Okay, we're going to kick off with the next presentation, Marsh & McLennan. By the way, I mentioned I had a good day in my career when Weston Hicks decided to retire. I was pretty happy when Keith Wallace left the business too. He was tough competition. We've got Dan Glaser from Marsh & McLennan here. Dan started his career at Marsh 30 years ago. He spent a number of years outside the fold, as we say, but returned in 2007 at what most would describe as a very challenging time. I'm probably being a little generous too. It was very difficult. He and Brian Duperreault really transformed the company over the past four years. Dan took over as CEO at the beginning of this year, and this is his first public appearance at a conference as CEO. We're really happy to have him here. Dan?
Thank you. It's great to be here. Happy Valentine's Day. I'm really thrilled to be here. I'd like to start by just thanking Jay for inviting me, and for Bank of America Merrill Lynch for organizing this conference and giving Marsh & McLennan Companies this opportunity to speak to you today. Most of you know MMC pretty well, so I think I'll just get right to it. Let's see. Okay, we are a leading global professional services firm. We serve clients in many ways, but mainly in the areas of risk, strategy, and human capital. In 2012, we had $11.9 billion of revenue and $1.9 billion of adjusted operating income. Over the last 10 years, we've really become a global firm. Went from really a U.S.-based company to truly a global organization. In 2002, 85% of our revenue was from the U.S., U.K., and Canada.
The past decade has really seen a significant shift in our global positioning and in our sources of revenue. We're structured in two segments, and we have four operating companies, Marsh, Guy Carpenter, as part of our risk and insurance services segment, Mercer and Oliver Wyman in consulting. We really do have a terrific executive team. In particular, we have four very capable leaders of our operating companies. I view my principal role as the CEO is to help build on our success and find ways for us to grow, invest, and innovate. My job is to guide our leaders, these four great operating company executives, and not to make all the decisions from the 44th floor of New York. It's not about me, it's about the team that we have. The team is strong, cohesive, we're very collaborative, we do well together, and we're driven to succeed.
We are seasoned veterans, we have a long runway. The average age of this core group is 52. You've seen this slide, or some of you have seen this slide before. We first unveiled it at our Investor Day in September of 2010. To state it simply, internally and externally, we aspire to be among one of the world's elite businesses. For us, that means to rank among the very best in consistent value creation. We first publicly articulated this four-pillar strategy in September of 2010. If I just go through the pillars briefly, our first pillar is to deliver consistent long-term growth in revenue and EPS. I'll talk a little bit more about that later. We will avoid businesses that are capital intensive. We will generate high levels of cash, which we will put to good use, and we will actively manage our risks.
To me, all big companies, maybe even some small companies, have neat looking strategies. When I review strategy presentations of our individual units, they look pretty neat too. I usually say, "It looks good, but can it fight?" Execution, in my view, is far more important than a neat looking strategy. As I said on our recent call, the best thing about our four pillar strategy is that we are executing it well. This is a checklist against those four pillars, which demonstrates that we are delivering on top line organic growth and double-digit operating income growth. Cash is growing and net debt is reducing, even though we are investing more in the business, as you can see when you look at our CapEx and also our headcount. Our headcount's up 2,700 people from year-end 2010.
We've continued to progress our risk management program as well. In the past five years have moved from risk reduction and avoidance to best-in-class intelligent management of risk. These are the targets we laid out for ourselves in September of 2010. As you can see, we're performing well and delivering on our commitments to shareholders. It may not be every quarter or even every year, we believe over the long term, we will deliver a CAGR of at least 10% growth in adjusted organic operating income, around 13% growth in EPS, and when combined with our dividend, a TSR around 16% in most years. That's a nice looking chart. Over the past five years, our leadership team has significantly revitalized the company and improved adjusted operating income, while increasing MMC's margin every year from 8.8% in 2007 to 15.6% in 2012.
We've proven our ability to create operating leverage. In 18 of the past 20 quarters, in each year for the past five years, our revenue growth has exceeded our expense growth. Good management, plus executing some changes to the composition of our expense base, in particular, increasing the portion of variable compensation as a percentage of total compensation, improves our ability to flex in stress scenarios. It's easier to do that in a year than it is in a quarter. If we look at the company and the margin on a rolling four-quarter basis, we just kind of take a snapshot every couple of quarters, you can see that the progression has been pretty significant. RIS, which is our Risk and Insurance Services, achieved a steep dramatic rise, followed by steady improvements.
Consulting demonstrated its resilience through the downdraft of the Great Recession, the trough of 2009, the comeback beginning in the last quarter of 2009. You're going to have to thank Keith for this chart. This is probably more information than we've given before. It's kind of a neat chart because it really shows that in driving the EPS from $1.40 in 2008 to $2.15 for 2012, there's been a lot of puts and takes. Really, when you look at it fundamentally, our EPS growth is based upon improving our core businesses and revenue growth. Those are the two big green bars. Really, that performance and future operating leverage becomes even clearer when you consider the headwinds of pension expense, fiduciary income, and amortization that we have absorbed.
When you do the math on just fiduciary income and pension expense, you'll see there's almost 20% accretion built in for the day when interest rates begin to rise. We're clear, we generate a lot of cash, and we're going to continue to generate strong cash flow. Our uses have remained pretty consistent, investing in the business, supporting our dividend, accretive acquisitions, and share repurchase. When it makes sense, makes discretionary contributions to our pension plans. I'm not going to spend a lot of time because I think people know the company pretty well on each of the component parts. I figure I'd spend a little bit of time on both RIS and Consulting. First, Marsh & Guy Carpenter. They're both tremendous organizations, really, elite organizations.
In my view, the deepest talent base in the industry on the insurance side of things, a collaborative culture, a dynamic culture, industry-leading innovation and intellectual capital, and it shows in their performance. It's one thing to say it and it's another thing to prove it with performance. 11 consecutive quarters of underlying revenue growth in Marsh, 16 consecutive quarters of revenue growth at Guy Carpenter, 5% underlying growth in 2011 for RIS, 5% growth in 2012 in markets that are still tough markets with not a lot of macro tailwind. Obviously, we're very proud of our RIS performance, delivering a CAGR of 24% on adjusted operating income over a five-year period. We know we can do better, and we expect further growth in adjusted operating income and RIS's margin in the future. Let me just touch on consulting.
You can see, $2.4 billion-$5.4 billion over the course of a decade. Through both acquisitions and organic growth, the consulting division has more than doubled in size in the past decade. Similar to RIS, this is a brain business. It's not a brawn business. It requires smart, creative people who are devoted to client service. There will always be a market for advisory and implementation services around human capital, talent management, and strategy. Mercer and Oliver Wyman are both very well-positioned as leaders in their respective fields. Here's the five-year picture for our consulting division. First of all, you can see the CAGR. It's had some issues noteworthy. In particular in 2010, that's Alaska, for those of you who have been shareholders for a while.
The CAGR over the period is through the Great Recession, fairly weak at 3%, but we're excited about the last few years from 2009 through 2012, back up to 14%. The segment itself has had 12 consecutive quarters of revenue growth. 5% underlying growth in 2011, 4% underlying growth in 2012. Mercer has had 10 consecutive quarters of growth. Although Oliver Wyman dipped in Q4, they grew organically in the prior 11 quarters, including growing both 7% in 2010, 7% underlying growth in 2011. As I said last year when I was at this conference, a significant focus for the team over the next few years is to generate higher operating income and margins from our consulting business. We are on a journey to elite, and there's many parts that we have to execute on around that. Clearly, profitable growth.
Nothing good happens without profitable growth. Leading with people. We are a people-based organization, and the most important thing for us to have is the highest quality of personnel in the areas that we compete. When we have the highest quality of personnel, we can put it to work on client business. We'll retain more clients, and we'll win more clients in the marketplace. People issues for us, winning in the workplace equals winning in the marketplace. We're very focused on engagement and motivation issues of our colleague base, and we feel that they're very strong. Operational excellence will remain something that we're very focused on. When I think about operational excellence, I really put it into two parts: effectiveness and efficiency. When I think about effectiveness, it's really, are we focused on the right things? Are we being effective?
Are we spending our time in areas which create real value? Are we being effective? I think efficiency is, okay, if we're being effective and we're focused on the right things, are we doing things right? Are we doing the right things, and efficiency, are we doing them right? A lot of our attention is on both of those component parts. Managing risk intelligently is a big part of what we do. I think that we have really, as I said before, best-in-class capabilities around risk management across the firm. Continuous improvement. That probably is the most important thing beyond profitable growth. Our core belief is we can do it better.
When we think about this journey to elite, I can tell you that the leadership team will make certain that we continue to strive, to innovate, to create in a search for improvement. Our mantra is, there is always a smarter way. It's an organizational state of mind, exhilarated by change. Not looking at an investment or a project as something to finish or get over with. It's actually a consistent thing. It's attracting people who love change, who love the process of creation and improvement. Broad, confident, challenging, entrepreneurial. That's Marsh & McLennan Companies. Our goal is to achieve double-digit earnings growth in most years over the long term. We understand that to achieve this goal, we need to continuously improve our performance through investments in our business, our colleagues, and our technologies.
We will conduct our business in a way that adds value over the mid and long term and enhances growth and provides more value to our shareholders, to our clients, and to our colleagues. Just to summarize, MMC has unique core attributes, significant talent base, high quality of personnel, market-leading thought leadership and innovation, a global footprint, a dynamic collaborative culture. We're well-positioned in growth areas of risk, strategy, and human capital, and we have a clear and consistent four-pillar corporate strategy. We have multiple paths to growth. We're not reliant on one path to growth. Each of our operating companies have multiple paths to growth, which we have demonstrated over the last couple of years in a difficult macro environment. We have strong brands, a great client list, and a leadership team with a deep bench.
We have the opportunity, in our view, to spur growth and improve efficiencies and increase earnings and expand our margins in both segments. With that, be happy to show you our forward-looking statement, and also be happy to take any questions.
Dan, on the fourth quarter call, you talked about a shift in revenues from fees a bit more towards commissions. Is that a conscious strategy, or is that simply because some of these mid-market or small commercial businesses growing faster and there's naturally more commission in that business?
The best answer to that is both. It was clearly a conscious strategy that we started about four years ago, particularly when we thought about both the large account segment and the middle market segment. In the large account segment, we had too many accounts which had global fees but were unclear in terms of certain of the value we provided and why it was paid on a fee. Our belief was that while fees make the most sense in the large account space, that the transaction itself, particularly when accessing areas like Bermuda or London, should largely be transactional commissions on the amounts placed. It was very hard for us to calibrate how much usage we would have, so how could we know what fee we should be charging a client when we didn't know how much we would involve London and Bermuda?
We converted a lot of the large account space to the transactional pieces being done on a commission basis when they're done outside the U.S. That's number one. In the middle market, we had actively, back even over a decade ago, won in the marketplace middle market business on a fee basis, which is different than all the competitors in the middle market. It didn't make sense for us to have to have conversations with clients and prospects in the middle market that none of our competitors necessarily had to have because they were on commission.
Over the course of the soft market environment, we had the opportunity to convert some of those fee accounts to commission, mainly because there was a downward draft on the rating levels to begin with. It enabled us to say to clients, "Well, right now you pay us a fee of X. We can negotiate a commission level with a carrier and still get you the same premium or maybe even better, and you don't have to pay us a fee anymore. Would you prefer that route?" Many middle-market clients chose that route. That combined with our acquisition strategy, which has been geared more toward middle market than it has been in the large account space. If you look at Marsh McLennan Agency right now, which is more than a $450 million brokerage business, it's 90% commission and 10% fee.
Those component parts have created a little bit more of a mix toward commission. We still probably have more fees than anybody else as a percentage of business, but it's a little bit more weighted, and I think that's a good thing. I think it gives us a little bit more weighting toward the market cycle than we had before. I also think that there's this kind of false sense that fees create tremendous insularity against soft markets. I think the reality is fees are set, and they're set in a lot of clients' mind as in some way a percentage of premium anyway. If the premium drifts down over three or four years, it's likely the fee's going to follow. From that standpoint, it wasn't as much insulation as one would have expected.
Hi. How would you rate your progress in Marsh McLennan agencies? What has worked as you expected? What hasn't worked as you expected?
That's a terrific question. I would say I didn't anticipate a long recessionary period. My expectation was that I was buying at a low organic growth level because we were buying in the recession and afterwards, but that the bounce back would've been faster on the top line. I've been quite satisfied with quality, with professionalism, with client service, with bottom line performance. I thought the top line was going to be a little better. Now, having said that, I compare our agencies to, say, the information that comes out from CIAB about the trend of that space, of organic growth. We match up with that. It has not bounced back to the pre-recession period of how these agencies have performed in the top line, where many of them were in those 6% and 7% growth as opposed to fours and fives.
I think that's coming someday. I'm really happy with this strategy. It's delivering everything we expected. The one thing that I do want to say, which is a little bit different than what I would have said four years ago when we embarked on this strategy. Four years ago, I said that ultimately, when we stop acquiring these agencies and we build this great business, this really big business in the small commercial and middle market of, in particular, the United States, ultimately, when the amortization rolls off, the margin will pull up the Marsh U.S. margin and therefore be better. That was true then, but we've done such a good job improving the Marsh core brokerage margin in the United States, that I would change that and say the margin will be around the same as the margin of the core brokerage business of the U.S.
It won't necessarily give that lift, but the lift will come from the declining amortization expense as opposed to necessarily that core business, because the U.S. is doing much better than it was at that point in time.
I have one other question. Some of your competitors have talked about margin goals. They don't put time frames around them, but they talk about where they want to be. Have you guys talked about that at all, and could you share your view of where your main core businesses can be in the future?
Yeah, I think we've been pretty clear over the last number of years that we believe we can improve the margins of the business, and we have done so, both on an adjusted basis and on a GAAP basis. We have made a lot of improvements. I have mentioned on a couple of calls that I think that the pursuit of margin without factoring in other factors can be a bit of a fool's game. In our executive team, when we think about the business, we put organic growth first. We put growth of earnings second, and we would think about margin really third, because there's no doubt that we could dramatically improve our margin in 2013 if we wanted to, and that doesn't necessarily mean that that would be good for 2015 or 2014. We think of margin in a balanced way.
We're not going to put numbers out there, keep them hanging out there for years as an aspiration. We're focused more on earnings. We've been very clear. We believe that over a long period of time, on a CAGR basis, we can deliver double-digit growth in organic operating income as well as EPS. There's very few companies that are able to do that, we believe we're one of those companies that can deliver that, I think that's what we'll hang our hat on, would be double-digit growth in EPS as opposed to a margin target.
The other question I had related to Europe, where I guess in both businesses, things have been fairly resilient given the economy there, the economy in Europe continues to be pretty bad.
Yep.
Is there going to be some additional pressure as you look at 2013, as it just weighs on things in that part of the world?
Well, I think the RIS side has proven to be tremendously resilient, we've been growing in Europe at a similar way as we're growing in the rest of the developed world. I don't fret much about the RIS side. Insurance is, for most individuals and most companies, not a discretionary expense. You turn to consulting, we have two consulting businesses. Our Mercer business, 70% of the revenue in Mercer is recurring revenue, is not really discretionary. Companies figure out what they want to do around health and benefits. They want to talk about the pension plan. They want to invest their assets, et cetera, those businesses tend to be recurring businesses. The talent business in Mercer tends to have a little bit more discretionary project type of exposure, discretionary expense, is more susceptible to economic uncertainties or downturns.
Of course, Oliver Wyman is largely a project-related company. They're the fourth largest management consulting firm in the world. They've got a big footprint in Europe. They've proven to be pretty resilient themselves in that they have a more fungible talent model than any of our other operating companies. They're built on a line of business specialty expertise basis. When the U.S. was really doing quite well in periods of time like 2011 and the first half of 2012, we were using a lot of European resource on U.S. accounts, of course, paid for by U.S. companies, including the travel and entertainment of getting people to the U.S. to conduct that work. I think that that's really good. What we saw in the back half of the year is the U.S. tempered.
Still had growth, but it reduced slightly, there ended up being a bit of an excess of capacity, and that's what impacted revenue a bit. I think that we have, as we showed in our charts before, through good times and bad, we link expense growth quite tightly with revenue growth, and we've proven our ability to do that. When we have a slowdown in Oliver Wyman in Europe, it tends to be more of a revenue event than an earnings event. Clearly, it doesn't help earnings, but we feel that we can cover most of it through good management, and that sort of thing, as opposed to having it both impact earnings dramatically and the top line. The question really is: Well, where does the world go from here?
Certainly feels better to us at this point in time than it did six months ago. Still, the visibility and the traction, there's no guarantees around that yet, and there's still a lot of uncertainty out there and a lot of economic issues that governments are wrestling to the ground, a lot of things can happen. We feel that essentially we can deliver a good return, even in sort of bouncing along the bottom on certain economic times. We expect to continue to be able to do that on an all things remaining equal basis. If there's better lift in economies in Europe or anywhere else in the world, we'll be there to catch it.
Any other questions? I think you exhausted them. Great.
Thank you.
Yeah.
Appreciate it.