Welcome to the Marsh & McLennan Companies conference call. Today's call is being recorded. Fourth quarter 2016 financial results and supplemental information were issued earlier this morning. They are available on the company's website at www.mmc.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risk and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For more detailed discussion of these factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the MMC website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule on today's earnings release.
I'll now turn this call over to Dan Glaser, President and CEO of Marsh & McLennan Companies. Please go ahead.
Thank you, Derek. Good morning, thank you for joining us to discuss our fourth quarter results reported earlier today. I'm Dan Glaser, President and CEO of Marsh & McLennan Companies. Joining me on the call today is our CFO, Mark McGivney, Peter Zaffino, the Chairman of Risk and Insurance Services, Julio Portalatin, CEO of Mercer, Scott McDonald, CEO of Oliver Wyman, and Keith Walsh, Head of Investor Relations. I recently returned from the World Economic Forum in Davos. For the 12th consecutive year, the WEF released its annual global risk report, which was prepared with the support of Marsh & McLennan Companies and other partners. The report highlights the social and political risks that crystallized around the world in 2016 and examines some of their root causes, which include income and wealth disparity, a fraught geopolitical environment, and disruptive technological change.
The year also saw significant volatility in financial markets, Brexit, continued terrorist activity, and a rising populism that challenges some of the basic tenets of capitalism and globalization. We are certainly living in an age of VUCA, an acronym that stands for volatility, uncertainty, complexity, and ambiguity. The complexity, quantity, and speed of information today make it difficult for countries, companies, and individuals to understand both risk and opportunity. For example, new technologies such as artificial intelligence are creating challenges from both a technological and governance standpoint. The cybersecurity landscape is likely to broaden to include critical infrastructure, governments in many parts of the world are less stable and perhaps less functional than previously thought. There is also a silver lining. Technology is transforming the lives of billions of people for the better and will continue to play a vital role in promoting global prosperity.
Productivity and quality of life are measurably up in most corners of the world, healthcare innovation is providing new medical solutions that allow people to enjoy longer and healthier lives. This is an extreme case of best of times, worst of times. It is the best time for those who are agile and innovate. At the same time, the pace of innovation is creating new risks, ones that will be amplified if companies are on the wrong side of social, political, and environmental issues. The challenges are daunting, but there is more opportunity than ever before, our clients need advice and solutions around the globe. We continue to execute a simple, yet effective strategy: to be a trusted advisor around the issues of risk, strategy, and people. With this backdrop, we see strong demand for our services.
Marsh & McLennan Companies is positioned for long-term growth, our competitive advantages will be put to good use. Now let's discuss our performance. We capped off another excellent year with a strong fourth quarter, which Mark will discuss in more detail. In the fourth quarter, we produced underlying revenue growth of 3% on a consolidated basis, including 5% growth in RIS and 2% growth in consulting. We also delivered double-digit growth in adjusted EPS, driven by higher operating income with strong margin expansion. At the same time, we continue to keep our annual commitments to shareholders to increase dividends per share by double digits and to reduce our total shares outstanding.
We continue to grow the firm through acquisitions, building our market position, capabilities, client services, and geographic footprint. Looking at our 2016 results in more detail, consolidated revenue exceeded $13 billion, with underlying revenue up 3%. Underlying revenue growth was balanced, with both the Risk & Insurance Services and consulting segments rising 3%. Within RIS, underlying revenue growth was 3% at Marsh and 2% at Guy Carpenter. 2016 marks Marsh's sixth straight year of underlying revenue growth in the 3%-5% range. Despite rate and other pressures faced in recent years by reinsurance brokers, Guy Carpenter has produced underlying revenue growth every year since 2009, a solid achievement. Within consulting, both Mercer and Oliver Wyman delivered underlying revenue growth of 3%. Mercer's consistent record of underlying revenue growth between 3% and 4% continued for the sixth straight year.
Oliver Wyman finished the year strong, overcoming a challenging third quarter. MMC continues to generate positive operating leverage as adjusted operating income rose 10% to $2.7 billion in 2016. Our adjusted margin increased 140 basis points, our ninth consecutive year of margin improvement. Similar to our revenue growth, margin expansion was balanced across the segments, with RIS rising 140 basis points to 24.7% and consulting up 130 basis points to 18.6%. As we have said many times, we do not have a margin target. We view margin expansion as a natural outcome of managing a business properly to grow revenue and earnings. EPS on both a GAAP and adjusted basis increased by double digits. GAAP EPS rose 13% to $3.38, adjusted EPS increased 12% to a record $3.42. Since 2009, adjusted EPS has grown at a CAGR of 13.3%.
We are proud of our track record on our journey to being among the elite growth companies of the world. MMC has consistently delivered strong financial performance over many years. We have come a long way since we began this journey nine years ago. Over that period, our adjusted operating income has nearly tripled to $2.7 billion, and our adjusted margin increased from 8.8% to 20.5%. This performance has compared favorably to the broader market. Over the past nine years, MMC's annual EPS growth has exceeded the S&P 500 by an average of seven points. While we may not accomplish this every year, we do expect to grow EPS at a higher rate than the S&P 500 over long stretches of time with lower capital requirements and lower levels of risk. Let's spend a few minutes on how we are positioning the firm for continued future growth.
We invest to grow MMC both organically and through acquisitions. We have been improving the mix of business over several years by focusing our investment in growth areas while divesting or de-emphasizing other parts of the business. Acquisitions are an important part of our balanced capital allocation strategy. Since 2009, we have committed nearly $6 billion across roughly 130 transactions. We invest to enhance the growth rate of the overall firm across three target areas, geography, segments, and capabilities. Recent examples include our expansion throughout Latin America, Asia, the Middle East, and South Africa. Marsh's build-out of MMA and our U.K. SME strategy. The emergence at Marsh & Guy Carpenter of the cyber flood and mortgage practices. Investments at Mercer such as Workday implementation capabilities, global health and benefits technology, and the Mercer Marketplace Health Exchange.
Investments at Oliver Wyman in their digital technology and analytics platform, as well as continued pursuit of high-growth areas, including healthcare and public sector. These focus growth areas now account for over 25% of our total revenues, up from just 10% in 2010. We expect these faster-growing businesses will become a larger proportion of MMC over time, enhancing our long-term revenue growth. We are building the company for the long term. We allocate capital based upon maximizing returns and increasing the future earnings power of MMC. This takes discipline and consistency as share repurchase will almost always be more accretive in the short term. We will always choose long-term value creation, which is in the best interest of our clients, colleagues, and shareholders. We manage the firm to deliver not just in a given year, but to invest and build for the future.
We believe MMC is positioned to deliver strong growth as the benefits of these investments emerge over time. Looking at 2017, we see the operating environment as broadly similar to last year, including modest global economic growth, political instability, and foreign currency fluctuations. We see geopolitical risk, specifically its impact on foreign exchange rates, being a potential downside, but difficult to predict. That said, I have more hope than I had six months ago with regard to the U.S. around GDP growth, inflation, interest rates, and possible U.S. corporate tax reform. Consolidated underlying revenue has grown in the range of 3%-5% for the last seven years, and we view this as the likely outcome for 2017. In addition, we expect to expand margins, deliver strong growth in adjusted EPS, and return meaningful capital to shareholders. Before closing, I want to thank our 60,000 colleagues for their contributions.
Our talented colleagues and how they serve clients are core to our long-term success. Companies that do well over long stretches of time can become complacent. Our culture guards against this. It is striving and challenging. It acknowledges that change is good and there is always a better way. This ensures a constant search for innovation, creativity, and efficiency. It is my privilege to work with a strong leadership team that is defined by its core values of integrity, respect, inclusion, and transparency. Our diversity of thought and cohesiveness are key strengths. We take our commitment seriously. We have delivered year after year. In summary, we are very pleased with our fourth quarter and full year results as we continue to execute our long-term strategic and operational objectives for growth. With that, let me turn it over to Mark to give you more details on our fourth quarter performance.
Thank you, Dan, and good morning. In the fourth quarter, MMC's performance was strong, with underlying revenue growth in all of our operating companies, margin expansion in both segments, and double-digit growth in both GAAP and adjusted EPS. Consolidated revenue increased 1%, or 3% on an underlying basis. Operating income increased 6%, while adjusted operating income rose 16% to $676 million. GAAP EPS rose 18% to $0.84, with adjusted EPS increasing 25% to $0.89. Our adjusted operating margin increased 250 basis points to 20.1%. As we stated on last quarter's call, you get a better sense of our underlying performance looking at margins and margin improvement on a year-to-date basis. As Dan mentioned, for the full year, MMC's consolidated adjusted margin expanded 140 basis points. At Risk & Insurance Services, fourth quarter revenue rose 4% to $1.8 billion, with underlying growth of 5%.
Adjusted operating income increased 15% to $421 million. The margin expanded 240 basis points to 23.5%. At Marsh, revenue in the quarter rose 4% to $1.6 billion. On an underlying basis, revenue increased 5%, led by solid contributions from all major geographies. The U.S./Canada division underlying growth was 4%. The international division underlying growth was 5%. EMEA rose 5%, Asia Pacific was up 4%. Latin America grew 7%, which came on top of 13% growth in the prior year quarter. In the fourth quarter, Marsh completed its acquisition of Bluefin Insurance Group. Bluefin will be combined with Jelf, which we acquired at the end of 2015 to create a leading SME insurance broker in the U.K. with more than 2,500 employees serving over 250,000 clients in 80 locations. In addition, this week, MMA completed the acquisition of J.
Smith Lanier, one of the largest privately held insurance brokers in the U.S. JSL has annual revenue of approximately $130 million, with 600 employees in 21 offices across the Southeast. With this addition, MMA's annualized revenue now exceeds $1 billion. Guy Carpenter's revenue was $222 million, an increase of 3% on both a reported and underlying basis. Underlying growth came on top of 5% growth in the fourth quarter of 2015. In the Consulting segment, underlying revenue rose 2%. Consulting's adjusted operating income increased 13% to $299 million. The adjusted operating margin expanded 220 basis points to 18.9%. Mercer's underlying revenue increased 1% to $1.1 billion. Investments grew 10%, while talent increased 3%. Health decreased 1%. Retirement was down 3%. In the quarter, Mercer completed the acquisition of Thomsons Online Benefits, a leading global benefits software business.
By combining our consulting and broking expertise with Thomsons' technology platform, we further position ourselves for sustained leadership in benefits globally. Over the last few months, Julio and his team have undertaken a review of Mercer's organization. Following this review, Mercer decided to implement a number of changes, including simplifying the organization and reducing layers, all of which is intended to improve speed of decision-making, agility, and efficiency. Fourth quarter results reflect a restructuring charge of $33 million that we have excluded from our adjusted results. Mercer expects additional restructuring charges of approximately $10 million in the first half of 2017. Oliver Wyman returned to growth in the fourth quarter. Revenue was $486 million, with underlying growth of 4%, a bit better than we had expected. Results were driven by strength across several practices, including a strong performance in the public sector.
As we mentioned on last quarter's call, in the first quarter, Oliver Wyman faces a difficult comparison to the 15% underlying revenue growth in last year's Q1. We are well-positioned for continued progress in 2017. This year, we expect to generate underlying revenue growth in the 3%-5% range, margin expansion, and strong growth in earnings per share. As we typically do at this time of year, let me update you on our global retirement plan. As discussed on our last earnings call, we closed our U.S. defined benefit plan effective December 31st, 2016, and froze future benefit accrual. As a result, we were required to remeasure our U.S. pension liabilities in the fourth quarter. This remeasurement resulted in incremental pension expense of less than $0.01 per share in the quarter.
Moving to 2017 retirement expense, many factors go into determining the year-end measurement of our global pension expense. Beyond changes in discount rates and asset returns, GAAP pension expense takes into account projected salary increases, mortality rates, demographics, inflation, and contributions. Based on our year-end valuations, we expect our global retirement expense to decrease by approximately $30 million in 2017. Moving to foreign exchange, as we anticipated on last quarter's call, the effect of foreign exchange on adjusted EPS was a slight positive in the fourth quarter, resulting in a de minimis impact for the full year. Assuming exchange rates remain at their current levels, we expect the effect of foreign exchange on 2017 operating income will be a slight negative. Investment income was $2 million in the fourth quarter, a slight increase over the prior year.
For the full year of 2016, investment income was less than $1 million, compared with $38 million in 2015. Following the liquidation of Trident III in 2015, we have a substantially smaller private equity portfolio. As a result, we expect to generate only modest investment income going forward. Our adjusted tax rate in the fourth quarter was 25.5%, compared with 29.7% in the fourth quarter of 2015. The lower rate in the quarter reflects several items, including the geographic mix of earnings and the recognition of some discrete items. For the year 2016, our adjusted tax rate was 28%, compared with 28.7% in 2015. When we give forward guidance around our tax rate, we do not project discrete items which can be positive or negative. Based on the current environment, it is reasonable to assume a tax rate of 29% for 2017.
Before I talk about our balance sheet and capital deployment, I want to reiterate the key elements of our corporate finance strategy. We talk about balance in many aspects of our strategy, and our approach to capital allocation and our balance sheet is no exception. Our current position strikes a balance between the efficiency of our capital structure and prudent flexibility to pursue opportunities or manage through disruption. Since 2013, we have added more than $2.5 billion of debt to our balance sheet and reduced our cash balances by around $1 billion. Notwithstanding these moves, our balance sheet leverage remains well-positioned relative to our peers and the broader market. When we plan for capital deployment, the amount we target is a combination of the free cash flow we generate and the debt capacity we create from our strong earnings growth.
This allows us to maintain our leverage ratio at its current level while deploying substantial amounts of capital. In terms of capital return, we have two annual commitments to our shareholders. We will increase our dividend per share at a double-digit rate, and we will repurchase enough shares to reduce our share count. We established these commitments for a reason. Very few companies are able to consistently increase dividends and reduce shares outstanding over long periods of time. The ones that do tend to significantly outperform the market. Beyond these commitments, capital deployed will be balanced across reinvestment in the business through acquisitions and other investments and returning excess capital to shareholders. We have a preference for reinvestment but also recognize that returning capital through share repurchase can produce substantial returns as well.
Our corporate finance strategy is consistent with our overall strategy, striking a balance between delivering solid results today while positioning for the future. Corporate debt at year-end 2016 was $4.8 billion, including $50 million of commercial paper outstanding. In January, we added an additional $1 billion of debt as part of our planned financing for 2017. Considering the $250 million debt maturity in April, we expect the net increase to overall debt in 2017 to be about $750 million. We project interest expense will be approximately $225 million, with Q1 slightly higher than the rest of the year due to the April debt maturity. Cash on our balance sheet at year-end was just over $1 billion, which was down from about $1.4 billion at the end of 2015. Cash in the U.S. stood at $184 million.
Uses of cash in the fourth quarter totaled over $1.1 billion and included $175 million for share repurchase, $178 million for dividends, and $778 million for acquisitions. For the full year, our uses of cash totaled nearly $2.5 billion and included $800 million for share repurchase, $682 million for dividends, and $1 billion for acquisitions. In 2016, we delivered on our capital return commitments. We reduced our share count by 8 million shares and increased our dividends per share by 10%. For 2017, we expect to deploy capital in line with the level in 2016 across dividends, acquisitions, and share repurchases. With that, I'm happy to turn it back to Dan.
Thanks, Mark. Derek, we're ready to begin Q&A.
Thank you. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. In the interest of fairness, we ask that you limit yourself to one question and one follow-up. Again, press *1 at this time to ask a question. Our first question comes from Quentin McMillan with KBW.
Good morning. Thanks, guys. Thanks, Mark, very much for the color. Just about the restructuring charge in the Mercer business of $33 million, can you just help us understand what you're investing in there? You said $10 million of potential outlay for the first half. Is that going to help organic growth in Mercer, and what specific divisions may that be?
Okay. Julio, you want to take that?
Yeah, sure. Thanks, Quentin. Part of our approach at Mercer has always been to be very disciplined in the way we look at our businesses and constantly challenge ourselves on how best to serve our clients, their needs, and further drive growth and improve profitability. We've been doing that quite consistently over the years that I've had the opportunity to lead this great organization. Most of the times when we do these reviews, and take whatever actions, we wear those in our operating results, whatever they might be. This time, we're taking a small charge, certainly small relative to our overall base of $4.4 billion in revenue.
One of the things we've done is we've created a wealth business, which basically allows us to take the retirement and the investment business, put it together, and allow to offer a value proposition against all of the asset management client needs across the entire spectrum. This reflects really how our clients want to do business with us. They are making decisions on managing and providing retirement benefits to their employees in ways that cut across these two businesses, and we've made that easier for them to do, and easier to do business with us. We also thought more broadly throughout the company to provide a simplified and faster decision-making outcome by delayering, increasing spans of control, empowering decision-making closer to the client, with the intent, of course, to be simpler and more agile. All of these actions will help us drive simplicity, agility, and empowerment.
Ultimately, yes, we want to drive more growth, too. That's what our intent is, or else we wouldn't be doing this. As time goes on, I think we'll be able to see some of that.
Great.
Thanks, Julio. Anything else, Quentin?
Just a quick question. You guys did the Bluefin acquisition. Can you tell us how much cash you have left overseas? A bigger picture question with that is, if the new administration does have a repatriation and a benefit on the tax side for that, would you guys repatriate the majority of your overseas capital, and would that change anything in terms of your outlook for maybe share repurchases or other opportunities within the U.S.?
A couple of things, and then I'll hand over to Mark to give you a little bit more detail. Over a long stretch of time, we have developed ways to effectively bring back the cash that we need from our overseas operation without putting undue stress on our overall tax rate. Having said that, we absolutely believe as a matter of U.S. competitiveness that a territorial system which matches up with the rest of the OECD makes complete sense. Not a tax holiday, as a one-time kind of basis, but a permanent level of reform that unshackles U.S. corporations from having to even think about where cash is located, where foreign competitors do not. Mark, you want to add to that?
In terms of the cash offshore, of our $1 billion of cash I talked about, as I mentioned, $184 million or so of that is in the U.S., the balance would be overseas. Just to build on what Dan said, we have proven very effective of getting access to our global cash flows every year. We don't necessarily have trapped cash offshore, if you will, in what goes into the roundly $2.5 billion of capital we deployed this year is getting full access to our free cash flow around the world.
Perfect. Thanks very much, guys.
Thanks, Quentin. Next question, please.
Next question comes from Kai Pan with Morgan Stanley.
Thank you. Good morning. The first question is on the brokerage organic growth, 5%, very strong in the quarter. Could you give a little bit more color on that, especially in EMEA? Do you see any sort of lifting uncertainty, post-Brexit that could help the growth going forward?
One of the things, Kai. Then I'll hand off to Peter, because you mentioned EMEA specifically. It's interesting that EMEA has grown underlying revenue for 24 straight quarters. It has been a stalwart within Marsh's overall performance, which has been consistently solid across many years. Peter, you want to give some more color?
Thanks, Dan, and thanks, Kai. We're really pleased and proud, as you pointed out, on our fourth quarter results with 5% underlying growth. We had equal contributions from the U.S. and Canada and international. I think it's important to take a look at the year, though, where we had 3% underlying growth, really strong contributions from many parts of the world. If there's one bright spot within the year that I would like to point out, it would be our new business growth. So we are attracting new clients, and that was particularly pronounced in the fourth quarter. We had a slower start to the year, but obviously a much stronger finish. The components of the growth, as I said, were terrific new business led by the U.S. core brokerage business.
We had solid renewal growth because we had strong new business in the fourth quarter last year, so overall contributing to strong growth in the fourth quarter. If I was to comment on IMEA specifically, as you pointed out, again, a very strong quarter. A lot of this was driven by renewal growth in Continental Europe, had a very strong new business year in the fourth quarter 2015. Several additional bright spots within
IMEA, where Middle East had a terrific quarter, its best quarter of the year, and Africa had strong organic growth. In addition, we had very good new business in the U.K. Overall, all components of IMEA contributed.
Okay. Kai, any other question?
Yeah. Follow-up on the MMA, now a billion-dollar total revenue. I just wonder, are you sort of better integrating that business with the rest of Marsh, or you leave it around to just preserve that entrepreneurship? I just wonder any synergy between these two, like intra-the organization.
There's some mild revenue synergy, very little expense synergy, because we're not going to pick up nickels in front of a steamroller. The very idea of us creating that division is to maintain its entrepreneurial spirit, its separate approach. It's a different kind of business. We have no intention of integrating MMA into Marsh.
Great. Thank you so much.
Next question.
Next, we'll hear from Ryan Tunis with Credit Suisse.
Hey, thanks. Good morning. I guess just thinking about the end of the year in Mercer, I guess 1% organic growth. Maybe you guys could just give a little bit more detail about the fourth quarter there, I guess in particular in health benefits, where it looked like organic declined.
Yeah, no, absolutely. I think Julio is very happy to be in the first quarter of 2017 because we've been talking about the fourth quarter for about the last month. We'll go on. Julio?
Okay, thanks, Ryan. Let me give a little bit of a panoramic view. Mercer, across all of its LOBs globally, okay, let's just start there, I'll get back to health, has been operating in a 3%-4% world for quite some time. Over the course of the year, of course, quarters will vacillate and they'll fluctuate. Our 2016 global Mercer results continue in that same range, with underlying revenue growth of 3% and strong earnings growth, of course, and further margin expansion. That's probably where I'd think of Mercer in 2017 as well. Health, it did have a pullback in the fourth quarter. As I mentioned, we don't really want to focus too much on one quarter, but rather look at the year's performance, which in the case of health, again, was around 3%.
We did have, in the fourth quarter, some client retention that held up rather well, quite frankly, and we were pleased to see that. We like to see our clients sticking around for us to continue to sell additional project work to. We did have some softness in that project work in the fourth quarter. I'm sure it won't be surprising to hear that some of our prospects and clients are indeed taking a bit longer to make decisions as they wait for the impact of the potential changes that are going to be coming about, especially in the areas of the ACA and others. It wouldn't be surprising that some softness would be picked up. Health remains a very profitable and growing business for Mercer. We expect this business will continue to be a strong contributor for Mercer, thank you.
Also, Ryan, not to give the 1% too much of a pass, it was a pretty tough comparator because Mercer grew 5% in the fourth quarter of 2015. Any other question?
Yeah. I appreciate that you guys don't target margins. It's a product, I guess, of organic revenues, organic expenses. One thing that I guess stood out to me this quarter in RIS was, if I look at the expense base and kind of adjust for acquisitions and currency, it looked like organic expense growth was pretty close to flat on the quarter. I was just wondering if there's something going on in terms of an organic expense management story there, if there's something you're doing differently where you think, I don't know, structurally or cyclically at this point, you think that you don't necessarily need to grow organic expenses at kind of the 2%-3% level you've talked about historically. Thanks.
Let me talk about margins a little bit broadly, then I'll hand over to Peter to get into RIS a little bit on the margin front. The first thing you have to do is look at the full year, and rolling four quarters as well. The longer stretches, the better. You're very right that we don't have a margin target, but having said that, we have improved margins for nine consecutive years. Actually, we're about 1,200 basis points higher from where we started this journey. Margin growth has been a big part of our overall performance. When you ask whether we're doing anything differently in terms of managing our organic expense growth, the answer is yes. It's been yes every year for nine years. We are continually finding ways of creating more value in our business. We believe we're in a more-for-less business with clients.
We have to deliver more value to them at lower internal costs year after year. Our search for efficiency, our culture of there's always a smarter way of doing something, is rooted deeply within the organization. When we look at the overall company for the quarter, we only grew expense 1%, and for the year, we grew expense 2%. Pretty consistently over nine years, we have grown revenue at a faster pace than growing expense. Peter, you want to talk about RIS?
Sure, Dan. I'll just add a few comments on RIS. The adjusted NOI margin for the quarter was 240 basis points, I think it's really important just to look at the full-year margin, as the quarters can have considerable seasonality
That was 140 basis points, and it was helped by pension. I think what Dan said in the earlier comments, and he said many quarters, is that the margin really does reflect the way we run the business. Historically, we've made a lot of investments. We grow revenue greater than expense. During that period, we've had a number of investments that have increased efficiencies. We are adding headcount. As of January, we will have over 900 producers in MMA. That's a great example. We've added headcount in Continental Europe and Latin America and Asia, where we think there's real good opportunities to grow. On top of that, we've been wearing intangible amortization, which has doubled since 2011 in our margins. We've been very disciplined.
Yeah. One thing to bear in mind as well in terms of overall margins when you look at the company, we've been pretty consistent in both segments. Each segment year after year has delivered margin growth. As Peter mentioned, for the year, pension was a help, FX was a help as well, even subtracting out those two factors, we had strong margin expansion in both segments.
Thank you.
Next question, please.
Next up we have Elyse Greenspan with Wells Fargo.
Hi, thanks. Good morning. My first question is on Guy Carpenter. As we think about 2017, you guys have made a decent number of hires in that segment over the past year. How do you think about just the growth outlook for that business and the margin profile there? When we think about growth picking up potentially from some of the hires from Guy Carpenter, is that something that we would see in 2017, or does it sometimes take longer if we're potentially thinking of you guys taking on business from some of your competitors in the space?
I'll hand off to Peter in a second to talk specifically about Guy Carpenter. I would just say really broadly that we're a big company. Hiring people very rarely will move a needle for a $13 billion revenue company. Every year, we attract a lot of talent into the organization. I think more than any other factor over the last nine years that has reemerged within Marsh & McLennan Companies is that we are the employer of choice in our chosen industries, and that we attract a tremendous amount of talent who want to come work at Marsh & McLennan. That level of strategic recruitment is very strong throughout the firm. The quality that we're adding within the firm is quite considerable.
When you think about the new hiring we do in terms of strategic recruitment, combined with the attrition that we would normally have in any given year, you're talking about hiring something like 7,000 people a year. We take it really seriously. We run people through a labyrinth because ultimately we know we become who we hire. We take that really seriously, and we're really excited about not only Guy Carpenter, but the rest of the organization, the talent that we're able to attract into the firm. Peter, you want to address GC specifically?
Sure, Dan, thanks. Elyse, let me just comment on the fourth quarter of the year for Guy Carpenter briefly. They had 3% underlying growth in the fourth quarter, their seasonally smallest quarter. That was on top of 5% growth in the fourth quarter 2015. It was a tough comp for them, but they did very well. Very strong new business in the U.S., Asia, and their global specialties. We continue to see rate decreases if we look at the fourth quarter led by property. Overall, doing 2% for the year with Guy Carpenter, we were very pleased. We are making strategic investments. It's around people, data and analytics, and organizational design. 2016, I think we accomplished a lot. Appointed new leaders. We continue to add and develop key talent. One thing to note, though, the headcount is not up.
We are creating our own space to invest by being more efficient. Overall, we've made some terrific hires that complement Guy Carpenter. We do believe it will help with production and top-line growth, but we are managing the headcount and expense, and we have a lot of momentum, and expect us to continue on the path that we have delivered over the past several years.
Okay, thank you. If I tie together some of your comments on the 2017 outlook, it seems like the lower retirement expense is to some degree offset by the higher interest expense from the debt you guys issued. When we think about potential EPS growth, you were about 12% in 2016. Your commentary on an organic basis would lead me to think 2017 might be a little bit better than 2016, just very high level. How do you think EPS growth, do you get closer to your 13% target in 2017, just based on where we sit today and how you're thinking about the economy, and things like that kind of post the U.S. election?
Okay. A few things. One, we're happy to inhabit this world that's filled with risk and uncertainty. The visibility is not clear. While we feel pretty good about where we're sitting today in terms of the internal operations of Marsh & McLennan, we're still quite concerned about when we look at the rest of the world. We're impacted by macro factors and whether it's global GDP growth, for us specifically, U.S. and U.K. GDP growth, P&C rates and premium growth exposures, that sort of thing, 10-year yields, foreign exchanges. There's a whole plethora of things for us to stay up at night thinking about on a macro basis, right? You go back nine years ago, our issues were inside the shop. Now it's really what's going on in the rest of the world, and there's enough things that keep us kind of on our toes.
Having said that It's certainly been a challenging environment all the way since the 2008 financial crisis, and we have been able to generate 3%-5% organic growth even in a difficult global economic environment with other macro factors which are generally more headwinds than tailwinds. If we were making any predictions, and it's not guidance, it's kind of soft. We're kind of, we've been in 3%-5% for a lot of years now, so we're probably still in 3%-5%. The world doesn't seem like it has changed all that much. That's, I think, where we are. What does that mean for EPS? If you go back, first of all, our adjusted EPS CAGR since 2009 has been 13%. We're proud of that delivery. It's very strong performance, market leading, and we've delivered for shareholders.
When we established that goal in 2010, our margins were much lower than they are today. Clearly, it's just the math. It becomes more difficult to grow at that pace the higher your margins become. In fact, it can be counterproductive because you need more separation, more air between revenue growth and expense growth to drive the same amount of margin expansion. While margin expansion was a key strategy of ours when you go back to where we were behind the pack in 2009 and 2010 and 2011, we're much more focused now on top-line growth and investing in the business for long-term performance than we are for any short-term margin expansion. Having said that, we do expect margin expansion in both segments in 2017. We don't give guidance on EPS growth. Our 13% CAGR, I remind you, is over a long period of time.
It's not any one year. It's not an annual target. We don't operate that way. We don't budget ourselves that way. We expect 2017 to be a pretty decent year. It's really too early to call where we'll end up with that. We're reasonably optimistic. We're certainly no more pessimistic than we were at this time last year.
Okay. Thank you very much.
Sure. Next question, please.
Next question comes from Dave Styblo with Jefferies.
Thanks for the questions. I wanted to come back to taxes. More importantly, just to get a better understanding of how you guys might consider Trump or Ryan's tax reform plans impacting you. I suppose there's so many moving parts here, there's the direct P&L impact from your corporate taxes benefiting, maybe there's an offset from potentially repealing the deductibility of net interest expense, maybe not immediately impacting you, but further down the line would be higher GDP growth from corporations outside of you investing and just needing more P&C and insurance overall. Have you guys sort of triangulated those data points to kind of get a better sense of maybe more near term how things could impact you versus longer term?
The answer is yes. We spend a lot of time thinking about the different scenarios, and we can drive ourselves crazy because nobody has any idea, and it's only speculation as to what would actually happen. Let me really take it at a helicopter view as opposed to any of the specifics. Certainly corporate tax reform in the U.S. would improve U.S. competitiveness, spur investment, and create jobs. We are absolutely encouraged that it is a priority of the new administration and several members of Congress to address our convoluted corporate tax system in the United States. Having said that, we are not certain in any way, shape, or form that there will be corporate tax reform in the U.S., it remains a hope and not something for us to really strategize around.
It's fair to say that any corporate tax reform in the U.S. would be good for Marsh & McLennan Companies. How good would depend on the details of it. Just as an aside, we would say the bulk of any tax savings that we could receive will drop into earnings and improve free cash flow. That's really all we have to say. The devil is in the details, and it's only a potential benefit to us. I just reaffirm that we've executed regardless of our tax rate, and it doesn't drive our strategy.
Sure. Okay. Obviously saw the headline of the National Flood Insurance Program award that's been finalized now. Can you talk a little bit more about the timing, the economics there? Specifically, it seems like the technical strengths that you showcased resonated. I'm wondering if there's something there that could help signal what you're bringing to the table superior and perhaps help with our other RFP shots on goal.
Yeah. No, absolutely. I'll hand over to Peter, obviously, we're thrilled with the win, particularly because when we evaluated the companies that would have enabled us to become a major player in the write your own flood market, we believe that Torrent had the best technology and was the best shot for the future. It's nice to have that validated by at least one large entity. Peter?
Thanks, Dan. Let me describe a little bit about what Torrent is and then talk a little bit about the National Flood Program. Torrent's a best-in-class flood servicing company. It has terrific technology. We acquired Torrent in 2014 because as Dan just outlined, we believe the company had built market-leading technology and will position Marsh to be a leader and innovator in the evolving flood insurance market. So that's the NFIP as well as the private market. We've made good progress to date. Technology, again, is industry leading, and the team has met expectations, so we're very excited about the future. We are very pleased that FEMA formally appointed Torrent in January 2017 as the direct servicing agent for the National Flood Insurance Program. Being selected as a contractor will administer approximately 20%-25% of the NFIP policies.
What you have seen publicly in terms of the estimated contract is based on the number of policies. It could go up or down depending on the number of policies that go in. The guidance has been around $20 million-$25 million annually, so it's a four-year appointment with an opportunity to extend for an additional year. Some of the things that I think that they found attractive was our ability to help facilitate NFIP's response to flood events, improving the customer experience for the policyholders, maintaining data security and delivering continuous innovation. Those are just some of the highlights, we really look forward to working with the federal government, to improve its performance. We're excited to get going.
Thanks, Peter. Next question, please.
Next question comes from Charles Sebaski with BMO Capital Markets.
Yeah, good morning. Thanks for taking my question.
Morning.
I just have a general question on the business overall on how you talked to, I guess, Dan, more on the more for less as a business philosophy of what you guys are having to deliver. I'm just curious if there's anything changing with regard to the relationship between organic growth and the ability to drive efficiencies in the business. I'm wondering if be it technology, be it other components of what's driving operating leverage. If the long-term relationship between ability to gain efficiencies is the same or equally dependent on organic growth as it has been in the past.
Yeah. We absolutely believe that there's linkage between revenue and expense. That is, in a consulting firm, in a brokerage firm like we have, the one thing that we can control is expense. Whereas revenue is really how are you positioned? Are you investing on the expense side in the right things to remain strategically relevant to your client base? We spend a lot of time on thinking about the customer experience and what clients will need, what's a day in the life of a client three years from now? Trying to position ourselves to be able to provide value to that client out into the future.
Obviously, that means a little bit more on analytics, a little bit more on data analysis, a little bit more, but not necessarily losing that high touch relationship manager face-to-face, because we still think that remains very relevant in the businesses that we operate. World is changing fast, and I think that there are a lot more efficiencies to come. Even though we're experimenting, we have very little use of robotics or artificial intelligence or deep learning within our businesses today, in any material way. Who knows where that can lead us. Ultimately, the package of what we deliver and what we focus on is more about what do we think clients not only need today, but what will they need in the future? Are we positioned to deal with that? What are our gaps? That's where our investments are.
This is a brains business, a people business. The most fundamental factor is, do we have a group of smart, hardworking, dedicated, client-centric people working in a collaborative, cohesive environment? The cultural aspect we view as a competitive advantage that is going to endure for a long period of time. There's not too many companies in the world like Marsh & McLennan Companies.
I appreciate that. I guess just maybe a numbers or an understanding on some of the recent acquisitions, Bluefin, J. Smith. Just coming into 2017, given the size, is there any seasonality to those businesses and how they are going to earn through next year that we should just keep aware of?
Peter, you want to address that?
There is no seasonality that I would draw your attention to. If you look at MMA as a business, it is very consistent quarter to quarter, roughly 25% of their revenue in each of the quarters. I wouldn't guide you towards any one particular quarter that we would be lower or higher.
Thank you very much for the answers.
Next question, please.
Next question comes from Josh Shanker with Deutsche Bank.
Thank you very much, everyone. I realize there's people who have questions about tax. We don't know anything. In the age of not knowing anything yet, does that change how much you're willing to pay or how the way you're going to finance a large deal if you were to do one?
I'll take that a little bit, and then I'll hand over to Mark to address that in a little bit more detail. First of all, we've had a string-of-pearls strategy more than anything else. We have not done what I would consider to be large acquisitions for quite some time within the firm. We've done an aggregation of the many. Something like 130 acquisitions over the last six or seven years. Obviously the integration risks when we do integrate are far smaller. Due diligence is far crisper and clearer. That has been our focus. Who knows what the future would hold on that, but we largely, because the acquisitions are not very large in nature. We've been not using much financing. It's been mainly using cash. Mark, do you want to take that?
Just to comment on value, we will see where things come out. Obviously, U.S. firms, they have more cash flow, and so it could increase value of things. Of course, they are more valuable because of the higher cash flows coming out. In terms of impact on how we finance our capital structure, at this point, I don't think so. We'll see what the change could be, but I don't see it having a fundamentally changing our view on our overall capital structure.
The other thing I would just add to it is, we've talked about MMA before many times because MMA, one, we're very satisfied with the agency, and we've committed over $2.5 billion of capital since 2009. It's been our biggest capital deployment in any one segment. The returns have been good. Of course, our returns on the investments that we have already made assume the high U.S. level of tax rate, and we're satisfied with those returns. If ultimately the U.S. tax rate comes down, it means the money that we've already committed, that $2.5 billion return profile, is far better than the good returns that we're already receiving. It's a huge potential positive for us.
I would assume any benefit from the lower tax rate that comes into EPS, would that money get reinvested in the business, or would you have a plan to return that directly to shareholders?
At the end, we've been returning more capital to shareholders than our free cash flow, and we expect to do that in 2017 as well. Our view on whether there's lower taxes in the U.S., and that would largely, the bulk of that would fall into earnings and fall into free cash flow, and then we would use our regular balanced capital allocation strategy to return that money to shareholders through not only organic investments, but as well as dividend policy, acquisitions, and share repurchase.
Okay. Status quo. Thank you very much. Take care.
Sure. Next question, please.
We have no further questions at this time.
Okay, fantastic. Well, I would just like to thank everybody for joining us this morning, and specifically thank our clients for their support and our colleagues for their hard work and dedication in serving them. Have a good day.
Once again, that does conclude today's conference. We thank you.