Joe Plumeri from Willis. I think the first time I met Joe Plumeri, he won't remember this, but he was running Primerica, and they started selling Travelers auto insurance. They thought it would be a good idea to have the insurance analyst go see Joe Plumeri. I was used to dealing with typical insurance executives, very nice people, tend not to be terribly dynamic. My first meeting with Joe, I walked out of the meeting really not knowing what hit me, very honestly. Very different from any executive that I've met. The good news is, when he entered the property casualty industry, he really took a company that was, at that time, fairly sleepy, and has dramatically changed the organization over the past 10-plus years. It's great to have Joe here almost every year.
I turn it over now to Joe to talk about Willis and talk about where they're going.
Thank you. Thank you. Can you hear me, everybody? Good afternoon. It's good to be here. I'm glad today there's an opportunity. Thank you, Jay, for scheduling this today, after I had such a great day yesterday.
It's good to be able to have the opportunity, after the results yesterday and the effect on the stock, to be able to explain what goes on in a little bit more detail than you can on a call. I appreciate your timing was impeccable. Let me go through this. Most of you know this stuff, but I want to get into some of the more nitty-gritty stuff. You know we're a global broker. We're every place you're supposed to be. We're in the risk management business. There isn't any business that we're basically not in as it relates to global broking. You can see the way the segment sets out. North America is about 40% of our business, international 30%, and global, which is basically London businesses and London-based businesses, which also includes reinsurance and our capital market business as well.
Last year was a year after, I guess I've been doing this for 40 years. I know I don't look that old. For 40 years. It was everything that could happen, happened. The good happened, the bad happened, more the bad than good. I want to run through this quickly. I know I don't have a lot of time. Obviously, we had a lot of economic weakness still here and in the U.K. and in Europe, and we have retail businesses in those three places. The effect of the economy had something to do with what was going on. Rates were generally soft, but less of a headwind. If you looked in the U.S. with regard to rates, they were basically flat over the year. In Europe, there was about a 1% of a headwind.
We had some operational costs due to investments that we were making. We had a $180 million charge that we took to get our business kind of aligned with our resources and our operations and our branch system around the world. We continue to make some investments in growth. We do retention amortization awards. We don't do bonuses. We give people a retention award in March, February or March every year, and then we amortize it over three years. They sign a document that says they're going to be around for three years, and if they're not, they got to pay us back. What happens is that over time, that grows and then flattens out. One of the things that happened in 2011 is that amortization grew $65 million over the previous year.
That was a hurdle that we had to overcome, which we told everybody was going to happen, but we knew that was going to happen. That hit us in one year and was a big shot. This year, by the way, that will grow at a lesser rate of about $30 million-$40 million, and then in 2013 will grow at about $15 million and then flatten out. It appears like a regular cash bonus would on an accrual basis. We reinstated salaries and 401Ks and all of that stuff after having not done it for a couple of years. Our expense base went higher than it usually did. We had to deal with all that. At North America, we had this business called Loan Protector, which came with HRH. Loan Protector is a force-placed insurance business for foreclosures.
That business, when we bought it at HRH, was probably generating $8 million of revenue. Economy tanks, the $8 million goes to $58 million. The EBIT or the EBITDA on that business is about 50%-60%, and as a result, it did very, very well. What happens in the beginning of 2011 is the business starts to go back down. One of the top clients was Balboa, a business that got sold, as you know. Another couple of the banks that were clients of ours that placed a force-placed business with us lowered their commissions sizably on us, and as a result, the business started to go in the other direction. The comparison of the business year-over-year took a big toll on our business, and as a result, it had a big effect on North America.
We had to deal with that quarter over quarter over quarter on a comparative basis. In the fourth quarter, for example, we earned $4 million off of Loan Protector. Last quarter, the fourth quarter of 2010, we earned $16 million. There's a big drop-off in that, which is nothing I could do about it because the business has changed socially and economically and otherwise. When you look at that, you see, geez, what's happening in North America? Well, Loan Protector had a lot to do with that.
Two of the biggest businesses we have are employee benefits and construction in North America, which came along with the HRH acquisition. It was part of the strategy of doing that. We buy the company in October of 2008. You know what happens after that. The two businesses that are most affected is employee benefits and construction. Matter of fact, I will tell you though, that construction's getting better, if you want that to be a litmus test for or a metric for the economy. In 2009, it was down 11%. In 2010, it was down 5%. Last year, it was down 2%, and I start to see that, excuse me, swing in 2012, going forward. That should be better. That's 11% of our business. Employee benefits is 24% of our business in North America. I can start to see that shift a little bit.
I'll talk about that in a second in terms of contingent compensation. Those two things are about 35%, 36% of our business. That was under a little bit of a pressure because of the economy. In the fourth quarter, and throughout the year, basically fourth quarter, we lost some business through M&A. About two points worth of retention through M&A took place in the fourth quarter, which means somebody bought our client and the client, then moved the business to wherever the broker was. Legacy HRH business defections means that over the three years since we've had HRH, obviously people have left. That happens in the normal circumstances. As a result, it affects you over a period of time. Everybody heard me yesterday, which was one of the effects, I think, on the stock, that they all left in one quarter.
In the first quarter, the retention was 94%, which is high in the brokers' business. In the second quarter, it was 91%. In the third quarter, it was 91%, and in the fourth quarter, it was 89%. The reason it was two points less is because of that M&A, which was two pieces of business that got bought. Effectively, a lot of that happened over the course of the year, but if I don't include Loan Protector in North America, the business is basically flat after you've been through all of that turmoil. What appeared to be a free fall of business, which I think affected the stock, was not the case at all. The business was basically flat and trending in the right direction and should go back up to 92%, 93% as 2012 continues to go on.
Change in broker compensation, we do not take contingents, as you know. Carriers are now changing the way we get compensated so that because of healthcare reform, they want to try to make 15% look like 19%. As a result, they're saying to us, "Instead of getting paid 4%, you're going to get paid 3%. If you want to make up the difference, you're going to have to take contingents on a volume basis." I announced yesterday we were going to do that because it's not in the shareholders' best interest that I take and clip the point because they changed the way they pay us. Not only will we make a point up, we'll probably make some money off of that.
A lot of stuff happened in North America, but basically things that we either didn't control or they just happened all at the same time. I think the North America business actually is turning in the right direction, and I think we'll have growth, in the first quarter of the year, excluding Loan Protector. Loan Protector will reverse itself in the second half of the year, but you'll have an effect in the first quarter of about $10 million, the second quarter, $5 million, and then it will reverse itself, and the comparison will be gone. That business is still a good business. It's a $15 million-$20 million business with a 40% margin. It's just not the lofty numbers that they were before. International, we had a lot of deterioration because of Europe and the U.K. Europe, basically in Spain and Denmark.
The U.K.'s economy is not doing well as you know. We had some service issues in the U.K. A lot of that hit us in the fourth quarter as well, which was unusual. Plus some M&A, again, that hit us in the fourth quarter. You had a very unusual set of circumstances that occurred in the fourth quarter. Our associate line, I never talk when I come to these things, Jay, about Gras Savoye. Gras Savoye is the largest broker in France. It's the 11th largest broker in the world. We own 30% of it. We don't have management control over the business, although, we have made steps to have it more aligned and integrated with Willis. Last year, what happened was is that there's a lag effect on how they report. In other words, at the end of June, we'll get their numbers for the first quarter.
At the end of September, we'll get their numbers for the previous quarter, and that we found that their business lagged three months, and the last two quarters, we had to true all that up. That cost us $10 million. It never happened in the 11 years that I've been doing this. That was $0.04 a share. When you start to add all this stuff up between Loan Protector and Gras Savoye, it came out to be about $0.16 a share on top of the $2.75 that we made, and both of those events were just extraordinary. It was the year that was. What did we achieve? A great deal. I told you we did the $180 million charge, which saved us $80 million in 2011, annualized of $135 million, $55 million in 2012.
We're going to reinvest the savings in future opportunities, take some of the savings, really puts us in terrific shape so that our expense base will probably be about 3% this year. It'll go higher if our revenues go higher. I think we can generate more revenue, create spread margins, expand, and do all the things that we wanted to do. I'm really happy about that. We successfully refinanced our debt. That's been a big issue since HRH. Balance sheet is the best position it's been in since HRH. I'll talk about that in a second. Replaced $500 million of extraordinary debt, 12 7/8% senior notes. My relatives don't charge 12 and 7/8. My friends at Goldman Sachs. Anyway, an $800 million bank facility. That's when we did the HRH deal. My timing was impeccable.
We announced the deal in June of 2008 and closed it October 1 of 2008, in between, the world fell apart. That was a bridge loan that was permanently financed. Didn't know whether the credit markets were going to open, we had to do what we had to do. We refinanced that and saved $40 million, reduced interest expense, extended maturity profiles, all the things you see which gave us the flexibility and the capacity to buy back stock. For those of you who've tracked the style with which we run Willis is to expand margins, take the margins because EBITDA is cash, take the cash, buy back stock, pay down debt.
We had a point in time where we were buying stock back so quick and paying down debt that we were one-to-one or 1.3-to-one in buying stock back, which is the nature of a cash business, which is the way it should be run. That was happening until HRH, you know the rest of the story. The plan is to get back to that. We rolled out revenue initiatives in 2011, which have not manifested themselves yet. Sales 2.0 is basically a middle-market sales platform that we built ourselves that's based upon specialization. You go to a company where you talk about that company and what it does rather than insurance, you train your people through portals or individuals to talk about technology or life sciences or whatever case may be.
After you talk all about that, make them feel comfortable that you talk about the risks, the solutions, the value that that brings, you talk about insurance. All of our people are trained on that platform. It's the only middle-market platform like that. That's the business we are in, we haven't manifested the results of that yet. That should come this year. Everybody's been trained. We spent a lot of money on that. Everybody gets a diagnostic. It's like when you fill out a personal review outline, tell me what you want to do, tell me what you want to be, we'll give you this and tell you what you need to do. This is the same thing with insurance, it's worked in all the other businesses that I've been responsible for.
It's working very well, starting to get traction now, and that's worldwide. WillPLACE is our way of placing business. Aon's got GRIP and Marsh has got MarshConnect, and they've sold those data systems to insurance companies. What we have done is given to our clients and said, "This is your risk profile. This is what you are. This is who you are. These are the insurance companies that best have appetites against the risk that you prefer and who you are." We tell the insurance company that what we will do is instead of selling you this program, we just want to get paid by making a match, and that match will cost you 1%. We have just rolled that out in the last 2 weeks. We've made about 1,100 matches.
That is a program that'll bring us not only great differentiation in the marketplace, but also, I think a lot of revenue that wasn't there a year ago. Willis Global Solutions is our large account business. Martin Sullivan runs that. That business has grown a great deal over the last year and a half because we already had the resources. People always say to me, "Joe, why are you getting in a large account business? Because that costs too much." Well, we already had the cost. We just didn't coordinate it the way we should, and that's what Martin's doing, and that's paying off very nicely for us. We've won some very big accounts from the competition. As a year of transition, with all of that going on, I feel extremely good about what's happened because we still had 2% organic growth.
When you see a chart that I'll show you is that because everybody honed in on the quarter and what happened yesterday, you'll still see that that organic growth is as good as everybody else's, and they didn't go through all the same stuff that we went through. Our global business grew at 7%. Reinsurance was better than our competitors because we don't High single digits, they report it separately, we don't. I can tell you it was much better. Our specialisms were great. 7% is great growth, those are our London businesses, our specialisms and reinsurance. Our international growth was 5%, and that's with all the mess in the U.K., which means that the rest of international, South America, even parts of Europe, even though Spain and Denmark were not as good as they usually are, China, Asia, Russia, were all fantastic.
We are the largest brokers in China and Russia because we have branch systems in those countries. As those countries grow economically, we could take advantage of it, rather than having just big accounts that we service. We grew really well in the rest of international outside the U.K. It was U.K. that dragged us down, it was for one quarter, and that was the fourth quarter for the reasons I mentioned. The organic line of commissions and fees were 4% in North America, 2% ex Loan Protector. The 2%, I told you, was the M&A from the retention, so that would have been flat, if you will. The construction in the EB brought it down a little bit, but that's going to reverse itself. That's why I'm so excited about 2012 for North America.
Our adjusted operating margin, after all of that, is 22.5%. It's down 50 basis points, but 22.5% is still better than everybody else. You'll see that in a second. When you go through that transition and you're still that high in margin, we feel very good that we got through that, and we still have the margins that we do, and obviously earn $275 unchanged for the reasons that I mentioned. This just shows you what I mean. We're not used to simply because we have standards at Willis, we're used to being better. We keep talking to each other about being better. That's the track record of the company. That was the year we had in 2011, and maybe I've given you, hopefully, a little flavor of what the heck went on.
You can see our average organic growth over the last five years is pretty good against peers. Again, if you look at the whole year, we did as well, or they did as well as we did, and that's unusual in terms of organic growth at Willis. What's even more, I think, impressive is that we grew 6% with the headwinds of 2% as well. That's the reason why we came out at 26% average net new underlying business is not bad given the conditions that we talked about.
Still, we actually had a margin expansion over our peers in 2011 rather than a contraction, which means that the underlying business, the balance sheet, everything that I'm talking about is very, very favorable as we begin to look at the future and HRH behind us and possibly some rate wins behind our back, which I'll talk about in a second. This is a cash flow from our operations, and as you can see, has grown dramatically since 2008. The uses of cash were the dividends, debt repayment, the operational review that I talked about, CapEx.
What we expect to do in 2012 is basically similar, except our mandatory debt repayment is now been reduced because of refinancing, which gives us the ability to buy the stock back, and we're going to buy up to $100 million, as I announced yesterday, which is the first time since 2007, because every year since 2001, we had done it with pretty much regularity and got out of sync because of HRH. I'm glad to get back in sync again because I like doing that. Paying down debt, buying back stock, increasing the margins, which is what we'll certainly do again. This is an idea of the ratios of where we were, and as I said, we got down to 1.3, and in 2005, the number was one to one. People kept saying, "We want you to do something with the money.
You don't need to be one to one." We got it up there, finally bought HRH, and the great timing of that transaction. By the way, HRH, to put it in perspective for you, even though you go through all of that stuff, the margin's 21%. Before HRH in 2008, North America's margins were 16%, not 21. The scale of our branch system now in the United States is more like 80 branches, where it was 32 before that. Of the top 10 cities in the United States, we are in the top three in every one of them, and in a couple of cities, ranked number one, and I'm happy to say Chicago is one of them. That's very good, and you can see the debt outstanding at $2.4 billion at December 2011, which is down from what it was in 2008.
With all of the economic woes and all of the issues that we had to go through, basically driven by HRH, I think pretty good relative to everything else. Here are the priorities. Reinvest in the business in the future. I talked about that. I get the debt-to-EBITDA down about two times. Continue to repurchase stock. People say, "How could you do both?" If you look at the track record, you can do both if you expand margins. That's why I'm such a margin fanatic. Although a lot of people asked me this morning What would the priority be? I said the priority would be because everybody's looking at revenue growth and looking at us to get back to growing revenue. I would tell you that the priority is to grow the revenue, and then secondly, to grow the margins.
I think both will happen, but really want to grow the revenue so then we can take our expense discipline and grow the margins and get back to in sync to where we were before. You know about the buyback. I talked about acquisitions. I mentioned it at the end of the third quarter and thought everybody was going to go nuts because we were going to spend $millions of making acquisitions rather than buying back stock. It's just tuck-ins. There's nothing really big out there to buy unless you want to get into another business. It's just accretive stuff. We just did something in Italy. We'll probably do more things like that. As you've seen, we increased the dividend simply because we thought we could, and we're really confident in our future.
More confident than I've been in 11 years, actually, that I've been at the company. I guess it's almost 12 now. Looking ahead, we want to continue to realign our business model, further grow the company. The Willis Cause, let me tell you what The Willis Cause is. I could do a whole thing on The Willis Cause. The Willis Cause is what the company stands for and what its value proposition is. There's four pieces of The Willis Cause. The first piece is to understand the client's needs and industries, which means if we align our understanding of what they do, rather than talk about insurance, we can maybe decommoditize the proposition a little bit and be different and better than everybody else. That's number one.
Number two, if we understand their needs and their industry, our ability to be able to place the business with the best terms and conditions is very important. You just heard from Tom Motamed. Those guys are looking at wordings much more cautiously and much more scientifically and much more surgically than they've ever looked before because they really don't want to pay a claim. It's our job to make sure that if we understand the business correctly, we understand a country correctly and a territory correctly, then our clients are best served. We had a lot of claims paid during the Arab Spring because of companies that we represented in the Middle East, because we understood the difference between a crowd, a riot, a rebellion, or a mob.
It makes a difference when you want to get a claim paid, and you got to understand the industry to be able to do that. Thirdly, put metrics around service rather than say our service is good, and fourth, get a claim paid. You won't find anybody who can tell you in this industry how long does it take to get a claim paid. I'll tell you in Willis it takes 38 days. The reason it's a big deal is because people buy insurance for the purpose of in case something, God forbid, goes wrong. How long does it take to get paid? You should know that, and you should know that globally. We make a big deal out of that in our value proposition. Then that is all circled with a big ribbon called integrity.
That's The Willis Cause, and that is embedded in all of our businesses. We want to nurture growth in North America. As I'm talking, it's getting better and better as we go along. Harness growth in international simply means the growth in international has exploded. What I want to do by harnessing that is put the controls in and make sure that we do it right so we make as much money as we possibly can because we're in some very explosive places. Our business in Brazil is great. You want to make sure that it doesn't blow up. Our business in China is great. We got 22 branches in China. I go to places I never heard of before. We got 23 million people.
I want to make sure that the business is a good business, then maximize our global business, which is our businesses in London, which are the best around and constantly find ways. That's 33% margin businesses in London. So how do you maximize 33% margins in London is why I say maximize that business. How do we get more out of it? Share repurchase, then the tuck-in acquisitions. Then just expand our operating margin and adjusted earnings per share. This thing on rate environment, they were slightly positive in North America in the fourth quarter toward the end, which kind of made them flat for the last half of the year. I did a survey with some brokers because it's too early to do it as a science yet.
I just asked some brokers how they saw things, and they told me the property in January was mid-single digits, probably around 6%. They said the casualty and personal lines, casualty was up simply because of workers' comp, low single digits, about 2%. Same thing with personal lines. If you take that number, there's no science to it at all, don't hold me to it. Just take the number and annualize it. It represents about a point of growth in North America very early in the game. I kind of see this as being gradual unless you get some sort of a cat that's big enough to spike it. Gradual is good. The reinsurance renewals saw a positive rate trend.
Probably other people told you that, it varied, depends upon whether it was cat affected or not. We're in good shape with regard to improvement in terms of rate. North America's premium volume is about $13 billion. I'd say that 70% is commission, 30% is fees. Of the $13 billion, I got to take about $2 billion off of that because it's more fee-driven business. $11 billion of the $13 billion is generated by commissions. Any kind of rate movement that you get, aside from all the other things we're doing, we don't grow a business because of rate, I'd know you'd want to know this, affects us, impacts us a great deal positively if that were to happen. To wrap up, I think we're in great shape. Ironically, best shape we've been in, certainly in four years.
Even better than we were when I started. When I started, the hard market came about six or eight months after I got here. We had no placement people. We had nobody to stop people from giving the business away when the rates went up. We didn't have the operational controls that we have now. We should get good savings. When I talk about resources against operations, for example, we're taking all the operational people out of the branches and putting them in service centers so people in the branches can sell things. That's why we have 2,500 people in Mumbai and 600 people in Nashville and 1,500 people in Ipswich, because people in branches should sell. The traditional way of doing broking is you sell, you place, you send certificates out.
You do all of that stuff in one place, which makes no operational efficiency sense whatsoever. That's how you grow margins and get more for less and let the law of abundance take over. Revenue initiatives are now rolled out, we're focusing on execution. We refinanced the debt. That's great. The balance sheet's strong. I have the right management team in place now. Tim Wright, who was our COO, runs international. Steve Hearn runs our global business. He's very well known in London. Ran reinsurance for us last year. That's great. We're well-placed to benefit from rate improvement. That's a kind of an overview of where we are. We don't need to talk about the appendix. If you ever heard me before, you can appreciate the fact that my statement is still the same as it was 12 years ago.
Anybody got any questions? You're stunned.
Actually, we only have time for about one question. I'm going to ask it, but it's a question that I've been asked by some investors as well. It has to do with the former HRH brokers that have gone elsewhere. It does seem as if in the fourth quarter was a particularly hard hit on revenues. It feels as if you have some visibility into the first quarter where it doesn't seem as bad. The question is, what prevents this from happening in the third quarter or the fourth quarter? They're still out there. They want your business.
What I said, Jay, which was, I'm glad you asked it. The first quarter, the retention was 94%, and the second quarter was 91%. We started to see that in the second quarter. It wasn't a fourth quarter phenomenon. We started at 91% in the third quarter. It went to 89% in the fourth quarter, two of which was, I told you, M&A. You started to see that flow throughout the year. When people say, "You got it in one quarter, how am I to believe it won't happen in the first quarter?" It's happened gradually over the course of the year. If I take Loan Protector away, the business was flat after having endured all of that. It wasn't a one-quarter phenomenon. It go away. It really happened over the course of the year.
Really, the comparison start to get easier because you've already been dealing with that.
That's exactly right.
Okay. That's helpful.
Okay. I think people misunderstood that.
Yeah.
They said, "Geez, fourth quarter. How could all this happen in one quarter where everything got dumped, and when's it going to stop?
Yeah
over the course of the year. Okay? If the M&A hadn't happened, we'd have had two-point uplift in the revenue, and you'd have been basically flat.
Right. Great. Join me in thanking