strong new business trends, particularly in the U.S. have been exceptionally strong. Underlying, again, tremendous opportunity as we continue to build the business. We would say from a pricing standpoint really think about it as market impact pricing on one side and then insured values on the other. Pricing is largely around the retail side, hovering around zero ± very slightly, and insured values are holding up, I would say, not decreasing. We're kind of marginal from that standpoint.
Which by the way, might be at a bit of an improvement, but is marginal overall, and that's really the context.
Terrific. My second question, I was hoping you'd talk a little bit more about the other income line. I recognize that there's more than one thing in there, but it seems like we've had a couple of years where on average, and I'm not asking here for a discussion really on the quarter, but more the year in total. On average, that line has become a positive number. Is that something that we should think about as possible in the future? I think historically we've thought it as being something that in the end ended up being kind of a zero typically over time.
Yeah. Paul, I think it's obviously a lumpy line and it theoretically should be zero over time. What you see reflected in there is our continued efforts in managing the portfolio to maximize ROIC for shareholders, and therefore it includes the gains on the sale of a business, and it also includes gains in certain long-term investments as we continue to optimize the portfolio around highest return capital. It is lumpy and therefore almost impossible to predict.
Well, I'm comfortable with lumpy, but I guess it actually sounds like if you continue to optimize the portfolio and sell things off and have these investments, that generally speaking, although obviously with a lot of volatility, it should be a positive number or am I just completely off base?
Well, I guess what I would say, Paul, is as we actually model our own business internally, we model it at zero, if that's helpful for you.
Absolutely. Fair. That is helpful. Thank you.
Thank you. Our last question is Charles Sebaski of BMO Capital Markets.
Good morning. Thanks for fitting me in. The first question I have is regarding GRIP. Wondering, I think, Greg, you said that some of the 30 or 35 clients currently participating in GRIP are on multi-year contracts. I wonder if we get some more color on how many of the accounts and how long those multi-year agreements might be lasting.
Yeah, we really don't disclose that. What we said before is, again, nearly half and so have signed multi-year contracts. Really, it was more an indication of the value they're seeing and the impact it has. That really is what we're trying to highlight. We're not going to go into detail in terms of the specific mechanics around it.
Okay. I guess what I'm trying to understand is I believe that the number's been around 30 for a couple of years now. Given, as you said, you work with 4,000 insurers globally, I would've thought that the value proposition you're talking about, we would've seen more expansion in that product line.
No, actually, we're not going for volume here. By the way, very good question, this isn't about volume, it's about quality content. With that balance sheet, our carriers deliver on behalf of our clients. It's been a reasonable progression, 20, 25, 30, 35, give or take. This doesn't need to be thousands or even hundreds, nor do we want it to be. In the end, we're really talking about using data and analytics to change the way that an underwriter thinks about applying capital to our clients. Fundamentally, that means it's better for our clients, it means it's better for the underwriters, better for Aon too in that process, really it's a function of our clients. That process takes real content, data and analytics. It also takes real leadership from an Aon standpoint and from a carrier standpoint.
This is really what we've been doing. As those relationships connect in different ways, that's really what's drawn and built the overall GRIP platform effectively. That's why we see it will expand over time. This goes back to Brian's earlier question. With the 30, 35, we think we see substantial opportunity to expand dramatically, that's a huge benefit for our clients and for them. Then we'll add a few from time to time if insurers really want to invest their time and energy to make this work, there's nothing instant about this. This is real hard work with new insights and new data to apply their capital in a different way.
Is there any sharing between that data analytics platform and what you're doing in Re? I guess what I'm wondering is, you talk about the $120 million spend in data and analytics for Re, I guess I'm trying to get an understanding better on what your total investment is across all platforms, be it eHealth, be it GRIP, be it Re, on where you guys are on that relative to the $120 million you provide.
Again, it would be very clear. What we talk about with the $120 million is Aon Benfield only.
Okay.
The investment on the risk insight platform is not included in that at all. That really is done in the ARS book, and ARS business overall. It's completely separate. We haven't disclosed what the number is, but if you think about it, $120 million in the reinsurance business is a tremendous annual investment. We invest substantially more than that on the retail side of the business. Now we haven't even got to Aon Hewitt yet. We're really just talking about on the risk side of the business. Back to what we're doing to sort of build our content capability. Again, we haven't disclosed it, but it's substantially, multiple greater than $120 million a year when you think about what we do in Risk Solutions overall. GRIP, the risk insight platform, is completely separate from this $120 million.
Could we get some idea at all on the investment? I know there was some commentary made about investments this quarter on the new clients for healthcare exchanges. I'm trying to get an understanding since inception on what kind of investment has been made in the construction of the healthcare exchange platform. Then going forward, what kind of investment upkeep or run rate investment growth is going to be required in that business?
What we said basically is we've invested, we explicitly said, as we were bringing this up and online, greater than $100 million investment. What we said going forward, there will be continuing to be substantial investments. By the way, bringing large clients on is a great cause for celebration for us. We have phenomenal validation of what we're doing, very reinforcing. What we said is all future investments, we're going to fully fund out of the P&L. What you need to hear from us is the following, exactly what Christa described, is we are delivering in HR Solutions mid-single-digit organic revenue growth and greater than mid-single-digit operating income growth for 2014. While there have been investments greater than the $100 million we described before, we are absorbing them all in the P&L, and by the way, delivering greater than mid-single-digit operating income growth for 2014.
That's really how you should think about it.
Just the last one, Christa, on the share repurchases for the first quarter, to make sure that I'm understanding something correctly. With the current share count at 296.1, and I think in the presentation, you say the expected diluted share count for full year 2014 is 295. Am I reading that right, that the expectation is really only about a million shares of buyback? Is that on par with where cash flow or cash ability is in the quarter?
Here's what I would say. The actual shares outstanding at September 30, 2014 were 285 million.
Yes.
You have about 10 million of additional diluted equivalents, which get you to 295, which is your starting point for Q4, before any share repurchase, et cetera. We're not giving guidance about share repurchase in this number.
Perfect. I appreciate the clarity.
Thank you. I would now like to turn the call back over to Greg Case for closing remarks.
Just wanted to say thanks to everyone for joining us. We appreciate it very much and look forward to our discussion next quarter. Thanks very much.
Thank you for your participation. That does conclude today's conference. You may disconnect.