Good morning, everyone. I am Lucy Fato, Deputy General Counsel and Corporate Secretary for Marsh & McLennan Companies. Welcome to MMC's Investor Day 2014. Today's meeting is being webcast and recorded. A replay will be available later this afternoon on our website at www.mmc.com, along with copies of the presentations to be made by members of our senior management team. For those joining us in person, we will also be distributing hard copies of today's presentations at the start of the Q&A session. To minimize interruptions, we ask that everyone joining us in person please turn off or silence electronic devices. Now let me turn to the agenda for today's meeting. For those of you attending in person, a copy of the agenda is included in your briefing packet. We will begin the morning with remarks by Dan Glaser, our President and CEO.
Dan will be followed by Mike Bischoff, our Chief Financial Officer. You will then hear from Scott McDonald and Julio Portalatin on our consulting segment. We will then take a 15-minute break. Following the break, you will hear from Alex Moczarski and Peter Zaffino, who will review our risk and insurance services segment. We will then have a Q&A session with all of today's presenters, which we plan to conclude by 12:45 P.M. For those joining us in person, you are welcome to stay for lunch, and we encourage you to do so. In addition to today's presenters, we have invited other senior business leaders to join us for the luncheon. Finally, please note that remarks made today include statements relating to future events and results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.
For example, we will use forward-looking statements in describing the anticipated growth in our businesses and projected earnings per share, increased operating cash flows, our expected level of share repurchases and total share count, growth in our dividend, and reductions in pension expense. Forward-looking statements are subject to inherent risks and uncertainties, and MMC's actual results may be affected by a variety of factors. Please refer to our most recent SEC filings, which are available on MMC's website, for additional information on factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Thank you very much for your attention. Enjoy the day.
Companies are complex organisms. Each one has its own trajectory. While you run this enterprise, while it's in motion, you've got to study it, crack its code, protect the moving parts, advance the agenda. Marsh & McLennan Companies can help. We work with you to solve the problems that complex human enterprises face. What's the right way to manage risk? What's the smartest way to grow? How can you get the most out of your people? How do you plan for 10 possible tomorrows while you're busy running today? We help you answer the hard questions. We protect and advance your people, your capital, your strategy, because we believe that complex human enterprises can do amazing things. We are Marsh. We are Guy Carpenter. We are Mercer. We are Oliver Wyman. We are Marsh & McLennan Companies.
Good morning. Come on, you can do better than that. Good morning.
Good morning.
It's great to see everybody. I'm Dan Glaser, the President and CEO of Marsh & McLennan Companies. It's really terrific to see so many people in the room today for our Investor Day, welcome. I'd also like to welcome those who are on the webcast, either listening or watching. Let's get started. I know a lot of you know a good deal about Marsh & McLennan Companies. I'm not going to spend a lot of time on the history of the firm. I'll just give you a brief overview of the company. I'll answer the question, why own Marsh & McLennan Companies? I'll talk about some of our performance over the last several years, our proven performance. More importantly, I'll talk about some of our aspirations for the future and our growth strategies over the coming few years.
I'll give you the helicopter view. Then our individual operating company leaders will dig in deeper and give you further insights into our growth strategies for the future. Marsh & McLennan Companies is a unique company. We've got plenty of competitors. We do not have a single effective competitor across the spectrum of all of our capabilities in risk, strategy, and human capital. We're a brains business. The quality of our colleagues is the single most important feature in the success that we've had as a firm. I applaud my colleagues for their hard work and dedication as they serve our clients. I think they've earned the respect of the entire industry for the performance that they have delivered over the last number of years. When I think about the company, we're an advisory company.
Most of our businesses are advisory businesses, most of them also have Solutions or transactions or implementations. The other interesting thing about the company is essentially our wide moat. We have several enduring competitive advantages. Number one, quality of colleagues, global footprint, the depth of intellectual capital and capabilities that we have, and our culture, cohesive, global, collaborative. These are all enduring competitive advantages. It would be near on impossible to replicate all the capabilities and attributes of Marsh & McLennan Companies. We are strong strategically, operationally, and financially, and we're getting stronger. When I think about the business, it's fairly well-balanced at $12.3 billion between consulting and risk and insurance services. The consulting business fought its way through the Great Recession and emerged on the other side stronger and able to grow and has some decent growth over the last few years, particularly Mercer.
I think both Oliver Wyman and Mercer are positioned for growth. RIS, what can you say about RIS? Delivery after delivery of fine results. RIS, at its very core, is the combination of Marsh & McLennan, Johnson & Higgins, and Sedgwick. The crew we have working for us in RIS believe they're the best in the business, and I agree with them. I also say to them, with the combination of Marsh, J&H, and Sedgwick, "You should be the best." What's the case? Why own Marsh & McLennan? I want you to remember four things. We are targeting long-term EPS growth of 13%. We have increasing cash flows. We believe we will reduce our share count year after year, and that we will deliver double-digit increases in our annual dividends.
We are committed to growth in earnings and growth in cash, we will put that cash to good use, reducing our share count and increasing our dividends. I'm very privileged and actually humbled to be the CEO of Marsh & McLennan Companies and to be the leader of this committed and fine leadership team. It really is a terrific team, when I think about the team, I think about proven capability, hard work, ambition and aspiration, cohesiveness, collegiality. It really is a terrific group. We operate under the principle of Cyrus the Great, diversity in council, unity in command. When we're in that room together, we challenge each other, we accept challenges of the business, we make good decisions. We make the company better, we make ourselves better. Sure, Peter Zaffino has primary responsibility for Marsh. Julio has primary responsibility for Mercer.
When we're dealing with the issues that are confronting the company, we're all in. The issue is in the middle of the table, we're all giving our feedback to that. You're not going to hear today from Laurie Ledford, Peter Beshar, or Scott Gilbert, you see them on the screen, I can tell you, they are significant contributors to the success of our organization. We have something special in our leadership team. We have the possibility of Camelot, I think it separates us and will serve the company and our shareholders well. We believe in philosophy. We think big companies should have philosophy, should stand for something. We have a philosophy around M&A. We have a philosophy for benefits. We have a philosophy for leadership. We have a philosophy around risk. Our philosophies are not blueprints.
The world is far too dynamic for that, but they're guideposts. When we consider our philosophy around leadership, it all starts with values as the foundation of the organization. Respect, integrity, teamwork, excellence. Those are the rules of the house. You either believe in those rules and that way of operating, or you don't work for Marsh & McLennan Companies. When we're thinking about the firm and we're in the executive committee, we make our decisions in the interest of clients, colleagues, and shareholders. We make decisions which we believe are in the best interest of all three over the mid and long term. We have no interest in shorting one for the other. In our view, it's all linked together. Big companies like to measure things. They like to count, and we're no different. We look at everything.
We've got plenty of metrics, but we don't lose sight of the fact that profit and profit growth, that's the most important metric. Nothing good can happen in Marsh & McLennan Companies unless profit is going up. When profit is going up, we can invest more in colleagues, we can invest more in the business, we can build more client technologies, we can acquire more firms, we can return more capital to shareholders. Profit is good, and we spend more time than any other factor in thinking of ways to grow our profit. The other thing about big companies, it's often like this, like who's in charge? Decision-making is obfuscated. Not in MMC. We have a phrase, it's actually a military term, called pinning the rose. We pin the rose on the person who's responsible for the next steps.
Pinning the rose, when you're wearing the rose, it signifies that you are in command. You are the responsible party. You're the person who will take talk and commit it to actual action. The wearer of the rose is not necessarily the most senior person or the most senior person involved in that decision, but they are the person in command of the next steps. At MMC, if you're leaving a meeting and there's any confusion as to what happens now, then what you're supposed to do is stop and ask, "Who's got the rose?" That happens within the firm periodically. We also believe, as part of our philosophy, that leadership should be distributed. Now, I should start by saying it's less about who gets to make a decision than it is about making the right decision.
In our view, making decisions as close to the client as possible, as close to the coal face as possible, usually is the right answer to get to the better decision. We build leaders. We're operating in 130 different countries. We can make plenty of decisions from the 44th floor of 1166 Avenue of the Americas, but we believe the right thing to do is to make as many decisions as possible out in the field. We don't only develop managers, we develop leaders. We develop people who can think with creativity and imagination about possibilities, not just probabilities. We have the possibility of being an elite company. Being an elite company means we have to identify challenges and tackle them and make good decisions. Challenges are good.
In our distributed leadership, people are seeking ways to improve the business, it underpins our entire approach to the business. If there's one phrase that captures us the most, it's there is always a smarter way. We can do better. Forget about what we've done before. We can do better. We have a permanent dissatisfaction with obtained results. That's not dissatisfaction with a scowl. It's dissatisfaction with a smile. It's, "That's good. That's terrific. What can you do now? What can you do next year? How will you improve? What are you doing and investing in now, which will benefit us next year and the year after?" There's always a search, a journey for the smarter way, it fundamentally underpins the decision-making of our leadership team and the entire company. Let's talk a little bit about the performance over the last number of years.
Some of you may have seen this before. This is our basic fundamental strategy, what we call our four pillars, it's about growth, capital, cash, and risk. We have been the champion of a consistent, effective strategy that's focused on us growing revenue and growing earnings in a low-capital environment where we intelligently manage risk. That's our approach. That's what separates us. This broad strategy, you know what's the best thing, the best feature about this strategy? It's because it's clear, broad, and simple enough for us to execute it well. That's what's the best about this strategy. I'm going to spend most of my time today talking about growth and talking about cash, I want to spend a couple of minutes on capital and risk. As a global professional services firm, we naturally have low capital requirements. That's just a given.
On a related point, we use some capital in our business. If you look at our CapEx as an example, it's about $400 million, which is around a peak for us as a company, clearly, significantly more than our competitors as we invest in the business for future growth. Having said that, our CapEx is still only about 3% of our revenue. You compare that to the S&P 500, which runs at about 6%. Let's spend a little bit more time on risk because when we think about risk, we really think about it in three component parts, culture, the risk framework itself, and also process improvements. Culture. From the top to the bottom of our firm, we emphasize ethical behavior and risk mindfulness in an environment where it's safe to speak up and raise concerns if you have them.
In fact, you have an obligation to raise those concerns if you have them. When we think about our risk framework, we have developed an enterprise risk management philosophy, we operate on that basis. We also have created our philosophy, what we call our risk appetite statement, we give that philosophy to every one of our 55,000 colleagues so everyone knows how we think about risk. There's danger in risk, there's profit in risk, we want to think judiciously and carefully about both component parts. In terms of process improvement, our focus has generally been on simplification efforts, taking what's complicated around the management of our businesses and making them more simple, improving controls, and upgrading technology.
When I think about risk, I'd like you to know that every one of our EC members owns a particular risk and reports to the EC on that risk. Some of our EC members are lucky to own a couple of risks, but they all own risks. We've done some good work, and clearly, over time, we've created award-winning communications around our greater good. To call it a code of conduct is not really accurate. It's more of a cultural statement. Let's talk about our proven performance against our targets. It's one thing to establish targets. It's quite another to actually deliver against those targets year after year. In our last Investor Day in September of 2010, we laid out some targets. How have we done?
We said that we would improve on a CAGR basis our operating income by 10% per year, and we have delivered. We said that adjusted EPS growth would approach 13% per year over the long term, and we have delivered. We said that we should deliver shareholder return of 16% on a CAGR basis over the long term, and we have delivered. That's about past performance. What's more important is about future performance. It may seem odd to talk about our history when I start talking about future performance. Again, it's cultural. It's the way we do business. There were no shortcuts taken to getting to sustained adjusted EPS growth that you see on this chart. No shortcuts. We got there the old-fashioned way, organic revenue growth, strong growth in adjusted operating income, margin expansion, leading to sustained EPS growth. That's how we got there.
We got there in the face of some pretty heavy headwinds, particularly when it comes to global GDP and low interest rates. Talking about global GDP, over a 30-year period, we have consistently outgrown global GDP. Our global positioning will serve us well in the future. Where there is growth somewhere in the world, we will be on the ground. Where there is growth, we will find it, and we will capture it. In our view, we will continue to deliver GDP-plus growth around the world. Why do I say that? One, we've been doing it for the past 30 years. Also, risk, strategy, and human capital are all growth businesses. They're more growth businesses today than they were 15 years ago. You pick a topic, globalization, industrialization, tighter supply chains, urbanization, demographic change, increased competition, all of that leads to complexity.
Companies of all sizes need advice. They need help. Plotting their journeys and their futures, assuring their success. There is no company better positioned in the world than Marsh & McLennan Companies in being able to provide quality advice, innovative solutions, and ongoing services in the areas of risk, strategy, and human capital. You know the world's getting better. It's not buoyant out there, to be sure. Just recent headlines, it's one step forward, two steps back, two steps forward, one step back, but it feels a bit better. Business confidence is improving a bit. I say it because it's important. GDP growth globally and interest rates have more of a factor in our success and our ability to grow than actual property and casualty rating levels. We've also materially grown our colleagues internationally.
If you look at overall, over the last five years, 51,000 to 55,000, decent growth, 8% growth in total head count. If you look at the growth in international colleagues from 25,000 to 32,000, in the environment of growing 8% in total as a company, we've grown our international colleague base by 28% over the last five years. That's saying something. We've been at it since 1871, 28% growth is saying something. We've got 26% of our colleague base now located in Asia-Pacific and in Latin America. We've had significant expansion over the last decade. If you look at the decade from 1993 to 2003, the company grew quite a bit, actually barely budged its revenue outside of the U.S.
Whereas in the last decade, we have seen a surge in investment and revenue outside of the U.S. to where the majority of the company, 55% of the revenue, comes from outside the U.S. Let's dig a little deeper. Let's look at the nine growth countries commonly referred to as BRICS and MINT. Brazil, Russia, India, China, South Africa, Mexico, Indonesia, Nigeria, Turkey. We are on the ground in every one of those countries. If you look at our headcount, you can see the strong growth, almost 10% CAGR of growth in those countries over the last five years. Clearly good decision because you can see the revenue is up over 14% per year on a CAGR basis over the five-year period. We are well-positioned for future growth as the BRICS and MINT do well.
Yeah, you may hear a bit, as we do, about the emerging market may come off a little bit, and certainly foreign exchange ain't what it used to be in the emerging market. What? We like our chances. We like the fact that we're on the ground in these countries ready for growth, and we're optimistic about the mid and long-term future of these economies. I want to spend a little bit of time on acquisitions. Acquisitions are a core part, fundamental part of who Marsh & McLennan Companies is as a firm. Ever since Henry Marsh and Donald McLennan put their two agencies together, we've been doing acquisitions, and we do them well. It's important to know we don't just buy companies. We develop relationships over periods of time with smart, hardworking, entrepreneurial executives.
Then more often than not, we jointly decide whether it makes more sense for us to be together than apart, whether we think we could grow better together, whether we think that we can improve better together. That's a joint decision. This is a people business. There's no hostile takeovers. We buy businesses that want to be part of Marsh & McLennan Companies, and it is clearly a joint decision. When we think about acquisitions, we really look all across the spectrum. Does it match with our four pillars? Are we getting talent? We obviously want to get talent. We want chemistry and a cultural fit, vitally important. You can all relax because we're going to stick with our knitting and what we're really good at. We are world leaders in consulting and risk and insurance services, our acquisitions in the future will fall into those categories.
We are not pining for a third stool of any sort. Now, we'll have the odd adjacency of those businesses to be sure, but we'll stick to our knitting. We believe in growth markets, and growth markets not just geographically, but growth markets by segment, growth markets by line of business, growth markets by capability. Of course, the deal economics have to make sense. But when you really go through all of that and you build that relationship and you cultivate, the deal economics usually just come together. I want to go through acquisitions a little bit more. The philosophy that we have been following is really a string of pearls. 57 pearls since 2009. You can see we've been a good steward of your capital.
Aggregate purchase price of $2.5 billion, giving us revenue of $1.2 billion, an average price of 2.1 times revenue, and an average deal size of $43 million. You can see from that, we're not trying to hit a home run. We want to hit many singles with the occasional double and the occasional triple. Why is that? Well, one, it's got less risk. That strategy of string of pearls has less risk, more visibility to the future, and easier to integrate the acquisition when we choose to integrate, when we both choose to integrate. As an example, Marsh & McLennan Agency, which is many of these strings of pearls, we have no intention of integrating MMA into Marsh. MMA will integrate together the various agencies and build their own culture and their own approach. But it won't be Marsh's approach.
They'll take some of the best attributes of Marsh, but they'll do it based upon their segment. Now, Peter will speak to you later with a little bit more depth about some of the things we're doing within Marsh & McLennan Agency, so we'll save that. As you can see, the revenue that we've acquired is largely where the bigger markets are, North America and Europe. In North America, that acquired revenue is almost exclusively Marsh & McLennan Agency. I've spoken to you about our ability to deliver global GDP plus growth, organic growth, international growth, international growth specifically in growth markets like BRICS and MINT, and acquisitions. All top line, all vitally important. Let me switch gears a little bit and speak to you about margin, operating leverage, cash, and earnings. Let's start with operating leverage.
Another basic philosophy, which sounds simple but may not be so simple to execute, is that our leadership team believes, as a basic tenet of our operations, that revenue growth should almost always exceed expense growth. It's a way of doing business. We've been able to deliver that operating leverage before the financial crisis, during the recession, and after the recession. That operating leverage has been the single most important factor in our margin expansion. Talking about margin expansion, you can see from this chart, which looks at the rolling four quarters of operating margins within the two segments that we operate, the adjusted operating margins, you can see some pretty significant increases in both over time. The yellow line shows MMC as a total firm.
When we had our last Investor Day back in September of 2010, our margin as a company was 14.1%, which was far better than it had been previously. Many of you in the audience asked, "Okay, you've delivered some margin expansion. Can you continue to deliver margin expansion?" We answered, "Yes." Here we are, three and a half years later, and that question must be in several of your minds. Can they continue to deliver margin expansion? Our answer remains yes, in both segments. In both segments, we have runway for margin expansion. To be sure, as I've said on calls before, for our leadership team, margin expansion is an outcome at this stage as opposed to a driver. Our principal focus is on revenue growth and earnings growth. Margin expansion, based upon our philosophy of revenue exceeding expenses, will occur.
I've also said before that over the long term, we thought that 3% revenue growth seemed to be a nice marker, that above that level, margin expansion should occur to a greater extent, and below that level, it may occur or may not occur. That's over the long term. As it's turned out, we've been able to, even when we've had growth below 3%, which thankfully is not in the recent past, we've still been able to deliver margin expansion. Using a tennis analogy, sometimes you just want to get the ball back over the net. You don't want to have a winning shot. If we were growing organically, which I have no expectation in front of us right now of below 3%, but if the world changed, if we grew below 3% organically, we wouldn't drive for margin expansion.
It wouldn't make sense at that stage. It might naturally occur, but it wouldn't be the driver. The driver is growth, top-line growth and earnings growth. You have operating leverage, margin expansion, and of course, it leads to earnings. When you look at our earnings, we do deliver elite financial performance. If you look at the S&P 500, the companies within the S&P 500 who have $5 billion of revenue or more, 345 companies, and say, how many of those companies deliver 13% adjusted EPS growth year after year over the last four years? You started with 345 companies in the mix, and after one year, there were 179, then 125, and four years later, there's only 34 companies still in the tournament. That 34 companies includes MMC. We are a capital compounder, delivering growth on growth, on growth, on growth.
With all that growth, you'd expect to see more cash and more capital available for dividends, share repurchase, and acquisitions. When we look at that, we do have more capital, and you can see over time how that has developed. Not only do we have, with greater earnings and capital flexibility, more capital available, we also have fewer calls on cash from areas like pension. How do we think about these three different areas? You take dividends first, and you can see dividends have been pretty consistent over time, consistently growing, but consistent. The dividend policy, in our mind, is pretty sacrosanct. We are a good dividend payer, and we will continue to be so. You look at acquisitions. We've done acquisitions in every year over the last five years. It varies because we have no budget around acquisitions.
Some years we'll do many, some years we won't do hardly any at all. We work the pipeline. We develop relationships. We cultivate. If you look over the last five years, we average around $500 million. It's nearing $500 million if you include the first quarter of this year as well. It's about that level. You can see share repurchase has become more consistent and has become bigger. I would say that's a change in philosophy in some ways, actually, it's part of my learning as being a new CEO. I do give a lot of credit to Mike and to Keith and to Peter Beshar to really help me think through running an entire company and all that comes with that, capital management, balance sheet management, et cetera. It's different than an operating company.
I've come to believe that share repurchase is not that dissimilar to dividends. It's returning capital to shareholders. I think we can be more consistent about that quarter after quarter. We have delivered 8 quarters in a row where we both have dividends and share repurchase, and I would expect that to continue. With that additional cash and less uses of cash, we certainly have significantly more money in 2014 than we have had before to devote to dividends, share repurchases, and acquisitions. As I had mentioned before, $500 million has been sort of our average on acquisitions. 2014 may be a bigger year than that. We've started pretty strong, and we have a rich pipeline. We have a placeholder in 2014 for $800 million with regard to acquisitions.
It may turn out to be less, it may turn out to be more, but that's our placeholder now, which leaves $1.3 billion for dividends and share repurchase, a significant sum and significantly more than it has been in the past. Mike will get into that in a little bit more detail during his presentation. As a firm, even internally as a management team, we don't think that people should make lots of commitments. I personally believe if you're lucky enough to live to be 100 years of age, your commitments should be on one piece of paper. If you have more than one piece of paper to outline the commitments you've made in your life or in your career, you got a list of platitudes. You don't have commitments. We think about real commitments, and our leadership team want to make a couple of commitments.
Before I do that, I want to say a couple of caveats. Caveat number one, dividend policy and share repurchase policy, that's a board item. That's on the board's agenda, and it fundamentally is a board decision. We're very aligned with our board, but I just want to make sure that I don't get out over my skis between what management does and what boards do. That's with the board. Also, I remember from Econ 101, ceteris paribus, all things remaining equal. As we view the world today, as the world looks today, we want to make two commitments. One, we are committed to reducing our shares outstanding year after year. We are committed to double-digit increases in our annual dividends, again, year after year. Why own Marsh & McLennan Companies? Remember the four items. We are targeting long-term EPS growth of 13%.
We have accelerating cash flows. We are committed to reducing our share count, and we are committed to double-digit increases in our annual dividends. We offer you growth in revenue, growth in earnings, growth in margins, growth in cash, growth in share repurchase, and growth in dividends. It's been a pleasure to speak with you today. I'm looking forward to the Q&A later. I'm sure you'll enjoy the presentations. I'd like to invite our CFO and my business partner, Mike Bischoff, to the stage.
Well, thank you, Dan, and good morning, everyone. When I was going over the list of attendees at this Investor Day, I was very pleased to see that there were many individuals that I had known throughout the years. Conversely, there were a number of new names on the list that I had not met. We're very much, not only myself, but the management team, looking forward to interacting with you. That's one of the things that I must say about this management team. We really enjoy talking with investors. I know that surprises many of you, but it's true. We really enjoy talking about investors because we're stewards of your capital. It's also nice that Dan kind of gave the commitments, so now I'll backfill and go into a little bit more depth about why we feel we can make those commitments.
If you look at the four pillars that we started with at Investor Day in September of 2010, those were very tough pillars. 13% long-term growth in earnings per share. As Dan just indicated to you, we know how tough that is. Very few companies can do that. All of you know what the long-term growth is of the S&P 500 over any continuum of time. It's 6.5%-7% at best. We're looking at doing almost double that over a long time period. We know that that's very tough. Also we look at, do we generate cash flow? Yes. Do we want to reduce the risk profile of the company and then manage risk intelligently? Yes. We want to give no reasons why you can avoid owning MMC. As Dan also said, we're not complacent and there's always a better way.
There's always a better story. We can make the story stronger. When we, as a management team, in consultation with the board, said, "How can we make this story even stronger?" It's returning capital to shareholders. The two commitments that Dan made is really addressed to that. It's double-digit growth in our dividends and it's bending the share count down year after year. Those are the commitments. Why do we feel we are able to do it? That's why I'm going to go into it in a little bit more detail to cover not just our financial performance, the use of capital, use of cash going back, and then giving you an idea of why we feel so strongly about it. Now, I must confess, I enjoy data. I love data. We analyze everything. Numbers speak to us.
I just have to get into the data. Please bear with me. First, we'll look at our financial performance. Dan covered a lot of that, and it's not just taking a victory lap for what we've done over the last few years, including 2013. It's really setting the stage for what you should be able to anticipate going forward. If you look at our adjusted operating income growth over the last five years, the compound growth has been 13%. That's very impressive. Dan indicated to you, and all of you have lived through it, what were the macro conditions that we faced?
Not only the recession and then slow economic growth, not only price declines in the primary marketplace for most of that time period, and in the reinsurance markets, we certainly, for almost all that time, including last year and through the January renewals of this year, have seen not only price declines, so we've seen headwinds, but in addition to that, there's been higher retention of risk by the primary insurance companies, and not the least of which is dealing with foreign exchange impact. As a global company with a strong dollar, we've dealt with all that. There's a few additional headwinds that you may not be cognizant of, or you wouldn't deal with them in aggregate. There's four that we'd like to talk to you about today. These additional headwinds, the first one is our GAAP pension expense.
If you look at it over the last five years, every year in a row, we've had an enormous headwind on pension expense. In aggregate, the impact has been over $250 million on a pre-tax basis. It equates to about $0.34 of EPS. If you look at the impact that short-term interest rates have had in our organization, as you know, both Marsh & Guy Carpenter have massive amounts, billions and billions of dollars, flowing through between clients and the insurance markets, and it averages anywhere between $5 billion and $5.5 billion on a daily basis. With short-term interest rates low, that impacts our fiduciary investment income. As recently as 2007, fiduciary investment income was almost $180 million. In 2013, it was $27 million. The impact has been in the neighborhood of $0.16-$0.20 of EPS, a headwind.
As Dan mentioned with regard to our acquisition policy, we have a string of pearls, and we continue to acquire companies. We run through the intangible amortization both in our GAAP and also in our adjusted numbers. In aggregate, the additional headwinds over the five-year period has been $0.06, and in total, it's been $0.10. Lastly, I'd like to point out something on increased share count. These are increased shares due to our equity plans for our colleagues. They're not dealing with any shares that we may use for acquisitions. You may say, "Wait a minute, that's a self-inflicted headwind." It's had an impact of almost $0.10 on EPS over the last five years, and we want to go into that much deeper to tell you why we feel very comfortable with regard to the commitments that we've made to you.
In total, we've looked at headwinds. In addition to the macro environment of $0.60 to $0.65 over a five-year period, which is about 25% of the earnings power of the company if you measure it either in 2013 or 2014. I call that my whining slide so that you should be aware of all of this, but it's also impressive about what we've been able to do. We've had this type of EPS growth. Many companies would have gone through that whining and said, "Well, if we could've just avoided this or that or whatever," or as somebody said, "All the bad things, our earnings would be really good." We've dealt with all of that, and our earnings are still very good.
It also gives you a sense not just of what we've overcome, but as these headwinds start to dissipate, and they will start to dissipate, that gives us even more possibilities for growth in the future. If you look at this slide with regard to EPS, you can see the impact of the recession during 2008, the end of 2008 and 2009, where EPS did not grow much. You can see the growth in EPS over the last three years has been in the neighborhood of 15%. What does that mean to shareholders? Well, index total return of the S&P 500 since the end of 2007 through the end of 2013 has been about 50%. If you look at how we've done, we've done double that. Is that surprising?
If our earnings are twice what the S&P 500 is, you would expect that our share appreciation and total returns would be twice what it is. The one thing that Keith wanted me to point out is if you look very closely at 2010, you'll see that when we were about in the same neighborhood as the S&P 500, that's when we had our last Investor Day. You can see significant growth and separation between that. Keith, being a nice investor relations person, said, "Don't rub in salt to the wounds of everyone that missed that opportunity a number of years ago, and don't applaud all the people that did listen and jumped on board." As Dan said, this is a journey. We plan to continue the journey. Keith schooled me to say, think about indexing where we are today.
Close that gap between 115 and 49, and index it back again at zero. Jump on board and you'll see three and a half years from now that you'll enjoy the journey. The other thing that Keith wanted me to point out is that while Dan has indicated that not only do we have higher growth capabilities as a company and lower risk characteristics, we also have that as a stock as well. You have higher returns with regard to MMC, and the beta for the stock itself is lower. Let's go into uses of capital and dig in a little bit historically, but it will set the table for what we'll be dealing with in the future. If you look at the uses of capital from essentially 2009 through 2010, it aggregated about $6 billion.
If you look and may have trouble reading the slide, the green part is what did we reinvest in the business. That was in restructuring efforts that we went through for a few years, our capital expenditures and acquisitions that Dan spoke to. The yellow is the return of capital to shareholders, which is about a quarter of our use of cash. The red was our legacy issues and what we had to deal with, and then debt reduction. If you look at it a different way, you would say there is about 40% of our cash that really isn't going into direct investment to grow the business or return of capital to shareholders. If you look at the next period, which was 2011 through the current year, 2013. We now see a markedly different picture.
The legacy litigation has disappeared, the restructuring has shrunk significantly, and leverage reduction, while it still occurred, was reduced. What's the net result of that? You see a significant increase of return of capital to shareholders, and you still see quite a bit of reinvestment in the business through acquisitions and capital expenditures. What will this picture look like in 2014? The leverage reduction is gone. The restructuring now going forward is absolutely de minimis. What we'll have is the entire amount of our cash flow that will be used for reinvesting in our business, acquisitions, and as Dan mentioned, return of capital to shareholders. Dan talked about acquisitions. We will spend more time on return of capital to shareholders, but let's just spend a few minutes on CapEx. There's a few things that I'd point out on CapEx. First, elevated levels.
You can see we moved from about $250 million-$260 million a few years ago to a level of about $400 million, not just for 2013, but what we're anticipating for 2014. We had been investing in the business. We continue to invest in the business. There's elevated levels of investment. These elevated levels of investment are for colleague capabilities, client capabilities. I won't go into that because you'll see examples of that with regard to the presentations by Peter, Alex, and Julio. The other thing that I would say is while you spend a lot of money, is it effective? Do you basically bring these IT projects in, which are about 70% of the spend that we have on client analytics, data systems, IT upgrades? The nice thing is that we've had a tremendous success rate with regard to these large IT projects.
The other thing that I would point out, though, is that we've spent about 30% of our CapEx on real estate. The reason that we spend on real estate is we have a global footprint of 12.1 million sq ft, 550 leases, annual expenditures over $800 million a year. When you look at that, we feel that there's a possibility, and what we've been doing is bending the curve downward with regard to cost. We've been bending the curve downward with regard to offices. We have co-locations now, gives us more efficiency. It modernizes the workplace. It also gives our colleagues a more up-to-date smart office concept. It's good all the way around. Let's look at our capital structure. We'll pivot to capital structure, then come back to things that are important. Balance sheet debt.
Many of you in the room just think of balance sheet debt as the only debt that we look at. You can see that based upon the de-leveraging, we went from about $3.6 billion down to about $3 billion a few years ago, where it stayed. There's other major obligations that the firm has, and this is the effect of what I was speaking about with regard to our modernization of offices. The present value of our operating leases were about $2.3 billion a number of years ago. It's $1.9 billion today. It's $1.9 despite the fact that the firm is growing, we have more colleagues. That has an impact on our P&L as well. We can continue to bring the cost down. Another example of smarter ways to do business. The other obligations that we have is our global defined benefit plans.
In an aggregate, these plans are in the neighborhood of $14 billion. You can see that it's affected with regard to the discount rate and the abnormally low interest rate environment we've seen over the last number of years. If you looked at recently as 2010, the deficits were about $700 million. They went up to about $1.8 billion. You see that in red at the top. Over the last year, they've reduced by about $1 billion, and they've reduced because of very good investment returns in our portfolio of assets. They've reduced because of the cash contributions that we made into the plan. In aggregate, we put $650 million into our defined pension plans last year. What we're anticipating this year is less than $200 million. We did a lot of pre-funding in a tax-efficient manner last year.
The deficits that we're looking at reduced by about $1 billion. This is only the deficit portion. We have many of our defined benefit plans that are in surplus. If you put it all together, a year ago, our deficit for pension plans was $1.5 billion. If you look at it at the end of 2013, we had a surplus of $100 million. A major obligation is essentially taken care of. That, as Dan said, frees up cash as we go forward. We can use it for things that are interesting. One quick look at our balance sheet and our debt maturity. You can see that we have a very comfortable maturity ladder. It's staggered over a number of years. The yellow is the $500 million of financing that we did in September of last year. The average rate that we got was 3.3%.
You can see the next maturity is coming up in July of this year, $320 million. We'll make a decision fairly soon of what would be the tenor and the amount that will be going into the marketplace. Our credit ratings are improving. Basically, if you look at it does lead to lower borrowing costs. It does afford us better access to the capital markets, particularly when there's dislocations. It gives us increased finance flexibility. The other thing, now we've gone back into the commercial paper market. For the first time in essentially 10 years, we're now using the commercial paper market to really find some attractive short-term borrowing. I won't belabor this point, but this is one coverage ratio, and I apologize to our colleagues at S&P. We've kind of interpreted what we think, how you look at it.
Whether you look at S&P or Moody's, by coverage ratios, leverage ratios, free cash flow, the picture still gives a very clear indication that we're a much stronger organization today. Not only do you get stronger returns, but you've reduced the risk profile. Our balance sheet is very strong. Now that we've dealt with balance sheet, things that I love to deal with, as treasurers and CFOs just kind of wallow in that, let's get to something that you're really interested in, and as Dan alluded to, returning capital to shareholders. Well, we first look at dividends. That's kind of a foundation of returning capital to shareholders. The S&P 500 dividends I'm sorry. If you look at dividends representing what % of total return for the S&P 500, really since 2007, it's been about a third.
If you look at it over a long-term period, dividends, as many of you know, represent a significant portion of the returns to investors, in the neighborhood of 45%, in some cases even 50%. The average dividend payout ratio for the S&P 500 over the last decade has been about 32%, and that's actually where it is today. If you look at our dividend payout ratio, it's 39%, markedly higher than the S&P 500. If you look at what is the S&P's dividend growth anticipated going forward, it's in the neighborhood of 6.5%-7%, which is slightly above the long-term average growth of dividends for the S&P 500 of about 6%. Why is that the case? You know it. Because the earnings growth of the S&P 500 is in the neighborhood of 6.5%.
While dividends may come in favor or go out of favor, the long-term aspects are they kind of grow in line with earnings. As Dan indicated to you, our commitment now, okay, is to grow MMC's dividend more aligned with the double-digit earnings growth that we're committed to. If you look at total returns and price change, the S&P 500 over this period grew by 30%. If you include dividends with it, you get a total return of 49%. We understand it. You understand it. Dividend and dividend growth is important. I love this because what it shows is that MMC's share appreciation, because of our earnings power and growth, tops the S&P 500 even with dividends.
Even if you're not a dividend investor, or even if you don't do dividend discount models, even if you don't look at yield, you basically have a very good story. On top of that, with our dividend, we more than double the S&P 500. A very compelling story. The other aspect of returning capital to shareholders, share repurchase. As Dan said, we're very committed to it. One of the things that probably is not well understood is the last point on this slide, which is offsetting dilution with regard to equity grants. That's something and another obligation and a headwind that we've been dealing with. What we'd like to share with you today is a little of our analysis and what it means going forward.
if you look at just long-term equity grants, the top is options in yellow or gold, if you look at the bottom portion of the bars, it's restricted stocks or designated stock units or whatever the names are that our colleagues at HR come up with. I'll just call it restricted stock. These were the grants in aggregate that MMC has essentially granted to its colleagues on an annual basis. You'll see, obviously, that the numbers have been going down for the last several years. Why is that? Well, you're quick, you're bright. You said, "Well, your stock price is going up. You need less shares for the same market capitalization and the same value." Well, you're absolutely right. That's true.
another reason is the last few years, we've been using more of our cash instead of our shares with regard to our long-term equity grants. Even though those grants are high and will continue to be high, the call on our shares have gone down. What are we projecting for this year? Well, because the bulk of the grants are done in February, we have a pretty good idea that it's only going to be 2.6 million share requirement. That's the grants that we're anticipating. another way to look at that's what's been granted. When are those obligations going to come home? When essentially are we going to have to issue the shares for the options and for our restricted stock? Well, the restricted stock is fairly easy because it vests over a three or four-year period. That's the blue that's on the bottom.
you can see that as the grants went down, the vesting has gone down. The top part of this is green, that's our employee stock purchase plan that all colleagues can participate in, or I guess almost all colleagues, depending on the jurisdictions. The middle part, the yellow part, is stock option exercises. This is the timing of when our colleagues decide to exercise their stock or their shares. you can see that in 2008, 2009, and 2010, while the world was going through the Great Recession, obviously, stock option exercise was de minimis. What you see and what we dealt with for 2011, 2012, and 2013 was a significant increase in the options that were being exercised.
for example, in 2013, despite the fact that we repurchased 13.2 million shares of our stock for $550 million, because 10 million shares were exercised, the total need was 14.4 million. We were unable to bend the share count down in 2013. you sit there and you say, "Well, why aren't you still facing that problem?" Well, I'm glad you asked. Thank you, okay? Because the projections that we have, based upon how many are outstanding, the time that's still to expiration, or the time allowed to expiration, and the usage pattern feels that we're down to about 7.5 million to 8 million shares. I love dealing with a sophisticated audience because you've already done the math. You say, "Gee, stock price is about $50 a share, about 8 million shares. That's about $400 million a share repurchase.
If you do that, you'll bend the curve downward. Already you know that we're going to do more than $400 million a share repurchase, obviously, if we did $550 million last year. There's a different way to look at this. What has been the overhang? We'll tell you, okay? This is something that I don't think many people, certainly in the investment community, truly understood, which is the headwind, the additional headwind, and the last headwind that we had to deal with, which is the outstanding equity awards. If you go back to the end of 2007, there were about 75 million shares that our colleagues had that could come back in, that we essentially had obligations for. We've worked that down to the end of last year, was 28.6 million. What's our projection about where we'll be at the end of this year?
We think it'll be 23 million. Do the math on that. That's essentially 50 million shares, $50 a share. That's an obligation of $2.5 billion that has been reduced. That's no longer a headwind. Once again now, when we turn our very strong cash flow into returning capital to shareholders and in repurchasing our stock, we should be able to bend that curve downward. Increasing cash flow and capital flexibility. I'll go very quickly through this. Now you have a picture that we've dealt with all of our headwinds. We've dealt with our obligations. That's behind us. We're in a strong financial position now. What is our capital management geared towards?
It's geared towards supporting EPS growth, investing directly in the business, either through reinvestments or acquisitions, but more importantly, well, I shouldn't say more importantly, I'll get slapped around for saying that, but as important is returning capital to shareholders. We can do both. The one thing that we want to do is to make MMC stock as attractive to the broadest amount of the investment community as possible. We want to make it attractive for growth investors, value investors, GARP investors, dividend growth investors. Yes, even income investors. I'm not sure if I care about deep value, but we've been there, don't want to do that again. By the way, some of my best friends are deep value investors, so it's not bad, but we just don't want to go there again.
If you look at dividend share repurchase and acquisition, let me just refresh what Dan showed you. If you look at the base, as recently as a few years ago, we were only diverting about $500 million of our cash into these categories. You can see that we took it up to another staircase of about $1 billion for a number of years. Yes, you've seen us now move up to a new staircase, roughly in the neighborhood of $2 billion. People will ask, "Well, what's going to happen going forward?" Well, if we don't have those other commitments for our capital, and if the company continues to grow, we should be on that staircase and then move upward. It's a nice position to be in. We really like it. Just to reiterate, we are committed to reducing shares outstanding each year.
We are committed to double-digit increases in our annual dividends. I talked to the dividend investors and income that just care about yields and may have minimum thresholds. I'll put that aside, okay? Because you have to look at dividend growth. If you look at the initial investment and what our dividend's going to grow at, that yield will calculate very nicely. Let's just bore into the math a little bit more. This is the amount of cash that was returned to shareholders in the form of dividends and share repurchase. It totaled about $1.1 billion in 2013. Dan already told you that we targeted roughly $800 million. If you look at what that growth has been over a five-year period, it's been compound growth of 20% growth in what we've been returning to our shareholders.
If you look at it now, we're anticipating moving that $1.083 billion up to about $1.3 billion or more. That's an increase of 20%. Any way you look at it, we feel that we're in a very strong position with regard to our earnings power, our cash flow, and returning capital and cash to shareholders. Just to reiterate, we have very long EPS growth, increase in cash flows, reducing share count, and double-digit growth. It gives me great pleasure to talk to you about this fantastic story. I know you're sitting there going, "Wow, this is great." Well, I'm glad you joined us today. I really love talking about MMC. I do love talking to investors. I do have to yield the stage. I know.
I have to yield the stage to my close colleague who heads Oliver Wyman, Scott McDonald, who is the President and CEO of Oliver Wyman. Scott, thank you.
Thank you, Mike. It's going to be hard to follow that story, I fear. I'm the newest member of the Oliver Wyman or the MMC Executive Committee, I wanted to tell you a few things about myself before I start with the presentation. I'm a Canadian. I work in New York. I live in London. I have the profile of a typical management consultant. I was appointed to this job in January, before that, I was the president of Oliver Wyman for 18 months. Before that, I've been a long-term Oliver Wyman-er since 1995. Between then and now, we've built Oliver Wyman from a series of small consulting boutiques into one of the world's leading management consulting firms. I'm a big believer in Oliver Wyman. I'm very excited about our future and what we can accomplish, and very happy to share that with you today.
I'm going to cover over the next 20 minutes or so, I'm going to give you a brief overview of Oliver Wyman. I'm going to talk about some of our accomplishments. I'm going to focus most of my presentation on why we think we can grow and grow strongly. I'll talk a little bit about efficiency and room for improvement on margins we still have at Oliver Wyman. I'll come back at the end to why is Oliver Wyman within MMC and why we think that's a good position for us. Let me start with the overview. Oliver Wyman is a leading global management consulting firm. We have over 1,000 clients, and they're mainly the leading and largest, most prominent financial institutions and corporations around the world. We have offices in 26 countries, although we operate in many, many more, often through the MMC network.
We have three business units within Oliver Wyman. Oliver Wyman itself, which is the traditional management consulting firm, that represents about 80% of the overall business. We compete with the other traditional management consulting firms like McKinsey and BCG and Bain in that segment. We also have a business called NERA Economic Consulting, which is an economic specialist, economic consulting firm that represents about 15% of the total revenues. We have a smaller business, which is a strategic branding specialist, very, very well-known in the industry called Lippincott, which represents the remaining five. Overall, we have about 3,500 really great colleagues. Each one is pretty remarkable and the best at what they do, we think. The overall business generates or at least in 2013, generated about $1.5 billion in revenues, roughly half coming from North America, 39% from Europe, and the rest outside those two regions.
Over the last 10 years, despite what was a pretty tough recession, particularly in the sector initially, that we focus heavily on financial services, we've had solid revenue growth. We've grown at a CAGR of 8% over that decade. There's three things we're particularly proud of over this period. The first is what we've built in financial services. We believe we have one of, if not the leading consulting firm to the financial services industry. We work for all parts of the industry. We're very deeply embedded. We work for the financial services companies themselves, for governments, for regulators, for other public policy groups. We're very proud of the contribution we've been able to make to the recovery of financial services over the last few years and the restructuring of that industry.
The other thing we've been very happy with is how we've managed to expand the business outside of our original core, which was essentially New York and London, broader North America and Europe. Over the last 10 years and five years in particular, we've put down much deeper roots in Asia, in the Middle East, and Latin America. We think each of those positions now gives us the foundation for much stronger growth in the future. Finally, we've taken a number of businesses that for us were pretty embryonic a decade ago or even five years ago, but we think are going to be very important for the general economy in the future and for us. That includes our health business, life sciences, energy, insurance, strategic IT, and operations.
all of these now are substantial and we think powerful businesses at Oliver Wyman. They enable us to help our clients in very interesting ways. We're mainly focused on growth at Oliver Wyman. We think that will be the main driver of our success and our economics. Today I'm going to talk about three things around growth for you. The first is we think in general, the consulting industry is poised to grow much faster than GDP now. Very much for some of the reasons Dan talked about earlier, but I'll highlight some more specific ones for consulting. We also think the leaders in consulting are going to grow much faster than the others, and we think Oliver Wyman is very well-placed to remain part of the leading pack and share in the spoils of that growth.
We do think there's room for margin expansion and earnings growth in Oliver Wyman, both from managing infrastructure more efficiently and also from getting more scale in our developing markets, which are still relatively small in the scheme of overall Oliver Wyman. We think MMC is a good home for us. I'll talk about this later, but we think we add very good value to MMC in a number of ways that probably aren't obvious to you. We think MMC provides us differentiation from our competitors that will be very powerful and even more powerful in the coming era. Let me start first with the general point about consulting growth. The world is becoming more complex. There's no doubt about that. There's more internationalization. There's increased regulation in almost every sector, and that's growing at an increasing rate. There are more disruptive technologies.
Big data is becoming more important. Whether or not you think this is a good thing for the state of the world, this is a good thing for an advisory business. There is enormous demand for advisory services now, and we expect that to grow. The chart on the right here shows you one of the many forecasts of how consulting has grown historically compared to GDP, and most forecasters think it will grow faster than GDP in the future and at an increasing rate. We also think that the leaders in consulting will continue to take share. A couple of things have happened over the last five years which have changed the consulting landscape. Through the financial crisis, we believe there was a real flight to quality, and the leaders in consulting took more share.
as companies become bigger and more sophisticated, their procurement departments always become bigger and more sophisticated as well, and they tend to shrink the list of consultants they use. If you think back over the last five years, there are many big, prominent, famous names in management consulting that have disappeared. They've gone bankrupt, or they've sold themselves to bigger players, and fewer and fewer remain, and the group of leaders is becoming relatively small. We think we've changed Oliver Wyman from what it was in the early '90s, which was a collection of boutiques, certainly mid towards the bottom end of the pack. Now we are the fourth-biggest traditional management consulting firm by any measure, by size, by productivity, by profile. We believe we're in the leaders, and we believe we'll share the spoils of being a leader.
I want to spend most of the presentation, though, talking about what makes Oliver Wyman specifically unique, as opposed to what makes the leaders in consulting unique. Let me work my way around this chart. The first thing is we think we offer a superior work environment that gets us the best people. As Dan mentioned and my other colleagues will mention, we put an enormous focus on MMC and at Oliver Wyman on culture and values. This is a people business. We have almost nothing else other than the people in it and the ideas they create. We spend a lot of time and we spend a lot of money focusing on the attraction, the development, and the retention of people in Oliver Wyman. We have a very strong reputation in the talent markets.
We're able to attract almost anyone we want to, and we have strong internal engagements. We think both of these things provide the foundation for any people business and position Oliver Wyman strongly against our competitors. Unlike almost every other consulting firm, we also have a specialist business model. When we started business 30 years ago, we designed Oliver Wyman to look different than the strategy consulting firms. We focused by industry, and we specialized, and all of our consultants were very deep in the industries they worked in, or we focused by capability, and they were equally deep in those capabilities. We run the firm globally on this specialized industry and capability basis. It looks unlike all of the other consulting firms, but we're confident that that's what the clients want and that's what adds the most value to the clients.
That's what creates the most impact to the clients, so that's what we give them. That's worked extremely well for us in the sectors where we're strong. We also have an internal process at Oliver Wyman called the Best Foot Forward process, which means that any time we talk to a client anywhere around the world about a problem they have or a challenge they have, the way we put forward the team and the ideas for that client is by drawing the best people we have from around the world without paying any attention to regional, country, or practice barriers. Again, this is completely unique amongst consulting firms who often are designed by country or by region and have very strong barriers. If you're in Italy and you ask for help with an Italian bank, you get the Italian team.
That would be a reasonably good solution at our competitors. If you ask Oliver Wyman for help with an Italian bank, you get the best we have to say globally about how to solve that problem, which we think provides a better service for our clients. I talked about the growing complexity in the world. We think there are specific sectors that are going to get hit very hard by increasing regulation. We've already seen it in financial services. We're seeing it in health. We think we'll see more of it in energy, and we think we'll see more of it in transportation. One of the things we're going to do is focus a lot of our attention and a lot of our investment on these specific sectors, which we think will grow faster than the rest of the economy from an advisory perspective.
There are 4 sectors we already have strong positions in, and we'll continue to invest in them. Dan mentioned that there's always a smarter way. We believe this wholeheartedly at Oliver Wyman, and every single process we have in the firm, we're constantly challenging. There's a real neurosis in the firm about making sure that we constantly improve and get better. We have very strong competitors, so we need to be on our toes all the time. We need to innovate, and we think that makes us stronger. The final thing I'll talk about is consulting is changing, and the ability to harness data and analytics is becoming more important to add more value to clients. I'll give you an example to highlight what we're doing here. I think we have the leading grocery store consulting business in the world.
It's a strange sector to be in, but it's a good one for us. In order to have more impact on clients, we do a lot of work around data management for them, manipulating their data, building analytical tools for their management, for their sales forces, for their store managers, so they can walk around with iPads and understand how to price things, how to position things on shelves. Ultimately, this helps them make the decisions they need to make better and adds enormous amount of value to their businesses and is a good business for us to be in. We're good at managing data. We're good at building these analytical tools, and this is something we're going to push through the whole company beyond the 1 example I've given you. I mentioned specialization.
What we do at Oliver Wyman, for the most part, is invest in intellectual capital. We're an ideas firm. We get the best people in, and we come up with ideas. We produce hundreds of reports every year, publicly to try and shape the industries we're involved in, and then thousands more privately during our work. I just wanted to give you a couple of examples here. We're the leading firm in risk management consulting in financial services, and we do a lot in corporations outside financial services. Every year, we produce a report called the Risk Journal, which is our best ideas in risk management for the year. This is enormously widely read. We think it's a good contribution, and there are some good ideas in there.
In fact, there are a couple of copies outside, which I know you will all want to get your hands on as you leave. The middle picture here is a screenshot from our web page that covers the work we're doing in what we call the Oliver Wyman Health Innovation Center. This is a center that pulls together 100 CEOs from across the U.S. mainly, in the health industry, from health insurers, hospital systems, government, and other innovative firms, and talks about how to transform healthcare. It's an area where we have very strong ideas on what can be done to improve outcomes and reduce the cost of healthcare. We get this group together once every quarter, and it's making good progress and having a pretty profound impact, we think.
Finally, there's an example on the right here of a report we do every year with the World Energy Council, where we talk about the future of energy, in this case, sustainable energy. I did also want to talk about, very briefly, just a couple of our client assignments so you actually know what we do day-to-day, if that isn't clear yet. Our highest profile piece of work this year and for a bit of last year has been the work we're doing with the European Central Bank around the restructuring of the European banking system. I probably don't need to tell any of you, but the European Central Bank this year is going through a process looking at more than 100 of the top banks in Europe. They're doing an asset quality review. They're doing a stress test.
The results of that work will determine the future of European banking, the shape and the structure of the market. Oliver Wyman is the engine room of that review. We're working with the ECB. We're doing a lot of the methodology work with them, and we're doing a lot of the process. We're incredibly proud of this assignment. It's probably the most important thing that will happen in financial services, and we feel we're right at the center of that. I talked about the Health Innovation Center on the previous page. A lot of the ideas we've developed in U.S. healthcare, we think are as, if not more relevant outside the U.S., even when the systems are government-provided healthcare.
We've taken the work we've been doing in the U.S. to the National Health Service in the U.K., and we're doing pilots all around the U.K. looking at changing care models to, again, improve health outcomes and reduce health costs. We think eventually we'll be able to have a pretty significant impact on shaping the healthcare in the U.K. Finally, I picked an example from here in the U.S. We helped US Airways and American Airlines with their recent merger. Those are two long-term clients of ours. We've done a lot of work around financial and operational transformation with them. Just recently, we helped American Airlines buy hundreds of new aircraft, which was something new for us.
I've talked about growth mainly now, but I'm going to spend one page on efficiency because there is more efficiency in Oliver Wyman, which can give a boost to the earnings growth in addition to the top-line revenue growth. The first thing we're focused on is process simplification. Until 18 months ago, Oliver Wyman still consisted of multiple different companies that each had their unique processes. We've pushed those all together now, and we think the impact of that will be higher quality processes internally and for our clients, and they should also be more efficient. It should be a better operating platform. I've learned a lot personally from my colleagues across the rest of MMC who are truly great operators about how to manage this part of the business. We also think there's just in general, more juice on the infrastructure cost management side.
We're aligning with MMC across a number of the areas of our functional capabilities. That gives us access to a much bigger entity and more power for areas like IT and technology, which should make us more efficient. There's also more we can do around the general outsourcing of some of the activities in Oliver Wyman, some of the lower value ones to cheaper places, rather than operating them in New York or London. Finally, I mentioned this, but I really think this will be a big deal. All the work we've done growing the business outside of North America and Europe has been great, our businesses in Asia and Latin America and the Middle East are still small, they're not as profitable as we want them to be.
As they get further towards scale, we think the earnings growth there will be very strong. A couple of comments on Oliver Wyman within MMC, because there's usually one question about this occasionally. We think we make MMC more valuable, there's three things that I think I'll highlight to show why. The first is we produce all of this intellectual capital and all of these ideas, we can share this with all of our colleagues across MMC, all 55,000, it means they can do more with their clients and help their clients in better ways as well. I think that's valuable for the organization. The second is because of the nature of our business, we have access to the chief executives and C-suites and senior management of most of the large clients around the world.
Again, to the extent we can bring together the capabilities of MMC to help those clients, it's better for them, it's better for us. The final thing I wanted to talk about, this won't be as apparent to you, is as a management consulting firm, we find it very easy to attract really, really good people. In the last five years, we've attracted over 250 people to Oliver Wyman who've then subsequently gone on to work in MMC in a different operating company. That's 250. It's a lot of people coming in, these are all really top-caliber people. They range across the whole gamut from junior to senior, there's also been some very senior ones, including my predecessor, John Drzik, Mark Weil, who used to run Oliver Wyman in Europe.
Both of those fellows have gone on to take very senior positions in Marsh. I think that talent flow-through is valuable. Why does it create an advantage for us? I said already we have tough competitors out there, we have to look for every advantage we can get to out-compete them. What we've found is that using the capabilities from across MMC, including Mercer, Guy Carpenter, Marsh, gives us things that our competitors don't have. The kind of solutions we've been able to come up with for clients in areas like energy and health that run across all of MMC, all the operating companies have a focus on, that makes us better than our competitors. To the extent we can use that, we become more valuable.
We also find that as we grow Oliver Wyman in new markets, instead of having to show up with two or three people and a couple of suitcases and try and be a serious firm, we have the MMC network. We have an office. We have connections into the society, and it's enormously powerful for us. Finally, compared to our competitors, we have more financial stability and investment support. If we can convince MMC and ultimately convince you that the investments we want to make will be good returns for the shareholders, this is something that our competitors can't even touch, and it will enable us to grow things like the data and analytics business at a far greater pace. That's the Oliver Wyman story. We're focused on growth. We think there's a lot of growth in the business.
We think consulting will grow, we think the leaders will grow, and we're very confident that we're part of that leading group and will grow as well and grow strongly. We think there's some room for margin improvement still, so we think the earnings will grow even faster than the revenues, and we think we're in a good home, and we can add a lot of value to MMC, and this is a good place for us and gives us a pretty unique competitive weapon. Thank you very much for listening to me. I'm sure you all came to hear the Oliver Wyman presentation today. I'm very happy to introduce my colleague from the executive committee, Julio Portalatin, who's the President and CEO of Mercer.
Thank you, Scott, and good morning, everyone. It's great to be with you. They always put me up right before a break. I don't know why. Nonetheless, hopefully, by the end of this presentation, you'll know why. We are here today, and I am very humbled to be here today as a leader of a great organization, 20,000 colleagues across the globe who work hard every single day to bring best practice solutions to 28,000 clients representing over 100 million individuals. This organization truly is a terrific organization with great intellectual capital and the opportunity to really make a difference as we continue to grow our business. When we think about that and we think about the business performance, just remember, it is all about the people, and Mercer is in the people business.
With that today, we're going to take a bit of a glance as to what Mercer is all about. Some of you know a lot about it. Some of you don't. It's okay. We'll hopefully educate you a little bit more on it today. Then I want to focus on the accomplishments. Then most importantly is the fact that we believe that we're very well-positioned for growth, and there are good growth initiatives moving forward that hopefully you can really spend some time thinking about and also asking us questions about later throughout the Q&A, which we welcome. With that, at a glance, Mercer is a company that is truly in the people business.
It's about delivering to the needs of health, wealth, and performance across the entire globe in the areas of human capital, in the areas of retirement, in the areas of investment, and, of course, health. Yes, I'm sure that most of you already knew that we were well-represented amongst the Fortune 500 and the FTSE. Probably you didn't know that over 80% of our client base actually has employees of less than 5,000. Also, as I mentioned earlier, over 100 million individuals we touch on an annual basis to 28,000 clients. Some accomplishments. Let's talk about the segment first and keeping in mind that the segment incorporates, of course, Oliver Wyman and Mercer together. When you think about that, our adjusted operating income increasing on a CAGR basis since 2010 on an annualized CAGR of 14%.
Of course, our margin expansion talked about already earlier today, 360 basis points, and you saw the line going very much northeast. We are going to work really hard to keep that line moving northeast. Mercer's had consecutive quarters of organic growth that equals 14. We have that magic 14. The underlying growth has averaged about 4%. Again, two things we're proud of and we'll be working hard to continue. 2013, these three things that we're about to talk about as far as accomplishments, the next three items, actually start introducing the three growth initiatives we'd like to discuss in more detail with you today. The first one is growth markets, and we're measuring very much, and we're retooling a lot of our skills and a lot of our solutions to apply to some of the demand curve in the growth markets.
This year, we're happy to say that about 18% of our growth came from the growth part of the world. As part of our reorganization also that we did at Mercer, we actually have all of growth markets now reporting under one leadership team. Our global investments business, very proud. Our assets under management continue to grow aggressively, and it's a CAGR of 24%. Yes, of course, Mercer Marketplace. We think we are very well-positioned as the dynamics of the health industry continue to change in the U.S. Whether it's exchanges, whether it's core H&B offers, we think we're in the driver's seat. So far today, I'm happy to announce that we're approaching 300,000 lives now.
Because we do have that heavy representation in the middle market, you're going to see that we still have opportunity to enroll and to sign new entrants into Mercer Marketplace throughout the year. It's not just a one-time event as it is for perhaps others. Here's the journey. We think we're well-positioned in this people business, this global people business. We think we're well-positioned to be able to increase our revenues, increase our earnings, to capitalize on significant global market trends that are happening across the world, and to achieve some very competitive and sustainable results while we're doing it. Keep in mind those four bullets because I'm about to make the case. The business, again, looks like this. We have a health business. We try to help our clients understand and answer very relevant questions.
Very relevant questions about how do we use health insurance as a way to be able to attract and also to control those costs over a period of time so we can stay competitive. Again, I keep in mind that this is not just a U.S. phenomenon. This is happening all over the world. We have countries who are studying the things that are taking place in the U.S., are asking for our advice on how best they can be able to capitalize on changes. We have governments are doing the same, asking the same questions. We have different types of opportunities and challenges in each one of these countries. I do want to bring your focus and continue to bring your focus. This is truly a global business. Yes, there is a lot in the United States, but there's also a lot outside of the U.S.
Our retirement business is going through a lot of changes as well, from the defined benefits, moving into defined contribution. Of course, CFOs, trustees, pension managers asking that question: how do we reduce cost, but at the same time mitigate risk? That's why our investment business plays so well for us as well. Just think about this for one moment. This is a real-life example. We have clients today who have been business partners of Mercer for decades. They may have started off as being a retirement client that was able to take advantage of our actuarial expertise for their pension liabilities. They may have then gravitated to an outsourcing client or a benefit administration client for those types of services as well. They may then have said, "You know what?
It's time to freeze or close our DB program, and we want to move to a defined contribution." We're very relevant in that space as we give advice and as we move into now the investment consultancy side of our business. You see they're very complementary of each other. Our ability to sell broadly to our clients is very much embraced by the fact that we have a continuum that we can offer, a broad range of continuum, and nowhere else is that better exemplified than the relationship between retirement and investments. Of course, we have our talents, very important talent pool.
There's not a CEO in the land that doesn't want to know about how they can win the war on talent, who doesn't want to know how to retain, how to obviously attract, and ultimately how to develop that talent so they could ultimately count on that as a competitive advantage. Incredibly important to the C-suite, incredibly important to us that we deliver. All of that equals about $4.2 billion of revenue. For those of you who attended back in 2010, September, you would have remembered a number somewhere around $3.3 billion at that time. I do want to take some time and pause on this house building, which I think is incredibly important when you're bringing an organization forward.
I can't help but reflect on some of the things that have happened over the last couple of years, starting off with leadership and the impact we've had on leadership. Today, if you were to try to compare the executive committee names and the slots that they occupy to what it looked like in 2010, you would find only one person in that time period holds the same position on the executive committee. Every other person is either new to the executive committee or has changed jobs and changed hats. If you want to cross-fertilize an organization and bring the best of one side to the other, you have to also be willing to take a bit of risk in changing leaders. Let's be honest, I'm a bit of a risk.
I came from 30 years in the insurance industry and was tapped on the shoulder to come run this great organization. How humbled I am, and hopefully, we'll see if it works out. Having said that, we also have to think about all of the business changes taking place, and more importantly, exemplified by, for example, taking the structure, reorganizing it around three regions. One is growth markets, as I mentioned earlier. We also took Asia Pac and put that together with Europe and called it Euro Pac. We thought that was an important distinction. We also took, of course, North America and made Canada part of the U.S. None of this was like that before. When we think about leadership, think about making sure that our leaders are very much in tune to what we're trying to accomplish in each one of those areas and markets.
We took the vertical structure that existed before. That vertical structure was organized around line of businesses. We took that and we brought a balanced matrix to it. That balanced matrix is a geography, and the geography is important because geography leaders think horizontally about client relationships, not vertically. They think broadly about serving those needs, not vertically. Bringing the power of our global business and the thinking of our regional business was incredibly important in moving this operation forward. Now the house. Anytime you build a house, you need a foundation. The foundation for us is our PRIDE values. We're instilling in every single employee, every single colleague, that we must have a passion to win, not just win for us, but win for our clients, win for each other, and win for our shareholders.
We also want to make sure that we have a respect for diversity and inclusion and for each other. You have integrity and innovation. Again, important aspects. You can't outperform if you don't have a process of innovation in your company. It is impossible. We have that as one of our values. We also think very much about incorporating a dedication to not only ourselves, but to our clients and to the communities that we serve. Yes, empowerment and accountability. Dan mentioned all about distributed leadership. Distributed leadership has to come with accountability. It also has to come with empowerment, and we must empower our employees and our colleagues who are closest to clients. You build the foundation. Rather than build the pillars next, we're going to build a roof next. The roof really talks about our vision, our purpose. What is our purpose?
Our purpose as an organization is very clearly to make sure that we are helping our clients enhance the health, wealth, and performance of their most important assets, which of course, are their people. We must do that consistently and keep that in mind. Here comes where it all comes together, the pillars. Yes, we had to state emphatically that we are an organization that looks to broaden our relationship with our clients. The deepness of our relationship cannot be debated. The broadness in our relationship can be enhanced. Yes, our people are important, and we must invest in those people. We must deliver profitable growth. That is correct. We're going to deliver profitable growth.
It is our mantra. All of that should allow us to do what all of us want to do if you're part of a company who wants to win, and that is to outperform the competition. Why do we feel that we're positioned for growth? Well, every time you pick up a newspaper or a magazine, it talks to you very clearly about what's happening in the world, and it intersects with just about everything we do. Let's talk about the health arena for a moment. People are asking questions about how they can really move forward in the health arena. Things are changing, costs continue to escalate, and we have, of course, significant opportunity to be able to address those issues with our clients. Aligning our businesses with all of these global aspects.
In Asia, 20 years ago, when I first started traveling to Asia, no one in that part of the world thought about an aging population. They are talking about it now. It's happening, and that gives a lot of reasons for us to be very relevant in that space. Of course, how to make smarter decisions, whether it's in a talent field. You have workforce urbanization taking place, globalization taking place. Velocity is increasing, retaining that talent and being able to maximize it. We think we're relevant in all the global spaces of news that's happening today. Focusing on our key growth initiatives as we move from down the funnel, from a very broad view, macro, what's happening, now down the funnel. How do we then focus to ensure that we are growing in the places where there's opportunity to do that?
Growth markets becomes a key indicator for us. Far, we're already growing double digits in growth markets, and we certainly think there's opportunity to continue to accelerate that double digit in the future. The average underlying revenue also for our investments business is already double digit, and we think there's opportunity, and there's absolutely a road ahead that will give us even more. Yes, exchanges. I mentioned earlier already. We have a projected revenue growth in exchanges, which will be accelerated in the years to come, and we think we have a great value proposition to be able to take us there. Let's talk about growth markets first. Why are we so excited about it? First thing, our definition of growth markets: Latin America, Asia, Africa, Middle East, across that spectrum.
Today, depending on how different organizations define what an emerging world is, what a growth market is, it's approaching 50% of the world's GDP. In addition to that, a very important indication for us in our business is the improving or increasing workforce and the ability to be able to spend on an average basis, that workforce. We'll talk about wage increases a little bit later. 80% of the global workforce exists in this part of the world. We, of course, have to be relevant. So far, only about 7% of our revenue comes from that part of the world. I think we can all agree that there's significant opportunity for us. We're retooling and preparing for even accelerated growth beyond what we've already experienced.
One of the ways to be successful is to find out what are the key indicators of success for your business. One of those for us is the average wage level. The average wage level will continue to grow. We see the middle market growing. We see average household income growing. Obviously, spending is increasing. When that average wage level increases, the demand curve also increases for our services. Early on, you might see that the demand might be, in some countries, for our data business, for information, for benchmarking, wage comparisons, stay competitive. That's early demand. You'll see that demand curve increase even further when you think about benefits brokering. As the wage levels continue to increase, to get through that demand curve, we got retirement and health then comes into play, investments.
I just got back from Brazil, yes, there's been a bit of a slowdown, people are now thinking about investing globally and not just investing in Brazil. Not a bad time for us to have our investment solutions there. Of course, talent consultancy. All of this moves, the important ingredient to understand to be successful in growth markets is to ensure that you understand where the maturity and demand curve is in those particular countries as you enter. That, we spend a lot of time doing to make sure we get right. In summation, as far as growth markets is concerned, what is going to drive growth? We're going to make those demand curve assessments. We're going to try some new products and new solutions.
We're going to ensure that we identify those countries that have the best opportunity for growth, depending on where they are in those maturity curves and demand curves. We're going to make sure that we then strategically invest, strategic business expansion in those countries, prioritize them. We can't do them all at the same time with the same priority. Discipline execution, incredibly important. It means that you're going to test some things and some things are not going to work. You're going to have to know that early. You're also going to know that some things are going to work better than you expected, and you have to be able to shift gears very dynamically as an organization to be successful. Yes, the same solution is not the same answer in each country. Also market share gains. Mercer Marsh Benefits.
I just want to take a second to talk about it because Peter's going to cover it later on in his presentation as well. The ability to be able to take the strength of Marsh under Peter's leadership, the strength of Mercer, and be able to put it together under one brand and work together in bringing those solutions to our clients, there is nothing more powerful than that. That's what we have growing in the international markets today, and we're seeing early signs of some pretty good success. Of course, expanding our footprint, especially through M&A, will always be important to us. Dan mentioned earlier, are we really concerned about the fact there's a little bit of a slowdown? Sure, we would prefer that everything always go northeast, but we know that's not reality, especially in these markets.
You have to really stay the course, make a couple of adjustments, because in the medium to long term, there's going to be good payoff in these markets. Starting to pay dividends. I mentioned earlier, approaching 20% of our revenue growth now coming from this part of the world, and that'll continue to position us well. We're very happy, very bullish. Our expansion will continue into these markets on the side of the growth. Let me switch gears a second to our investments. This is something actually, if you were to look back in 2010, you would have seen also as a growth initiative in 2010. I would say that it's been pretty successful. We've been pretty much high single digits, low double-digit growth in the investments business for quite some time. What is continuing to propel this?
Why are we seeing all this taking place? More and more companies continue to understand and recognize how do they decrease risk? How do they manage risk in their pension programs? DB to DC, as I mentioned earlier, all of that presents opportunity for the investments business. Yes, there is some increased volatility and complexity in the markets today. How do you predict interest rates today? If you were looking at some of the reports on interest rates, you would have thought that we'd be at 10% by now based on the last 3 years of reporting. The reality is that we're in a different world, different economics. Interest rates have some degree of volatility. They have some degree of complexity in terms of understanding what the return should be.
Any time there's complexity, any time there's volatility, really does lead to a very good solution that we have, and that's the investment consultancy solution. With that being the case, we think that we're well-positioned. Now think about this. We are advisors at the front end. We're then consultants as well. We provide data, we provide tools, we provide information on funds. We do fund-to-fund management. We also implement advice. The full spectrum of our opportunities and capabilities is what's at play here. The side that we're talking about now on the right-hand side of the slide is the whole side about what about implemented solutions? That's the latter part of what I just described in the continuum. What about that? Well, we have global outsourced assets growing from $0.7 trillion, with a T, to $1.1 trillion over the last years. Opportunities continue to grow.
That's the global market. We'll give you a little bit of feel of how we're growing in a second. The advice and tool continuum, all of what I just before, over to delegated implementation, leads to the following things. If you look at Pensions & Investments magazine, it'll tell you that Mercer is ranked number one as investment consultant based on assets under management. Assets under advisement, sorry. Assets under advisement, this is a huge number, $7 trillion assets under advisement, as reported by Pensions & Investments magazine. We're also a leading outsourced CIO manager. We focus most of our attention on institutional investors, of course. We've got over 5,000 managers that we cover. Ultimately, we have an open architecture to be able to understand multi-manager funds and the management of those funds.
When we say manage those funds, we manage the managers who manage those funds. Just want to be very clear about that, which is very important, we track their performance, and we work with our clients. Any time we do any work at all for our clients, it's always on the basis of understanding what their risk appetite is, ultimately what their investment philosophy and strategy is, and giving us the opportunity to work with them then in implementing that strategy over a long period of time. Now you can see on the right-hand side, Mercer's investments or assets under management has increased on a CAGR basis 28%, and now it's up to $87 billion in 2013. We hope to be able to pass the $100 billion mark sometime in the near future. We're excited about our growth market initiative.
We're excited about the prospects of continuing to grow our investments business. We're also excited about exchanges. Now, rising benefit costs. Let's put it in perspective. From 2000 to 2015, delivering health benefits in the U.S. has gone from $1.4 trillion to $3.4 trillion during that time period. Now, those Ts gets everybody's attention. There's a lot going on in the market, Ts always open eyes. That sets a perspective. Something has to change. Can't continue to have that type of growth in costs. What has to change? Well, one of the solutions from our government is the healthcare reform, the Affordable Care Act. The Affordable Care Act now mandates that most companies have an active solution for health for their employees.
Now, there's been some changing in dates and things like that, but that's what it mandates over time. That brings a significant amount of opportunity, a significant amount of people asking questions, decision-makers needing to understand what the implications of that are, states needing to understand, how do we plan for exchanges? How do we plan for ultimately reaching the objectives of the Affordable Care Act? There's another part of the phenomenon that perhaps is not talked about quite as often, and that is the movement of responsibility for delivering health solutions from an employer base to an individual. If you think about exchanges just for a moment, the exchange experience really is about an individual taking more control over their health employee decisions. I'm given the opportunity to customize what I need. Why do you think that's important?
We estimate that probably about 80% of employees covered by healthcare, health insurance in the past have probably overbought. They probably had too much insurance. About that same percentage, by the way, are people who never use their full deductible. The reality is that the ability to be able to customize to your needs is a powerful thing. It's a powerful opportunity. We also have, of course, in the active space, there's a predominance of what we're talking about here, and I'll show you a little slide in a second. Everyone's excited about exchanges because that probably, depending on what the estimates are, we're anywhere out of 165 million active group employees who currently have their health facilitated or provided by companies. Only about 1 million to 1.5 million of them are currently on an exchange. The opportunity is significant.
People get very excited about it, and they should. Here it is. The biggest part of this opportunity lies in the 165 million category that I just mentioned. These are active employees that are having their particular health benefits provided through companies. If you take the other 3 categories and you double them, they still don't reach the number of group actives, 165 million. Still important to have solutions in the other bars as well, and you may have heard most recently that we made an acquisition called TransitionAssist to allow us to be able to build scale in the retirement space, which basically deals with the individual Medicare of 35 million and also the sponsored retirees at 15 million. We think we're very well positioned. Again, keep in mind, the Mercer Marketplace was designed to really deal with the 165 million.
That's what it was designed to do. We're expanding, yes, but that's what it was designed to do. You think about some of our survey data, and I'm sure this will continue to change, and if we take another data in three months. The reason why we know it's going to continue to change is because we have more clients, more prospects talking to us more and more about their interest in potentially doing something in the exchange field. Our survey says that within two years, companies are thinking about exchanges, and about 25% of them say they are within that time period. It almost doubles when you think about it over a five-year horizon in terms of number of companies thinking about exchanges. We clearly see a momentum building in terms of interest.
If you are going to be relevant in this space, no matter who it is, no matter who talks to you got to have three key ingredients. One is about distribution, the other one is about intellectual capital, and certainly, you have to have partnerships that are very strong and deep with carriers. We believe that Mercer ticks the box in all three of these. First, 98% of employers in the U.S. employ less than 5,000 employees. 98%. More than 50% of the employees employed in the U.S. are by employers that have less than 5,000 employees. Mercer has 73% of their current health and benefits portfolio represented by employers with less than 5,000 employees. We also have a good representation in the upper end as well. You see nearly a quarter of what we do is there.
We think we're well diversified, and of course, one of the reasons I mentioned earlier that the number of enrollees closing in on 300,000 changes a little bit every time we report is because we continue to have enrollments throughout the year, signups throughout the year, because we're in the middle market space. Leading expertise. Last count, Mercer Marketplace is talked about or mentioned in 125 or more articles across different periodicals. Intellectual capital. People really look forward to a lot of our surveys that we send out. Soon we'll be reporting on healthcare costs based on 2013 results, and everyone is sure waiting for that. Of course, our other surveys, like cost of living surveys, et cetera, are very well publicized and certainly gives us premier intellectual capital to operate in this space.
We also consulted and helped many states plan for these changes, as I mentioned earlier. Of course, strong carrier relationships. There's not a carrier that you can name that we don't have a relationship with, and they're strong and they're deep, and they've been there for a long time. We develop products together. When they're thinking about a product, they come to us. When we're thinking about a product, we go to them, we test, and then we launch. These strong, deep carrier relationships pay dividends when something as monumental as this changes has taken place. Everybody's waiting for a little bit of statistics or additional statistics. Here they are. Again, I want to say we have a strong value proposition. These are early indicators. I would not take them to the bank yet.
I mentioned earlier, we have 67 clients on our full breadth of Mercer Marketplace solutions that represent 282,000 lives. With the addition of TransitionAssist, we add an additional 7,000 lives to that right off the bat and a nice pipeline and the ability to scale up. What do they look like? We go down to the low as 100 employees to as many as 33,000 employees and across 15 industries. Very wide appetite here, very wide appeal of Mercer Marketplace. There's a lot of discussion about whether one particular solution is better than the other. Let me just be very clear. We offer both fully insured programs and self-insured programs. In fact, 75% of what we've sold so far have chosen to be in the fully insured bucket.
Most of them, as I mentioned earlier, think about this, usually self-insured is for the larger companies, 2,000 plus. A lot of these could be potentially below 2,000, so they of course have fully insured programs, and they stay that way. Of course, 66%, so two-third, another kind of let's break the myth. Two-thirds of our clients have decided to continue with defined benefit and not move to defined contribution. Of course, one day they will, but this is a transition period where they want the employees to understand the customer experience, the client experience, and all the different changes of being much more involved in selection process, much more involved in customizing their benefits. Savings. $800 savings so far per employee. That $800 savings breaks down into the following categories: $550 for the employer and $250 for the employee.
From day one, Mercer Marketplace stated very clearly that our objective was to make sure this was a win-win situation for both employers and employees. With that, early indications seem to suggest it is. Those who experience our call center are satisfied more than 93% of the time. Very proud of that. About a quarter of the participants have chosen to also buy ancillary and voluntary products. We have a full range of products on Mercer Marketplace: accident health, critical illness, life, disability, et cetera. About a quarter of our clients have decided to buy more. With that being the case, we really believe that this is a win for employers, a win for employees, and a win for Mercer because we get to expand our relationship beyond the core medical into the voluntary, which we have not, in most cases, had before.
I'd like you to think about yourself as an employee for one moment, going through the Mercer Marketplace enrollment experience. We have a two-minute video that we show to all the employees. We think it's a pretty good experience. We're going to roll the video, two minutes. Please keep your eyes open. We would appreciate it.
When was the last time someone helped you make the right decisions in life, especially when it came to your benefits? It always seems like there are not enough choices available to get the type of benefits or coverage levels you really need. No more. Finally, there's a solution designed to help you build a personal plan that's just right for you and your family. Welcome to Mercer Marketplace, a private benefits exchange that offers a simple, one-stop, guided shopping experience with access to an enhanced array of benefit options for you to choose from. Here's how it works. Your employer has provided you with a dollar amount that you can use towards purchasing your benefits. Mercer Marketplace is designed to help you use these funds to make the best decisions for you and your family.
Your choices include traditional benefits such as medical, vision, dental, life, and disability. Supplemental benefits like critical illness and accident insurance, among others. With more than 20 types of benefits and multiple options within most benefit types, you can use your benefits dollars to purchase only what you really need and not what you don't. With a variety of educational videos, cost estimators, and other decision support tools, Mercer Marketplace makes it easy to compare plans and calculate costs, allowing you to make informed, confident benefits choices. If you should have any questions or prefer assisted support, Mercer Marketplace's call center, staffed by benefits counselors, is ready to help you during the enrollment process and beyond. Are you ready to begin? Just click Get Started and follow the prompt. The path to a personalized benefits program designed by you for you is just a click away.
That was an example of defined contribution, of course, where an amount of money is set aside for each employee to decide how they're going to purchase on a particular exchange. We think we have the right platform, believe we have the right solutions, fully insured, self-insured, multi-carrier, another thing that floats around, multi-carrier, okay, and single carrier, defined benefit and defined contribution. We have over 30 products. You'll find no other with that breadth. Exceptional online decision-making support for each one of the individuals. Of course, the acquisition of TransitionAssist, giving us a wider breadth of solution in the retirement space. Remember the first slide, it said that I was going to commit to you today that we have room to continue to grow our revenues, to increase our earnings, to be able to capitalize on market forces globally, and to achieve competitive and sustained success.
Hopefully, that case has been made. Thank you.
Thank you, Julio. That was terrific. If you were paying attention during that video and you saw the fellow with the mustache at the end, that's Julio. In all seriousness, we've had some terrific presentations, in my view, this morning, Mike and Scott and Julio. We've dealt with the consulting segment. We're going to take a short break, and if you can come back at 11:00 A.M. We're going to start at 11:00 A.M. sharp with our risk and insurance services segment. Thank you very much. If everyone can please be seated. We'll just wait another 40 seconds or so while we get everyone together. I see a couple of you brought blankets back with you. Well done. Now it's time to delve into our risk and insurance services segment.
We're going to start with the President and CEO of Guy Carpenter, Alex Moczarski, and then Peter Zaffino is batting cleanup for us. Over to Alex.
Thank you. Dan didn't tell you that King Cyrus the Great's generals died of cold. You'll remember the pearl analogy that Mr. Bischoff and Mr. Glaser talked about. You may not know, but you may, that the largest pearl in the world is called Lao Tzu, the Alla Pearl, and it weighs 14 pounds. I'm going to talk about Guy Carpenter because I think you are owners or are advising owners of what I consider to be a pearl in the Marsh & McLennan Companies. I'm going to talk about who we are, what we do, what we've done, and how we've done, and where future opportunities lie, and what our key drivers are. We're a blend of three disciplines, not three businesses, but three disciplines. Reinsurance broking, strategic advisory, and analytics. We're a Tiffany brand.
We have a fantastic client base, both diverse and blue-chip. We're a global company. Our footprint is around the world. We have a group of professionals that are, in my view, the best in the business. We also have a defined market. We win in it, and we have a high margin. We have a great track record. We've been growing at more than twice the market growth rate. We've been doing that for five years. We've invested in competitive differentiation. We've invested in strategic advisory, which I'll talk about later on. We've invested in analytics. We've invested in bringing in very high-quality accretive brokers. We've invested in technology, and we are, I think, are at a very good point in our competitive advantage vis-à-vis our other companies. Our leadership has been streamlined. It's highly engaged, highly motivated, and used to success. It leans forward.
Our broking talent is, I believe, amongst the best in the world, we've been adding to it. We've retained high-quality people, we've brought in high-quality people. On the strategic advisory side, we've brought in industry heavyweights, people who have gravitas, who have C-suite access, and have that Rolodex that allows us to get into the C-suite. In fact, I would think out of the four operating companies with MMC, Guy Carpenter has the best and closest C-suite access of all of them. We've invested in analytics. We've increased headcount, we've pushed analytics into the geographies, into the regions to bring them closer to their clients. We've executed some accretive acquisitions, which I'll talk about later, we have disciplined expense management. Our revenues grow faster than our expenses, that's our mantra. Let's see what we do.
Well, first of all and foremostly, we're a reinsurance broker. All right? We help companies find capital and contingent capital. We help them design their programs. We help them design their products. We benchmark for them. We provide access to capital. We provide best practices, we also provide client support services from the point of view of the contract, claims, and premiums. We're experts. We're totally aligned with our companies, totally aligned with their success. We're moving from being just a pure reinsurance broker, looking at contingent capital and capital and trying to optimize it for our clients, to being more than that because we're beginning to be asked to do certain things around strategy. Hence our growth in strategic advisory. That alignment with our clients, their success is our success. We don't have any other interest. We deal in the insurance industry.
Their growth, their health is our growth and our health. Long-term relationships, decades of years with major companies as well as with smaller companies, means that we have the trust of our clients. We're investing in strategic advisory services because we're being asked to help companies who want to get into a new geography, want to develop a new product, want to get into a line of business, want to enter a new segment, have issues around talent. They're coming to us for help. We also provide advisory services around capital. We provide advisory services around risk. While this is a global capability, essentially it's the strongest in the U.S., it's evolving into Europe and beginning to evolve into the other countries. 150 professionals with gravitas and experience helping companies reach their imperatives. Analytics is really the pay to play, I would say.
If we don't have good analytics, you can't win in this business. We believe that we have the ability actually because of our financial wherewithal and our size, to create a gap between ourselves and most of our competitors in the area of analytics and client-facing technology. We're working to do that. We have quantitative analysis. We have core analytics as well as applied analytics in the area of predictive capabilities. I'm going to scroll some of our products as I continue talking, because precisely these products and the ones that we're coming out with that I believe will allow us to have a competitive advantage and allow us to grow and be more useful to our clients. This last product is a satellite-based one. It's just been announced.
We announced it in late February, and it's helping our clients in the U.K. deal with the flood claims and evaluate what their reserves should be. Very pertinent, state-of-the-art model. We continue to want to roll out new products on a regular basis. How have we done? I think we've done pretty well. We've beaten the market fairly substantially. This is not only year by year by year, but it's a great record on a quarterly basis. I've been there now for three years. I used to be a Martian, now I'm a carpenter. Can't remember being a Martian, but I love the opportunity that Dan's given me, and actually, I'm having a great time, and I'm going to kiss all my management team. No. I don't want to be the first CEO for a while to have a quarter that doesn't grow.
I'm a little bit paranoid about that. Anyway, I think it's a tribute to our value proposition. It's a tribute to the trust that our clients have with us. It's a tribute to the fact that we are leaning forward. We're confident, but not arrogant and never complacent. We've been growing internationally as well. I'm particularly proud of that too because it provides us balance. We've invested in China. In Shanghai and in Beijing, we were the first reinsurance broker to open up a branch. Our position in China, which is still small from the point of view of our relative positions elsewhere, is about 40% of brokered market share, which is more than the sum of our second and third largest competitor. We're very happy about that and excited. We continue to invest elsewhere.
We've invested in Dubai and Middle East, and we've also recently bought a company or a piece of a company in Greece. We continue to grow either through acquisition or through accretive hires. Indeed, in Peru, we strengthened our company dramatically where we basically multiplied our headcount by four or five just recently, a couple of months ago. We continue to be what we hope to be a place where professionals who have the right hearts, the right minds can bring clients of the quality that we like to work with and where we can provide value to. Where are the opportunities to grow? Obviously, the hottest topic at the moment is what we call convergence capital, which David Priebe coined, I think it was in Monte Carlo in 2010. Okay. Which is this new private equity and pension capital coming into the market.
Clearly, it's had an effect. It's changing prices, it's changing sentiments, it's changing structures, it's changing products. Yeah, it's affecting our revenue. Now, this new convergence capital, we think, adds up to about $45 billion. While we see short-term effects on our revenues, we actually see that this is an opportunity for us. Because if we are able, and I believe we are, to understand private equity and pension fund appetites, and also understand how we can get products for our clients and match those two together. Because there are more options, because more capital, more sources, more options for our clients, they need advice. They need sophisticated advice. We're building on the basis that we have, plus bringing in new people to make sure that we are well-positioned to give them that advice. Choice is good for brokers. Choice does not mean disintermediation.
We're going to be taking advantage of the opportunity. Where are the other opportunities? Well, obviously, M&A advisory because there is going to be more consolidation. The ability to provide sophisticated advice on regulatory change, that regulations continue to do so. We have innovative products that will deal with emerging risks like cyber and in the CAT area. We also have been working both internally and externally to build up capabilities through partnerships to be able to deal with big data and what's going on in the predictive analytics side.
Three years ago, we got together and came up with what we figured would be the five key drivers of growth, and we added the sixth last year or the beginning of this year, which really reflects the entrance of new capital coming in and what we believe we can do indeed with the traditional capital that's becoming more flexible as they face this competition. Let's start with segmentation. Again, some three years ago, we looked at our client base and we divided it into five clusters. We could have gone straight into five segments, because it wasn't a broken platform, because of management bandwidth, we decided to focus on the ones that would give us the biggest return. We have what we call the global partners segment, which essentially is our top 33 clients.
These are large global companies who need sophisticated advice as well as complementary analytical support. We work with them. They are managed by David Priebe in the U.S. and Eric Paire in London. Blue-chip companies, and we are getting a bigger share of wallet. We are also providing strategic advice to them on an increasing basis, which is allowing us to get that increase. Strategic advisory, as I mentioned before. In the areas of growth, in the areas of capital, operational risk, human talent, we are the company that insurance companies are coming to because they trust us and because they trust the expertise that we have. We are also working closely with Oliver Wyman and Mercer, sometimes white labeling, sometimes not, in order to provide that holistic solution to them. Now, we are not looking to dilute our margin by coming up with some sort of fee agreement and become a sort of a consultant.
On the contrary, what we are trying to do is actually say, "Look, we can do this for you. Give us your reinsurance programs. Increase our participation in them." Because we are looking for that recurring business with a high margin, and the hook is working. I mentioned analytics before, and I think we have the capability because of our talent base, as well as our financial backing, our track record of coming up with good products to build a gap between ourselves, to get some light between ourselves and our other competitors. It is a pay to play, and if you cannot afford it, you are going to be out of this business pretty soon. Capacity management. We can do much more than we are doing right now.
We are beginning to look at not only the different sources of capital and where they might play in an insurance company's protections, but also we are looking at how do we deal with traditional markets? What information do we have? How do we analyze their results, their ability to pay, their keenness to pay? We brought in some talent. We are looking at systems. We might look at some systems that Marsh has, but I believe that there is value there which will allow us to retain our clients and allow us to bring in new ones. With 85% or 80% of brokered reinsurance handled by three companies, there is not a lot of room for major acquisitions. Essentially, we are looking, as Dan Glaser mentioned before, we need to have quality. It has got to be accretive. Culture has got to fit.
And we are looking at areas that we feel will grow. So we have looked at Accident and Health. We think that is a growth area. We have bought the Smith Group. We have made some strategic acquisitions from a couple of our competitors. We now believe we have the strongest A&H team in the United States, and we believe that is going to help us grow, and it is helping us grow. We are also looking at agriculture. We are looking at other industries. We want accretive acquisitions from the point of view or strategic acquisitions in areas where we can be stronger. I have mentioned our international growth. We continue to look for opportunities, and we have The phone is buzzing. Okay? It is really about coming up with making sure we understand who it is who wants to join us and making sure that the economics work.
Once again, a company that's growing at the rate that we've been growing for five years within an organization that's so successful as ours has been, if we have the right culture and we have a place which welcomes new people coming in, I believe we can continue to have growth. We think we have a lot of activities upon which to base our growth optimism on. We're a lean-forward company. We're used to growth. We like it. On the basis of a talent foundation where we have high retention, high engagement scores, where we are collaborative, and I know that because I debrief people who come into the company after three months, and I ask them what it's like to be at Guy Carpenter. Now, some of them say there's a bit of organ rejection. That's natural.
Most of them say they found it to be extremely collaborative, and though we have a lot more to do, it's very good because it's really about finding where the best solution lies in the firm to where the problem lies in the client. If we can put that together, we surely have a value proposition that's worthwhile. Our international footprint continues to grow. It's been growing at a good pace, and it's increasing. We've invested, as I said before, in geographies such as China and the Middle East, and we're looking at Africa and other areas where we can be pertinent and we can grow. We've invested in strategic advisory. People who have gravitas, people who have a track record of helping companies grow, who are welcomed by the C-suite and give us the ability to originate new broking business.
We've invested in our specialties, from marine to retro, to facultative, to agriculture, to A&H. Wherever it is that we play, we want to be the best. We want to be the best in every geography and in every practice that we're in, and we have the wherewithal to do it. In fact, we don't have an excuse not to do it. We've invested in GC Securities. We have a team now in London, which is the paramount team for M&A. We brought in the likes of Peter Jacob and others here in the U.S. to strengthen our organization there. We're also up to date with disruptive technologies.
We have a company in Oliver Wyman called Celent that looks at technology in the insurance industry, and they've looked at some of the partnerships that we have, and we're in the upper fourth percentile, quartile rather, from the point of view of where they think that our partnerships are going. We think that we're in a very good position to continue with our growth trajectory. Companies either shrink or they grow. They never stay static. We're hungry. We have a track record, and we believe that we can continue to do more. Thank you very much. Let me present my fellow segment leader, Peter Zaffino, President and CEO of Marsh. Thank you.
Good morning, everyone. Dan shared an experience with me when he went through the last Investor Day, and he went last, and he said in the order, "You're going to be anxious to go because you want to tell the story, and it's really hard to wait." I want to tell you were correct. I'm very honored to be able to share the Marsh story with you today. I think it's a good one. What I want to cover with you is just an overview of Marsh. I want to transition into some of our selected accomplishments. I want to spend most of my time today talking about how we've grown and how we intend to grow. I want to take you through, briefly, one of our core strategic objectives at Marsh, which is achieving operational excellence. Marsh at a glance.
Our main focus of all of our colleagues is to deliver value to clients. We have 26,000 colleagues worldwide. We're in over 130 countries, 500 office globally, $5.4 billion in revenue at the end of 2013, and we place approximately $50 billion of premium into the market each year. If you look at the breakdown in terms of how we are geographically split, the U.S. and Canada division is 46%, EMEA is 35%, Asia PAC is 12%, and Latin America is 7%. Let me take you through some of the selected accomplishments, again, focused around growth and profitability. Our underlying revenue of 4% on a three-year CAGR basis is something that we're very proud of. We've had 15 consecutive quarters of underlying organic growth, and in 2013, we had record new business of over $1 billion. Now focusing on the segment.
During that period of time, our, I'm sorry, the Risk Insurance Services adjusted operating margin has expanded 280 basis points. Our adjusted operating income on a three-year CAGR basis was 11%. One other note is talking about acquisitions. Since 2009, we've made acquisitions that total about $1 billion of revenue. We believe we are building the premier platform in the U.S. in the middle market, and now we have approximately annualized revenue of $600 million. That does include the most recent acquisition of Barney & Barney that we closed in early 2014. This is just a little bit more insight into how we've grown since 2008 to 2013 across all our geographies. 5% CAGR during that period. What are some of the observations that I have when I put this up?
One is that we've grown in all of our regions on a CAGR basis during this period of time. In particular, we've been able to grow in EMEA with some very challenging headwinds with the economic challenges that we have faced over the past several years. You've also seen us increase our growth in Asia Pacific and in Latin America, respectively. Asia Pacific is now 12% and grew at a 10% CAGR basis. Latin America is now 7% and grew at a 9% CAGR. We're starting to grow at a more rapid pace in the developing parts of the world. You can't talk about Marsh without talking about our capabilities. We call it delivering the firm, which is synonymous for delivering all the value that Marsh has to our clients. It's unparalleled, and we have tremendous intellectual capital.
I could spend all day talking about how we believe we differentiate ourselves in the marketplace, but I want to highlight a few that stand out for me. We have 30 global specialties and risk practices. We have 26 industries that we focus on where we dive deep and have relevant information to all of our clients to share. We have unmatched claims advocacy. We have 2,000 full-time professional claim colleagues within Marsh, there are no insurance brokers that can claim anywhere near that. It's the single question I ask every client I meet with is, how are we performing on claims? In my tenure of three years, I've yet to receive a complaint. We take this very seriously because what our clients are entrusting Marsh is can we get complicated claims settled? We have market-leading analytics, I want to take you through that.
We have broad placement capabilities, publish a lot of thought leadership. Let me transition into driving profitable growth. There are four building blocks that I want to focus on in this presentation. What are we doing in the developing markets, how are we strategically positioning ourselves? What are we doing in the mature markets, how are we using our global footprint and our focus on industry? Take a little bit of a deeper dive into mergers and acquisitions. What have we done? I'll take you through a little bit more of Marsh & McLennan Agency. I want to give you some insight on what we're doing with data and analytics and how we're changing the conversation with our clients. This slide talking around how we're going to invest in high growth countries in the developing markets.
There are 12 countries that are outlined here that represent the three-year growth CAGR from 2010 to 2013. That's the P&C premium growth in these countries. For the composite of these 12, they grew 10% during that period of time. We've had a specific focus on accelerating investment in those countries, trying to grow at a quicker pace than the property and casualty CAGR premium. As you can see, we've been able to do that. There's certainly a few outliers in India, Peru, and even Turkey, where we've had significant growth during that period of time. Our composite on those 12 countries is 14%, that's a 400 basis point delta. We're very focused on how we accelerate investments in areas of our business that we think we can accelerate growth.
This is just a quick snapshot of those 12 countries and the revenue that they represent out of the total of our international. 17% is what those countries represent at the end of 2013. If we can continue to grow above the P&C at around 300 or 400 basis points, you'll see we'll continue to grow that share over the next three years. We have a big international footprint, I'm not going to suggest that that outpaced growth is going to have a predominant percentage of our total international premium, I'm sorry, brokerage. We can see that that accelerated growth is becoming more relevant in our international business. Let's talk about how we've rebalanced our global workforce over the last five or six years when looking back into 2008 to 2013.
Quickly, you'll see that we have rebalanced to more colleagues that are client-facing during that period of time. Our headcount has grown 6% on an absolute basis from 2008 to 2013, and we're focusing on having more feet on the street focused on sales. When we've been reinvesting during that same period of time from the mature parts of our business to the developing, you can see that we have a much larger percentage today. It's a 50% growth of the percentage of colleagues that we have in the developing part of the world versus the mature. I don't want to leave you with the impression that we are under-investing in the mature parts of our business. We're becoming more efficient, better end-to-end process in the use of technology.
With our global footprint, we pivot very quickly to redeploy investments where we believe we have the best long-term opportunities for growth. Julio had mentioned in his presentation the power of Mercer Marsh Benefits, how we go to market in the international arena, and believe that there's significant opportunities for growth. We have an integrated value proposition. We have a high level of focus on the developing markets, Latin America, Asia, Middle East. We've increased dedicated sales capacity in the developing markets by 50% in 2013 and intend to accelerate significant hiring around the same percentage of growth in 2014 and in 2015. We've been able to enhance our cross-sell of property and casualty and have been thoughtful on our yield management and driving value for clients. Let me transition into the mature parts of our business. There's many initiatives that we undergo to drive growth.
I just want to highlight a few. You can see that 78% of our new business came from the mature parts of our business and believe we will sustain that. We have a very strong sales culture. We have a strong track record of execution on sales, and we have a very broad, diversified client base. I want to highlight some of our representation in the larger segments. We have 80% of the Fortune Global 500, and we represent 85% of the Fortune Global 100. We're growing our presence for Marsh. What it is, and it'll sound simple, is that when you have a global client that comes into Marsh, maybe in 40 or 50 countries, can we navigate them through our organization seamlessly where they get the same quality of service and same offering irrespective of where they actually approach Marsh.
If you look at, if it's in Johannesburg, Sydney, London, New York, can we get them connected with the network? Again, it sounds simple, but it's not, because you have local regulatory challenges. You have to know what those regulatory rules are. There's also elements of making sure there's not systemic risk, global programs. We have a seamless worldwide network. Approximately $10 billion of gross premium is represented by our multinational clients. We have 1,200 dedicated colleagues. We have industry-leading technology. We talk about having global quality delivered locally. Again, irrespective of where you penetrate into Marsh, can we connect you through the infrastructure? The answer is yes, we can.
We think this is such a huge opportunity for growth that we recently asked one of our senior leaders, David Bidmead, who ran our U.S. business, to lead our global multinational client services because we believe we are the market leader today, but want to distance ourselves from any of our competition because we believe this is a significant opportunity for Marsh. Industry, when I came into Marsh three years ago, I learned very early how important it was to have relevant and deep expertise in industry. Expertise does provide context for clients. They like to understand what's happening, not only with their business and giving insight as to what we're seeing, also what perhaps is happening outside of the jurisdiction that they operate in. What's happening with some of their competitors when it's melded into information that is relevant. We use data and technology. It's powerful.
It's real-time information that is shared with them. It has to drive value. Again, connecting our global business is something that our clients really enjoy. The one industry that stands out for me within Marsh, led by Jeff Alpaugh, our real estate industry. That group has expertise in that segment that has relevance all across the world. We have him traveling to Asia. We have him traveling down to Africa. He has a broad footprint, and it's all about driving expertise in that specific industry. It allows us to have outside opportunities for growth. Let me dive into M&A. Dan outlined our core philosophy, and I want to share what I see meaning for Marsh. We focus on high-growth geographies and businesses that have a high growth track record.
We're always working on a pipeline of high-quality assets, and you can see I put five acquisitions that we've done over the past several years to the right, Barney & Barney, Alexander Forbes, HSBC, Central Insurance, and Rater. All of those very high-quality organizations that we had cultivated over a long period of time. They have to be value accretive. We have a focus on the middle market as a segmentation. We've tended to focus on small to medium-size acquisitions. We feel that those are easier to integrate. We do look at complementary capabilities that could be in the mature parts of the world, that could be in the developing parts. Businesses that may complement what we currently do. It's incredibly important that there's a cultural fit, that they believe in the strategy, and that we believe that coming together makes both organizations stronger.
Let me dive a little bit deeper into Marsh & McLennan Agency. We're five years into the journey. Some of the core principles, we've had a disciplined investment strategy in the middle market. We've been able to grow revenue during that period of time from $75 million to $600 million. We've acquired 35 high-quality agencies. We're investing for organic growth. We're investing to expand our sales capacity by 10% each year over the next three years. We believe we're creating a differentiated value in the middle market, and we believe we're going to be the market leader. At the last Investor Day in 2010, this is what the footprint would have looked like. We were just getting going. You can see it has a little bit more population in the Northeast and the Mid-Atlantic region. Again, buying high-quality hubs and beginning the acquisition strategy.
This is what it looks like today. You can see that we've been able to expand significantly on the upper Midwest. We've been able to expand out West with the acquisition of Barney & Barney. You can see that the Northeast, the Mid-Atlantic, and the Southeast looks more densely populated because we've been able to make acquisitions in those geographies as well. We're really proud of what we're building. I wanted to take you through how we execute the strategy and just give you a little bit more of a lens on what we do after we acquire a high-quality hub. I'm going to take RJF, which is in the upper Midwest, led by Bill Jeatran, one of our top executives in Marsh & McLennan Agency.
At the time when we made the acquisition of the upper Midwest region in 2011, we had $25 million of revenue. We operated in two states and had four locations. If we fast-forward to what it looks like today RJF has been able to make acquisitions and grow organically, and our revenue now is over $100 million. We now operate in five states and have 11 locations. That journey is not complete. It's just where we are today. We've been able to accelerate growth through the spokes and fold-ins, and we've been able to drive organic growth at the same period of time. Speaking about organic growth, I wanted to highlight Rutherford, which was a hub that we purchased back in 2010.
If you look at how many producers we had with a book of business of $1 million or more at that period of time, it was seven. If you break it down with a little bit more specificity, is that in property and casualty, we had $1.6 million, in surety, we had $1.3 million, in employee health and benefits, we had $700,000. Let's look at it in 2013. We now have 18 producers that have a book of business of $1 million or greater. Look at the dramatic change from the largest books of business in P&C, surety, and EH&B. I think it's a combination of things. One is investing for organic growth, sharing best practices across Marsh & McLennan Agency, and reaching into Marsh when it's necessary on RFPs or looking for content or industry expertise. The model is working.
Now, I have a unique perspective on data and analytics based on my background. I spent 15 years in the reinsurance business. I've taken you through how we intend to grow in the developing parts of the world. We took a look at the mature parts. I've taken you through some selective accomplishments that we've had in M&A. I want to share with you how we're delivering our solutions and how we're changing the conversation with clients. You have to have valuable insight in order to change a conversation. It's not just about taking data and putting it in front of a client, and having a series of different interpretations. You have to be able to drive value. You have to empower clients to make sure that it's interactive and it's solutions based in the discussion.
It's not just coming up with an answer, but it's showing a variety of variables that can get you to the answer together. It has to be real-time information. Our industry has tended, at times, to look in the rearview mirror. We want to have more real-time relevant information when we're having these discussions. We take our clients through a different experience, and I just want to give you a little excerpt of that now, and show you what that experience can look like. When you take data, technology, and analytics and combine it together, you have a different discussion. At Marsh, we've developed Marsh Analytics Platform, which is our new mobile platform that we deliver through an iPad with our clients. We pull this from MarketConnect, which gives you an overview of what's happening with pricing by industry.
We take our clients through a variety of factors of risk tolerance, optimization, and we take a look at product-specific models. There are four key dimensions: geography, industry, exposure, and size. I want to take you through a live example. We're going to pick Latin America, we're going to pick the manufacturing industry, we're going to pick property, and the size is going to be between $1 billion and $5 billion. You can see we have three segments that we go through, risk management, middle market, and small business. It's customized analytics, it's real time, and it's interactive. The risk identification phase. This is very important for our clients. When we go into the identification phase, it's looking at current issues for risk as well as emerging issues. You can see the risk issues on the right.
How does insurance respond, and what can we do to mitigate the risk? Looking at frequency and severity. It identifies important key risk issues, now we're going to take a focused analytical process and apply this. The risk assessment phase. We're going to take a look at how we're going to dig in a little bit deeper on some relevant information. This one example shows what's happened with renewal rate changes over a four-year period. We can look at property pricing per $1 million, now we get to get into benchmarking and peer reviews. You look at yourself, the average, the first quartile. The best part of this is the features. You can customize it to what's relevant for you as a client. If you don't want to look at four years, you can look at two.
It's real time, we blend data. We use client data as well as a Marsh database to make sure that it has relevance. We further dig in. We want to look at the risk-bearing capacity. For large accounts, we'll look at the cost of capital change and what cat risk it has. Getting the risk tolerance framework worked out, then going into what are some optimal program structures. This to me is my favorite part of what we do, because this is the interactive part that looks at if you had no insurance, you select a structure, you can come up with as many different options as you'd like. In this particular case, we came up with a couple. You compare the different risk tolerances and what we think is the expected pricing, and you compare it to the current structure, and we make choices.
We look at risk tolerance, capital considerations, and evolve loss modeling in the process. Overall, it becomes a much more interactive discussion, and then we look at risk financing optimization as the output. This is just a very small sampling of what we're doing. Usually, it's a couple-hour discussion with our clients. Think it's very relevant. When we have taken our clients through this process, the success has been tremendous. I mentioned MarketConnect. Many of you are familiar with it, but I just figured I would review it just quickly. What is it? It's a portal that gathers relevant client information. You should just think about effective dates, industry, size, line of business. Carriers can license it to get a lens on our portfolio and business that may be coming up. Why are we doing it?
If you talk about getting efficiencies in the industry of the quote process and matching insurers that want to have their risk appetite deployed to some of our clients' business, it's very powerful. Just think about navigating your way through Marsh, with 500 offices in 140 countries trying to develop business. It's a central place in where we can match carrier appetite with our client demands, and when our clients go through the marketing experience, it's much more efficient. You don't send it out to 40 or 50 insurers. You end up having that discussion to be much tighter, and it's a much more effective process. Where are we now? We're rolling out our third version, which will have better interfacing, a richer set of data, and we continue to expand it geographically. Let me talk about achieving Operational Excellence. Again, one of our core strategic imperatives at Marsh.
Our guiding principles is it has to have value for clients. An enhanced value has to have impact, then for us, does it position us differently in the marketplace? All the initiatives that we discuss in terms of how we're going to drive operational efficiencies always has the discussion of growth. Does it deliver an enhanced client experience? Does it make us more productive? Does it have relevant value for growth in the future? Then when you do gain efficiency within an organization, you redeploy resources and you reduce risk. Here are just some selected accomplishments that we have achieved in our Operational Excellence journey over the past several years. We've identified and are beginning to deploy a target operating model. We've implemented our One Marsh designation of excellence. We've enhanced our electronic document management systems. We've automated some policy issuance capabilities for certain business segments.
Think of our MGA business and the Schinnerer Group . We have invested to streamline and automate some of our financial systems. Let me take you through One Marsh. I just mentioned it. What is it? It's a streamlined client and market interaction. Think about end-to-end process. When our clients give us information and we load it into our electronic data management system, does it have a full end-to-end process and workflow for our clients? That's what One Marsh is. We've just received a patent on it. It's a transformational service model, so we're quite proud of that. Why are we doing it? It is to enhance the client experience. I mean, this is from client demand, clients have been talking to us for years about can we make the marketing process more efficient. Can I get quotes on a more timely basis?
Can we do this with less intervention and less keying in different alternatives along the way? We believe that we have solved for that. We want to reduce risk again and rebalance resources. Where we are now is we're deploying it in 2014 in the U.S., and we've identified 10 countries that we'll be deploying it in 2015 and 2016. Again, it's end-to-end process. We aspire for a certain segment of our business, and what we call our national brokerage business in the middle market, is to be able to get policies at inception for a qualified group within our national brokerage segment. We're really excited about how this is going to differentiate the client experience and us in the marketplace. This is One Marsh, our operating model. This is actually a picture of a floor.
I wish it was a better picture. I wish I was actually taller. I could point out a few things to you on the screen. It's going to be a much more digitized open floor format. It's going to foster collaboration, knowledge sharing, best practices. We're going to have a variety of KPIs that are available throughout the floor, and it's a place where clients and markets, when they come in, will be able to do things within the One Marsh context in a streamlined basis. It's going to be highly automated. We're driving towards consistent delivery and not having the variability that has been in the business in the past. I want to close with why we're positioned to win in the marketplace. I believe we've proven that we have a very strong sales culture.
We have been making investments in our business for years to drive growth and to drive profitability and to increase efficiency. We will continue to make those investments. We're strategically aligned with our M&A as to where we want to grow. We have tremendous market expertise. The global scale and scope allows us to do a lot of things, share best practices much more efficiently, pivot when we want to grow, because we're in so many different places across the world, and it really does generate a very good balance. What are we going to continue to do? We're going to continue to drive profitable growth, drive the top line, be prudent with expenses, and increase operating income. We will continue to invest in our business as we have been for years.
We will provide differentiated value and focus on where the market's going, not where it has been. We believe we've developed and sustained strong momentum, and I'm very optimistic that we can do that in the future. I really appreciate your time in allowing me the opportunity to share the Marsh story. With that, I'm going to turn it over to Dan for Q&A.
Okay. Thank you, Peter, and thank you, Alex. We're setting up the chairs now. Let's see, we're going to hand out copies of today's presentation so you have them available and in front of you during the M&A, or the Q&A question. We will have microphones interspersed, so ask for a microphone, state your name and company affiliation so the people on the webcast can hear you. I'd like to invite my fellow presenters up to the stage, and we'll sit down, and we'll start the Q&A. I'll tell you a little bit about the team while we're getting all settled. The average age of the executive committee, 55 years of age. The average tenure with Marsh & McLennan Companies is 15 years. We have two EC members who were born outside of the United States.
If you look at the individual countries that members of the EC have lived in, we have 25 separate countries. That's not visited. That is lived in. We have four EC members who, at one point, worked for an insurance company, two who at one point worked for a bank, two who are lawyers, and we've got one bald guy.
Who wants to start? Please, Jay. Let's get a microphone down here, please. Think I got to get some roller skates on those microphones. Jay.
Thank you. Jay Gelb from Barclays. I think one thing we'd all be interested in is to get your perspective on how much better margins might be able to get in RIS and consulting, potentially over the next few years. With RIS, we're almost back to record historic levels, essentially, before there were a lot of challenges in that business. For consulting, we're already at record levels. It would be helpful to get some perspective on the outlook.
Sure. That's a very good question, and I can definitely understand it. Several years ago, our primary focus was margin expansion. We were behind. We wanted to catch up, and we wanted to get in the lead. Our primary focus was that. As I said before, our primary focus now is growth, principally revenue growth, followed by earnings growth, but both really in tandem. Margin expansion is an important outcome for us, but it's not like we're in the room figuring out ways of driving expansion. We're in the room figuring out ways of driving growth. Having said that, we believe that there's considerable runway in both businesses. Both businesses are different. I don't think you can compare them to the peak periods of years past. They're different businesses. The RIS business is a far more developed business. Guy Carpenter, in particular, is far more than a transactional broker.
They do an awful lot of things, as Alex has mentioned, for the C-suite. The easiest way for me to answer that question is we believe that there's considerable runway in both segments, although we believe it's an outcome to organic growth and to our overall focus on earnings growth.
It's a great chart you put up with the operating-
A little bit louder, Jay.
Sorry. It's a great chart you put up with the operating leverage, showing the expansion over time, revenue growth faster than expense growth. Can that gap widen over time?
Can it get wider? It absolutely can get wider. A couple of things. One, our largest expense is compensation and benefits, as it should be. Our compensation and benefits as a percentage of revenue is 58.9% as a company. In a lot of industries, that would be considered pretty high. We think it's a good place to be. Having said that, we've proven our ability to make the business more and more efficient. If you just look, 51,000 people to 55,000 people over five years, but adding $1.5 billion of revenue and $1 billion of profit. We've got a raging fire in the fireplace, and we can put more logs on that fire without doing anything else to infrastructure. We can sweat our infrastructure more, and therefore, the bigger we grow, the greater our top line, the wider that gap would be. There aren't pent-up demand.
As I had mentioned earlier, we've been investing across the piece, and our pace of investment has accelerated over the last few years. Next question, please. I don't want to favor the people who I could see in the first three rows, so I'm going to rely on the microphone bearers to pick people as well. Thank you.
Thank you. Kai Pan with Morgan Stanley. Question is on the EPS growth. If you compare with three years ago, the macroeconomic condition now is better and for Marsh, and you have less headwinds in terms of pension expense and share counts. I just wonder, what are the key risks in your mind that could prevent you to grow faster than the 15% you delivered in the past three years?
Yeah. It's a great question. You basically converted your question in the way that oftentimes I talk to these guys, right? Our long-term target is 13%. We've done 15% over the last couple of years, so you're saying, "Well, can you do more than 15%?" I kind of say the same to the crew when we get together. The reality is, we look at our business. One, we've been at it for 1871. We plan on being at it for a long period of time. There are no shortcuts. We can drive greater margin expansion and faster EPS in a very short, condensed period. It would not be good for clients, colleagues, and shareholders over the mid and long term. There's a pacing in our thinking.
We believe, as we've demonstrated, there's very few companies that are able to deliver 13% EPS growth year after year on a CAGR basis over a 10-year period. When I look back, it was right around 2011, I looked at, well, what companies, large companies, had delivered a double digit, not even 13%, EPS CAGR for 10 years in a row? There was one company who did that. When we looked on a CAGR basis, there were only 48 companies that had $5 billion of revenue or above out of all public companies. I think the 13% over the long term is a good target. I'm not going to make the target 15% or greater, we're a cash-in, cash-out business. There's no buckets that are created where we can put revenue or build expense unnecessarily. It will be what it will be.
When Mike was walking us through after the last quarterly call and was talking a little bit about the pension expense and how some of the pension savings might be offset by things like foreign exchange, yeah, that is our thinking about the year. It's not definitive because we don't know how FX comes out in the year. If FX turns out not to be as much of a headwind, then more will drop. That's an example. Next question, please.
Larry Greenberg from Janney. Wondering if Julio could just review the economics of the exchanges versus traditional healthcare and maybe separate out the opportunity on the voluntary side of the business.
Sure. It's a good question. Julio, you want to take that?
Sure. Thanks for the question. The economics of our healthcare business in totality has been pretty positive contribution to our organization for quite some time. If you start thinking about those differences between the exchange and that totality of that business, it's kind of tough to start doing that in these early days, right? It's really early still. We're still enrolling. You saw some of the statistics that are up there in terms of what we see with the business so far. Certainly, for sure, in the health exchange side of things, there's no question that because of the ability to be able to customize solutions, that you're seeing significantly more choices that are quite different in their mix than before. For example, certainly high deductibles are being chosen at a more rapid pace under the exchange solution than it was under the DB core H&B solution.
There are other choices that the employees can make, as an example, different provider networks, okay? If you're younger and you're less likely to be concerned about having to go to the hospital often, and thus your provider network choice might be different than you had the opportunity to choose before. There's also other choices like prescription drugs, and do you take the generic option or do you take the regular prescription drug option? Those things we're seeing early indications of changes as we continue to move through the spectrum of exchanges. As far as the economics, look, at the end of the day, we believe that as the business develops over time, that it's going to provide economic returns that are very similar to our core H&B business that we've had previously.
We don't see any kind of deceleration of profit margins or anything of that nature as we go into exchanges. We do see the opportunity to continue to change the client experience, the client buying experience, and some of these numbers we mentioned earlier I think will continue to be seen. Remember that, as I mentioned earlier, there was a significant amount of over-insurance being purchased in the past. Now with these types of choices beforehand, they're calibrating where they want to have their insurance needs met or where they need to have the insurance needs met with all of these different types of choices that I gave examples of before.
I had a-
Next question.
I had a question for Julio as well. Back here. You referenced the, I guess, 24% of employees are buying ancillary products as well.
Right.
My first thought is, that's pretty good for starting from a standing start.
Right.
How do you see that developing? Where can that go?
I think the possibilities are quite endless, and the reason why they are is a couple of things. Number 1, first year out is, as you very well noted, early days, and the breadth of decision-making support tools that we have, while strong, will get stronger as time goes on. Showing different scenarios of how they might be able to apply some of those ancillary solutions to some of the decisions they make on core. That'll continue to be developed, more sophisticated over time. We also will be adding more voluntary and ancillary products on the platform over time.
In fact, on April 1st, we'll probably have auto and home on the platform for individuals to consider. We'll get an opportunity to go back and ask those same individuals that have already made choices on their core and ancillary products to consider auto and home solutions additionally. That adds another dimension, let's say, to the potential of the platform. We see those dimensions continuing to evolve. If you just think about one day having an experience similar to what you might have on other types of websites that are very popular today, which will tell you that based on your age and based on the way you answer these questions, the last 25 people that look like you and answer these questions this way chose these types of options, right? 1 option, 2 option, 3 option.
That's how sophisticated over time this will become. The more sophisticated we become, the more pointed and targeted we become in the offers that we offer these individuals, the more chances there are to sell additional ancillary products along with the broadness of what we offer.
Julio is not doing himself full justice because in his background, he was truly a guru at a large multinational insurance company when it came to things like ancillary benefits. I remember quite vividly when he came to the U.K., and I was running the U.K., and we had very large call center capability. Julio sort of invented the, "You want fries with that?" from an insurance company standpoint. People would call up just to change their address, and they'd end up with a personal accident policy by the end of the phone call. It was a wonderful business.
Please.
Meyer.
Thanks. Meyer Shields, KBW. A question for Alex. I think you referenced, probably very appropriately, coming consolidation in the insurance industry. Can you talk about what that means medium term for the demand for treaty reinsurance and whether that is likely to be a material impact on margin expansion?
Okay.
Please.
Thank you. Clearly we're going through a trend. It's a pendulum that swings backwards and forwards, okay? Right now we're looking at consolidation. There are strong companies and not so strong companies. Balance sheets have improved. Centralized buying seems to be the flavor right now. Yes, that does have an effect on the revenues one can have if we were just doing the same thing all the time. We're evolving, as Dan said before. I do believe that the more we can help our C-suite clients fulfill their growth imperatives, the greater opportunity we have to have a bigger share of what might be a decreasing wallet. This is a trend, and the trend will change. I'm fairly sure that it will.
The other thing which I didn't mention is that when we were going through our segments, we're the largest small insurance company reinsurance broker in the U.S. Nobody thinks of us as that. The National Association of Mutual Insurance Companies, NAMIC, we have 300 clients there. We went down there actually for the first time. It's almost as if it was by accident, segmentation has now given us the focus. Now we have branded products. We have people who are dedicated to it. We brought in somebody from a competitor who's also working with our John Holderman. I mean, we're all over NAMIC like a rash. Those insurance companies need analytics and need reinsurance, okay? When you're talking about consolidation, et cetera, I think it's probably at the middle to the upper end.
It's there where I believe that strategic advisory and getting a bigger share of whatever reinsurance that they're buying is still an opportunity for us because companies still have to buy reinsurance. Right? Who would you rather buy with? Somebody who can help you grow and has all the other bases covered or somebody who just has the bases covered?
The other thing, Meyer, is that with all that improved balance sheets and companies taking on a little bit more, retaining a little bit more of their own risk, some old salts in the business do say it feels very odd to be retaining more risk when prices are going down.
Sure. In fact if your contingent capital is cheaper than your cost of your charges of capital, why are you retaining more?
More questions, please.
Thanks. Sean Dargan from Macquarie.
Sorry.
I have another question for Julio about exchanges. You mentioned single carrier versus multiple carrier.
Yes.
Where are the economics more favorable to Mercer, what will be the trend? Will we see more multi-carrier options in the future or fewer?
Okay. Let me be careful so that I don't want to upset my carrier friends here with this answer. Look, as time goes on, there's no question that consumerism starts taking over, right? The consumer experience becomes even more important as we try to differentiate between one offer and another offer. There'll be little appetite for consumers to accept that they would only have one choice on a platform, right? I think you will see as time goes on that a full scope of choices across the spectrum will be needed in order to satisfy the demand. Now, whether or not a single carrier might be able to actually offer that full spectrum of choices, we'll have to wait and see. Normally, this does turn into, in other markets where these maturity curves have taken place, and you've gone from DB to DC.
When you look at a 401 plan in the U.S., you don't only have one choice with one investment firm. You have various choices. You have multiple choices. I think you could see a natural curve where it'll have to be a multiple of choices for clients and for customers to choose from, ultimately. Whether that's provided by one carrier or multi-carriers, we'll see. We certainly see the appetite today as being a lot around give us choices. Our customers, our employees want choices, and they want to be able to customize widely for the types of things that really are appropriate for their family situation. That seems to suggest that broad choices will be the winner as everything is said and done.
Thanks.
Jay.
I guess for Mike and Dan. You talked a little bit about capital deployment, sort of cash in, cash out, and sort of the evolving philosophy around share buybacks. I guess if I look at just point in time, your financial leverage is very low, continues to decline, and as earnings rise, as you suggest they should, and your debt costs or notional amount stays the same, is the right answer in your mind just lower is better? Or is there a band of leverage that you want to maintain such that we should expect maybe deployment in excess at some point of the cash that comes in the door? Thanks.
I'll give that a try just so Mike can see whether all of his coaching and training is having in the right effect. It's a good question. I would say that we are not de-levering or getting more conservative over time, naturally. I think what you will find is that we will have the ability to borrow more money over time. In a natural way, we may do that very slowly if it's not acquisition related. It doesn't feel comfortable to us to just go out and borrow money to buy back shares. I wouldn't do that in my personal life. I don't think the company would operate under that basis either. It's one of the reasons why I said that our placeholder of $800 million for acquisitions is there.
Our level of acquisitions, where maybe in the past when our philosophy was less developed, my personal philosophy was less developed, I may have said, "Well, whatever's left over after dividends and acquisition ends up in share repurchase." Sort of a residual category. I don't believe that anymore. Acquisitions and the number or size of our acquisition strategies will not affect share repurchase for the foreseeable future. Therefore, if we ended up acquiring higher than that placeholder at $800 million, we would still keep share repurchase and dividend at the $1.3 billion for this year. If it ends up being lower than $800 million in acquisitions this year, then the $1.3 billion would rise as a result of that. Please, Jay.
Yeah, a question for Alex. Jay Cohen at BofA Merrill. Alex, you talked a bit about alternative capital in the business. Let's look forward and just let's say for a second that this type of capital now dominates the financing of reinsurance risk. In that environment, what do you think your role will be versus the reinsurance companies? It seems to me there might be some conflict. Somebody could be disintermediate, intermediate.
Let me take that a little bit, then I'll hand off for Alex to give more substance to it. We're an intermediary. The many is our protection. The many capital providers, whether they're traditional reinsurers, whether they're newfangled reinsurers, whether they're hedgies in the reinsurance business, whether it's alternative capital, there's many different choices. Companies need to evaluate those choices on the basis of form, substance, longevity, stability, reliability, all kinds of different factors, and they won't do that themselves. They will hire somebody to do that work. Alex?
Yeah. I just add what Dan says. Yes, options means choices. Choices means you need advice because you need to know what those choices are. You know there are a myriad of them, so you need to have people who understand them and who you trust. In the conversations that I have with clients, first of all, this capital that's coming in is really interested in non-correlation, though it's beginning to seep over into other areas, and the traditional reinsurers are beginning to come up with multi-year deals. They're becoming more flexible. They're also providing their underwriting capabilities and management. It's becoming a little bit more mixed, but that just makes it more complicated. We're good at complicated. Okay? If it's a simple solution, you don't need us. If it's complicated, you need us, and we can charge you for it. We like that.
Secondly, again, speaking to the folk out there, at this moment, this could come back and shoot me in that manner row. At this moment, the sentiment is, speaking from a client's point of view, we can never see ourselves having more than 30% of our reinsurance programs with this untried, untested capital because, one, in case it doesn't work out, in case their appetites for paying claims don't match their promises, we don't see that tradition of helping companies out when the time gets tough. If you have a long-term relationship, sometimes some claims that are on the borderline get paid, whereas in a new one, they typically don't. I think we still have some time, it may be short, but to be able to be flexible and to figure out how to go through it.
The great thing about it is we've got great minds in Guy Carpenter. We've got clout, we've got the relationship with the rest of the company.
The other point is, whether you're talking about reinsurance or whether you're talking about retail, if you want to find the highest rating, narrowest terms and conditions, go to the markets which have the least broker penetration. Please.
James Maklicki with Citi. My question is for Julio. When do you think the exchange business can be profitable, what are the hurdles to achieving margin growth? Is it more of scale, is it investment spending, or is there something else?
As you can imagine, in the early days, we have made some investments in getting our platform up and going. Mercer Marketplace was actually put together in a six- to nine-month period of time with a significant opportunity to really distinguish itself early, it has, I think, done exactly that. It continues to grow. We'll continue to invest. In the medium to long term, Mercer Marketplace will return the same type of margins that we had experienced in our traditional health and benefits business. We don't believe that it's going to take a significant amount of time to be able to realize that.
Of course, we're still in the throes of making our investments appropriately, and that's where we're focused right now, making them wisely, ensuring that some of the early returns we expect from that investment comes in, and we'll continue to calibrate and wear most, if not all of that in our operating results. We have been able to do that so far, and we'll continue to do that, we believe, in the foreseeable future as well.
Please.
Greg Peters from Raymond James. You laid out a case for a lot of the growth going forward coming from outside the U.S. I was curious if you might just spend a minute talking in the context of cash flows, how that might affect all of the capital management initiatives that you've discussed today.
Sure. Why don't we start with the business, and I'll really, to save time, just focus on Marsh and Mercer in terms of the growth of their businesses outside the United States, and then hand over to Mike to tell you some of the things we do when we have more cash and earnings outside of the United States and how do we bring that back to the U.S. as a way to be able to use for dividends and share repurchase. Peter, you want to kick us off?
Sure. The international part of our business is quite large, and there's a lot of opportunities for growth in each of the geographies. If I break them down and looking at Latin America, I think we have invested for very strong organic growth, but we've also made acquisitions that differentiate us in that part of the world. I think that balance will continue as we look to the future. We haven't made any real large acquisitions but have positioned ourselves. If you look at Peru, we were number 2. Rehder was number 1. We purchased Rehder and became a clear number 1 in Peru. We look for strategic alliances in Latin America.
I would say when we look at Asia, it's a lot more of an organic growth story. We identified some of the countries that we want to accelerate growth, where we think there's great opportunities, whether they've been more prevalent in supply chain, or whether there's stronger GDP, or whether our own market share is a little bit lower. Talking around the segmentation is just to reemphasize, Julio and I believe that the employee health and benefits in the international business trajectory is quite strong because we now have come together. We have a target operating model that we're executing and believe that we can grow that organically quite well.
Okay. There's a long road to travel for that to continue to grow and actually maximize its contribution to the organization since we're just at the beginning stages of making that move. Peter and I are very committed to Mercer Marsh Benefits moving forward in those big markets like China, Brazil, and others as well. Let me just for a moment, level set for a second, what's happening in that world. First thing, as you know, Mercer is about 50/50, right? About 50% of our business comes from international, 50% of our business comes from the U.S. The reality is that from that 50, most of it is in the Europe, more developed markets, and not enough of it is in the growth markets. We have a significant opportunity for growth going forward. The economics are there. Middle classes continue to move, small businesses, medium-sized businesses.
We also have a phenomenon of local companies, of course, going multinational, whether they're doing it internally within their region, their regional sphere, or going to the developed world. You have a lot more activity taking place now between the growth market, multinational aspirations going into developed markets than you do developed markets going into emerging part of the world. All of that, we think, puts us in a great position to be able to play catch when they are moving into the developed world and obviously develop indigenous opportunities in those markets as well. It's our job to grow the business profitably, and it's Mike's job to figure out how to get the cash in.
All right, Mike, we've got 55% of our revenues coming from outside the U.S. The characteristics of that business are very good. The margins and earnings are there. We've got the cash. What do we do with it?
Yeah, it's a great question. Multifaceted question, multifaceted answer. The first thing that you think about is you do international acquisitions, you never bring the money onshore, you can redeploy it. Obviously, a lot of our investments and capital expenditures are international as well. I would also point out a few other things. First, the U.S., when we went through our trough period, saw the profitability decline the most. In fact, Marsh for some period of time in the U.S. did not make money. The recovery of U.S. earnings has been fairly phenomenal. While we're talking about the balance with regard to international and U.S., you also have to be aware of the velocity and the acceleration of our U.S. earnings.
All of that said, we do look at our cash on a global basis, at the end of the year, we had about $2.3 billion overall and about a little less, between $900 million and $1 billion in the U.S. That was because we are able to have fairly effective repatriation strategies in addition to the earnings growth that I mentioned. The real crux of the issue, okay, the real crux is that you've heard us talk about returning capital to shareholders, that's dividends, that's your repurchase, that's all basically U.S. expenditure. It is a challenge to basically bring in that portion of our international earnings that we then want to pass back to our shareholders in a tax-efficient form. That's one of the reasons why our tax rate is 30%.
It puts a pressure on us to do that, so far, we've been effective in doing so. Our tax rate over the last three years has been about 30%, we think that's reasonable to do going forward. The one thing I would say is the $2.3 billion at the end of the year kind of caught us a little bit by surprise. We know that it's a seasonality and a lot of our money goes out in the first quarter for bonuses, for share repurchases, for dividend payments and what have you. We would essentially build our cash over the course of the last half of the year. My colleagues produced so much earnings and cash flow in the fourth quarter that we had a little bit extra to deal with.
By the way, that's one of the refinements that I would make to Dan's question when you were asking the question of operating leverage. We don't necessarily just need to do debt. We plan to draw down our cash balances, not just in 2014, but over the course of the next three to four years. We think it's excess cash, that's where we're going to go into first. Thank you.
If I could just add to it, just one last piece of it. I mentioned earlier that Mercer has a significant presence, of course, in the developed world of the international markets. We also believe that there's opportunity there to grow our business as well. There's no question that the European continent has probably seen its worst of the global recession over the last 3 or 4 years. It's probably in a point of inflection, and there's opportunities there as well to be able to grow our business even more robustly than perhaps we've seen over the last several years.
Okay. Other questions? Make sure we're servicing the back of the room as well, please.
Joshua Shanker from Deutsche Bank. I think Julio is probably the most popular person today. Could you compare or contrast the economics of retirement exchange versus active employee exchange and talk about what went into the decision to buy versus build on the TransitionAssist acquisition?
Right.
Also earlier, you said you weren't convinced that the economics exchange was worse than the current health and benefits margins. Was that another way of saying that it might be better, or is that a way of saying that it's just probably going to be the same?
I'll go with the second part first. I think our best estimate of how it will develop is very similar to what we've experienced with the core H&B traditional business prior to going to exchanges. The economics seem to level off right about at those levels. If we are surprised, then hopefully it'll be to the upside. As we get more experience over time, we'll know that. We do expect it to be pretty similar.
You may get more revenue because of ancillary coverages.
Yes.
The margin's the same.
Yeah, margin's the same. We're talking about profitability. Yes, absolutely. We have the potential. In fact, we will get more revenue over time as a result of it, no question about it. I think I may have mentioned that the more ancillary products we sell, the more opportunities, the more expansive our relationship gets with these clients. Most of those relationships we didn't have before, the ancillary parts of it. Obviously, it'll be a benefit to us on average revenue per client over time. Early days, so that'll take some time to develop. Nonetheless, those are some of the early-day findings. Your first part of the question was?
Compare and contrast economics of the retirement exchange,
Okay.
versus the active employees, and talk about what.
All right.
went into your decision to buy TransitionAssist?
Okay. Thank you. As we think about these different segments over time, today somewhere between 10,000 to 11,000 citizens in the United States are retiring every day. Okay? We have the opportunity to be able to be very relevant as they make decisions about their health choices in the future. We want to make sure that we have the opportunity to have a scalable platform with already existing business flow, with already CMS compliance as part of it. That does take some time to do if you're doing it on your own, but they're already licensed, they already got CMS compliance there, and scalable. We think that this particular acquisition, although appearing small at the moment, has the potential to provide that scalable option for us over time, and to build a strong value proposition for the retirement sponsor space as well as the retiree individual space.
Now, what will grow faster? Most companies, as time goes on, have already capped their contributions to retiree. Many companies have. Thus, it'll be easier for them to transfer that into an exchange situation where you're now already on a defined contribution because you've capped benefits. Thus, that sponsored retiree, which is currently a group, will turn into an individual offer at that point in time. We wanted to make sure that we had a good value proposition and solution long term for those two elements as they continue to develop. It's likely that that's going to happen at an accelerated pace early on. All right? It still won't match what's happening in the active space because active is so much larger.
Nonetheless, that's likely to happen on an accelerated pace early as companies make what they consider to be decisions that are an extension of what they already have decided because they've capped benefits for that particular segment. We want it to be there as that early development happens and continue to build scale as an alternative. We're not satisfied with just having what we believe is the best solution for active exchanges. We want to make sure that we have the best solution for all of those changes that are going to be taking place in years to come, and this gives us the opportunity to build scale for those solutions.
In terms of expected margins or returns on the business, actives is the better place to be in the market. One, because actives last for a lot longer, and two, just the use of technology and propensity to buy ancillary products would be larger in actives than in retirees. Grandma and grandpa don't use technology to the extent that you do. They call up more often about medical issues and stay on the phone longer. The margins would likely be lower in the retiree business as compared to the active business. Okay, other questions?
Thank you. Charles Sebaski at BMO. Peter, I was wondering about the role of technology in your business maybe over the next couple of years, and if that's going to change the landscape on scalability, on how much business each employee does. Do you need to put on new employees at the same levels that the business has historically done as it grows when I think of the iMAP and the other products that you're rolling out? What kind of investment given the CapEx increase we've seen this year?
Peter?
Sure. A couple of things. If you look at just the core business and the investment in technology, we spend more time on the end-to-end process and workflow because actually, the technologies work pretty well. On the core business, I don't see any significant investments, CapEx in terms of technology. The iMAP is certainly an investment. It's one that, again, I could spend hours taking you through it, but I just chose to go through the global risk management piece. If you look to the segmentation of middle market and small commercial, those will be a little bit more standard, a little bit more dashboard. It's really the data that's behind it, which we aggregate and collect today. It's a matter of how do we cleanse that? How do we get it from a wider geographical footprint within our organization?
There'll be some modest investment there. The delivery platform, really, which is on the iPad, we've trained 250. I would expect that to be 1,000-1,500 over time. Don't see that as a significant investment and one that we can't wear within the operating companies to expand margins. I do think it's becoming more prevalent. If you look at the insurance companies and the clients that Alex has, in that segment, you're spending more and more time talking about predictive analytics, and that's how they deploy capital. That's how they think about counterparty risks. If you don't have a broker that's advising a client that has the same capabilities of understanding how the capital is being deployed and using predictive analytics as a portion of the advisory, I think your clients are going to be falling short in the future.
We're prepared for all of that.
It's just another example of the widening moat in some of our businesses. Marsh is not only about the technology, it's about having the insights and skills to use the technology, and it's having the raw data to be inputted and to evaluate. This is just another way that Marsh can separate from the rest of the competitive set.
Paul Newsome with Sandler O'Neill. A few of my peers have some rather views towards pricing, and we haven't had. I'd love to get an update as to how you think that pricing is currently affecting you.
I didn't hear the first part of the question. Can you repeat it again?
I'm asking about insurance pricing across businesses.
Insurance pricing. Sure. I'll just take that. In over a 30-year period, insurance pricing goes up and down, but usually down. We have built our business under the fundamental notion that in more times, there will be downward pressure on pricing than upward pressure on pricing. For us, when there's upward pressure on pricing from an economic standpoint, that's good for us. It becomes a mild tailwind, although it's not so good for our clients. Conversely, when prices are going down, it's very good for our clients, and it becomes a little bit of a headwind. We don't run our business. P&C pricing in its normal bands of +5%, -5% kind of thing, really has very little impact on our ability to grow our top line. Please, Ryan.
Yeah. This one's for Peter. Alex has talked about the alternative capital in the reinsurance business. It's a new source of capital. I'm curious, on the insurance side, are you seeing any kind of newer emerging areas of capital coming in, be it emerging markets, be it China, be it other areas that you're seeing could potentially have a significant impact on the insurance business?
Thanks, Ryan. There are some small examples. When you look at $50 billion of premium seeded into the market and you do a couple of deals, I wouldn't call those trends. What we have seen post-catastrophe, I think of Superstorm Sandy, there were a few risks that we partnered with Guy Carpenter to look at cat bonds, and we had a client that actually did a cat bond at the renewal time. I think that looking at alternative capital as a solution, not necessarily as capacity has come in in several examples. It's not prevalent across any part of our geography.
I think I'm talking more about other new areas of capital, more geographically, like Saudi Arabia, like other areas of the world where you're seeing insurance markets kind of popping up and stuff.
If you look at the insurance business on the retail side, there's not a more global business that exists. If you look at the top 10 insurers, it's probably seven countries represented. Certainly, there has been some developing Chinese capacity that has begun to participate on risks that are outside of China. I think you're going to see a phenomena in multinational trade where it's not just mature markets moving into emerging markets or developing markets. It's Pan-Latina, or it's in the Middle East, let's say the whole Gulf Cooperation Council. There's a lot of movements in regional blocks and regional trades. I think the most important thing to think about is the pie itself is expanding. If you go back 30 years ago or 40 years ago, there was no such thing as political risk insurance, trade credit insurance, EPLI insurance. D&O was just beginning to take root.
You have areas around supply chain, cyber, which clearly create risk exposures for companies, concerns for C-suite teams, and boards, I think will be developing. When we look as a team in terms of some of this new capacity or any available new capacity, the first thing we want to do is hoover up as much of it as possible for existing problems for our clients. We have clients in certain segments and certain geographies that can't buy the amount of insurance that they want to buy today. The traditional market is so modeled and so tight, they don't want to offer it. If there are some alternatives or new traditional players that emerge, we want to get those companies and get them around the capacity problems of clients. Believe me, there's plenty of them.
Catastrophe areas, certain segments, as I said, certain industry groups, it's near on impossible for them to buy the limits that they want to buy. Last couple of questions. We've got one down here. Thank you.
Elyse Greenspan with Wells Fargo. I also had a question for Julio, just following up on the healthcare exchanges. When we talk about the revenue and the economics, as you guys first started, you've been focusing more on current clients of the company.
As potentially new clients come on board, we obviously can see increased revenue on that front.
Right.
When you look at the long-term kind of game plan of Mercer Marketplace, when do you kind of see Marsh going after more new clients to potentially add on additional revenue? Then as a second question, as we look at the 24% of employers or employees that have come on purchasing the ancillary product, how high do you think that that percentage can go as this exchange does expand?
How high can it possibly go? Hmm. Hope it goes to 100.
Let me start by setting you up on that 24% question. Is Mercer considering adding additional ancillary coverages?
Yes. As I mentioned earlier, we'll continue to add
More coverages, more offers, more extension, Effective on April 1st, as mentioned earlier as well, we will start offering auto and home as an additional ancillary set of products for the exchange solutions. This is one of those things that has the potential to really become a broad platform for many things to be offered to employees over time and or even separately as things continue to develop to a more individual sale as opposed to maybe through groups. We see this evolution, this platform being the beginning of much to come, and we'll continue to make sure that we are taking the pulse of the clients that will look in the service to ensure that the platform stays very relevant and that it continues to move forward in a very innovative way, giving the type of offers that are necessary for the demand.
In fact, ahead of the demand, if we can. There was a second part of the question as well.
It was selling to new clients or bringing new clients on.
As you very aptly said and stated, the early days of success for Mercer Marketplace was very much focused on explaining all of what was going on with the ACA to our clients and giving them options to think about different types of ways to deliver healthcare services to their employees. Because of that, it was obvious and expected that a lot of our conversions to Mercer Marketplace would be current clients. Of the ones that we talked about, only a couple, less than a handful are actually new prospects and new clients that we have converted so far. Here's the real great interesting point, though. We've had significant conversations with prospects who are currently not our clients, who are still thinking about whether or not they're going to go to the exchange solution.
As they think about whether they will or they won't, we see a win-win situation for us. Those that choose not to go with exchange solution for, let's say, the 2015 or 2016 enrollment period, we immediately pivot to other solutions that we have available for them to consider for potential H&B revenue going forward. While perhaps some have mentioned that the time element spent in attracting exchange solutions may have impacted their core because of that attention, we see it as an opportunity, and we see it as a pivot to be able to offer our broad range of services to that particular client or prospect that we're talking to. We also, I think, mentioned earlier, I think you had a question about Marsh too in there, if I'm not mistaken. You said something about Marsh.
Just Marsh & McLennan.
Marsh & McLennan broadly. Okay.
We have time for one more question, and we would clearly favor a question for Scott on Oliver Wyman. We won't hold you to it.
Hi, Justin Bandy from Artisan Partners. Sorry, Scott. Have to wait for the next one. First on the buyback, I was just curious, Dan, what really caused the change in philosophy on this, and if there's any sensitivity to the share price. In other words, if the share price doubled tomorrow, would you still have the same propensity to do buybacks as you do today? Just on Marsh Agency, how big of a business do you want this to be? How many
Sure
more deals do you see in the runway in building that business?
Sure. We'll use that as the last question because we're running out of time. I'll take the buyback question, then I'll hand over to Peter to talk about the potential size of MMA in the future. On the buyback side, I'll just be completely upfront with you. I was in the business running an operating company for several years, and you have operating company issues. You dig into those issues, but you don't really dig into corporate issues when you're at the operating company level. There's a lot more of that now, frankly, because the way I run the executive committee and the way I've always run businesses that I was responsible for would be sharing the issues, sharing the challenges. Peter and Julio, Alex, and Scott hear a lot about the issues that we have as a corporation.
If I was hearing them before, which I did, certainly was in the room, I wasn't paying as much attention. They weren't my issues. My issues were around growing Marsh and improving Marsh. When I became the group president in April of 2011, then even more so when I became the CEO, all of a sudden those corporate issues became very much issues that I sponsored within the executive committee, I tabled for further discussion. Whether you're talking about tax or repatriation or government policy or pension or buyback or dividend. I would say it was very much a learning process, and I relied heavily on all members of the EC, and none more heavily than on Mike and on Peter Beshar to inform my thinking. We would just talk about things. What is the right capital structure? What does cost of capital really mean?
Is it the same in China as it is in Houston? How should we think about that? How do we look at our risk-adjusted returns? We create a balance around that. My thinking around share repurchase, and coming from an insurance company background, you could never have too much capital. I was a broker for 18 years before I was at an insurance company, so the muscle memory started to come back, that this is actually a better business. This is a business with less risk, with better cash flow, less calls on that cash, not a whole category called losses. From that basis, I think, the philosophy around share repurchase, we formed as a team, and we got there ourselves as part of our journey. The journey doesn't end. We keep thinking it through.
There are other possibilities, we'll continue to think that through. Now, in terms of, if our stock price went up in a hurry, what would we do? That's all speculation and conjecture. My view is that dividends, you pay every quarter, share repurchase, you should do every quarter, and you just maintain a consistency quarter after quarter. That's the way you run a business. I would think that that's where we would be. As I said before, it is ceteris paribus. From that standpoint, where we sit today, that's what I would say. Peter, you want to close us out on MMA?
Sure. At Marsh & McLennan Agency, there's no blueprint, there's no aspirations for a certain size. We're focused on acquiring high-quality agencies. One thing to keep in mind is, it's early days in terms of acquiring some of the smaller spokes and folds, we can continue to build out a denser regional platform. Acquiring Barney & Barney, that very high-quality company, independent for 100 years, has certainly put us in a different spot today than we were six months ago. We have a more national platform, how we expand east from California and how we expand west from what we've built in the Midwest is all very exciting. Again, as we're focusing on high-quality companies, we only did two acquisitions in 2013 at MMA because the agencies that we were very attracted to were not for sale.
We've been cultivating those and expect us to continue on the journey that we've been on.
Thanks, Peter. Okay. Well, a couple of things. One, I'm lucky because I have the finest executive team in the industry, and it's special. We're going to create something special, our own Camelot. Now, we've spoken at you for a few hours now we're going to feed you. Before we feed you, I want to make sure that you remember the four things. Right? We are targeting long-term EPS growth of 13%. We have increasing cash flow. We're going to reduce our share count. We're committed to reducing our share count and committed to double-digit increases in our dividend. Keep those four thoughts in mind, and we'll meet you at lunch. It's right across the hall. There'll be people to guide you. Please sit anywhere you'd like.
We have members of the executive team, as well as other senior members of Marsh & McLennan Companies who will join you at lunch, we'll just disperse amongst the tables. Thank you very much.