Good morning, and thank you for holding. Welcome to Aon Corporation's first quarter earnings conference call. At this time, all parties will be on 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's 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 first quarter results, as well as having been posted on our website.
Now it is my pleasure to turn the call over to Greg Case, President and CEO of Aon Corporation.
Good morning, everyone. Welcome to our first quarter conference call. Joining me today is our CFO, Christa Davies. To begin, our first quarter results reflect continued momentum and progress as we execute on our strategy to substantially strengthen and unite Aon around the globe, irrespective of a soft market, economic conditions, or other challenges outside our control. 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 continued areas of investment across Aon. And third is overall organic growth performance. On the first topic, our performance versus key metrics. Each quarter, we measure our performance against the three metrics we focus on achieving over the course of the year: grow organically, expand margins, and increase earnings per share.
In the first quarter, organic revenue was +2%, highlighted by solid growth in both our retail brokerage and consulting services businesses, placing us firmly on track for growth in 2011. Adjusted operating margin decreased 230 basis points, and EPS was $0.80, as the inclusion of Hewitt results, including a significant increase in intangible amortization expense and a higher effective tax rate, offset strong underlying performance and effective capital management. Overall, our team views the underlying first quarter results as a solid quarter of continued progress as we strengthen the firm for long-term growth and value creation. On the second topic, further areas of investment. We believe Aon is in a unique position. Solid operating performance, combined with expense discipline and strong cash flow, continues to enable substantial investment in colleagues and capabilities.
As we have significant opportunity remaining to deliver further margin expansion, we will continue to build on our leadership position and industry-leading capabilities to capture growth opportunities we see across our markets, specifically focused on the two most dynamic sectors of the global economy, risk and people. A few examples include, in risk solutions, we're invested in innovative technology such as our Global Risk Insight Platform and ImpactOnDemand to ensure that clients have full access to the best of global Aon in every region around the globe. In fact, highlighting the unique value of GRIP, we've now completed over 1 million trades, capturing more than $50 billion of premium and continue to expand its addressable market opportunity.
We're also investing in additional capability and talent, as well as strengthening our international footprint through recently completed acquisitions such as Glenrand in South Africa, which solidifies our position as the largest broker on the continent of Africa. We're investing in client leadership to drive greater productivity and efficiency with the rollout of the revenue engine in EMEA and Asia Pacific, the rollout of Client Promise, which is driving greater retention rates and ensuring clients understand our value proposition, and the rollout of our Aon Broking platform to better match client needs that ensure appetite for risk in any geography around the globe. In HR solutions, we continue to strengthen our industry-leading position in both public and corporate healthcare exchanges, enabling clients to prepare for ultimate changes in healthcare legislation with design, purchasing, and administrative capability.
We're expanding our capability in investment management consulting, as highlighted by the acquisition of Ennis Knupp. This complements our incredibly strong U.K. business, creating an industry leader with over $4.3 trillion in assets under advisement. Finally, we're continuing to invest in expanding our core HR BPO offerings and platforms, including the use of new social media channels. In addition to our focus on our core BPO business, we're also continuing to expand add-on benefits in HR solutions that have shown significant growth in the last few years. In summary, across risk solutions and HR solutions, our fundamental client-serving capability continues to substantially strengthen around the globe.
These investments, fully funded in the context of long-term margin improvement, position Aon very well to take advantage of an improving global economy and the long-term growth opportunity we see across our markets. Finally, on the third topic of growth, I'm going to spend the next few minutes discussing the quarter for both our segments. In risk solutions, overall organic revenue was +2%, a continuation of the positive trends we saw in the prior quarter and a solid start to the year, despite soft pricing, excess capital, and fragile economic conditions globally.
Against these headwinds, which were primarily market-related, we're driving a set of initiatives that continue to strengthen our underlying performance and give us confidence that our risk solutions business is firmly positioned for long-term growth and leverage in an improving economy with strong management of our renewal book portfolios through Aon Client Promise and retention rates of 90% or better on average, highlighting strong client satisfaction. Strong new business generation of more than $200 million across our retail business, with double-digit new business growth across many markets, including France, Italy, Asia, Africa, New Zealand, and Canada, just to name a few, highlighting the strength of our global client-serving capability. Investments in new products and service capabilities with the rollout of GRIP, Aon Client Promise, and ImpactOnDemand. Turning to the individual businesses. In the Americas, organic growth was +4%.
We saw strong growth in Latin America and in our affinity products, modest growth in U.S. retail despite continued pressure from pricing, which is down low single digits on average, and weakness in major sectors such as construction. On the international front, organic revenue growth was +3%. We saw strong growth across Asia and New Zealand, driven by a solid client retention and new business activity. We had modest growth in the U.K. retail side and EMEA, as exposures are generally stable, but recognizing the economic conditions remain fragile across the region. In reinsurance, organic revenue was flat. Results reflect a modest improvement from a -1% in the prior quarter. Growth in facultative placements were offset primarily by higher ceding retention, continued soft pricing in the U.S. for treaty placements.
Despite significant industry loss experience internationally in the first quarter, we believe excess capacity globally will continue to drive soft pricing globally, albeit at a moderately lesser rate of decline. Given these industry conditions for treaty business and the transactional orientation and nature of the facultative placements and capital advisory, we'd expect the trends in our reinsurance business to be fairly similar for the foreseeable future. Turning to HR solutions. Overall, organic revenue was flat, similar to the prior quarter, as price compression and benefits admin continued and fragile economic conditions placed pressure on corporate discretionary spend and global unemployment trends. Against these headwinds, which are primarily market-related, we're driving a set of initiatives that continues to strengthen our underlying performance and gives us confidence that our HR solutions business is firmly positioned for long-term growth and leverage to an improving economy.
With a high degree of recurring revenue across HR solutions, with strong renewal rates highlighting strong client satisfaction. Solid business generation of over 100 new client wins, including more than 10 new large and mid-market benefits admin wins and a very significant win with a large leading financial institution in HR BPO. Continued investments in new product and service capabilities in emerging markets such as investment management consulting, healthcare exchanges, and international markets. Turning to the individual businesses on the HR solutions side. In consulting services, organic revenue increased 4%. The results reflect a modest improvement from the prior quarter. Solid growth in international health and benefits and human capital consulting was partially offset by the impact of weaker economic conditions in U.S. retirement consulting. In outsourcing, organic revenue decreased 3%.
Anticipated price compression and a modest decline in project-related revenue and benefits administration was partially offset by new client wins and growth in point solutions revenue in the HR business process outsourcing business. Excluding a $14 million favorable impact related to deferred revenue recorded by Hewitt in the prior quarter, organic revenue outsourcing would have been flat compared to the prior year quarter. Most important, I wanted to provide a brief update on the progress of Aon Hewitt. First, our teams are working exceptionally well together to support clients, client disruption has been basically nonexistent. As an example, eight new benefits administration clients went live on January 1, and two large HR BPO clients are ramping up with all systems go, and implementation proceeding exceptionally well.
The leadership team has been particularly sensitive to all the normal issues that arise out there, and they are listening very carefully and working hard to respond to feedback from our colleagues around the world. We are deeply engaged with key talent across the businesses to ensure we are building a solid foundation for long-term growth. Second, new business wins across Aon Hewitt continue to be exceptional across middle market, large corporate, and Fortune 100 clients, with Aon Hewitt having already secured a number of new business wins across multiple product lines as clients fully recognize the breadth and depth of Aon Hewitt's product and services capabilities. Lastly, integration activities are largely complete. We are fully on track to deliver the $355 million of synergy savings in 2013, as well as our committed savings in 2011. Christa will provide an update on this shortly.
With the integration work set, we are focused on growing and building Aon Hewitt for the future. It is a very exciting time for all of our teams. In summary of our first quarter results, we are delivering solid underlying progress against the key metrics that we communicate to shareholders. Events occurring in Japan, Australia, New Zealand, our pending healthcare reform in the U.S., just to name a few, only reinforce the needs of our clients and the significant long-term growth opportunity for Aon as the industry leader in both risk and HR solutions. I am now pleased to turn the call over to Christa for further financial review.
Thanks, Greg, and good morning, everyone. As Greg noted, our first quarter results reflect continued progress to strengthen our industry-leading position and client-serving capabilities across risk and people. We are firmly on track for growth in 2011. Against that, we are managing expenses, delivering savings from our restructuring program, and effectively allocating capital, as highlighted by the repurchase of $350 million in common stock in the quarter. Now let me turn to the results for the first quarter. Our core EPS performance, excluding certain items, was $0.80 per share for the first quarter, compared to $0.83 in the prior year quarter, as the inclusion of Hewitt results, including a $61 million increase in intangible amortization expense and a higher effective tax rate, offset strong underlying performance and effective capital management.
Certain items that were adjusted for in the core EPS performance and highlighted in the schedules on page 12 include $30 million of restructuring charges primarily related to the Aon Hewitt restructuring program and $15 million of transaction-related Hewitt costs. Lastly, there were two items not adjusted for in the core results, including $19 million, or $0.04, of lease termination costs of facility exits in France and an unfavorable impact of $0.02 related to foreign currency translation. Let me talk about each of the segments. In our Risk Solutions segment, organic revenue growth was 2%, and we delivered an operating margin of 19% on an adjusted basis, down 150 basis points from the prior year quarter. Our operating performance for the quarter was primarily impacted by three items.
As noted above, we incurred $19 million of lease termination costs or 110 basis point impact to facility exits in France that were not part of the formal restructuring program. Foreign currency translation, primarily resulting from a weaker euro versus the US dollar, unfavorably impacted margin by approximately 60 basis points. Lower investment income impacted margin by 10 basis points. These three items, largely non-recurring or macro related, unfavorably impacted margin by 180 basis points in the quarter. Excluding these items, our underlying performance for the quarter continues to demonstrate strong operational discipline and underlying structural margin improvement, positioning the segment for greater operating leverage long term as growth and economic conditions continue to improve around the globe. Let me spend a moment on each of the restructuring programs, key initiatives that are enabling concurrent funding of investments and delivering long-term structural margin expansion.
With respect to the 2007 restructuring program, we have incurred 100% of the charges necessary to deliver the remaining savings. Restructuring savings in the first quarter are estimated $134 million, compared to $110 million in the prior year quarter. Approximately $113 million of savings were related to the Risk Solutions segment, primarily for workforce reduction. With respect to the Aon Benfield restructuring program, we incurred $7 million of charges in the quarter and have now incurred 92% of the $155 million of total costs necessary to deliver the remaining savings. Restructuring savings in the first quarter are estimated at $29 million, compared to $22 million in the prior year quarter. Overall, we are ahead of schedule on our 2007 and Aon Benfield restructuring programs.
We have completed nearly 100% of the charges as at the end of the first quarter, yet we still have approximately $48 million of incremental Risk Solutions savings still to achieve under these two programs between now and the end of 2011. The following three areas of margin opportunity are within our control and continue to put us firmly on track towards delivering our long-term margin target of 25% in Risk Solutions. Number one, operational efficiency and the remaining restructuring savings. Number two, the continued rollout of the revenue engine. Number three, Aon Broking and GRIP related initiatives. In addition, there are two additional macro drivers that provide significant operating leverage based on improvements in the external market.
An improving global economy in areas such as employment levels, asset values and corporate revenues will drive leverage to exposure growth, along with every 100 basis point rise in short-term interest rates delivers roughly $35 million to $40 million to the bottom line. Lastly, improvements in insurance pricing. We are on track to delivering our long-term margin target of 25% for Risk Solutions. Turning to the HR Solutions segment, organic revenue is flat, and we delivered an adjusted operating margin of 14.4%. As a result reflect the merger with Hewitt, including a $61 million increase in intangible asset amortization expense. To further assess the underlying performance of operating income and margin in the segment, we believe it's useful to add together results for both Aon Consulting and Hewitt in the prior year quarter to form your starting point of analysis.
For example, if we take Hewitt's adjusted operating income of $123 million plus $56 million for Aon Consulting, your combined total is $179 million of operating income as reported for the prior year quarter. If we subtract additional intangible amortization expense of $61 million, this leaves an underlying $118 million of operating income. Compared to the $161 million we reported in the first quarter, the increase in operating income reflects savings related to the restructuring program, additional synergy savings, and other operational improvements. Essentially, we believe that strong operating income growth on flat organic revenue implies solid operating margin expansion in the HR Solutions segment. Lastly, for the HR Solutions segment, I wanted to briefly comment on the Aon Hewitt restructuring program. With respect to the Aon Hewitt restructuring program, we incurred $23 million of charges in the quarter, primarily for workforce reduction.
The Aon Hewitt restructuring plan is expected to result in cumulative costs of $325 million through the end of the plan, primarily encompassing $180 million in workforce reduction and $145 million in real estate rationalization costs. Cash costs are expected to be approximately $275 million. Savings related to the restructuring program in the first quarter are estimated at $24 million, with additional synergy savings achieved outside of the formal restructuring program. We expect to deliver total annual savings of $355 million in 2013, including approximately $280 million of annual savings related to the restructuring program and additional savings in areas such as information technology, procurement, and public company costs. We are on track to deliver $242 million of annual savings in 2011. These savings are the first of three key drivers for delivering our long-term operating margin target of 20% in HR Solutions.
The other two key drivers are growth in the core business, including HR BPO improvements and declining intangible amortization expense beginning in 2013. Let me discuss certain line items outside of the operating segment. Interest expense increased $29 million due to an increase in the average amount of debt outstanding following the merger with Hewitt. Other income in the quarter was $17 million, including a $9 million gain related to the sale of certain investments and $7 million related to distributions from certain private equity securities. Going forward for these items, we expect a run rate of approximately $5 million per quarter of interest income, $35 million of unallocated expense, and $65 million of interest expense per quarter.
Turning to taxes, the effective tax rate on continuing operations increased to 29%, compared to 24.9% in the prior year quarter, due primarily to changes in the geographic mix of income following the merger with Hewitt. The prior year quarter was favorably impacted by certain deferred tax adjustments. Going forward, we will continue to anticipate an underlying tax rate on continuing operations of 30% in 2011. Turning to shares, average diluted shares outstanding increased to 345.4 million in the first quarter, compared to 283.4 million in the prior year quarter, due primarily to the issuance of 61 million shares of common stock related to the merger with Hewitt, partially offset by the company's share repurchase program. Actual common shares outstanding on March 31 were 330.5 million, compared to 332.3 million at December 31. There are approximately 14 million diluted stock equivalents.
The company has approximately $1.7 billion remaining under the share repurchase program previously authorized in 2010. Let me turn to the balance sheet. At March 31, cash and short-term investments were $1.3 billion, and total debt outstanding increased to $4.9 billion. Included in these figures is approximately $377 million of cash that was used to fully repay $375 million of Canadian debt due April 2011. Post this transaction, we had roughly $900 million of cash and short-term investments and $4.5 billion of total debt, similar to December 31. Per requirements of our outstanding billion-dollar term loan, we expect to pay down $100 million of the term loan debt in 2011. In summary, we delivered 2% organic revenue, placing us firmly on track for growth in 2011, despite fragile economic conditions and a continued soft market.
We continue to strategically invest in long-term growth opportunities and are well underway with the integration of Hewitt. We are managing expenses, driving operational initiatives across both segments, and fully on track to achieve our long-term operating margin targets. We have significant leverage to an improving global economy. Our balance sheet and strong cash flow continue to provide significant financial flexibility to deliver increased shareholder value, as highlighted by the repurchase of $350 million of common stock in the quarter. With that, I'll turn the call back over to the operator. We'd be delighted to take your questions.
Thank you. For questions on the phone, press star one. Please record your name to be introduced. Again, for questions, press star one. If you'd like to withdraw the request, you may press star two. Thank you. One moment for your first question. Our first question comes from Jeroen van-inwegen, Deutsche Bank. Your line is open.
Good morning, and thanks for taking my questions. I have a follow-up after that. My first question relates to the Risk Solutions segment and the expenses there. Even when I adjust for the FX and the lease termination, and despite the 3% improvement in the comp and benefit expenses, the adjusted operating income was still flat year-over-year. I was hoping to get a little more color on what I guess is organic revenue growth-related expenses and maybe how we should think about it going forward.
Yeah. I think as we look at our Risk Solutions margin, we believe that we have underlying Risk Solutions margin expansion in the quarter after we adjust for the one-time lease termination payment in France. That's 110 basis points, and the FX and investment income impact of 70 basis points. That's 180 basis points, which if you then adjust for that, it's 30 basis point improvement year-over-year. We do believe that we continue to drive structural operational improvements in our business, which is leading to long-term margin expansion both over the course of the year and towards our long-term 25% margin target.
Wasn't that improvement that you were just talking about, it all came from the compensation expense side, and it's pretty much offset by the other expenses in a scalable business, or what I thought was a scalable business.
Yeah. I think there are a couple of one-time items in the quarter, which are really sort of meaning that we're not getting quite the level of margin expansion we would, excluding those one-time items.
Okay. Then on the HR solutions side, could you maybe talk a little bit about the pension business? Do you see it coming back at some point, maybe to a point where it starts giving 2%, 4%, 5% organic growth again for a longer period? Do you think that's possible without a regulatory change?
We see tremendous opportunity across the HR solutions business from a growth standpoint. The fact, if you just reflect on sort of the last few years and what's happened in the U.S. economy and the global economy on that front, the business has actually held serve quite well. During that time, we made substantial investments to sort of build for the future long-term growth, and we see a number of those items actually come into pass now as we think about what's going on. When you just think about what's going on in the overall retirement market right now, and what's needed to think about pensions and retirement across an employee base, that demand is going up, not down, and we're incredibly well-positioned for that. The same on the healthcare side.
When you think about what's happening in the healthcare in the U.S. right now, this is one example, but you can actually talk about it around the world, and the demand for advice in the context of reducing healthcare costs is actually going up. We actually see lots of opportunity for growth across the HR solutions business, whether it's on the retirement side, the investment advice side, the admin side. We're very optimistic about how we think that's going to evolve over the next couple of years.
Great. Thank you very much.
Sure.
Thank you. Next, Brian Meredith, UBS, your line is open.
Yeah, thanks. A couple of questions here. Greg, first one, I was hoping you could chat a little bit more about what's going on in the outsourcing business. We've been hearing from some of the carriers that are starting to see some exposure growth out of the comp business. I'm just curious why you're not seeing it translated to the outsourcing business as well.
Yeah. Brian, I think one of the things we're seeing in our HR solutions business in outsourcing in particular is, they're very long-term contracts. We absolutely sort of expect long-term growth in that business. As we've said before, with five to seven years sort of average contract length in the HR BPO business, we can see the next four years of revenue and EBITDA growth. Absolutely, we see the structural forces you're describing. They just take time to flow through, given the long-term contract nature in that business.
Changes in employment don't have an immediate impact?
Changes in employment absolutely do. We have huge potential upside from changes in employment. They do flow through and get trued up on a monthly basis.
Okay. We haven't seen that yet, I guess is what's happening here.
Absolutely.
We expect that, Brian, on the horizon, and again, that will come through faster than you would say, for example, on the risk side, you see rates come through. That's a much more direct impact.
Okay. Also just curious, on cash flows in the quarter, share buyback was greater than I was expecting. You had some cautionary remarks on cash flows, I think last quarter on kind of timing. I'm curious why the level of share buyback was great, but why was it bigger in this quarter? Should we expect a big slowdown coming forward?
Yeah. I think, as we think about share buyback going forward, I'd look at cash and short-term investments on the balance sheet, which I would observe post the Canadian debt is down from $1.2 billion at year-end, to $900 million ex the Canadian debt. We have used up excess cash in the quarter. I would say going forward, as we think about share buyback, Q4 is more a good run rate to use than the Q1 number, because really what we've done there is used up some excess cash on the balance sheet as well as operating cash flow.
Great. Thank you.
Overall, Brian, look at our investments on the buyback side, as Christa described before on the calls, reflecting our view on where we are and the opportunity on return on invested capital. We're just very positive on our current position and the opportunity against it. That reflects our investment.
Great. Thank you.
Thank you. Next question, Meyer Shields, Stifel Nicolaus, your line is open.
Thanks. I just want to follow up on Jeroen's question with regard to retirement. If we see, within the U.S., a general trend towards later retirement, for whatever reason, skepticism on Social Security or whatever, would that have a negative impact on, or does that comport with your expectations, and what's the anticipated long-term impact on HR consulting?
No. In fact, we actually, again, back to the fundamental principles of what's going on across really the overall HR solutions business in total, whether it's on the retirement or pension side, or whether it's on the healthcare side, we actually see demand for advice in that business, which is really what we do exceptionally well, going up. In fact, because the costs are going up, the demand for high-quality execution, which is also what we're capable of doing in the outsourcing businesses, is actually going up. We are very bullish on the fundamental underpinnings of what drives our HR solutions business, both on the advice side as well as on the execution side.
As an example, I was with a client last week, just talking about their current situation, look, they're essentially talking about how they can think about supporting their employees for overall retirement and actually delivering on a set of promises that are helping their employees deliver on a set of commitments that they've really made over time. Our advice in the context of what's going on in the current marketplace is vital to them, both in terms of how they actually execute it, but also in terms of how they do it in a cost-effective way. That same argument holds true on the health and benefits side.
Okay, thanks. A couple of quick modeling questions, if I can. One would be the expected share issuance as compensation over the course of the year, and the second would be the ramp-up of the $200 million or so in expected Hewitt-related savings over the balance of 2011.
On the share issuance. Share issuance in the form of stock compensation, has been coming down over the last couple of years. We would expect around 8 million shares over the course of 2011. Q1 is always the highest because that's when we issue shares related to our major compensation programs. Your second question, the ramp-up of savings. We have said that we are on track to deliver $242 million of total savings. That's comprised of restructuring savings plus other non-restructuring savings. You saw $24 million of restructuring savings plus some other additional synergies in the quarter. As we complete projects, the savings will ramp up during the course of the year to that $242 million total number.
Brian, we are fully on track, as Christa described, both in the overall game plan for 2011, as well as I described for the $355 million in 2013. The teams have just done a magnificent job coming together and really identifying the projects, getting those behind us, and really focusing Aon Hewitt very much on future growth. On the savings side have just done a terrific job.
No, I understand that and that's helpful. I'm just trying to use the methodology you talked about with summing Aon and Hewitt's operating income, subtracting the increased amortization, and then adding back the savings. I'm just trying to get a handle on the seasonality or the expected pattern.
Would you like the baseline sort of numbers in terms of how to think about the starting point, and sort of seasonality of our business? Seasonality of our revenue overall, Q4 is our strongest revenue quarter, followed by Q1, and then Q2 and Q3, sort of on the revenue front. If you think about the starting point for the HR Solutions operating income for Q2, if you take the Aon Consulting operating income number of $47 million, you add in the Hewitt operating income number of $105 million from Q2 2010, that gets you to $152 million mark. You subtract the $61 million of amortization expense. That gets you to a $91 million operating income starting point for Q2. You can do a similar math for Q3 2011, taking the numbers from Q3 2010, Aon Consulting, $55 million, Hewitt, $115 million.
That gets you to $170 million, less the amortization expense of $61 million gives you to $109 million starting point in operating income for Q3 2011.
Okay, fantastic. Thanks so much.
Thank you. Next question, Dan Farrell, Sterne Agee, your line is open.
Thank you and good morning.
Hi, Dan.
Hi. You guys obviously in the brokerage segment, have taken out a lot of expenses over the last few years. Importantly, I think you've been very disciplined in putting some of those savings back into the business. I'm wondering as those expense savings are ramping down, is there still a need to keep reinvesting? Then I also wonder if we're in an environment that's only modest organic growth, would the margin expansion that we think we might see be a little more muted because of ongoing stuff getting put back into the business?
Look, Dan, I take a step back. You're absolutely right. If you think about sort of what we've done over the last number of years, we've literally laid out a game plan and executed as cleanly as we could against that game plan, which was to invest in our business, build for long-term organic growth, and also do it in a way simultaneously that we built margin over time. I would just reflect, as you think about your question and some previous questions around the margin front, you think about the track record over the course of the last five years. We've increased margin 530 basis points from 15 and change to 20 plus. We have a game plan in place to drive that to 25%, as we said before. The 25% really is fundamentally driven by five specific areas where we believe there will be real improvement.
The restructuring, and you're absolutely right, it's ramping down, but there's still $48 million left in that. What we're doing with the revenue engine and how we think about bringing in new clients and increasing share with those clients. What we're doing with the Global Risk Insight Platform, which is literally fundamentally helping us increase yield per dollar of premium placed. Obviously some of the things that are in less our control, as Christa has described before, on interest rates, and the overall GDP situation. We absolutely see that track that's driving to 25%. The first quarter has done nothing for us except underpin that we're on track to achieve that. We've, by the way, done it in environments in which growth was flat or negative.
Now that growth is picking up and we're confident we're seeing that, we're even more positive in terms of being able to both achieve organic growth, and grow the margin to 25%. Many of the investments we've made over the course of the last few years are just beginning to really kick in and pay off, as I described before, be it revenue engine efforts, GRIP or Client Promise, et cetera. Look, we feel very good about the progress, and we're just going to keep marching forward against the game plan we've set in place. As I said, Q1 has done nothing but underscore that we're on track to do that, and whether it's on the risk side or the Hewitt side or the risk HR solution side.
Is there a level of organic that you think you need to achieve the 25%? I realize there's other headwinds, the low interest rate environment and other things that could help as well over time. Is there a type of organic level in your mind that you think you have to sort of have on a run rate to get to that point?
There really isn't. Obviously, we're about growing our business and building our business over time. We're absolutely focused on doing that. We've reflected on these calls before. We absolutely don't need insurance pricing, in the context of growing our business. Again, you can look at the last five years, we've been able to grow, most of the years. We've certainly been able to improve margin, and we've done that in an environment, obviously, that's got soft insurance pricing, a very negative economy, low interest rates, et cetera. We absolutely have the game plan in place to continue to drive and do that. Obviously, growth in some of the external factors can really help accelerate that and can bring the 25% to us much more quickly. Irrespective of what happens on the items outside our control, we intend to get to a 25% margin.
Okay. Thank you very much.
Thank you. Next question, Jay Gelb, Barclays Capital, your line is open.
Thanks. I wanted to touch base on the reinsurance brokerage business. You had a nice uptick in organic growth in the first quarter versus 4Q. I'm trying to understand the implications of the impact on the massive Asia-Pacific reinsurance losses going forward and what that means for Aon's organic revenue growth as well as margins. Alongside of that, Aon recently put out a report talking about pretty much dampened expectations for the U.S. mid-year property reinsurance renewal. I was hoping you could expand a bit on that because the reinsurers are talking it up a bit more. Thanks.
Yes. Jay, absolutely have to talk about it. Really two questions in the context of what we're doing there. One is it relates to Aon Benfield. Agree with you, our colleagues are doing a great job as we continue to build on that platform. We believe is a very unique platform in the world today with Aon Benfield, and our position on the treaty side, number one in the world, number one in facultative, number one in the capital markets world, et cetera. A very strong platform, and we're improving in that. I would say in the first quarter, factually, the market had a negative impact on us. It was negative 1% as you think about what we were able to deliver on flat organic growth. Market impact was negative 1%. Overall, we haven't seen the impact that you've described.
As we go forward through the year, we expect it to be a lot of the same. Obviously, we're reacting to the trauma around the world and supporting our clients, but we see more of the same. In the context of your second question in the broader pricing environment, look, there's always going to be a lot of discussion. It's obviously an important topic for our clients, critical for our clients. We observe it on two sides. One is you think about Q1, literally what happened, and then think about sort of what the go forward's going to look like. We base our observations very much on a couple of things. One is the Aon Benfield team that does great analytics.
Really, we believe world-class analytics around this as well as what happens and the observations we take on the specific data out of GRIP, the Global Risk Insight Platform. That's now got 1 million trades on it, over $50 billion in premiums. We literally look at that fact base. In the context of that, Jay, literally, rates were down 2% to 5% in the first quarter, and that's just factually what they were. It impacted our retail book negatively. It impacted our reinsurance book as I described before. On the go forward, what we've essentially said is assuming no new events, capital availability will remain at surplus levels, it just will. As a result, it's going to continue to support a pretty competitive market. Obviously, we recognize that there were a lot of important, very important critical regional events that have occurred around the world.
Accordingly, there's going to be price increases in those areas. Certainly in these affected areas, in some cases, there'll be substantial increases. We also recognize, by the way, to your point, there's more pressure on the system than ever before around rate declines. Overall, the facts indicate unless there's another event or series of events, the industry is going to have excess capital, and that remains supply, demand imbalance. It's going to continue and put downward pressure on price. Particularly in the non-affected areas, which happen to be, in this case, much, much larger than the affected areas. In the example you described on the reinsurance analysis, what our colleagues have done is literally calculated bottom up, literally brick by brick, the capital in the industry. It's roughly $470 billion as of the year-end 2010, which was a 17% increase over 2009.
It really is that supply-demand imbalance, Jay, that's led us to basically say, look, there's clearly less slack in the system than maybe there has been for a long time. We see that supply-demand imbalance remaining at a reasonable level. I would just finally say our GRIP data suggests that if you sort of look at our pipeline over the next 30, 60, 90 days, it also indicates continued decreases in price, albeit at a lower level. Want to make sure I'm highlighting that. It's a lower level, but not the turns that others have talked about. Hopefully that's helpful.
It's very helpful, Greg. Just on GRIP, are you talking about primary commercial as well as reinsurance?
The GRIP really is primary commercial. I was trying to give you two perspectives, one on the reinsurance side and one on the primary side, given the importance of the topic. GRIP literally look at it as 1 million trades. It's not the market, but it literally is our entire market. It's pretty extrapolatable to the overall market. It's the specific data which shows exactly what happened in the first quarter, then it literally has all the indications in it for the foreseeable future.
That $470 billion, you're saying that's dedicated reinsurance capital globally?
Yeah, exactly. The analysis, finally, happy to send it to you. You can also access it on our website, is we did our level best to identify dedicated reinsurance capital around the world. That's how we got to the $470 billion.
Great. Thanks for the answers.
Sure.
Thank you. Next question, Matt Heimermann, JPMorgan, your line is open.
Hi. Good morning, everybody.
Hey, Matt.
Hi. Couple questions. Just specifically in HR solutions on the traditional consulting side, I'm just curious if you could maybe break down what you're seeing in terms of growth between maybe the less discretionary lines, which I would think about being kind of health and benefits, actuarial, investment consulting, and then the discretionary of kind of talent, compensation, leadership.
Essentially, we're actually seeing growth across the board. What you do see is the areas that are really impacted by the economy, talent, comp, et cetera, those are really beginning to bounce back. We see that as very positive. Things that involved, Matt, discretionary spend during the last few years have really been under pressure. Our colleagues have done a great job in those businesses. Now as the economy has leveled off, or even in some cases looks like it might even be coming back a bit, we're seeing real upticks in those businesses. The others that were actually holding serve a bit more during the downturn are doing just fine, but they don't see as much of an uptick.
Okay. As we think about what might happen with growth there, it's more likely we should think about those discretionary areas pulling the growth rate up more so than much of a change in the other areas?
We see a change in the other areas. It'll just be more gradual in the other areas. The uptick will be more acute and more positive on the areas that involve discretionary spend. We're invested and see it on both sides. We've got, again, great capability on both sides, we see positive movement really on the discretionary and some of the things that were more recurring.
Okay. If we kind of dovetail that same question into outsourcing with respect to project revenues, is it fair to think about the timeline there maybe being a little bit more drawn out than what we might see in some of the discretionary areas in the consulting side?
That's right, Matt, because of the long-term nature of the contracts. The only thing I would note is as our employment levels increase, they do flow through the outsourcing contract with a month lag. Employment levels have significant upside leverage to that revenue base. The project-related sort of revenue year-over-year will stabilize really in Q2.
Okay, that's helpful. Just a couple of numbers questions, if I could, just Christa, just the pension expense or benefit in the quarter, and then also, can you just tell us what the common outstanding shares were at the end of the quarter?
The pension expense for the year, Matt, it's down slightly from 2010. It's roughly the same per quarter, is the way I think about it. Contribution levels on pension, we did say were about $400 million for the year, and again, roughly equal by quarter. Common shares outstanding was 330.5 as at March 31.
Okay. Thanks much.
Sure.
Thank you. Next question, Dan Johnson, Citadel, your line is open.
Great. Thank you. Good morning.
Hi, Dan.
Good morning. You mentioned in your prepared remarks your outlook on the reinsurance business. I cannot recall the exact word you used, but I did not think it implied much change from the current level of the, I think we put up a 0 this quarter. Is that characterization correct?
I think we are, Dan, I would say we are continuing to build and working to grow that business. We essentially characterize it as sort of over the next 12 months, sort of roughly positive, but [we did not note it as significantly positive] .
Sure. That sounds like a decent uptick from last quarter, where I think it was minus 1, the expectations were for more, something that looked a little bit more like 2010, which was a minus 3. If all this math is right, what sort of led to a, I guess I will call it an improvement in the outlook?
Listen, I would, again, back to we have been trying to be pretty measured about this, we will always do that as is our practice. We believe we will see continued improvement here. I would not say it is a dramatic change. It really is sort of roughly the overall same outlook. Again, as we said before, certain aspects of the business on the fact side and on the capital market side, cat bonds, et cetera, tend to be a bit lumpy. Sometimes a little more positive, a little more negative. We will highlight that in the process. Essentially, this is a business in which we think demand is going to continue to increase. The events around the world have actually highlighted that. It will be reflected in our overall business. We just see solid progress for 2011.
Okay. Then in terms of the brokerage margins, do you have any visibility on any further sort of one-timers, if you will, like we saw this quarter with the lease termination?
We really don't. I would highlight again on the lease termination in France, for us, that really for us is just an investment in our colleagues around the world. This is something that in the context of what we're trying to do with Aon United and really bring our global firm together to deliver for our clients in a very local way. Our colleagues in France have just done a remarkable job with Robert Leblanc. Laurent, Michel, and all the colleagues there have just done a great job. Really it's an investment we wanted to make to get our business back closer into kind of central Paris. It's something we've talked about for quite some time, and we believe that this is going to help our business long term. We made the investment. We're going to always do that to strengthen our business.
Our business lets us make these investments and absorb it, and that's exactly what we did in the context of Q1. We don't see anything more on the horizon, but wanted you to understand why we did it and the psychology behind it.
Yep, understood. Then last quick one on the commission compliance efforts. I forgot exactly which program that falls under, but any update you could add there as to sort of how that has helped profitability versus what you think it could do and sort of maybe what inning we're in, I guess, in that effort? Thank you.
Great question. Thanks, Dan. This really relates back to kind of Aon Broking. If you really think about how we're going to grow our business, we're going to take a number of steps to really bring new clients in and get a greater share of wallet with them, a la what we're doing on the revenue engine and Client Promise. We're also going to work to, in the context of that, is we get them the best deals out there in the world, best terms, conditions, best price. We're also going to work to make sure we get a fair and appropriate kind of yield per dollar of premium placed. That really is our Aon Broking effort. That's what you're describing. We're in the early innings of that still.
In the nine-inning baseball game, if you want to use that analogy, we're kind of still in the third or fourth inning, early innings. It's beginning to actually have some benefit for us. We're excited about that. We can see how that's going to play out for us over time in a very positive way. That's really still early innings, but we're quite excited about it. That combination of new clients, again, we had a great quarter from a new client, a new business standpoint, grew it 11% across the board, which is fantastic for us. Feel very good about that. Very good on the retention side, we think this one you're describing or highlighting, Dan, is a very important one for us as we continue to increase yield per dollar of premium placed.
Do you see it as a contributor to 2011 profitability, or is this more of a 2012 and beyond sort of effort?
No, we see it as having meaningful impact as we get into the second half of 2011 and then really kicking in in 2012 and 2013.
Thank you very much.
Sure.
Thank you. Our last question comes from Scott Scher, Clovis Capital. Your line is open.
All my questions have been answered. Thank you.
All right. Thank you. I would now like to turn the call back over to Greg Case for closing remarks.
I just wanted to say to all of our investors and partners on the phone, thanks for taking part. We appreciate your support in Aon.
Thank you. That does conclude today's presentation. You may now disconnect.