Morning. I'm Lester Knight, Chairman of Aon's Board of Directors, and at this time it's my pleasure to welcome all of you to Aon's annual general meeting of shareholders and call the meeting to order. There are three items of business on today's agenda, the election of directors, the ratification of the appointment of Ernst & Young LLP as Aon's independent registered public accounting firm for 2012, and an advisory vote on the compensation of the named executive officers as set forth in Aon's proxy statement. There will be an opportunity later in the program for questions. Those of you listening to our meeting this morning via audio webcast, the slides that accompany this presentation can be viewed on Aon's website at www.aon.com. Now it's my pleasure to introduce Ram Padmanabhan, the Secretary of the company, who will provide the Secretary's report.
Thank you, Lester. Morning. Notice of this annual meeting, together with Aon's proxy statement and annual report, were made available beginning April 18th, 2012, to shareholders of record as of the close of business on April 9th, 2012. Aon has appointed Jennifer Leone of Computershare Trust Company as Inspector of Election for the voting at the annual general meeting. Based on a preliminary report from the Inspector of Election, of the 326,423,865 voting rights of all of the shareholders entitled to vote at this meeting, more than 289 million shares representing more than 88% of the total voting rights of all of the shareholders entitled to vote are present in person or by proxy at the meeting. As a result, I declare that a quorum is present, and we will proceed with the meeting.
A list of the shareholders eligible to vote at the annual general meeting as certified by Computershare, as well as a copy of the minutes of the 2011 annual meeting of stockholders, are available at this meeting for inspection. The following individuals have been nominated for election as directors of the company, and each will be elected by way of a separate ordinary resolution of the company: Lester B. Knight, Gregory C. Case, Fulvio Conti, Cheryl A. Francis, Edgar D. Jannotta, J. Michael Losh, Robert S. Morrison, Richard B. Myers, Richard C. Notebaert, Gloria Santona, and Carolyn Y. Woo. There are two additional matters scheduled to be acted upon at this meeting.
In accordance with the recommendation of the Board of Directors, I move the following proposals for approval: the proposal to ratify the appointment of Ernst & Young LLP as Aon's independent registered public accounting firm for the year 2012, and the advisory vote on executive compensation, each to be proposed as a separate ordinary resolution.
We will now conduct the official business of this meeting. It's now 8:35 Central Time. I formally propose that each of the resolutions set out in notice of the meeting are put to the meeting, and I declare the polls open for voting on all matters. Let me spend a moment reviewing the voting procedures. Proxy statements and proxy voting cards were sent to all shareholders prior to this meeting. Those of you who returned proxies prior to this meeting authorized the persons named in the proxy to vote on all proposals coming before the meeting. Similarly, if you granted your proxy over the telephone or internet, you do not need to vote during the meeting. Any shareholder who has not submitted a proxy or wishes to change his or her vote, please stand and you'll be given a ballot.
Anyone who still has a proxy card should now hand it to the Inspector of Election so it can be counted. Will the Inspector of Election please collect all ballots at this time. Are all the ballots in? All the ballots are in. I now declare the polls closed. Ram, please note the time of the closing of the polls for the minutes. The Inspector of Election is requested to tabulate the proxies and ballots. There's time for discussion and questions after. If you'd like to, we can have discussion now.
Thank you, Mr. Chairman. My name is Martin Glasser, Chicago. I'm a longtime shareholder in the company and meeting here in Lincolnshire. We're a long way from where I first attended the meeting at the Peoples Church on Lawrence and Broadway. For those of us who don't know why you looked at your watch and you said the time is 8:35, could you explain to us, to the ones who aren't informed, why you noted the time of 8:35?
It could be put in the minutes, Mr. Glasser.
That's not true, Mr. Chairman. The reason is we're a Delaware corporation. Under Delaware law, corporate law, you're supposed to announce when the polls are open and the polls are closed.
A lot of people go to shareholders meetings and don't realize why the chairman announces the time to begin and the time to close. The secretary mentioned shareholders. That we are a U.K. company, at what time are we going to lodge the company shareholders' list and records at Somerset House in London?
Bob, you want to answer that?
In terms of when we would file that shareholders list. Are you talking about with the 14A filing?
Lodging the shareholders list at Somerset House in London. We're a U.K. company, and we're not going to lodge our shareholders list? Many U.K. companies lodge their shareholders list at Somerset House. Why isn't it required of you? I'm a very good listener. When someone says something that I don't understand, I ask, "Why not?" Okay. On the proposal on the election of the auditors. Look at Ernst & Young, they have law offices all over the world. Looking at the current proxy statement and the certificate says Ernst & Young's Chicago office is doing the audit this past year. Which office of Ernst & Young will audit our books now that we are headquartered in the U.K.?
Good question. Christa?
It'll be the Chicago office because we are a U.S. listed company, and we're filing on SEC financial statements under U.S. law.
Thank you.
Thank you for your question, Mr. Glasser, for your comments and discussion. Now it's my pleasure to introduce the nominated directors. I'd like to ask those who are seated to my right to stand and please be recognized. First, Greg Case. Fulvio Conti. Cheryl Francis. Edgar D. Jannotta. J. Michael Losh. Bob Morrison. Dick Myers. Dick Notebaert. Gloria Santona, and Carolyn Woo. Please join me in thanking the directors for all the time and effort they devote on behalf of Aon and its shareholders. At this time, I'd like to express our appreciation to former directors who retired from the board during the course of the year or who are retiring today. Judson Green, Jan Kalff, Eden Martin, Andrew J. McKenna, and John W. Rogers Jr. We're extremely grateful for your years of service to the company and wish each of you the best in the future.
I'd also like to thank our management team, Greg Case, Christa Davies, and the rest of the team for their efforts on behalf of the company and its shareholders. We're also joined by representatives of Ernst & Young, and they'll be available for appropriate questions during the Q&A portion of the meeting. Now I'd like to ask Ram to report on the voting.
Following a review of proxies received and tabulated before the start of the meeting, each nominee for election as director received a majority of the votes cast at this meeting, with the number of votes cast for each nominee for director exceeding the number of votes cast against each nominee for director. In addition, each of the following resolutions, the ratification of the appointment of Ernst & Young LLP as Aon's independent registered public accounting firm for the year 2012, and the advisory vote on executive compensation received a majority of the votes present and entitled to vote at this meeting, and therefore are approved.
The Inspector of Election will furnish a written report of the final vote count, which will be attached as an exhibit to the minutes of this meeting reported in a filing by Aon with the Securities and Exchange Commission and made available on the company's website in accordance with applicable law.
Thank you, Ram. I'd like to turn the meeting over to Aon CEO, Greg Case.
Thank you, Mr. Chairman. I appreciate it. I also want to add my sincere thanks to our shareholders here today and around the world for their support over the course of the last year. Thank you very much. Also, on behalf of management, I'd like to thank the board of directors for their incredible support over the last year. Certainly an eventful year for Aon, thank you for that. Very much appreciate it. To our shareholders here and listening around the world, I want to offer four messages before turning the meeting over to Christa Davies, our CFO, to talk about our financial review. The four messages start with the platform we've got, which we believe is quite unique, focused on risk and people.
Second message around the fact that we have this platform at a time when the global economy needs what we have, needs the understanding we have on the topics of risk and people now more than ever before. Third message is around investment in that platform, which continues. I'll talk a bit about that. Finally, some recognition we're getting from clients, really the ultimate arbiter of how our success is proceeding. Those are the four messages I'd like to deliver. Start with the platform. Your firm, Aon, is in a unique position, built by colleagues from Aon all around the world over many, many years. The platform is really focused on two topics. The topic of risk, helping clients understand, measure, and mitigate risk in every way.
Second is around people, helping them with their most important people issues, whether it's retirements and pensions, health and benefits in talent. These are the two platforms that define our firm, define your firm. We're number 1 in these positions, so the strongest platforms in the world on risk, strongest platform in the world on people, and we're roughly split 60/40 when you think about our risk business and our people business. Message 1 is a very strong platform. Message 2 is we have this platform at a time when the economy, the global economy, I think you could argue, needs these topics, needs these capabilities, perhaps now more than ever. On the topic of risk, there's more risk than ever before. It's more intertwined and complicated than ever before.
You see Taiwanese floods that actually are global supply chain issues, as opposed to just catastrophes in the region, really they connect all around the world. More risk than ever before, global warming, pandemic, identity theft, terrorism, more complex than ever before, more people care about it than ever before on the topic of risk. You need only look downtown Chicago today to really understand how people think about risk now more than ever before. Same is true on the people side. More scrutiny, more understanding, more perspective than ever before around what are we going to do about retirement? How are we going to think about health and benefits? How are we going to think about talent rewards? At a time when we have the platform, the global economy, the business economy needs what we have, I think you could argue more than ever before.
Not only do we have that platform, we're also working very hard to invest behind it, to strengthen it. While we may have the number one positions in risk and people, our mission, our focus is really strengthening that position. Here you see summarized six specific initiatives, more on the risk side, equal numbers on the health and benefits and HR solutions side, around how we're trying to strengthen that platform. Whether we're bringing together our global capability, thinking about how we define better a year in the life of an Aon client, how we think about Aon United, bringing our global capability to our firm and our clients in a very local way. All these initiatives go into strengthening the platform of global Aon on the topics of risk and people. Finally, we are seeing response, and that's most important.
The response really is from our clients. We have a saying at Aon, everything we do at Aon starts and stops with are you helping a client? Are you helping a colleague help a client? That's how we define everything we do. These just are some examples of recognition that we've received around global Aon from various publications around the world on the risk side and on the people side, most important, reinforcing what our clients are telling us. We listen very carefully to what they tell us on how we can improve, and we're seeing results from that. Your firm, Aon, strong platform, number one platform, in fact, on the topics of risk and people, at a time when the economy needs that capability more than ever before.
Fear not, we will continue to invest behind that platform more than anyone else to strengthen it, we hope to continue to get reinforcement from our clients around how we're doing and how we can improve that. Just a quick summary of sort of what's going on in the global world with Aon. My pleasure now to turn the meeting over to Christa Davies, our CFO, to talk about our financial performance. Christa?
Thanks so much, Greg. I'm going to start with the three key metrics that we report on every quarter and every year to shareholders. Growing organically, expanding margins, and growing EPS. As you can see over the last six years, we have grown organically in almost every year except one of the last six years. Even in the depth of the economic recession, where pricing in both our risk and our HR solutions business was negative, we actually only went down in organic revenue growth by -1%. Quite a strong performance, and we continue to see organic revenue growth positive in both of our segments in 2012, and we expect that trend to continue. In terms of margin expansion, you can see over the last six years, we've expanded margins by 490 basis points, a very impressive achievement.
That margin expansion, combined with tax rate reduction and better capital management, is really leading to the EPS growth you can see that's compounded at 19% over the last six years, a very impressive achievement for shareholders. As we think about our financial targets going forward, there are really two big financial targets we set for the company. They're operating margin targets to each of our major segments. We have a 26% operating margin target for the risk solution segment and a 22% operating margin target for the HR solutions segment. We feel very confident that we have the right plans in place operationally to deliver on these targets over the long term, we don't require any changes to the macro environment, no changes to GDP, interest rates, or the pricing environment in either our risk or HR solutions segment to achieve these long-term operating margin targets.
Achieving these targets will drive substantial value to shareholders over the next couple of years. As we think about the financial strength of the company, we are very pleased that we have a very strong balance sheet and very strong cash flow. At year-end 2011, we had a little over $1.1 billion in cash and short-term investments on the balance sheet. We have a very strong rating, which we feel very proud of. It gives us enormous financial flexibility to do things like partner with Hewitt in 2009, like partner with Manchester United. We feel very good to be able to take advantage of those opportunities or be able to win with major clients and use the strength of our balance sheet and our reputation to enable us to do that.
In terms of cash flow, this is a very important metric in driving value for shareholders, we focus on it increasingly in Aon. As you can see from 2010 to 2011, cash flow grew almost 30% year-over-year, we expect that trend to continue. As we think about cash flow growth over the next several years, one of the other drivers of value creation for shareholders is not just achieving organic revenue growth, expanding margins, tax rate reduction, and better capital management, it's decreased uses of cash. As we look at the big uses of cash over the last couple of years, pension and restructuring have been very big uses of cash, we expect both of those to decline.
Restructuring, we're really coming to the end of our restructuring programs in 2013 and 2014. We expect restructuring cash to be de minimis after that point. Pensions, we could say, have been a significant use of cash, $400 million to $500 million cash contributions per year for the last couple of years. We are now pleased to report that by 2016, we will have fully funded pension plans on a GAAP basis, which means that our pension contribution between now and then will decline year-over-year. We feel very good about the decreased uses of cash. In addition, the re-domestication to the U.K. is improving cash flow of the company in two distinct ways. One is it's improving the capital flexibility and our ability to invest anywhere in the world in any form, particularly in returns to shareholders around share buyback and dividends.
That very much helps us in capital flexibility. The other benefit it provides financially is a reduced tax rate, and we have said that we expect a significant reduction to our global tax rate over the next several years. We feel very good about the cash-generating capability of the firm, and therefore its ability to generate value for you as shareholders. With that, I will hand it back over to Lester.
Thank you, Greg and Christa. Does anybody have any questions for Greg, Christa, myself? Please, Mr. Glasser.
Thank you, Mr. Chairman. I think I'll start off with a complaint. It bothered me. When I sent in my certificate to the transfer agent, I requested a physical delivery of the shares. Still haven't received my certificate. I've called the transfer agent several times. They said there's some difficulty in transferring the shares from the U.K. company to myself. Whoever at the company could expedite the delivery of my certificates, I'll appreciate it.
Sorry to hear that. We'll take a look at it.
The next question is a very popular word. Not quite 10:00 in Chicago. The word is Facebook. I attended the annual shareholders meeting of U.S. Cellular yesterday, and I threw out the word Facebook, General Motors, U.S. Cellular. I asked if we do any advertising on Facebook. Here I am at the Aon's meeting, and I'm asking the same question. Do we advertise on Facebook? If we do, are we getting our money's worth?
Good question. Greg?
We do actively work the different channels on social media. It's very important as we think about how we communicate value propositions.
Are you being recorded?
Yes, I'm being recorded, I believe. Thank you very much for that. Appreciate it. We actively look at that as an overall strategy. I'm pleased to report we track it very carefully. In fact, when we think about our share in social media as it relates to risk advisors and HR solutions, we actually have a quite high share, and we in fact track it analytically. I would say, though, in the context of the broader social media world, it's a very small part of what we do. It's something we look at very carefully.
Well, that's true, using the word Facebook, which brings up the subject of our investments. Some place in this world, we list our investments as a company through insurance companies, et cetera. I would believe if I requested a quarterly report of our investments, you would get it. The subject of Facebook, I'm not going to ask you at this time, if we are investing in the initial public offering of Facebook. I have the patience to wait and see if it comes out in the quarterly report if we bought shares of Facebook as part of our investment portfolio. Unless you care to answer that at 10 o'clock, we got a bid in to buy some shares of Facebook for our portfolio.
All I would highlight is our investment strategy is truly driven by what drives value for our clients. Our investments really are around investing in content and capability to serve our clients. Therefore, we wouldn't be looking at things like investments in securities. We'd be looking at things like investments in the Aon Global Risk Insight Platform that helps capture the insight of our data around the world, or investments in content capability that helps us serve our clients better. That's where our investments will be focused.
I have to say, I listened, but you said the word so fast. Could you slowly repeat what our investment portfolio is so I could catch them?
Certainly. My apologies.
Right.
The investment focus we have at Aon is very much driven by client need. We wouldn't be thinking about investments in the classic term of investments in securities like Facebook. We'd be thinking about investments in content and capability that would help us serve our clients more effectively. One example would be the investment we've made in the Aon Global Risk Insight Platform, which captures Aon's $80 billion of flow around the world, and how we can translate that into actions that clients can take. Mr. Glasser, those would be the kinds of investments we'd make to strengthen our firm, different than an investment in a stock or a security.
In listening to you, we hear about global investments, and I'm also a shareholder at JPMorgan Chase. Do we do the similar situation at Aon as JPMorgan Chase Investment Group?
As our CFO said, no. What I would remind just for your background is Aon is not a balance sheet firm like a JPMorgan Chase or even an insurance company. We're a people firm. We have, in fact, the assets on our balance sheet really are much smaller on a relative basis. The assets of Aon are really our people, our 60,000 colleagues around the world. We're very balance sheet light, and our investments are around how we support our colleagues to serve our clients.
Your comments are really what an annual shareholders meeting is all about. It gives the management the opportunity to explain some of the things that the general investing public are not aware of. Thank you.
Very good. Thank you.
Thank you. Are there other questions? Seeing none, I'd like to thank you all for coming. I call the meeting adjourned.