We're very pleased to have with us today Willis Group Holdings. Willis is one of the largest insurance brokers in the world with a strong global presence. Presenting today will be Steve Hearn, who is Deputy CEO and also Chairman and Chief Executive of the Willis Global unit that accounts for over one-third of the company's revenue. Just to give you a little background on Willis Global, it's a substantial part of the company. It includes Willis' wholesale specialist brokerage and consulting services. That also includes the Willis Reinsurance Brokerage unit, Willis Global Specialties, Willis Global Risk & Analytics, Willis Global Solutions, and also Willis Global Placement. We're very pleased to have Steve with us today. With that, I will turn it over to Steve.
Thank you, Jay. Good morning, everybody. I've got about a dozen slides or over a dozen slides to get through and quite a lot of material. Without further ado, thank you for the introduction, I'll get straight to it. Inevitably, more words on the next couple of slides, but you'll be familiar with that content. I actually want to start with, what are we? Start right at the top. I'm going to dig into some of these areas over the next few slides. The clue's in the title. We're global. We're in the risk business. We're an advisor. We're a broker. We have our clients and our carriers and our responsibilities through a broad range of activities to connect the two. The other thing I'd point out on this slide is the commission and fee mix, a question we're often asked.
70% of our revenue is approximately coming through commission earnings and about a third coming through fees. 3 segments within our group. Willis Global. As Jay mentioned, my responsibilities include managing Willis Global, 38% of our group's revenue. Willis North America, our retail operation in the U.S. and Canada. Willis International, our retail businesses outside of the U.S. and around the world. We made a change at the beginning of the year, and we moved our U.K. retail business into Willis Global. I have responsibility for that in addition to the things that Jay listed earlier. $3.7 billion of revenue, growing organically at nearly 5% through the 3 segments. The other thing I'd point out on this slide is, as we've described over the last year or so, the emergence of the analytical broker, the final bullet point on the slide.
Core to our proposition is increasingly sophisticated thinking and risk analytics in terms of addressing the needs and issues of our very diverse client base around the world. A quick introduction to our group. Some investment highlights. Our proposition to you, if you like, the 3 key elements. Firstly, we would say we operate in some attractive growth segments both in terms of the long-term structural drivers of some of the places that we operate, the growing penetration of insurance in some interesting parts of the world, obviously, an increasingly expanding set of interconnected risk issues around climate, cyber health, et cetera. Secondly, we're very diversified, geographically diversified. As the opening slide said, we're global, truly. Our clients operate throughout the world, in many segments and many different industries around the world.
About 85% of our revenue and activities are in property and casualty insurance and reinsurance, and about 15% of our activity by revenue is in human capital and employee benefits. I'll come back to that a bit later. Thirdly, we've had a solid operating performance, improving organic commission and fee growth across the businesses, some good operating income and EBITDA margins, and some strong and growing cash generation. I guess the thing that's not on this slide and worth noting and recognizing is we are in a very challenging rate environment. Why? We're seeing this in the reinsurance world, definitely. We mentioned this on our Q1 earnings call that the reinsurance rating environment is challenging. We're also starting to see this manifest in the specialty insurance markets, particularly in London. Is this the manifestation of so-called new capital through the ILS contribution to capacity? Certainly, in part.
As Jay was quoted in a recent FT article, and I agree entirely, this is a growing and significant phenomenon for us. However, all sorts of other things are at play as well. Unquestionably, a benign claims period contributes to that rating environment, possibly emerging and new participants coming to the fore in a relatively crowded market for intermediary and insurer and reinsurer. A challenging rate environment. Nevertheless, our business continues to gain share from our competitors, and I'll come on to explain how. Our growth opportunities, and I'll pull these out over the next couple of slides, so just briefly at this point. As I've mentioned, we're in some of the faster growth geographies, industries, and sectors. Strong businesses in Latin America, parts of Asia. Our reinsurance business has been a particularly strong performer over the last few years.
Global Wealth Solutions, where we're getting into very high net worth individuals. Healthcare, and obviously the changes both demographically and also in terms of regulation around the world offer opportunity rather than threat to us. We have the Willis Advantage exchange in the United States of America, which is going well for us. Employee benefits business around the world is subject to increased demand. We're well-placed. Connectivity, and I'll come back to this theme in just a second on the next slide, is an important thing for us. How do we take Willis' deep specialty capability and its geographic presence around the world and provide better solutions to our clients than our competitors can?
New capital and actually making it an opportunity rather than a threat, embracing the new capital, and we have a particular initiative in our London specialty business called Global 360, where we're embracing this opportunity. Finally, growth opportunities arising from a disciplined approach to M&A, which again, I will talk about more over the next couple of slides. Not all of our growth opportunities, but certainly some of the highlights. This really is at the heart of our Connecting Willis strategy as we've described it, and one of the things I have responsibility for is how do we better refine our approach to the large corporates around the world. Some statistics in terms of U.S. company growth and opportunity arising from it. We're underrepresented here in terms of our share, our market share. Interesting, our share of wallet is perhaps the thing that indicates the opportunity.
We've been using one of our specialty areas to really describe this, that's the aviation sector. Willis don't need to apologize for being the third largest insurance broker in the aviation space. We are the biggest and the best, and by some margin. However, our proposition in that space is monoline. We offer hull and liability insurance to the buyer, to the chief executive of the airline. We're known in the boardroom because to an airline, there's nothing more important from an insurance perspective than hull and liability insurance. What we don't do is leverage that position to address the other needs that those organizations have to get into their employee benefits, to get into their auto physical damage, their property risks, et cetera. We're recognized in the board.
They are buying from us, We're not using that position in terms of diversifying our conversation with the client about their broader risk needs. Huge opportunity for us. What we're doing is rewiring things like reward structures mentioned on the slide. How do we pay people across the world? How do we incent our people in the geographies to work with our specialists located in the global hubs of specialism to work better together? A key thing and an important part of our growth agenda moving forward. Next, SME and mid-market, We have some of this business obviously at the moment and some concentration in some geographies. We want more, We want it where it's sustainably profitable. The key to this, we believe, is to recognize that this is a distinct segment and to treat it and manage it accordingly.
The technology that applies, the reward structures, how we place the business, and with whom should be the key to us creating sustainable long-term competitive advantage. The converse, where we can't achieve that, where we don't see either the macroeconomic environment or our ability to leverage the types of things that I've talked about, then we should exit. Those are conscious decisions and a very robust decision tree that we operate in terms of taking those decisions. We want more, We want it to be sustainably profitable. Next is our human capital and employee benefits strategy. We see this as having significant opportunity for us in the immediate short term, as well as over the mid and long term. A potential for us to create a billion-dollar business. We start at GBP 500 million of revenue across Willis last year, coming out of human capital and benefits.
A big business for us in the United States of America already and growing. An emerging business for us around the world and certainly in emerging markets, a significant opportunity for us. We recently announced we would connect our business through taking a global approach and under Tim Wright, one of my colleagues and the CEO of our international segment, bringing some focus at the highest levels in the company in terms of how we grow our human capital and employee benefits business. This is looking at things such as M&A opportunity, business planning, technology, how we cross-fertilize our multinational client base, and of course, how we connect with our P&C organization around the world. We're very excited about this, and as I say, believe this could be a billion-dollar business for us.
Next, our inorganic growth, our M&A activity, something that Dominic and I, Dominic Casserley, our CEO, myself, and our operating committee focus on very closely, as you can imagine. We are seeing an increasing volume of opportunities for us to take a look at. We're taking a very disciplined approach in terms of how we are looking at those opportunities and how we go about it, where we see white space for us, where we see opportunity for us to add value to our business, and a very disciplined financial approach around NPV. Our current focus, of course, emerging markets. There are opportunities out there. Human capital and benefits, obviously part of our growth coming organically, but we would anticipate some of our growth coming through acquisition. Reinsurance, as I've said, a very successful business sector for us and again, offering some opportunity.
Specialisms, again, where we have, in many cases, market-leading businesses, but still opportunity to drive growth through M&A and some geographic gaps. Culturally, when we engage with the management teams of these businesses, we find a very good strong fit. Willis is an interesting place for them to bring their clients and staff, and that's an important differentiator perhaps from others. That's M&A. Next, within the context of M&A, I should talk about Gras Savoye, a 2015 decision for us. As you may know, the biggest broker in France, offering significant opportunity for us there, but also significant in Eastern Europe, parts of Asia, notably in Africa. The connectivity, again, as we connect our businesses around the world and look at our very significant position in China and the influence of trading relationships between China and Africa, by example.
This is a very significant opportunity for us. Very collaborative relationship. We work well together on mutual clients. We see that operate particularly between London and Paris, where working on some of the largest organizations together is proving very successful for both organizations. I need now to turn to operational improvement program, which we announced with our Q1 earnings. Our ambition here is to deliver savings of $420 million through 2017. A cumulative charge over the period of $410 million to achieve this, an annual benefit thereafter from 2018 onwards of $300 million. We believe, as you can see on the slide, 70% of this will be derived from role relocation and 30% through a better approach to real estate, IT, and other synergies.
The savings that we believe we can achieve are before any potential reinvestment. We do expect the majority of these savings to be reflected in our earnings. A little bit more detail over the next couple of slides. Firstly, on relocation of roles. This is good news. We've done some of this. Willis Global, the business I have responsibility for, has done a lot of work over the last decade in terms of using Mumbai and Ipswich as centers for us to locate work from at a very cost-effective level. Our margin in our global segment is better than our competitors. One of the reasons for that is our effective use of role location. We have an opportunity to do more of this in Global, but certainly in Willis International and Willis North America. A key driver, as you've seen, is work location.
Secondly, improved use of real estate. Again, we have some experience of this in some parts of our business, but it's not an institutional approach, and we need to make it an institutional approach. We see an opportunity to reduce, by example, the ratio of seats to employees in a number of key locations around the world. An IT transformation, an opportunity for us perhaps to take a better approach and reduce the complexity and some of the duplication that exists in our organization in terms of some of the core operating platforms. I'd point out to you the footnote. I think it's important. I think it should be important to you. The key operational metrics will be reported regularly and transparently. It's an important part of our commitment to you. Three key levers or levers, depending on where you come from. Firstly, a step-up in our operational efficiency.
I've talked about the optimal locations. Enhanced operational excellence in our systems and reducing our operational cost base is obviously a significant lever for us in terms of what we're doing here. We want to create some space to invest in the business. We see an opportunity to invest. However, as we have said, the majority of savings we expect to be reflected in our earnings. Thirdly, this gives us the opportunity to reinforce our commitment to positive spread between our revenue growth and our expense growth. Growing revenues with positive operating leverage to improve cash flow and deliver compelling returns to our shareholders. Finally, it is my last slide. We are targeting mid-single-digit revenue growth. We're targeting a minimum 70 basis points of positive spread and a flattening capital expenditure and pension funding. That will generate improving cash generation for us.
We will invest in our business for growth, and I've talked about some of the areas that we have highlighted for growth. We will, very carefully and in a very disciplined fashion, embrace the opportunity that M&A offers us. We will generate a steadily rising dividend, and we have already expressed our intent to repurchase shares. There's three things, if I had an ambition for this morning, that I'd like you to take away. One, Willis is an exciting growth company in an exciting sector. Two, whilst conditions are challenging, Willis is well set up to take advantage of the opportunities that are out there. Thirdly, we will take a very disciplined approach in terms of how we execute against our strategic plans. Thank you again for your time this morning, and I'd welcome your questions. If there are any.
Yeah.
Thanks very much, Steve. First question I had is, in an environment where, as you mentioned, it's a challenging property casualty rate environment, but at the same time, the economic expansion story is usually quite a nice tailwind for the brokers. How do those factors interplay with each other, and what do you view as being the net outcome in terms of the influence on organic revenue growth?
Let me try and pull out the middle of the question and go from there. Unquestionably, an improving macroeconomic environment has a direct impact in terms of growth opportunity. No question about it. The reverse, of course, is also true. I mentioned, in one of my slides, the opportunity that comes out of the growth in insurance in areas of the world that are largely unexploited in terms of insurance penetration. That again gives us the economic growth, and that lack of insurance penetration gives us good growth opportunity. What's been surprising, Jay, I think to everybody, has been the speed at which the rating environment in the reinsurance world and some of the primary specialty classes has deteriorated.
Key renewal dates, and I'd point you to Willis' internet site in terms of some of the reports we put out around key reinsurance renewal dates in terms of what's going on, are quite alarming. 1/1, certainly 4/1, are now perhaps what we're seeing in terms of the key U.S. renewal season. There's some quite dramatic rating things going on. Can the opportunity of macroeconomic growth and increased insurance penetration run at the same speed as a declining rating environment? As we all know, what happens in the reinsurance world is more often than not a precursor to what happens in the primary insurance world. Save for some, I can't even imagine the cataclysmic event that would be required to correct that deterioration at the moment. It's the speed at which those two things are interplaying.
For us, as I've tried to describe, we see significant opportunity. We are global. We're in some of those faster-growing economies, in some of those places where insurance penetration is low at the moment, and actually, we're in very significant positions. If we can take the experience and connectivity that operates in our specialisms by example, and put it into play in those environments, we should be in a better place than some, at least in terms of what's going on.
Okay. Just to clarify for the mid-year U.S. reinsurance renewals, and we focus on the Southeast and Florida, what's your perspective in terms of where that could shake out?
I'd hesitate in being too prescriptive in terms of where it is. We have seen, in the European renewal season, in the key Asian renewal season, rate declines of 20% and upwards. That will be consistent, I suspect, with what we see in the United States of America in its key renewal season. Now, you do see exceptions to rules, and obviously, that's subject to claims. The other thing which is a factor, and again, I try to explain this when I get the questions on the earnings call around our own position, don't presume that a decline in reinsurance rate necessarily follows directly into earnings of the intermediary. It's very dependent on what the client buys, and some clients take the opportunity of a declining rate environment to buy more. Others are retaining more at the moment.
There's a real mixture of different factors going on in terms of what you'll see in the intermediaries' results. Then, of course, as I said right at the start, the mix of fee to commission earnings is obviously going to be relevant. Certainly, in the reinsurance space, and we will be no different to some others, when you get to the very largest reinsurance relationships, you're often seeing a fee content, which takes some of the volatility out of the earnings. Does that answer your question?
It does. Thank you.
Thank you.
Just to clarify on the potential for margin expansion. With the restructuring program in place, you said a majority of the expected savings expected to fall to the bottom line, does that mean there could be upside to the 70 basis point spread between revenue growth and expense growth over time?
Thanks. That's a very good question. What we have still up on the slide, a mid-teen shareholder return over the medium term. Medium term's operative, so we're looking over that period. The lever of mid-single-digit organic revenue growth is, of course, important. If we were at the bottom end of that range, the operational improvement plan in context of the 70 basis point spread becomes relevant. Obviously, if we're at the top end of the range of organic growth, then we'd expect more to fall to earnings. It's, Jay, I know this isn't a great answer, but it's a depends. It depends actually what happens in terms of the organic revenue growth and over what period. Thank you. No questions? Here we go. Thank you.
Just looking at that slide, One of the criticisms of Willis is the debt level got too high after the big U.S. acquisition. There's no reference to what levels of debt equity gearing you're happy with is. Could you just give us some clarity on that?
Yeah. You're referring to the HRH acquisition that we did back in 2008. Obviously, in our U.S. business, some challenging performance post that. As you say, the debt that was taken on at the time, at a time when obviously the global economy was significantly challenged. Our U.S. business continues to perform very well now. All three segments of Willis last year performed well, including our U.S. retail business. We sincerely believe any of the challenges of an acquisition that's coming up to its sixth anniversary are well behind us. The question in terms of the amount of gearing, I think we have a stated number, Peter, 2.7. 2.7. Do we not have a number out there in terms of how we go in terms of comfort? Maybe we don't have that number out there. We don't have that number.
Within our tolerance and certainly within any covenants, in terms of our indebtedness. Obviously, we throw a lot of cash off.
What debt to EBITDA?
It's 2.7 Yeah.
Could you just talk through any foreign currency exposures you might have, revenues, costs that we should know about? Could you say where you are on your pension funds or anything on that?
Okay. Foreign currency, first of all, we are global. Within that, are, as you would imagine, inherent hedges as well as purchased hedges in terms of our currency exposures around the world. Sometimes we benefit, sometimes less so. We're highly diversified in terms of our geographic footprint and the revenues that arise as a result. Fair bit of dollar income, because premiums typically around the world, not entirely, but typically, are paid in US dollars. We obviously have significant expense in sterling, as well as in US dollar. Hedged and protected. The question around pensions, we have different pension programs obviously operating around the world. It's a competitive environment. We have to offer a competitive pension to our employees. Different things going on in terms of reviews. Certainly, something we actively look at in terms of the cost and the competitiveness.
We have some legacy defined benefit programs in the U.K. Obviously, defined contribution in terms of what we expect people to start at at the moment, and we regularly review the competitiveness of those and how we fund them.
Thank you.
Any other questions? Excellent. Please join me in thanking Steve Hearn. Thank you very much.