Good morning, everyone. Let's try and get started right on time here. Thanks for coming to the first analyst day for Willis Towers Watson. I know some of you had some exciting flights to get here, but we thank you all for getting here and sharing the morning with us. We're actually pretty excited to be talking about where we are. It's coming up on nine months as Willis Towers Watson, and we want to talk about our thoughts regarding our integration objectives. This is the agenda for today. We're going to give you a merger update, a high-level view of our financial performance, then we're going to talk about our expectations, both for 2018 and then really also beyond. Let me first, before I do anything else, though, introduce some of the Willis Towers Watson leaders who are here with us today.
We have Julie Gebauer, who heads our Human Capital and Benefits segment. We have Tim Wright, who heads our Corporate Risk and Broking, Dominic Casserley, who's the Deputy CEO and the head of Investment, Risk and Reinsurance, and Gene Wickes of Exchange Solutions. Many, if not all of you know Roger Millay, our CFO. We also have a couple of folks. We have Joe Gunn from our large market property and casualty business and Cecil Hemingway from Global Health Solutions. Before we get started, I've got to remind you that we're going to be making some forward-looking statements today that have associated risks disclosed in our SEC filings, and we do not undertake to update any such information. Our actual results may be different than expected. In this presentation, we'll refer to non-GAAP measures which we believe are relevant for evaluating our operating results.
I'd like to take a step back and just think about why this merger was important to both of the legacy organizations. When we first came together as Willis Towers Watson on January 5th, we really talked about three main goals that we show on this slide here. One, providing a powerful client proposition, two, accelerating the growth trajectories of each of the legacy organizations, then finally, recognizing significant cost synergies. Our aim was to create something that we perceived really wasn't out there in our industry generally, that's an integrated advisory risk and broking solutions company that could address both clients' Human Capital and risk issue needs. We wanted to build one not just for today, but for the future. The enhanced scope of Willis Towers Watson means that we're well on our way to doing that.
We can provide our clients with more capabilities than before, and we're working on building and knitting together the strengths of each of the legacy organizations. This one slide here on values, the reason that was important is that while Willis and Towers Watson were coming from different positions in terms of the kinds of services they provided, in terms of some of the markets they addressed, they actually both had a very common cultural component, and that was a very strong client first mentality. It was really about every professional services organization in the world, of course, will tell you they have a client-focused mentality, and they probably do to some extent. I think what was interesting about both Willis and Towers Watson was a real roll up the sleeves and work together with the client as part of the client team.
What we've seen happen so far is that our colleagues have actually spontaneously reached out across the different parts of the legacy company to start working with one another and to form these teams. This cultural part that we thought was going to be sort of the bedrock and a key component that we were building on is proving to be that. In any kind of a merger, mergers are hard, and I think in many ways, the merger of equals that we have here are the hardest of all. One of the things we like about that is that we think the payoff is the greatest if you can get a merger of equals to work correctly.
One of the things that it requires is that you create a new organization and that your colleagues from each of the legacy organizations feel like they're at home in the new organization. That's what we've been working very hard on. At the very beginning, we went out, and we said to everybody, "We're going to take 3 years to really put this together the right way we want to do this." Part of it is that it just does take a while to work through the various synergies, the various alignments that you need to do. After nine months, I'm very pleased with where we are. Some things are a little ahead of schedule, some things are a little behind, but overall, I like the momentum we have, and I like where we're positioned.
I was talking to somebody the other day, and I was saying, if I think about it, we're not today where I want to be a year from now, but we're in position today to be where I want to be a year from now, and that's the important thing. That's why I say we're on track there. One area that we've been spending a lot of time focused on, and we'll probably talk a little bit more about this later, is bringing the balanced matrix to life. The balanced matrix, where we're operating both on a roughly balanced between a geography and a business way of managing things, is new for many of our colleagues.
We're working together to make sure that we build that structure throughout the organization and also adapt it to what the realities are of the organization and create really the Willis Towers Watson way of doing that. Let me move on to this next slide here. This talks about the diversity in our portfolio, the strength in our colleague base of over about 39,000 colleagues around the world, and the global reach of Willis Towers Watson. This first year, we've had some challenges regarding organic growth. It's been lower than we had thought or hoped it would be coming into the year.
I think one of the key points I want to make, though, is there is nothing that we see in what we have been through this first half of the year or actually pretty much through the first three quarters now that suggests that we are not going to be able to get to all the goals that we had. We'll talk about how we see that unfolding in the future. We look at some of the challenges regarding organic growth as challenges of the first year, not as challenges of Willis Towers Watson going forward. Throughout the first half of 2016, our adjusted revenues were up 11% overall compared to the first half 2015 pro forma results, up 13% on a constant currency basis, of which 2% represents organic growth. The revenue growth has not been as high as we wanted it to be, as I said.
In fact, that's really not the key issue in terms of increasing earnings. The more significant long-term issue has been stagnant profitability. Profitable revenue growth is an important objective for me. I think, in fact, I always tell people that I think profitable revenue growth should be one word, but we need to be focusing on that. What we have to do first is establish a base of saying we need to build margin improvement into what we are doing, and we need to get a handle around profitability. To underscore that importance, earlier this year, I went to the board and asked that the annual bonus for the named executives for this year be weighted 80% on achieving profitability goals and 20% on revenue growth. That doesn't mean that revenue growth isn't the important thing in the long run.
First, we want to have that very profitable base that we are building from, and then we'll have the capital required for I think a robust growth pattern. When we have gone through this year, when we think about some of those challenges, we have had to adjust our forecast twice this year. I got to tell you, I hate doing business that way, and we don't intend to be doing that in the future. Roger Millay will be talking a little bit more about greater financial discipline as a merged company when he comes up here. Integration. As I sort of alluded to earlier, I think overall integration plans are on track. If anything, they're probably slightly ahead. I talked a little bit about the spontaneous reaching out of folks across the boundaries and the experienced teams really wanting to work with their colleagues.
This is a little different than things I have observed in some of our other mergers. It wasn't that people didn't want to work together in the other mergers, in those ones, those were scale mergers. We were taking one company, and we were just getting bigger at everything we did. What happens there is you have folks who have been competing against one another, and they're wondering who's going to be in charge of the clients, and there's a little bit of an angst around that. In a scope merger, where we're just enhancing the whole scope of what we do, and we don't have as much of that overlap, you actually get people working together and looking at. They don't see their new colleagues as competitors in any way. They're just part of an expanded team.
That's one of the reasons I think we've had some more joint wins than we would have expected at this point. We've referenced a few of those on our earnings call. My colleagues will be discussing some more of them later today. What we've seen so far makes us feel pretty good about that. Of course, we're ahead on achieving our 25% tax rate objective. We're ahead by about a year on that, we think we can actually just check that one off. As we look at our cost synergy plans, we're on track with that. Everything feels pretty good about that. We also recognize we still have a long road ahead of us. We have the benefit leveling and global pay structures. We've been working hard on them. They will soon be announced for 2017.
I mentioned earlier continuing to learn to work within a balanced matrix honing our go-to-market strategies. Overall, if you had told us that January 5th that we would be where we are today, we would have taken that in a second. We're very pleased with the integration. Let me say a few words about capital allocation and how we think about that. First of all, our focus is really going to be on shareholder repurchase. Now, if we find some M&A that would provide a higher internal rate of return that is better in pretty much all respects than buying our own shares, we will of course consider that. The primary focus is going to be on share repurchase.
We also recognize, of course, we do need to continue to invest in the business, we're going to be taking a very disciplined and focused approach on investing in the business. In particular, we're not going to be reinvesting in the business unless we can see a clear uptick coming in organic growth. We also want to be an organization that promotes smart innovation, we are going to be looking at ways we can invest in innovation, particularly providing a way for our folks on the grassroots to develop innovative things and then have us develop that as a company. We want to continue to pay dividends, the payout ratios are likely to remain steady. We want the flexibility for share buybacks and M&A, which we think is a better return for our shareholders.
In terms of M&A, we've outlined on this slide here some of the areas of investment in each of the little areas there that might be most attractive to our portfolio. A couple comments on M&A. First of all, there's no area that we look at and we say, "Boy, we got a bit of a hole here where we really need something." In fact, when we look at potential M&A, we're going to be looking at things that are adjacencies, what I might even call near adjacencies, because the closer something is to what we're already doing, the better a handle we'll have on that business. I think when we think about M&A, we're going to be looking for things where we really understand the value proposition of the business, we really understand what you need to do to be successful.
That doesn't always occur. That's not naturally occurring in most adjacencies. I think that the best acquisition that we ever did back in the Towers Watson days was clearly buying Extend Health. One of the reasons I think that acquisition worked so well for us was we had been a channel partner for Extend Health, we had been talking to our clients about potentially implementing exchanges there. That meant that we understood very well the value proposition. We actually worked with clients to implement on Extend Health, we knew what you needed to do to be successful. Now, we had to buy Extend Health because we didn't have the capabilities ourselves, so we were getting something different. We started out with a bit of a leg up.
The other thing I like about that merger, or acquisition, it's one that I think about for future ones, is we thought we understood very clearly and could quantify the downside risks, we thought those were limited. We had a number of upside potentials, we weren't sure what would be the most attractive there. We thought we could, at that time, Extend Health service the retiree market for retirees who were eligible for Medicare and were covered by a retiree medical plan. We said, "Well, we could extend. There's only so many that are covered by the retiree medical plan, but there's this huge consumer market that isn't covered by them, we could expand into that, or we could get into actives." At the time, I thought the retirees were going to be the biggest market. Turned out actives were that.
Acquisitions that give us optionality like that, a lot of things where things could go on the upside, that's what we're going to be looking for. Just one thing underlying all capital allocation, Roger will talk a little bit more about this too, we expect to be a strong generator of free cash flow. We expect to have a significant free cash flow that will give us the opportunity to look at all of these different buckets here. When we think going forward, what does success look like for us? There's two things I think that, two sort of ways I'd like to think about this. One is the competitive factor, the other is the financial. In the competitive factor, we'd like to be a leading competitor.
What we really want to do is establish ourselves as being the go-to company when people are facing risk or people issues, that Willis Towers Watson is the company that they naturally think of. We want to be known as an innovative organization and a destination for talent in our industry. If you think about, I mentioned earlier, sort of the integration exit goals. We think we can get a 25% adjusted EBITDA. Roger's going to provide some details about that metric in his update. Very important. We've seen very little of the operational improvement program drop to the bottom line so far. We need to change that. We're confident that we can get well more than half of current and future savings to hit the bottom line. That's perhaps the single most important focus we have over the next year or so.
As you'll see on the next slide, we've been talking about these metrics of getting to between $10.10 and $11.50 in adjusted EPS. We have several levers that we think we can pull to get us there. This slide, when you look at this, it looks at various revenue growth scenarios. We got either 2.5%, 3.5%, 4.5%. Ideally, we might grow even faster than that. What we wanted to show with this slide is even in a low single-digit growth rates, we think we can get to some of our target metrics or better. We're assuming we're going to hit the 25% EBITDA margin. I think Roger will talk about why we have the confidence in getting to that. We do expect to be repurchasing shares. We have here up to 8 million shares.
That would be the net share reduction that we would have over this time frame. Frankly, if we only grew at 2.5%, we hit the 25% EBITDA, and we repurchased 8 million shares, we would still hit the $10.10. To the extent we can grow faster, we can actually get even higher EPS coming out of that. One of the key things, as I mentioned, is free cash flow is an important lever for achieving this EPS goal because we've got to be buying back some of these shares, and we will give you some more details on our projections later on in this presentation. However, we feel pretty confident that we'll have the ability to do this. Key takeaways.
I think we've come a long way in the last nine months in defining really who we are, who is Willis Towers Watson, and how we do business. As I said, we've had some benefits from the merger already that are more than I had expected they would be at this stage. One of the things about some of these revenue synergies that we're seeing pay off is we expected so little by this time because it takes a while to ramp up for that the fact that we're ahead of that doesn't necessarily mean we're going to be way ahead a year or so from now, but it does give us a lot more confidence that we will certainly hit what we had planned there.
Integration is progressing well, integration is always messy, and anybody who plans to do an integration in only one year is setting themselves up for failure. We've always looked at this as a three-year project, and we still look at that, but we feel very good about where we are today. I think we settled on a strong capital allocation and balance sheet policy. We are providing strong and clear operating goals to our organization, and we'll be talking to you about making sure we hit them. The bottom line on all this is we have a strong focus on shareholder return. That's what we want to make sure that we're delivering on. Again, thanks very much for joining us and thanks for your time. Let me now introduce Julie Gebauer, the Head of Human Capital and Benefits.
Thank you, John. Good morning, everyone. I'm going to be spending the next bit of time talking to you about our Human Capital and Benefits business segment. I'll be providing you an overview of the segment overall and try to give you a good understanding of each of the major components of the business, looking at business drivers as well as our competitive position and our focus for the future. You'll hear me talk about it as HCB in shorthand. As you might have seen on one of John's slides, the HCB segment is just over 40% of the company. It comprises four major businesses and operates in all of our geographies. You can see on the right-hand side of this slide, the distribution by business and geography.
This is based on our current integration mapping, and you'll see similar slides for the rest of our segments as we go through our presentations this morning. The largest of our HCB businesses, at just over 45%, is our Global Retirement business, where we have a market-leading position helping organizations manage their defined benefit pension plans, DB plans. You'll see and hear that we have an emphasis on actuarial compliance services for clients, as well as de-risking strategies and solutions. We also assist organizations with defined contribution or DC solutions. Nearly as large and equally as prominent is our Global Health and Benefits business. Through this business, we provide advisory and broking services and solutions for organizations that provide corporate-sponsored benefit programs.
While there is significant emphasis on healthcare programs here, whether it be plan design, vendor selection, insurance placement, we also provide solutions here in specialty areas and help organizations with benefits like life insurance and disability. Our Global Talent and Rewards business is our third business at 19% of the segment. Our colleagues in this business help organizations across a broad range of HR issues, from executive compensation advisory services to broad-based pay programs, from conducting employee opinion surveys to doing talent assessments and providing HR software. Finally, our Technology and Administration Solutions or TAS business is about 9% of the segment. This business is focused on benefits administration and outsourcing in selected markets outside the U.S.
Across these businesses, we have over 6,000 clients, ranging from small local companies that have been historically serviced by legacy Willis teams to the largest and most complex of global organizations around the world. We have the capabilities to help organizations in about 140 countries now. For this financial year, as you've heard, we expect to deliver mid-single-digit growth with low single-digit organic growth and deliver operating income margins in the mid-20s. We believe that this portfolio is a competitive differentiator for us because the offerings that we have in each of our businesses is focused on addressing the key strategic issues that clients face, whether it's pension de-risking or pay for performance, addressing say on pay issues. In addition, we are able to and often combine offerings across our businesses to address broader HR and benefits issues like productivity improvements or overall labor cost management.
Our intent is to provide a consistent Willis Towers Watson experience in all we do across all of our clients. We do this by providing strategic insight and advice that is based on deep expertise in every area we operate, as well as sophisticated analytics calling on a treasure trove of data about benefits, compensation, workforce attitudes, and workforce behaviors. This, rather than just general knowledge and broad-based information, we are able to deliver for clients objective advice that is really tailored for their situations. We also assist clients by not only providing this advice, but by turning it into sustainable solutions through our services and solutions, including insurance placement, HR application software, and outsourcing. I am now going to turn to each of the businesses in turn to give you a bit more detail about each of them.
Starting with the retirement business, which has been a very good business for us, delivering low single-digit growth on a very strong profit base. In spite of the fact that the prevalence of open defined benefit plans has been on the decline and continues to decline, we have been able to deliver growth. The growth comes because ongoing services are required for both open and closed plans, annual compliance work, actuarial services. Even though there has been pricing pressure in this kind of work, we have been focused on improving our operational efficiency so that we can continue to drive earnings growth. We have also been focused on value-added services.
Value-added services, including some basic things like scenario planning and forecasting because of the variability in pension costs when there is economic volatility or a change in pension legislation. Also focused on helping organizations move pension risk from their balance sheets, off their balance sheets, to reduce that risk exposure through such things as providing lump sum settlements to plan members or doing group annuity purchases. When done well, this business is a very sticky business. We are awfully proud of our 99% client retention rate among our Fortune 1000 clients. We are also proud of our position leading the market, as you can see from some of the statistics on the right-hand side of this page, leader in all of the major DB markets around the world. We have leveraged this, and continue to leverage it to continue to grow market share even as market leader.
That focus on market share improvement as in addition to operational efficiencies and focus on value-added services has enabled us to deliver earnings growth over the last three calendar years of 3% per annum. We think this is very good even as most individuals think that this is a pretty challenging market for growth. In addition to this, we have focused on building out services to capture additional opportunity in the area of defined contribution. Those of you who have been following Towers Watson for the past couple of years will probably remember that we launched a new product, Defined Contribution Master Trust in Great Britain a couple of years ago that we called LifeSight. This is a multiple employer defined contribution scheme that is fully managed by Willis Towers Watson, fully managed from selection of investment advisors to benefits administration, dealing with governance requirements, and also communication with participants.
We've set off on this path in response to what we were seeing as market trends for sponsors in Great Britain interested in fully outsourcing their defined contribution responsibilities, because they could reduce costs, they could eliminate internal resources, eliminate the need for governance requirements, and improve the experience for their plan members. We've capitalized on this and we're on track for our growth here. Thus far, after a couple of years, we have 10 clients signed on for LifeSight with the expectation that by the end of 2017, GBP 1.8 billion of their pension assets will be part of our Master Trust. We've got a really nice pipeline here proposing with plan sponsors who have pension assets of about GBP 3 billion, we expect the business to grow exponentially and getting us to revenue of about GBP 70 million by 2020.
We're also looking at this opportunity selectively in other markets where we see this sort of trend. I'll now turn to our health and benefits business. This is a business which is a combination of our businesses from our legacy organizations. Both of our companies had meaningful positions in this business prior to the merger, with Towers Watson focused on the large market in North America and emerging in the global market, and with Willis having a very strong global brokerage network and a very strong presence in the small and mid-market in North America. This business has similar positive attributes to our retirement business, with annuity relationships and the opportunity to leverage to drive really good profit margins. In addition, as opposed to the retirement business, the health and benefits market is growing quite nicely around the world.
Part of this is because health and benefits are an important part of the value proposition that individuals consider when deciding to join or stay with a company. The cost of these benefits is significant and growing rapidly, oftentimes in excess of underlying inflation. Organizations are looking to us to help them design the best benefit programs at the lowest cost for them. We do that through advisory services like plan design, by helping select the best vendors and place insurance as well. We're also, like in the retirement business, focused on value-added services. In health and benefits, we do this through specialty programs. One example of this is a collaborative that we've established around pharmacy benefits in the U.S. Pharmacy benefits happen to be the fastest-growing part of healthcare.
To help companies address this, we've designed programs, best practice programs, that help their employees focus on low-cost alternatives like generics. Also we've aggregated purchasing power across our client base to help them get the best deals from vendors. We've built a cadre of specialist resources, indicated by the column on the right-hand side of this page. While most of these are U.S. numbers because the U.S. happens to be the biggest market for healthcare, we have as big a business outside the U.S. as in, so we have additional specialist resources outside the U.S. as well. You'll note on this list that we have a group of 250 people focused specifically on international consulting because there's a big opportunity around global benefits management, a trend we're seeing with organizations that operate in more than one country to manage their benefits globally.
In addition to that group of people, we now, as I mentioned, have the opportunity to serve clients in about 140 countries, and we've got information on benefits or data for benefits in over 100 countries around the world, positions us really well to capitalize on this growth. Now, thinking about this growing market and our position, we have generated nice growth over the recent past. The legacy Towers Watson part of the business growing on average 5% a year based on our increasing market share, as well as faster growth in our specialty services and support for exchange solutions. At the same time, or nearly the same time, the legacy Willis business doubled in size by about $500 million because of strong organic growth and important strategic acquisitions like Gras Savoye. The opportunity for growth in health and benefits is even greater as Willis Towers Watson.
This is because more and more companies, as I mentioned, are interested in consolidating the management of benefits around the globe. They're doing this to address governance issues, to eliminate inefficiencies, to reduce costs, and to improve the experience for their employees around the world. Now, prior to Willis Towers Watson coming into existence, there were effectively only two viable solutions in the market. Both Willis and Towers Watson were separately trying to challenge this position, but it was slow going. It was going to take years for Towers Watson to build out a global brokerage network and effectively compete in that space. It was going to take years for Willis to build the infrastructure and technology needed for them to compete in that space.
On January 5th, we immediately formed a third viable competitor in this marketplace, and the market has received it positively because of the breadth of our global distribution network, our brokerage network, the ability to deliver in 140 countries, and because of the quality and consistency of the offering, even in countries that are sparsely populated for some of our clients. Our global benefit solution provides data analytics and governance support to corporate headquarters, and at the same time, tailored local services to address the needs of local business and HR teams. It's something that the market has been asking for and is finding appealing in our offering. In addition, we're providing a high-quality, consistent employee experience that's powered through a technology suite, Benefits Manager, Benefits Broker, and Benefits Marketplace.
Interestingly, the Benefits Marketplace of this suite is leveraged from our exchange solutions Liazon technology so that we can provide a similarly transparent, flexible, and user-friendly experience for employees around the world. It's been very well received. With that, we are committed to and are on track to increase our clients in this arena in such a way that we will generate an additional $75 million revenue run rate by the end of 2018. Now, turning to talent and rewards. This is a slightly different type of business, a business mix that includes more project work than the last two businesses I mentioned. Though there is also some multi-year and annuity relationship revenue in this business as well.
The projects that our teams in this business do are driven often by organizational change, so that we are helping companies align HR, pay, other reward programs to new strategies or new organization designs. Also driven by challenging environment for attracting and keeping talent in high-value jobs. The focus that boards and management have on pay levels for executives and more broadly to keep those competitive pay levels drive the annuity part of the revenue in this business, as do an increasing focus on technology solutions in this area. We can leverage these drivers of the business because of our strong position in many of the parts of this business. We are the number one executive compensation consultancy around the world, serving over 30% of the S&P 1500 and 20% of the FTSE 100.
We are positioned as one of the top two compensation data providers in virtually every country around the world, leveraging the data that's supplied to us from more than 30,000 companies around the world. The recent acquisition that we made of Saville Consulting positions us as a very strong provider of online talent assessments. The British Psychological Society has actually given us a top rating of our tool relative to other competitors, so much so that we've been able to implement this solution in over 700 organizations so far. In this business, because of the project nature of it, our focus has been and will continue to be to take advantage of the market demand that exists and manage our capacity to that demand so that we can deliver appropriate margins.
We are going to continue to focus on the annuity part of this business, and to work to expand margins by doing things like offshoring resources where it's appropriate. With that focus over the last three calendar years, we have been able to drive nice growth in this business with a 13% earnings CAGR. Finally, our TAS business has characteristics that are much more like the retirement and health and benefits business that are with annuity relationships. This is the part of the business, the outsourcing business, that is outside of the U.S. The U.S. outsourcing business has many more connections to our Exchange Solutions segment, managed as part of that segment, so Gene Wickes will be talking about that part of the business.
We have been growing our TAS business deliberately and carefully since inception so that we could deliver administration services with the same level of quality that's consistent with our brand reputation, and at the same time, deliver appropriate profit margins. We think that's pretty unique in this part of the business. We now have almost 400, 370 clients, primarily in Great Britain and Germany, and a sterling reputation among large organizations. That has translated into a great winning rate. I'll call your attention to the bottom right hand of this page that highlights some of the very recent wins that we've had in the large market, something we're quite proud of. In the end, because of our focus on this high quality, we retain our clients for a long time. Average tenure of a client is over 12 years.
Because of that focus on the high end and corresponding pricing at the high end, we've been able to generate nice growth, additional operational efficiencies by offshoring resources where it's appropriate, and the per annum growth over the last three calendar years in this business has been 12%. As I noted already, we think the portfolio itself is a differentiator for us, as is our ability to address the full range of the market, from small and middle-sized organizations to large corporations around the world. We think our focus on insights as well as solutions is distinctive and our ability to balance global and local needs. John talked about where we are on integration and revenue synergies. We're making good progress. I highlighted the focus on our global benefit solution.
We have had already 19 new multinational sign up, and we are on track for delivering what we need to get to that $75 million. The HCB segment is also involved in two other areas of stated revenue synergies. The first being our focus on cross-selling to large corporations, our P&C services, where our retirement consultants often have relationships in the finance department and are able to help open doors for our colleagues in Corporate Risk & Broking. While there are other ways we're going about this, and Tim Wright will talk much more about this, we've been able to help close six deals in this area since the deal closed. The other area, which Gene Wickes will talk much more about, is our middle market exchange revenue synergy opportunity.
Our health and benefits team is very important in opening doors for this and introducing the concept of an exchange as an alternative delivery platform for healthcare. Thus far, we've had some nice success contributing to wins that will add 70,000 lives to our exchange platform the beginning of next year. Now, if we look ahead, we feel very good about this business segment. We expect to have a financial contribution that is in mid-single digit revenue growth, and at the same time, we expect to expand margins. We'll do that by focusing on that single word that John talks about, profitable revenue growth altogether, in a couple of ways. In retirement and TAS, we're going to be focusing on continuing to grow our market share and focus on value-added services in retirement.
We'll remain agile in talent and rewards and take advantage of the market demand that exists, stay in our leading position there. In the health and benefits area, where we see the market growing, we're going to have significant focus. We're going to take advantage of the growing market, and we're going to intend to grow market share, particularly as organizations continue to set up global benefit solutions. At the same time, we'll focus on operational effectiveness. We started a program in 2016, this year, to ensure that our capacity was well-aligned with market demand. John mentioned softer revenue growth than expected. We've been vigilant about that, taking action to reduce our workforce where it made sense to do so, where the market demand wasn't strongest.
We will keep that vigilance moving into the next couple of years and ensure that capacity is aligned with demand so that we can deliver on the margins that we commit to. At the same time, our operational effectiveness efforts will be focused on delivering global consistency. It's a key differentiator for us, and it's different for some parts of the business that have been operated on a geographic basis in the past, particularly the health and benefits business from legacy Willis. We will be implementing consistent tools, processes, and best practices around the globe. We've begun that, but it's going to take some time for us to complete that.
We will also be focused on leveraging resources across our business. We have begun a process to review all of our operations to identify any new opportunities for process improvement, for taking resources offshore, and for leveraging technology where we can so that we can expand margins. The final area of focus is continuing on the integration efforts that we've had in 2016 to ensure that everything is strategically aligned, that we are focusing our resources on the core areas that I've described today, and don't have distraction from anything that we find is non-core. I talked about our ability to move from the small end of the market to the large end of the market. That's absolutely a part of our ability today in the health and benefits area.
We are working to find the best opportunities to do that in other parts of the business, whether it be in talent and rewards or retirement. Finally, as John mentioned, looking at adjacent areas, we will be looking to make investments inside the requirements of delivering the operating margins to which we commit, so that we can position ourselves for growth in the longer term. Overall, we are quite confident about the future prospects for this segment and for each of its businesses. Now I'd like to turn the floor over to Tim Wright, who will talk to you about Corporate Risk and Broking.
Thank you, Julie, and good morning, ladies and gentlemen. Over the next 30 minutes or so before the break, I'm going to talk about Corporate Risk and Broking, really falling into 2 parts. I'm going to talk about what it is that we do, the markets we operate in, and how we win. I'm going to move to the financial performance. Some of the things that are driving the underperformance of the business at the moment and the steps we are taking to fix that going forward. This page, this is going to be a similar page for all of the segment presentations, just summarizes Corporate Risk and Broking. Few things to call out. What is it? It is what it says. We provide risk advice and insurance broking to companies, from the smallest companies to the largest multinationals.
The core of what we do is insurance broking. Increasingly for large and sophisticated clients, we are also providing risk advice underpinned by risk and analytics, I'll talk about that a little bit later. One of the things that has changed since the merger is previously we organized this business just around geography. We have supplemented that with a line of business organization since the merger in order that we drive the transfer of capabilities and leveraging our scale across geography going forward. In terms of the outlook for the business, low single-digit organic growth, 20% margin. Just quickly, in terms of the participants in this market and the businesses, right in the middle of this chart, you'll see insurance broking and risk advisory. That's the majority of what we do. That's about 95% of our revenues.
In addition to that, there are two other businesses that are small but are growing rapidly that I want to call out. First of all, affinity, where we work with our clients to help them develop insurance solutions for their customer base. Think about banks, telcos, utility companies. That's about 2% of our total revenues, but growing in the teens. On the right-hand side of the chart, facultative reinsurance, where we provide insurance companies with capacity on single risks to transfer that through reinsurance, and so provide increased capacity for our end clients by doing so. Again, 3% of our total revenues, but again, growing in the teens. This is a build. Let me go through to the end. A lot of you have asked us what drives the growth of the Corporate Risk and Broking market.
While the answer is a combination of factors from country to country, market to market, there are really four things that drive growth in this business. The economy, insurance, the environment, and broker share of distribution. The economy, broadly, Corporate Risk and Broking will broadly track the economy. The good news is that companies still buy insurance even in recessions. When you see a downturn in economic activity or political instability, you do see project business reducing, and that's impacted some of our emerging market businesses recently. Penetration, this is gross written premiums, insurance premiums as a percentage of GDP varies enormously from market to market. You'll see that the U.S. is three times the penetration of China, and that's why countries like China are relatively under-insured and they provide long-term growth opportunities. Again, a lot of you ask us about the rating environment.
No big news here. Rates are still soft. It's a bottom-up exercise to look at rates by business and by geography. You have on this chart. The picture is overall decreases some areas, big decreases, very few areas where we see increases in pricing. What's driving that? Really four things. There is the insurance company competition, which is unabated. Have the lack of major losses in the industry. Losses, the insurance market pricing, continuing getting back to normal very, very quickly. You have the influx of alternative capital, which we still see as a dynamic in the industry. Finally, we brokers are fighting, innovating in terms of solutions, and that puts pressure on prices as well. Geographies. This is a big business, both in terms of the revenues, our international footprint, our number of colleagues, and the $23 billion of premium that we place around the world.
A few things to note. First of all, number of countries, you will see that we have representation, as John said, as Julie said, in 100 where we can support our clients. You add up the number of countries in the it's about 70, 80. That's where we have 100% owned subsidiaries in those markets. A few words about each of the geographies. North America is the biggest business. It is predominantly mid-market. 75% of our revenues are mid-market or small commercial in that business. Great opportunity that I'll talk about in large accounts. The U.K., and actually the rest of the world, has a much larger market component. Probably about 60% of the revenues outside North America come from large accounts, a different composition. The U.K. was our traditional home, that's the specialty market where we have centers of excellence that we leverage through global lines of business.
Western Europe, we have a series of country positions. We are the leader after the acquisition of Gras Savoye. International, where we have an expanded foot so as a result of our Gras Savoye acquisition, but where we have seen some pressure that I'll come back to later, particularly in the big emerging markets. Competitive environment. This is a large, we estimate the revenue pools to be about $30 billion, a highly fragmented market. There are literally thousands of competitors. We think we have an 8%-9% market share. Actually those overall statistics are fairly meaningless. There are different sets of competitors by segment. For the large multinationals, it's the global players have leadership in a number of key markets. We are leaders in certain geographies, parts of Western Europe. I mentioned France, also Spain, the Nordics, but also emerging markets like Russia, China.
We are also leaders in certain client segments. North America, mid-market, we have a very strong position in that business. We also have leadership in certain industries, in financial institutions, in natural resources, and in construction. These are we are leaders. Positions also in certain lines of business, from the traditional to the new. Marine and aviation, given our London heritage, we are global leaders in those specialty lines of business. Also in cyber, we are a leader in the cyber business, I'm going to talk about that later. That's the competitive environment that we're operating in. Again, a number of you ask, how do we compete? How do we win? What this slide describes is our end-to-end client journey, I'm going to call out some ways in which we differentiate from the competition at each stage of that journey.
Right at the beginning go to market and engage with clients in the first place. Uniquely, we have a united go-to-market approach. Julie's business, my businesses under a single brand, which is unique in our industry. We also bring industry perspective to those clients. We talk about their business talk about solutions to the issues that they face. That is different. I said we have a growing role to play as a risk advisor underpinned by analytics. The differentiator here is not that we have the risk models, although we probably have them to a greater degree than our competitors. This year, we will put 2,500 clients, their data through our risk models. What is distinctive is the way that we work with analytics, risk advice, and insurance broking in an embedded fashion rather than as two separate lines of business.
Time after time, we hear from our clients that is distinctive and compelling, I'll show you an example later. Transact, broking, are still the core of what we do and how we get paid, we're very good at it. We have specialty broking capabilities that are leadership positions around leverage those to our global lines of business. Servicing the client, get this wrong, you lose the client. Get this right, you keep a client for a long time. We have a fantastic service ethic, as John described. We also have modern platforms, we have a network to service our clients wherever they operate around the world. Finally, develop. We develop with our clients, we innovate, we develop new solutions.
Again, uniquely, we are combining capabilities from legacy Towers Watson and legacy Willis to deliver new solutions to our clients in a way that our competitors are not. We talk a lot about Willis Towers Watson being the analytical broker. I want to bring that to life a little bit for you. Talk about the risk models. It is a very, very hot topic as you all know. You would have heard the statistics about $400 billion of annual losses associated with cybercrime. This is the issue of the moment for companies and their boards, that is up 38% from 2014. There is an industry forming to serve that need and address that need, estimated to be $140 billion of revenues by 2021. Insurance has so far been a small part of that industry.
Total cyber premium, about $2.5 billion, mainly focused on privacy breaches and network outages. That is changing, we are part of changing that. I checked our clients and recent wins, many of the companies or many of the banks that you present, the people in this room represent, we place your cyber insurance for you. We're winning in that area. That business is up 50% year-to-date. We see good growth opportunities. In terms of modeling, what are we actually doing? We take market data on losses, we take and we model the probability and impact of a cyber loss. Alternative strategies using retention of risk, transfer of risk through insurance, we develop those different solutions. We compare the cost of capital associated with those, we make recommendations to our clients based on that. It's incredibly powerful. We're beyond just placing insurance programs.
We're actually helping our clients to manage the total cost of risk. These models that we've invested in underpin that. Moving to the financials, which I know you are interested in. First of all, on the left hand of this chart, current performance of CRB. It is below our expectations, below prior years, potentially even below our peers, with revenue growth at about half the level that we've seen historically. Expense growth higher than that and margins at 20% fallen off a little bit in the first half of the year. What are we doing to address that? First of all, we have a series of revenue actions, both business as usual revenue actions, I'll talk about that more. We think we have an opportunity to improve our revenue performance.
The revenue synergies, I'm going to talk a lot more about that, where we see potential. Operational improvement program. A lot of questions from you about how that's going and why that's not flowing through to the margin in CRB, which is probably about 50% of OIP savings are directly attributable to CRB. I'm going to talk through that. Our goals. Our goals for this business are top line growth of 3%-4%, expenses less than that, and margin expansion from the current 20%-22% to 23%. Those are our goals. Let me talk about that in a little bit more detail. A couple of things, busy chart. On the left-hand side, at the bottom, of course, integrating our acquisitions, particularly Gras Savoye, is going to be really important to driving revenue growth.
By the way, that is going well. Revenue management, and this may sound like back to basics, and that's what it is. Really focusing on managing our pipelines, managing our retention, and our sales conversion. To just give you a sense of the opportunity that we see, we think our unweighted sales pipeline should be about 3 times our sales target. We're probably at around one to two times that. We have upside from pipeline focus and filling our pipeline. Retention. A large part of our business is renewable business, and therefore, retention is very important. There we look to a 92%-plus retention rates. We're probably at 90%-92%. Retention has held up pretty well through the merger. Sales. Our sales as a percentage of prior year, which is a lagging indicator.
We aim for that to be around 12%, and it's probably 8%-10%, we have some upside there as well. On revenue management, we are focused on managing our revenues, making sure that we have line of sight over that, regular reviews, and all of the basic disciplines that Roger's going to talk about later. Turning to revenue synergies, I know you're interested, and I hope you're excited about this. First of all, we're running a classic pipeline, as you would expect. We think there are about 1,750 clients, legacy Towers Watson large account clients in North America, where there is potential. We've prioritized the first 750. We put together joint account plans, working with the people in the legacy Towers Watson organization. We have over 200 more that we'll complete by the end of the year. We're implementing those account plans.
We've already started to implement 100, we have another 100 to come this year. We're taking an industry by industry approach. We focused on healthcare, natural resources, and financial institutions in the first instance. We are seeing success. We have in total, Julie mentioned six accounts where we're working with our retirement colleagues. In total, we have 10 wins. There is a lead cycle on this. There is a lead cycle, 10 wins, worth about $6 million. We think we're on track to deliver around $10 million of revenue synergies, which is on plan and on expectation. A couple of things to call out. Our win rate has improved against our historic experience. Most of these are competitive tenders. By the way, large companies tend to run competitive tenders every three years, and that's why there's a bit of a lead time on this.
Competitive tenders in legacy Willis and large accounts in North America, we had about a 40% win rate, which is not bad. We have seen on legacy Towers Watson accounts, that's running at about 60%. We're also getting a halo effect for non-legacy Towers Watson accounts, where our win rate has gone up to 50%. Early days, the proof of the pudding here is going to be in the eating. I think you can see that we've started cooking here in terms of revenue synergies. I'm going to turn to expense management. You will see on the slide the OIP program, which I think all of you are familiar with, and Roger's going to talk about in his presentation. I'm going to try to answer two questions on OIP, again, that I have heard from you.
Number one, why are we not seeing OIP savings translating into margin improvement in Corporate Risk and Broking? Secondly, are the OIP savings in Corporate Risk and Broking real and sustainable? The answer, by the way, on the second one is yes, let me answer the first one. We have seen in the first half of the year, and we've shared this with you in our earnings, we have seen margins actually compress in the first half of the year. What's driving that? On an adjusted basis, including acquisitions and disposals, we have margin dilution of 80-100 basis points, mainly because of the Gras Savoye acquisition. That was a lower margin business that we brought into the group. The margin trajectory is good for that business, but that acquisition accounted for 80 basis points alone in terms of the margin on the business.
Secondly, we have seen a decline in the growth of our international businesses compared with historic rates. To give you a sense, those businesses historically, legacy Willis, have contributed 10%-12% organic growth, that's going to be pretty much flat. Flat year to date. Our expenses on that business are running at the rate that you'd expect if you were in a 10%-12% environment. We have margin compression associated with those international businesses. We are fixing that. We are right sizing the costs of those businesses to the realities of trading in Brazil, in China and Russia. That takes some time to adjust. The rest of the businesses are actually seeing pretty good performance and actually pretty good operational leverage. Let me give you one example. GB, which is the most advanced in our operational improvement program, we have margin expansion year to date.
A couple of percentage points of margin expansion in GB as a result of OIP. North America, which is probably midway through the OIP program, we have seen margin expansion, lower margin expansion, we have seen a margin expansion in North America. Western Europe, we expect to see margin stability or even expansion by the end of the year. International, our margin compression is what I described to you earlier. That's impacting the overall margin of CRB. Other things to call out in terms of CRB is we have been making investments. Not all of those are reinvestments of OIP savings. Some of those are infrastructure investments, ongoing growth investments in areas like our industry expertise and risk and analytics. There have been some selective investments in hiring people where we see opportunities to grow our business around the world. That's my answer to the first question.
Second question on are the savings from OIP real and sustainable? The answer is yes. We are at different stages in that program around the world. In G.B., for where we've had the margin expansion, where the OIP savings have dropped to the margin, we relocated 320 roles from the U.K. to our center in Mumbai, that has allowed us to expand our margin. In North America, we have more of an efficiency play. We have productivity improvements in two areas that drive a lot of cost around certificates of insurance production and accounting and settlement. We have 25% improvements in productivity in those two areas. In small commercial business, which was located in our branches around North America, we have taken that out of those branches and put them in lower cost service hubs.
15,000 small commercial accounts have been relocated, we're starting to see the benefit of that. For our Western European and international businesses, stage on OIP. The reason for that is that in many cases, we've had to establish our lower cost centers because of language skills. as our lower cost center that's based in Bulgaria to serve Western Europe. We've already transferred about 25 roles from Denmark, more to come from Northern Europe, high-cost market. In international, we established a center in Dalian, in China, a lower cost location than Shanghai and Beijing, where we have most of our operations, and we've already transferred about 40 roles to that center. Earlier stage in terms of Western Europe and international, but real tangible benefits across the different businesses. Let me summarize.
2016 has been a challenge in terms of a combination of external factors and internal factors, but we are taking actions to improve both top line growth and operational leverage. That is the single source of profitable revenue growth. Probably greater focus on the profitable and the margin performance in the CRB businesses for the reasons I described. What is driving the current underperformance against prior years expectations and peers? Sector-wide rating and economic factors, that impacts everyone. We are probably more exposed to those than some of our competitors because of our being overweight in high growth markets or previously high growth markets like Brazil, China, and Russia. Probably greater exposure to commission-based mid-market business in North America and very rate sensitive business in our specialty. Average pricing in the London market book that we have was down 15% last year. That has an impact on business.
Our operating model, historically, that has been more decentralized. We are managing our operations in a more centralized and controlled manner globally, helped by global lines of business and global functions, some inevitable merger distraction, and limited staff attrition. I see the future opportunities as much greater than those challenges. That's why I'm optimistic about this business for the future. We see growth opportunities in all four regions. In North America, not only in our core middle market business, but also in large accounts through the revenue synergies working with our legacy Towers Watson colleagues. In Great Britain, leveraging those specialty broking capabilities around the world through those global lines of business. We think that has great potential. In Western Europe, we have a series of strong country businesses with an entrepreneurial flair, big development in affinity and facultative in those markets.
International, despite the very real challenges that we are addressing, we see opportunities for growth with an expanded footprint after the Gras Savoye acquisition, both in local markets and servicing multinationals around the world. We are seeing returns on our investment. I talked about risk and analytics. We are winning because of those capabilities that we have developed. We have a new and distinctive model. The single go-to-market approach is unique in our business, and we think will pay dividends. The way that we have reorganized CRB around the world, not just geography, but also global lines of business, that is distinct. We think that approach, that end-to-end client journey with all of the differentiators and supporters below that, is differentiated. We are focused on basic financial management discipline, both on the revenue side and on the expense side.
Our outlook for the future, low to mid single digit organic revenue growth up from low single digit revenue growth, positive operational leverage and margin stabilization, growth over time. Thank you very much for your attention. We will now be having an intermission until 11:10 A.M. Thank you very much. Oh, hi.
Adrian from.
Oh, okay. Good.
All right. Being a hedge fund.
Okay.
Just wanted to ask you, quite interesting, this retention rate. I haven't thought about it. We know what it is for the legacy guys.
Yeah.
The 90% months ago, or is it already the case much more?
It's around 90%-92%. It's a different business from the pension retirement business. It's pretty high. That's on the renewable business that we have.
The retention?
It varies by geography. Probably if we think about the business, between 20% and 40% is one-off business. The rest is renewable business, and our experience is that across the portfolio in terms of client mix, 92% is a good target. Sometimes it's more, sometimes it's less.
My last question is sorry, the little software solution that you have.
Yeah.
Is it really Mercer, they don't, Marsh, they don't have this? Or Aon?
Hey. We hired the entire team from Marsh that used to do. They have some of this stuff. The difference is probably how far we've gone in embedding it in-- Oh.
Let's say you had a-
Sorry.
How about now? Check, check. Check, check. One, two. Check, check. Check, check. Check, check. Check, check. How about now? Check, check. One, two. One, two. Check, check. See, that's a good level for you. Okay. Check, check.
He's already read the slide.
All right.
You're the one they're waiting for.
Let's get going here. Good morning, everybody. I'm Dominic Casserley. As you can see from this slide, the man with the longest title in corporate history. When you have to take a breath when introducing yourself, you know there's a problem. What I'm going to do today is to talk to you about Investment, Risk and Reinsurance, which is our segment that covers what we do in the reinsurance, wholesale insurance, capital markets, and investment markets. Look, in the context of volatile and evolving reinsurance and wholesale markets, we are very excited about our businesses in this segment. We see significant growth opportunities and continuation of good margins. That being said, 2016, for a variety of reasons which I'll discuss, has been a difficult year for the segment. Difficult versus our aspirations for the segment.
In this section, I will talk about the makeup of the segment, some of the pressures we've seen in 2016, and why we are optimistic about the future. A theme you will hear a few times is that we are investing in some areas to offset the maturing of some older businesses, and that we're coming through really the apex of those transitions this year. Let me start by giving you an overview of the segment. The slide you've all now become familiar with. IRR, as you can see here, is made up of actually six businesses. It has revenues of about $1.5 billion in total. What these six key businesses have in common Is their exposure to the reinsurance, wholesale, and investment markets, and the fact that many of them have insurance companies as their main clients.
The two largest of our businesses, reinsurance and Risk Consulting and Software, or RCS, represent over 60% of the segment, and both are focused on providing advice and solutions to insurance companies. Wholesale, which is very largely Miller in London, serves other brokers on their specific London market needs. Investment is the leading advisor and provider of delegated investment products to pension funds, trusts, and other investors. And then we have Portfolio and Underwriting, our evolving MGA and underwriting platforms, and Capital Markets and Advisory, our insurance M&A and ILS business. Finally, when giving an overview of the segment, let me remind you that these businesses, often for client-specific or regulatory reasons, need to be managed separately. For instance, from our CRB business, our reinsurance business needs to be managed separately from our CRB business or from each other in some cases.
There are some interesting regulatory and management underpinnings for why we manage IRR this way. I said that 2016 had been a difficult year for the segment. It's worth noting that despite the challenges in these markets, we will see overall growth and good margins for 2016 as the box at the bottom left-hand side of this chart shows. We just have higher aspirations for this segment than we've been able to achieve in 2016. What have the challenges been? The general market conditions across a number of these businesses have been quite challenging. I presumably don't have to go at length into the delights of pricing in the reinsurance market. They have been extremely well documented. While in 2014 and 2015, our reinsurance business continued to grow, we have seen some further headwinds in 2016 in some parts of that business.
On the other hand, we are also seeing more purchasing of reinsurance by a number of carriers and some softening of the softening of rates. Net net, this has been a year of transition for that industry. Our RCS business, the second biggest business within IRR, has seen fewer big projects hitting some of our consulting revenues, software has continued to grow, but not quite enough to offset some of the softness in consulting. Not surprisingly, Investment has seen declining consulting revenues from DB plans for all the reasons that Julie talked about the state of the DB industry. These were more than offset by rising delegated investment income and our new master trust product that Julie talked about. Miller has done well, even in the face of some difficult specialty rates in London that Tim talked about. Miller has had a very nice year.
Our Portfolio and Underwriting business sees lots of opportunities in building out our MGA platforms and our underwriting platforms. Deliberately in 2016, we've been adjusting our portfolio. We made some deliberate moves to exit some legacy MGA business. Finally, our very smallest business, which is our Capital Markets and Advisory business, its core activity is insurance M&A, and that market has been down. The market has been down about 70% year-to-date. What does this all mean for 2016? If you look over the last three years, apart from RCS, our four biggest businesses have all seen compound annual growth in revenues. This is good performance given some of the trends I just talked about. The growth has slowed.
Coupled with some ongoing investments we've been making and some exits, we expect that operating income, when you take out the one-time FAJS legal settlement, when you take that out, we do expect that operating income will be down versus 2015. This is disappointing, but we don't think it's the result of problems with our direction or strength of our business. Now let me give you a perspective in each of the businesses and how we see them evolving. I'm going to start with the biggest business, which is reinsurance. As you can see, we have a phenomenal business in Willis Re. It has performed incredibly strongly over the last decade or so, clearly taking market share around the world. We are very excited about this platform.
We have seen some consolidation of position in 2015 and 2016, but we have a very competitive business that plays in the North American reinsurance market strongly, internationally in key markets, and in specialty reinsurance markets, mainly in London. Its clients include the leading insurance companies in the world, medium-sized and regional companies, specialized players, and Lloyd's syndicates. A very broad-based business geographically and by client type. Going forward, we are very optimistic about moving forward from that base. As I said, we have a very diversified business and a business operating at scale. We have 1,700 colleagues around the world sitting in Willis Re with multiple different capabilities, from deep broking capability to analytics to their client service capabilities. Historically, we have been a P&C house, a property and casualty reinsurance broker.
Prior to the merger, Willis Re was looking seriously at opportunities to expand into the life market. Obviously now post the creation of Willis Towers Watson, we see that opportunity only accelerating. Over time, we see life reinsurance as a real growth opportunity for Willis Re. Overall, if you look at what we're saying here, we believe we have the advanced analytics that clients demand. You can see we've been investing over many years in analytics, and within Willis Re have over 400 analysts supporting client problem-solving. The ability to design and execute new alternative capital strategies, all delivered through best-in-class client service or relationship management. It's important to understand that we deliver to our clients an integrated, advanced analytical problem-solving approach, financial structuring, and reinsurance execution. It's a package of capabilities to deliver solutions to our clients' needs and issues.
In that context, we obviously have to make significant investments in learning and development to keep us at the cutting edge. Clients require us always to be one step ahead of them as we think through how we can help them. We see this as a real growth business in the medium term, and I will discuss later some of the additional cross-selling opportunities we're already seeing from the merger. Let me now turn to the second biggest business within IRR, which is risk consulting and software. First of all, this is another business at scale. We have 1,200 colleagues around the world, 900 of them serving insurance companies directly in consulting and sales activities and client service activities. Another 200 plus developing and delivering software solutions. We are both a trusted advisor and a software solutions provider.
We serve again, as you'll see the parallels with Willis Re here, the complete range of insurance companies. From the very largest, P&C and life companies with a very deep bench of life clients, through to Lloyd's syndicates, to new startups, and we serve intermediaries. We offer the full range of actuarial services covering reserving and pricing issues, but also outsourcing services, M&A valuations, and of course, our market-leading software like Igloo and Radar. A well-diversified global advisory and solution provider focused on the broad insurance industry, an enviable franchise in the global market. Why has this business been showing some revenue slippage? Basically, it's on a transformation journey, and some declining businesses have not quite been outpaced by our growing businesses. The consulting business is transforming itself to move beyond the actuarial work to really deal with the full range of insurance performance opportunities.
We're also growing an outsourcing business as another revenue stream coming from our capabilities. The transformation has made good progress. We're very happy with the way we're proceeding. There are some areas of the world we want to move faster, and in those areas, we have seen more volatility in revenues. The transformation of our consulting business to be a broader performance-based consulting activity is going well. In parallel, we're building the software business to be a solutions provider to a larger part of the market. Today, we have about a 30/70 split between software and consulting activities, and we aspire to move to 50/50. That is going to be a key factor in driving growth. Now, critically, it's important to understand that these two activities are integrated. In some cases, a client issue is best resolved with a consulting project.
In other cases, with a software solution, or one may lead to the other. It's an integrated offering we deliver. In all cases, we are in the business of resolving a client's issues in the best and most effective way. Now, while we are building out our revenue model for this business, we do see opportunities to deliver our services more cost effectively. We're looking to optimize our costs, share resources across geographies, and learn from some of the other businesses by using offshoring more aggressively. Combined, we see the transformation of our revenue model to that 50/50 split and our focus on cost will deliver growth and margin improvement over the next few years. Let me now turn to investments. Again, a global business at scale with over 1,100 colleagues providing consulting and delegated investment services with close to $80 billion in delegated assets.
We're involved in asset allocation and portfolio construction consulting work, delivering specialized investment tools, and delegated investment management, either specialized in certain asset classes or across a broader portfolio. We serve the full range of pension trustee, endowments, sovereign wealth funds, wealth managers, and actually insurance companies. Clearly, there are some parallels to the journey RCS is on for our investment business. With the mostly DB consulting revenues flattening in recent years, as you would expect Being balanced with growth in DC-related activities like our master trust in the GB and our dedicated investment management activities. The next slide gives you a better sense of those trends. Advisory revenues have recently seen very slow overall decline, but delegated revenues have more than made up the difference, so that the overall balance has been growing, as we said in an earlier slide, at about 3.5% compound annual growth rate.
Facing the market trends of relative decline in DB actuarial services, but growth in DC product needs and a growth in delegated investment services, we're focused on the following. Continuing to innovate and focus on the investment opportunities related to DB funds. It's an important part of the business and will be for many years to come. Growing the delegated business. Growing defined contribution solutions. Expanding our scale in North America. We have an opportunity to be bigger in the biggest investment market in the world. Of course, managing our costs tightly. We believe that these actions can lead to continued growth and margin improvement. Let me now talk about Miller. Miller is the leading wholesale broker in London, and our clear plan from the very first day we established the partnership was to manage it in a particular way.
Let me explain again, for those of you who haven't heard the story, the rationale for why we bought Miller. We see the London wholesale brokerage market, the market in London which serves other brokers in getting them access to the London market. We see that brokerage market consolidating. It has been historically a very fragmented market, and we see that it will consolidate over time. Clients, brokerage companies, and talent will be looking for the surviving winning platforms which they can go to or where they can work. We believe Miller is the best option for them.
The best option because Miller, before it became part of the group, was a great firm with a great franchise and a great track record, but it now has the heft of Willis Towers Watson behind it, and some of the cost and analytical capabilities that can be added to its delivery. We believe that over time, clients and talent will say Miller is the place to go. We are deliberately running it at arm's length, and keeping the Miller brand to make clear that this is a standalone, separately regulated, separately managed wholesale broker, but with the weight of Willis Towers Watson behind it. Our plan is to keep it as a separately managed and branded U.K. regulated entity. To enable Miller to expand as the wholesaler of choice in London through leveraging some of Willis Towers Watson's analytical capabilities and cost expertise and scale.
Being, as a result, a beacon for clients and talent to enable Miller to take profitable market share in London. The market conditions, of course, are not easy in the London specialty market, as Tim talked. Through its diversified base of programmatic products for the broker client and its specialized P&C and specialty capabilities, Miller has the platform, brand, and financial backing to grow and succeed. We are very happy with the performance of this acquisition and excited about its prospects to win new clients and to attract the very best talent to this platform. Let me talk about portfolio and underwriting services. Portfolio and underwriting services is our evolving platform for MGA and underwriting activity. Let me be clear. In no case are we involved in taking underwriting risk on our own balance sheet. Roger will be happy to hear that.
We are transforming this business. Legacy Willis had a series of MGA activities in North America. We are now transforming this into a transatlantic business operating in North America, but also in the U.K., to be a platform for MGA activities and for the packaging of risk and placement into traditional and potentially alternative markets. This is a business around data management and IT. Data is critical here to having the track record to be able to place risk into these markets, and it is an opportunity to leverage talented underwriting capabilities to work from our MGA platform. As we speak, we are looking at exiting some legacy MGA businesses we have had. In parallel, adding underwriting capabilities for our MGAs on both sides of the Atlantic and investing to build out our IT platforms for more risk packaging and distribution.
We are using some new software, but leveraging extensively existing legacy Towers Watson software from RCS and others that can be used to build out these platforms. We have expected to see a bit of a revenue dip here as we have made this transition, and you can see we have seen some in this slide. That is on purpose because we are restructuring the business for long-term growth and margin improvement. Having given you a quick tour of the major businesses in IRR, let me now talk a bit about the revenue synergies we are seeing in IRR. First, let me just point out that the revenue synergies we described in June 2015, when we announced the merger, did not include what I am about to go through. We did not talk about these potential revenue synergies, these are additional to anything we talked about before.
We have taken a very structured approach to cross-training between Willis Re and RCS to enable these two businesses to go to market where appropriate, either together or to cross-sell each other's capabilities. This slide gives you an example of some of the wins we are already seeing and our pipeline in North America and outside North America of opportunities coming from this approach. These are real revenue synergies. We are seeing them now, and we see real growth of momentum out into the future. John and I were together at Monte Carlo, and we saw in action the power of having in the room together John Cavanagh and colleagues from Willis Re, Michael Murphy from RCS, Rafal Walkiewicz from Capital Markets and Advisory together talking to clients about ways in which we could help them. Let me finish by just summarizing the IRR story.
2016 has been a difficult year for this segment because of a set of factors. Nevertheless, we will deliver growth and margins around 20%. It has been difficult relative to higher aspirations we have for the segment. We are very confident about the quality of these franchises, the depth and range of capabilities we have, and our ability to grow. We will continue to build out reinsurance investment in the Miller businesses. These are great franchises with clear growth prospects. We are reinvigorating RCS, moving to that 50/50 split of consulting and software. We are excited about the growth opportunities in our MGA platforms and our packaging of risk for distribution. We are seeing momentum in cross-selling, and collaborative problem-solving between different parts of IRR. What does this all add up to?
Over the next few years, we see low single-digit revenue growth across the range of the portfolio and overall margins continuing to be above 20%, and we're excited about that future. That's enough on IRR. Now, let me introduce my good friend, and co-leader with me of Willis Towers Watson integration, Gene Wickes, to discuss our exchange solutions segment.
Thank you, Dominic. It's a real pleasure for me to be here. In fact, it's a somewhat unexpected pleasure that I can stand here. I know a number of you, and over the years, I led the benefits business for Watson Wyatt and then Towers Watson. At the merger, John asked me if I would take on the co-leader role of integration for Willis Towers Watson. You can look at me and know that that was probably a good glide path to doing something else when the integration was over. I went home and told my wife, "This is good for us. We'll be able to plan something different." Then my good friend Jim Foreman announced that he instead was going to take that retirement glide path, which was a surprise to me.
John called and said, "Gene, I have another role for you, a second role, because we're not going to change the integration role. You and Dominic are still going to co-lead. I'd like you to step in and take Jim's role." I went home and told my wife, I said, "John asked me if I would take on this role." She breathed a sigh of relief because she wasn't totally committed to my glide path to retirement. She says, "That makes a lot of sense that John asked you to take on this role." Make sure I can run the clicker here.
So that John asked you to take on the role." I was thinking, she's always boosting my ego and telling me that, "You did a really good job all those years running the business." She says, "See how large that retiree business is in the exchange? You look like a retiree, and they're going to relate to you." "When you go talk to clients and tell them the experience, they'll look and say, 'Well, tell us how your personal experience has been on the exchange.'" You know it's true, but it really confirmed it when John called me a few days later and said, "You know, Gene, we're in the employer business, but we could get into the individual Medicare business too.
I think you'd do really well on the Golf Channel." "You could become the Ed McMahon of exchange solutions." Most of you probably don't know who Ed McMahon is. John and I know Ed McMahon. We watched him, and the retirees all know. If you get bored one night and you turn on the Golf Channel and you see my face, we're growing this business different ways and away we go. I have the opportunity to talk about what I think is our most exciting business. I used to think the benefits business was the most exciting business. I now think exchange solutions is the most exciting business we have. I'm going to give you some flavor for what we're doing and where this business has gone and where it could go and the challenges we're facing with it.
When you look at the business, we really have four lines of business. John talked about the Extend acquisition, and his view on how powerful that's been for us in the retiree exchange. We have had and continue to have a tremendous outsourcing business. Our active exchanges are growing. We, with an acquisition of Acclaris last year, got into the consumer-directed accounts, but I want to talk about how we put all this together. If you look at exchanges per se, we've been in the business now for just the exchange, if I take the outsourcing out, 10 plus years. We have a lot of experience in this business. There's still a question as to where the market's going, but our business has matured and continuing to grow.
One of the things that we think we're sitting at a position now that's a tremendous position is we now own all the pieces to put a seamless offering together. As we got into the business, we were working with partners, we were doing different things, the Acclaris acquisition now gives us the ability to put the whole thing together on a seamless basis. The other thing which is a tremendous benefit to us is the health and benefits business that Julie talked about. We have lots of relationship with a lot of clients, and one of the things we're focused on now is tying the businesses closer together. When we acquired Extend, John said, "You know what? We paid a lot of money for this." Some of you weren't real favorable to us when we acquired it. Market didn't totally like it to begin with.
He said, "I'm going to put it out front and center." You might ask why we have a segment that's as small as Exchange Solutions, John said, "I want it sitting out there so people can judge and see what we're doing with this business." We kind of separated from our health and benefits colleagues, and one of the things we're working very hard to do is tie them back together. We don't have an exchange opportunity that there isn't a health and benefits consultant who's intimately involved, and one of the things that we called timeout on was arguing over who got the revenue. It was one of the things that we did is, well, we're Exchange Solutions. We get all the revenue.
The health and benefits consultant said, "Well, why would I sell it because I'm going to lose my client, lose the revenue?" Actually, over time, Roger's going to have to build a model to tell you how all the growth is gone, because I have a belief that if it's health and benefits revenue, it sits there. If it's administration, it sits here, and you'll need to figure out the model as to how we completely put it together. If we tie us all together, we will have a seamless offering that we really move into the market. From a financial profile, you can see how we've grown in 2013 with the acquisition of Extend and our outsourcing business, we had revenue of $276 million, just over $600 million. On the operating income, you can see the growth of the operating income.
One of the things that made me nervous about my job is early on, going to John or Roger and say, "Help, I need some money." They were saying, this is great, that a lot of you keep saying, when are the margins going to continue to improve? We're not running at the same margins as the rest of the business, and how do we get into the mid-20s? Can we be in the mid-20s? We've invested this year about $50 million, not for growth or scale of the business to go in, and I'll talk about in a few moments some of the challenges we've had, fixing some of the challenges we've had in the business as we've grown. If we took that $50 million and add to margin, which John or Roger were hoping we would do this year, we'd be pushing the mid-20s.
We still have some investment to do in this business to continue to grow, I want to talk about that in a moment. Exchanges in context, where are they going? Are they here to stay? That's some debate that continues to go. The retiree exchange, for sure. We're going to see more and more companies continue to move into the retiree exchange. It makes all the sense in the world, especially post 65. In the Medicare space, a company to run their own Medicare business doesn't make a lot of sense for a company to do it. The exchanges continue to grow, and that's where we see a lot of growth. You can see the evolution, and the exchanges actually follow the evolutions of HR.
How has HR changed from used to be the personnel director to the Vice President of Human Resources to the Chief Human Resource Officer to the Chief Employee Experience Officer? Focus was on cost, then the change to resource, then the change to employees were assets. We're really getting into the fact that employees add value, are valuable, and how do I give the employees different experience? We see exchanges moving along that continuum. As HR changes, we think the focus on exchanges will do the same. Where are we in our journey? We went all in in 2013. We acquired Extend. We then acquired Liazon. We took the pieces, we spent a lot of our capital and said, "We're all in on this exchange business." We took our outsourcing business, it's our health and welfare outsourcing business.
As Julie talked about outsourcing, our pension outsourcing, except for the systems build, really sit into in Julie's segment. We took our health and welfare outsourcing, put it in there, focused on where we were going, and in 2015, we acquired Acclaris, which was the last piece to give us the consumer-directed accounts. In our business on the Medicare side, employers will fund accounts. On the active exchange, they'll fund accounts, and we now have the ability to manage those accounts, which I'll talk about also. Our focus isn't where do we go acquire pieces, although I still find some things out there that I go and tell John I'm intrigued with this and that. He said, "Go be intrigued and get the business running." I go back, but I still periodically will go tell him I found some other things.
Our focus now is how do we make this a seamless business. One of the things when we acquired Extend and when we acquired Liazon, we said, you know what? They're entrepreneurs. They know how to build the business. They know how to run the business. We left them pretty much alone as we continued to build and grow using our distribution channel, but their operations, and we're changing that over time so that we have a seamless offering. We've got the scale now that we can become more efficient. Our real focus now is how do we tie these businesses together so that we're running at a seamless operation and seamless offering? We have and offer the full array of services, from seasonal employees to retirees, pre and post, to full-time employees. We can now offer these services to a company going through.
How large is the market? We, in the Medicare space, estimate in the private sector, there's about 6 million retirees who have company-funded accounts. The Medicare space is huge, but the space we've been focused on primarily is a company who has an offering of a retiree medical funding for the retirees. There's about 6 million in the private sector, about 6 million in the public sector. That private sector account is about 50%-60% penetrated. A lot of the large employers have gone into exchanges. There's still a fair number that still are moving, but there's a large piece of the private sector who have moved. On the public sector, we've just started seeing them move. We have four states who have moved into our exchange. We have another state who is talking, and we just got an announcement.
The League of California Cities just announced that they'd selected us. It's a conglomeration or an association that helps all the cities in California go to that. We're seeing the public sector actually starts moving. One of the things that you need to focus on is down on the bottom chart. There's 6 million early retirees. They're not 65 yet. That 6 million will move into the 6 million eligible for Medicare. The 50-year-olds, the 55-year-olds, and the 60-year-olds, which a lot of corporations have, will go in and replenish. That 6 million in the private sector actually gets replenished year to year to year. If we have a relationship with the client or the company, the cost to sell becomes very small because it's a natural place for them to go to it.
One of the things we're focused on is our relationships with those companies. Not just, "Gave us the retirees, see you later," but how do we continue that relationship so that it's natural that they continue to send their retirees our direction? The addressable market, I talked about what we're focused on right now, which is Legacy Towers Watson was focused on large companies. With Liazon, we got the capabilities to move into the mid-market. We didn't have a big distribution channel into the mid-market, though. The Liazon acquisition actually gave us capabilities, and then we'd look at each other and say, "Okay, we can go deliver to a 500 life client." And we'd all look and say, "But we don't know any 500 life clients. How do we deal with this?" I'll talk about the benefit we have in there now.
If you look at the Medicare space we're touching, if you look at other places, our addressable marketplace with more investment becomes huge, and that really is discussions we're starting to have now. We don't see this market saying, "Gene, you've about run out of the 6 million, where are you going to go?" We actually have an addressable market that could be much, much bigger than what we have. I remind Roger it'll take some money, so don't put pressure on me on the margins. He dismisses me and tells me to go away, but we'll need more investments as we continue to go into that. One of the reasons that we were so excited on the Towers Watson side for the Willis Towers Watson merger was the synergy that it gave us in this space.
We at Towers Watson had no distribution channel really into the mid-market. Well, I'll talk about it. We did with other brokers. We had channel partners, but we didn't have any direct access into this market. Willis has a tremendous, in the U.S., presence in the mid-market. If you look at this chart, they're the broker of records of several thousand companies. They do benefits work in several thousand more. The P&C space, they got 10,000 plus clients. Willis actually was one of our better channel partners, so they would bring clients to us on this basis.
I think what they would do is a client would say, "I need to think about this or that." I think a lot of the Willis brokers would say, "You might not be interested in that," or, "You might not be interested." When pressure came, "Okay, I have an offering for you." We now have the distribution channel to go in and on a seamless basis, open it up. What we're seeing in the active exchanges is companies below 10,000 lives is where a lot of the movement has occurred and continues to occur. The middle market access with the Liazon platform and the distribution channel of Willis, we think will really open things up. Where are we on the retiree exchange? You can see the retiree exchange, the growth that we've had.
If you look at new enrollments. Let me talk about why we invested the money. If you look at 2016, we enrolled 267,000 core retirees, but that is the core retiree. The retiree also has a spouse, which gives us another account. They also buy prescription drugs. They buy dental. They buy vision. That 267,000 enrollments almost brought us to our knees. It was a very big piece, and really it was not the challenge of the 267,000. If you look at the couple of years earlier, the 163 and the 162, we enrolled a couple of other very big clients. Our experience is we enroll you. You do not need to change the next year. You do not need to call us. It just continues. You stay with your plan. There is not a reason to call.
We had a couple of clients whose retirees, for whatever, whether it is the culture of the company, whatever it was, decided they needed to call too. At the same time we are enrolling these 267,000, we are getting calls from 162,000, then a call from 163,000, and it was a different experience than we had ever seen. Our systems got plugged, and we had wait times of half hour, 45 minutes, hours for the retirees. One of the things we committed to. I have actually visited, I think, all 600 clients we have in my role. That is actually what I have been doing the last six or eight months is going visiting every one of those clients and explaining the challenge. We have invested this time, this year, to make sure we do not have those challenges again for this annual enrollment.
One of the things we have in our model is, for five or six months, we need a lot of people. We need benefit advisors on the phone who actually are licensed brokers because they are selling products, and then we do not need them for six months because they sit, and we are not doing things with them for six months. We committed this time, we kept essentially 2,000 of those benefit advisors on our payroll so that when open enrollment comes this time, we do not have the hiring pressures, and we have more people than we need so that we can fill in these gaps. You might ask, is this $50 million going to be there forever? We also have a partner who takes care of the HSA and HRA accounts.
We turn the phone calls over to them, and as we, with Acclaris, tie this together, we will then use our own benefit advisors to take care of the accounts and the calls. We have things for them to do as we tie these businesses together. You can see just the tremendous growth that we have. This year, we have sold about 115,000 lives. It is less because it was also a conscious decision we made was to slow down the growth so that we would not have the issues that we had last year. On the outsourcing solutions, we have what I think is a tremendous outsourcing business. You can see the growth we have had in the outsourcing business the last five or six years, and this is the health and welfare outsourcing. You tie it together with Julie's pension, but the health and welfare outsourcing has just exploded also.
Challenges on our infrastructure and our system, which is where we're investing the money to come back and make the infrastructure and systems support continued growth. This is primarily active. Companies saying, "We need to enroll our employees on all of their benefit programs. How do we get them set up and do it?" You can again see it. One of the things we're seeing with exchanges is if you're doing the administration and you're doing the consulting, it's a natural for them to move to your exchange. It's one of the reasons that we're so pleased with the growth that we've had in the outsourcing business, because it gives us a natural movement towards the exchanges. From an active exchange standpoint, again, we think we've had a very good year. You can see the numbers, where we are.
The two columns that you see on the sold clients and the sold eligible lives, we sold 129,000 lives, and last year, 62,000 lives. You can add them to get closer to the number we're serving. We had a very good sales season. You can also see, after the merger with Willis, where we are on the synergies. Last year, legacy Willis sold about 9,000 lives in the exchange. Far this year, we're at 47,000 sold lives, and we think this will just continue because we're in our infancy of putting it together. One of the other things, which is another synergy I want to talk about for just a moment. This is a Willis synergy, but not quite the Willis synergy we thought. We had a client go to bid on an exchange.
Our legacy Towers Watson colleagues, 25,000 lives, came to us. We submitted a proposal, not someone we had a strong relationship with, and we were dismissed in the first round because we didn't have a relationship. In all this business, it turns out relationships are still the most critical thing. It's still difficult to differentiate ourselves from our competitor. We all say the same thing. John thinks because I'm a retiree that there will be a differentiation, that I can talk about experiences, but it's hard to differentiate, and we got dismissed in the first round. You know what? For this particular company, it turned out that their P&C broker was Willis, and the P&C broker went to the CFO and said, "HR dismissed us immediately because there was no relationship.
We have a relationship, and let me tell you about the exchange." The CFO got us reintroduced back, and finance got involved with the discussions with HR, and we won the 25,000 life client that if we hadn't have done the merger, we were dismissed first round because we, Towers Watson, didn't have much of a relationship with this company. We see potential for this. Remember the slide I showed you, the 10,000 P&C clients that Willis has. How do we introduce and go into there? We see again, the distribution channel there, tremendous. This isn't even mid-market. I call that a big client. We see the distribution channel great coming through. Again, you can see last year we had sold lives, just over 100. We're over 200,000 this year. Continues to grow.
The other thing is we have this third-party broker channel, which we've talked about. We're committed to this channel. This is a lot of our competitors who don't have these capabilities that we white label a product that they continue to sell. You can see that we've dropped from 35 to 22. We're working hard to maintain this. This broker channel thought it was great when Liazon was independent. They winced when Towers Watson got involved, but we weren't, in their mind, a direct competitor. Now Willis is a complete direct competitor. We've had some of the third-party brokers drop out of the channel. We've had a number where we continue to have discussions with them. We're committed to maintain independence in here.
You'll see names like Liazon and other things floating around instead of Willis Towers Watson, because I can't imagine one of these competitors going to their client and saying, "Oh, Willis Towers Watson is going to provide your services." We actually let them white label our exchange product under their name, and we still think that this will be a strong opportunity for us, but it's an area that we need to continue to work on. Consumer-directed accounts, this is the piece that ties it together. When a company has a retiree and they tell them, "I'm going to give you $2,000. I'm going to put it in an account. You can take the $2,000 and go buy," they come to us as the marketplace, and we can now administer and keep track of that $2,000.
One of the things that we just got was IRS approval, this was about three weeks ago, and we now have approval from the IRS to become a non-bank custodian. In the past, what we'd have to do was have a bank hold the money for us, and we now have the ability to be a non-bank custodian, which gives us seamless opportunities in here. We think this will tie all the pieces together. It's another place where, when I talk about the $50 million, we've been doing a lot of investing, is getting Acclaris systems tied in so that we can tie them in. Today or tomorrow, when a retiree calls in, our benefit advisor will be able to see their account, will be able to see their offerings, will be able to see all the pieces, and can take care of them seamlessly.
Today what happens is we say, "Okay, we're to this point here. Let me push an 800 number and you can go someplace else, and let me push it and you go someplace else." This is the area that we're focused and we continue to invest in. The other thing is this isn't just a U.S. offering. Julie talked about the global Benefits Marketplace and what we're doing with global brokerage, and she talked about Benefits Marketplace.
A couple of us woke up, my friend Cecil is sitting over here, woke up one day and said, "This Liazon platform, if we got someone to translate it into Spanish, or we got someone to translate it into Chinese, or we got someone to translate it into something else, this kind of technology could work many different places." As we got into the global brokerage business, a lot of the clients would say, "It's interesting. I don't need help with my brokerage. I need help with the administration of my programs." Sitting in Exchange Solutions is the technology that we're using for Benefits Marketplace. Julie and I are now very best friends. She owns part of the business. I own part of the business. She's a better negotiator than I am, so she probably gets the best piece of the revenue.
Again, my timeframe, I actually don't care. It isn't going to make any difference how much sand is in the sandbox. We can grow this, we now have a number of clients who are piloting, how do we do their administration? You can see most of this is on cell phones and the rest of it, how do we do this administration so that they can enroll in their benefit programs? We have exchange-like opportunities in a lot of the countries that will offer this insurance company or that one. Again, it's what I call the fifth service line here, is how do we take this now and go for our global clients so that we can give them the same experience that we can give them in the U.S. in any other country?
With the 140 countries we're in, you can see this is a very big initiative that we have going forward. Cecil, I don't know, you can ask him the question, how many clients we have on it now, but we have a number, we're moving into country by country by country as we go along. In the exchange space, we think it's great. In closing, the one thing I want you to know is we are completely committed to this business. I have colleagues ask me periodically about, "Gene, are we really in this space? Are we really going to go?" I remind them that we've spent somewhere between $800 million and $1 billion making acquisitions in this space. We're all in, aren't we, John? We're all in. We have a comprehensive package today.
Continued investments will make it much more seamless as we go tomorrow. I also have some colleagues who ask me, "What are we going to do tomorrow?" As my boys were growing up, one of my favorite cartoons they used to watch was Pinky and the Brain, when Pinky asked the Brain, "What are we going to do tonight, Brain?" His answer was, "Try to take over the world." That's what our goal is in Exchange Solutions, try to take over the world. With that, my good friend, Roger.
Thank you, Gene.
You're welcome.
I'm not sure how to follow Pinky and the Brain. By the way, what is Pinky and the Brain?
You're not old enough.
Not quite at that retiree level, right, Gene? I think you've heard a lot of great discussion about what we see in the business for clients and how we're managing Willis Towers Watson here in the early days, and some seeds have been planted already, particularly by John, on how we see that playing out financially. What I am looking to do is add more depth and focus to what you've heard already. I think broadly, this really isn't the flow of the slides necessarily, but I want to hit four main themes. First, go back to the merger goals. John did that a bit. I'll provide a little more depth. Again, talk about where we are relative to those goals. I'll talk about the current financial results and looking forward expectations. The agenda of this Analyst Day was really introducing Willis Towers Watson.
We're not providing specific guidance for 2017 and forward. Talking about how, again, we view the strategy of the merger manifesting itself going forward into the future. Again, following up on what John talked about. Emphasis on free cash flow. We've had a number of you in the room who have been asking us questions about free cash flow. Of course, the cleanup hitter here, capital allocation. There's been a lot of focus on that, a lot of questions. Tell you where we are there. Again, to step back to merger financial goals. Again, there's no news in the purple on the left. Hopefully pretty much everybody in the room knows what the goals were. Illustrative of the kind of transparency that we like to have about what we're going after, it was all laid out there.
We talked already. A couple of folks have talked about the organic growth pressures on revenue coming into this year. We're not meeting our goals for revenue growth. There are particular parts of the business that are providing some challenge. Really, we've talked about it on the earnings call, several kind of broad areas. Also, niche areas of the business. Again, in the Q&A, we could talk more about that. I think you've had some introduction from the segment leaders. Certainly, a key goal of the merger, although overall, as we all know, the merger had strategic objectives. A key goal was to enhance the profit margins of the company. Both firms came in with cost-related programs. Some mixed results about achieving margin growth relative to those objectives.
Clearly, with integration and the extension of those programs and adding on the cost synergies that we saw in the merger, there was a great opportunity to enhance the margins of the company. Big focus. As you've heard, we still see that as an achievable goal. We're building momentum in that direction. One of the specific levers, of course, was $100 million-$125 million of merger cost synergies, rationalizing basically overlapping parts of the two companies. We're well on track with that. I'll give a little more depth on that in a couple pages. On the revenue side, we defined a range, $375 million-$675 million of revenue synergies. Again, you've heard good discussion about where we are broadly on those things.
At this point in time, given the delay in the excise tax under the Affordable Care Act, the range that we had defined for exchanges, for exchange solutions, of $100 million of revenue to $400 million, we see ourselves at this point really probably most realistically focused on achieving the lower half of that range, so $100 million-$250 million. Again, just giving effect to what the expected ramp-up is at this point of the active exchange business based on the delay of the Affordable Care Act excise tax. Finally, putting all this in the mix and putting it in the terms of EPS, which again, John gave you a good introduction for, we targeted exceeding $10 of adjusted EPS by 2018. As John's message said, we see achieving that with reasonable assumptions. Okay. What did I just do? Okay.
One of the questions again that we frequently get from investors is, well, some of the things you're talking about doing, you may not be able to see a track record in the legacy companies of achieving this. What's going to be different here, particularly in the area of the operational improvement program, OIP, that you've heard Tim talk quite a bit about, and Tim really talked quite clearly about what's going to be different. In order to achieve particularly the margin goal, what is going to be different, how are you going to operate? Some of this is motherhood and apple pie, but I think in this case, actually, motherhood and apple pie is quite powerful. I'm the financial discipline guy. Great term. What does it mean? I think you've heard others this morning talk about that.
I think it's very much about profit margin focus and commitment, which you've heard each of the segment leaders talk about. I think it's very much about process. I think it's very much about the metrics that you use. I think that particularly in the early days here of a large integration, we needed to come in with some very clear, consistent measures for what we're trying to achieve. When you saw us come out of the box in the early days, we immediately were talking about the adjusted EBITDA margin goal. You saw us talk about the operating margin goals for the segments. Again, both legacy companies hadn't done that.
We got ourselves aligned actually before the merger closed on what measures we were going to talk about in the market and manage to, and then how we were going to manage ourselves internally against those goals. That drives ownership. It drives alignment. As we've gone through our monthly and quarterly processes, and you've heard some discussion about this in the earnings calls, those are the measures that we're focused on, and we've ensured that we're aligned, as you're hearing today, around achieving those goals. I think at the end of the day, again, another thing I've said to some investors, which people kind of look at me like I'm a little crazy. I think at the end of the day, there's a lot of complicated, hard work here. On the financial side, it's actually not that complicated, right?
I think it's very much about alignment and commitment. We're not asking the team and the company to change the world. It's about achieving some very achievable things within the business, drive forward with real commitment against our goals. That's what we're doing. As we do that, we're going to enhance value for clients and for shareholders. Not going to drill this page too much, just to reiterate our annual guidance, compare it to the six months of results, reflect a little bit more on the organic revenue growth story. There are parts of the business Tim talked about, the international brokerage business, where the growth rate significantly declined coming into this year. Dominic talked a bit about some of the businesses in IRR. We've talked this year about the talent rewards business coming in softer.
There are several areas that have led to the downgrade in the organic growth outlook. You might look at this and say, "Well, you got 2% in the first half. Why are you confident about 2% to 3% for the year?" There are identifiable parts of the business, whether it's a particular team hire in Europe on the brokerage business, whether it's the ramp-up that we see through pipeline in the data services business, whether it's some of the comparables and the activity that we see in IRR that turns favorable in the second half. There are levers that we're very focused on to achieving enhanced growth. Again, not at the level we aspire to coming in, enhanced growth in the second half. I just mentioned on the margin goals, you can see the full year is lower than the first half.
We are a business that has higher margins seasonally in the first half of the year. This track, we think, is appropriate, again, considering the seasonality. Given the business pressures, not the kind of momentum that we hoped for at this point, good achievement and clear, again, as Tim mentioned, clear indications in parts of the business such as GB and North America in the brokerage business, where we are seeing margin enhancement from the operational improvement program. They're furthest along. As other parts of the business catch up, we'll be driving margin enhancement there as well towards our goal. Cost synergies, $30 million run rate as we exit, we think on revenue synergies about $25 million as we exit. Important to note on the revenue synergies, we've talked about a number of wins today. Of course, those are wins.
In some cases that I think some folks have noted, the business hasn't been done yet. The business is committed, you don't get the revenue lift as immediately on the revenue side as you get it on the cost side. The first thing you're looking for is success in the marketplace, we're seeing that across all the revenue synergies. Clearly 2017 and 2018 are more dramatic ramp-up years for revenue synergies. A little bit more, given that, again, this has been a real topic of interest on the current momentum and the go-forward momentum around EBITDA margin enhancement. There are a number of pieces, this is obviously a simplified slide, I think it illustrates the key themes. We are achieving OIP savings. I think Tim talked about that very clearly.
We are systemically and programmatically changing the nature of business processes in the company and as a result of that, reducing cost. We think relative to margin, that provides this year the opportunity to enhance margin by 90 basis points and the integration savings another 20 basis points. We had the opportunity actually coming in to have over a point of EBITDA margin enhancement this year. We haven't achieved that. There are really, I think, two big drivers of that, and at the end of the day, I would suggest that we probably shouldn't distinguish going forward between the two drivers. One is the business headwinds. Again, Tim talked about the international growth headwind. Clearly created some off-balance dynamics within the international brokerage business with a plan for cost growth was at a higher level due to prior year organic growth success.
With lower organic growth success, of course, you lag in pulling the cost back, and that's what we're doing now. Also in other parts of the business, Julie talked a bit about some of the actions that she's taken in HCB relative to the softness there. Again, reacting to the environment we came into the year with, but there are business headwinds that are bringing margin down really across all the segments except for Exchange Solutions. The other piece is what has been called in legacy Willis reinvestments. I think Dominic made the point actually that a lot of the activities that were put in place and I think might have broadly been understood in the market as reinvestments, really weren't specifically related to the OIP program itself.
They were investments that were identified that were needed to either enhance the overall efficiency of the enterprise or to seed growth areas of the business. Again, not necessarily related, but OIP was providing some cost reduction cover to put in some investments. That's probably, I look pretty closely at the OIP-related reinvestments. It's probably $40 million to $50 million this year. It's spread around the world. It's spread around the businesses that legacy Willis had. But again, they're very operational in nature. There's not one or two large things you can look at.
As I've dealt with it this year, I've started to just step back and say, look, we just need to look at the margins of the segments. We need to talk about the investments that we're seeing that were viable, and challenge ourselves as to whether they're worth continuing to invest in going forward. We have pulled back as we've reforecast this year and rebalanced ourselves, we'll continue to do that. Again, my suggestion here is, going forward, probably reinvestments is not that useful a term for us to use. Finally, I think, again, as you think about what those investments were, I just wanted to note, I say here 60% of them were front-end associates. Probably that's a little low. It probably actually, in reviewing the last couple of days, it was probably more like 70% or 75%.
The rest in some systemic capabilities. Tim mentioned some of the analytics capabilities that are being built. That is an area, and perhaps actually deserves more of that term reinvestment, as cost is taken out of the mid-office reinvestment to enhance analytics. That's really been the picture going forward. We are committed to driving the margin goal, to balancing investments, whether they're the continuation of investments that had been made, or new investments that come up. Through the OIP savings in 2017, that will accrue continuing margin benefit in 2018, and the integration savings, and the actions in the businesses, we will achieve our 25% margin goal. A little bit more on OIP. You've heard quite a bit about it.
I do want to emphasize the points that first, we're on track to achieve the goal of having a run rate at the end of 2017 of $325 million of savings over the life of the program. We will end this program in 2017 on time. Again, these benefits are key to reaching our margin goal. You can see the items noted here in the second bullet where you see those impacts in the business. It's primarily headcount-related salary and benefit-related areas that are impacted, 1,800 roles roughly that have been moved to lower-cost locations to execution in lower-cost locations. There's incredible discipline around this program, very programmatic in its execution, and good visibility to the savings around the world.
In addition to the headcount-related savings and the salary and benefit-related savings, we're driving real estate savings and accessing through OIP, which is also being enhanced in integration, opportunities to run our overall global technology at a lower cost base. How do we see the savings going forward? We acknowledge that you can find limited benefit in the legacy financials to drive value out of the OIP program. Again, I'll say that Tim talked quite directly about that. Going forward, we anticipated very limited reinvestments in the business. Those will be tightly controlled and prioritized very importantly against both existing costs as well as our margin commitment. That's a big part of when I say that financial discipline has to be a theme for us to achieve our goals. That's a big part of it.
It's really not just seeding areas in the company where we see growth potential, but where we see them and we're convinced about them, looking at the full business and balancing that against the overall performance of the business. As I think a lot of you have seen, the compensation of the operating committee, which is the leaders of the business and the corporate leaders of the company, our compensation, both from a bonus perspective as well as from a long-term perspective, are aligned with achieving these benefits. Just a little more context here. I think, again, the $100 million-$125 million of integration savings was a well-known target. We're on track. A little more context on where we see getting those benefits with some ranges here.
Again, not a lot of overlap in the business, principally corporate capability-driven synergies, whether it is overlap and driving efficiency out of integration. Real estate is certainly a big area, both the overlap of real estate, in the new real estate solution, having a much more efficient platform, of course, technology. Some of the key levers here are noted really with the purpose of giving you a sense of the timing. There is low-hanging fruit in this kind of situation. The reason broadly that we have a run rate at the end of this year is there are a lot of duplicate positions. As we set the organization, that gets rationalized.
In a lot of the areas like real estate, like procurement, like hardware to support the technology delivery in the company, as well as specifically finance and HR, ERP-driven software, and related processes, those are projects and programs that take time. All of those areas are under execution now, and that will continue in phases generally as we go through to 2018. The estimated cost to achieve for integration, about $150 million-$175 million this year, and about $100 million each of the next two years. Now, away from earnings, which we have had a lot of discussion about, into what we think this turns into in free cash flow.
Thinking about the goal of being above $10 per share in adjusted EPS in 2018, we have, based on looking at where we are currently from a free cash flow generation point of view, relative to adjusted EPS or adjusted net income. Currently, we are expecting about $650 million of free cash this year. It is about 10% up from last year, which if you looked at adjusted net income, that free cash level is quite a bit below adjusted net income. What drives that, it is really the integration and the restructuring costs, the OIP-related restructuring costs. If you add back that over $300 million, you get very close to adjusted net income, and that is the level that we expect to be at coming out of integration.
The $10 or so, or in excess of $10 of EPS, translates to about $1.3 billion or $1.4 billion of free cash flow. That is what we expect to generate. The levers are the levers we have been talking about, whether it is meeting the financial goals, including tax synergies, getting out from under the one-time related costs of restructuring the company and integrating the company, continuing the capital expenditure discipline. Both companies roughly were in that range of 2%-3% of revenues of CapEx, and that is what we expect to continue. Continuing or enhancing working capital discipline. The two businesses are quite different from a working capital management point of view. There is not as big an opportunity, I do not think, in the legacy Willis brokerage business because of the captive nature of commissions that are paid and that process integration with clients and with insurers.
We're looking hard at working capital, and we want to be as efficient as possible and hope to drive some improvement there. Finally, on the pension side, we expect about $150 million to $200 million of pension contributions this year. As we look forward, assuming a steady state, that would be about the rate for the next couple of years. What does that all turn into when you think about free cash generation, the capital that we'll have available, how we expect to manage the balance sheet, and then how will we allocate that capital, and how do we expect to manage ourselves going forward? First, the dividend is set. I think John talked about that a bit. We are committed to the 25% payout ratio, which implies that the dividend would gradually grow as adjusted net income grows.
I will note that this year, because of the merger, we will have three dividend payments. Of course, now getting into next year with a full year, we'll have four payments. On the share repurchase side, as we got into the year and we evaluated where we were from a leverage point of view and from a free cash generation point of view, we thought we had a few hundred million dollars of available capital. We considered what we might do from an acquisition point of view. As Gene said, we do get knocks on the door. As we evaluated it, as we said, starting 15 months ago, we did not expect to do significant acquisitions this year, and we have not. We've deployed available capital to share repurchases and forecasting $300 million of share repurchases this year.
We are now, as part of the financial discipline process, we've started our budget process, talking about 2017, where we expect to be on the trend to meeting our merger goals in 2017. As we talk with the board about that, we'll be talking about capital allocation for 2017, and again, where we see the balance between repurchases and M&A activity. That's all in the context of how we manage debt on the balance sheet. I know this is an area that's created some discussion this year, and may be fair to say in some quarters, at least, confusion. One of the first things that we did as a merged company from a financial point of view is confirm that we were going to manage the company to really the legacy Willis approach to ratings, and that's a low investment grade rating.
We think that's appropriate for the company. That's really defined by the Moody's ratio. We're rated one step below S&P by Moody's. They have a calculation for leverage, and I'll talk a bit more about this on the next page, but they have a calculation that's different than the balance sheet calculation. On a Moody's basis, our threshold is 3.5 times. Finally, on cash on the balance sheet, we will be seasonal. We'll pay incentive comp about probably $700 or $800 million in the first quarter. We'll build cash in the second, third, and fourth quarters. Then we do have statutory capital requirements, captive insurance company capital requirements, and working capital requirements around the world. Which means that as you look at our balance sheet now, there's not a lot of available cash for other deployment otherwise.
Really the point on this slide is simply that the difference between the Moody's calculation of leverage today versus what you see on the balance sheet, which is about 1.5 turns of leverage. That calculation, which does not give, call it adjusted earnings credit for restructuring costs and integration costs, that gap is elevated at the moment, again, as we go through integration. You see 2.5 times roughly on the balance sheet, four times roughly from a Moody's point of view. As we come out of integration, that gap will narrow to about one turn, we expect. Our flexibility going forward as we kind of land the company at that level, our flexibility going forward will be enhanced.
Also as we grow earnings and we have success against all of the targets that we put out there, our debt capacity will grow. Finally, and these are takeaways for all that you've heard this morning. I hope you've gotten the message that based on the first nine months of our operations here, we see not only success about all the things that we took on in the merger, but our visibility to what we need to do and our enthusiasm within the company about chasing or executing against all those areas of potential value creation for clients and shareholders. We feel really good about where we are, and as John said, we're on track. We're working with a company that has great assets. Our brand is very well-recognized.
That's a part of why the win rate, as Tim talked about it, is higher than it has been before. We have great relationships with clients to leverage, a very stable underlying business that has a strong financial history, both in cash generation, but earnings increase in generation. We have the leadership that knows its business and is committed to the goals that we have to realize, again, the shareholder value targets that we've focused on. Again, John said it, shareholder value creation is top of the list here in doing this merger, and we feel good about where we are. With that, I think we're moving on to questions. I think John is coming up. We have two microphones that will be passed around, and we'll open it up.
Yeah, Greg?
Okay. Gregory Peters with Raymond James. You've laid out your vision and your operating targets, and when you consider the range of outcomes to get to your $10.10 minimum EPS, where are some of the areas where there's some downside risk in terms of the range of the outcomes?
Yeah. I think, if you think about what we have there, with the revenue growth rate, we had the EBITDA margin, we have the tax rate, we have the share repurchases. If you think about each of those, the revenue range we had in there is 2.5%-4.5%. We think that we have the downside already incorporated in that rate. Even this first half year, where we think we're running well below what we should, we're at 2%. We don't think there's really a lot of downside in that range we had there. The tax rate, we're already there, we got that taken care of. The 25% EBITDA margin, you sort of saw that's what we went through today. I think we have our arms around how to get there.
We think we have a plan to get there, of course we're not there yet. To that extent, there is some potential downside there. I think the share repurchase, we initially actually had, I think, share repurchase between two and eight million shares or something there, we were saying we could do these things, a lot of people interpreted it as saying if the revenue grew, we would only purchase fewer shares. We changed that around. We didn't want to give that message. Frankly, we feel pretty good about the ability to buy back the kind of share level we have there. Although, if it shoots up to $200 a share tomorrow, we'll have a problem. Assuming that's not the case, we think we can get to that.
Perfect. Just on the legacy OIP program, can you walk us through just some of the reinvestments that have happened that I assume they're going to come up for anniversaries, you won't be making those reinvestments. Can you give some additional color around that?
Do you want to talk about that?
Yeah. Maybe I'll start there. Where did Tim go? There's Tim. He moved up. Maybe Tim can add some more color too, or Dominic. Look, as you look at, as I said, when you look over time, of course, the reinvestments really started, quote unquote, "reinvestments," started, I guess, in 2014, really. It is a mixture of growth-related things that I would say might relate to planting in individual countries or in individual capabilities within the brokerage business around the world, additional resources. As I said, there's not one big program you can look at. It was where are there opportunities for us to grow, either in terms of momentum, Tim talked about the countries around the world and international, where growth was seen, adding resources to drive continuing growth at the levels of towards double digits.
Some of those capabilities, Dominic referred to the managing general agent activities. Some of those capabilities were more strategic, looking at parts of the business that were quite mature, where there were shifts in the market, investing to take advantage of, some offense relative to those shifts in the market. Those activities, I think, in general, probably were some of the more material areas. Again, not $20 million a year, some of the larger dollars versus putting another three people in a high-growing country in the world.
I think the fair thing to say is this, we actually don't have a lot that are going to be coming up for renewal on that. We made investments in building this capability or that capability to go after particular revenue growth in areas. When we're looking at those, it's not going to be because we decided to invest in that, now that's coming up for renewal. We might be looking at things as an assessment of how the business is performing overall and how we want to get. Tim talked about improving the profit margins, things we might do there. There's not specific programs that we're looking at like that.
Just to add to that point, that's why I suggest we move on from the discussion of reinvestments. It really is-
Yeah
more about discipline of managing the businesses that we have today.
Okay.
Elyse Greenspan with Wells Fargo. I have a follow question to that. As you guys have laid out your plan, you expect to pick up on organic growth in the second half of the year and in 2017 and 2018. However, you just said you kind of want to walk away from this topic of reinvestment, but reinvestments have, as you said, helped drive growth in the past. What makes you confident that you can see the growth targets that you have without having to reinvest in the business going forward?
Yeah.
I can start with a couple of things.
Yeah, go ahead.
Then you can clean it up.
Correct.
For one, I didn't really say that the reinvestment areas were driving growth.
Right.
I said they were targeted to areas with the intention of driving growth, right? Internationally, as we've talked about, the growth rate has stepped down quite a bit. I think some of the pullback will be because we haven't seen the growth that we hoped to, right? I think there are a couple of terms that I think John and I both really like that really inform this discussion. First is, don't add cost ahead of revenue, right? It's not a speculative activity. I think that's a mindset we'll use going forward. Also when you heard discussion from the segment leaders about profitable growth. That mentality throughout the company, I think, is one of the most important aligning things that we have relative to investments.
Yeah. I guess, just to follow up a little bit on that. Roger talked about prioritizing our investments, I think what we really are focused on by that is we think there will be some investments that we can make that will yield some high growth, it will drive some of our top-line growth right away. We want to focus on just them and not get down to the next layer, we think maybe in the past, we got too much down to the next layer.
Okay, two questions on the margin goal. You guys did take down the exchange revenue outlook a little bit but left that 25% EBITDA margin goal. Is that by function? I guess the exchange business does run at lower margins than some of the other businesses. Is that how you kind of see lower exchange synergies and still the 25% goal? A second question on the margin front, is the expectation that it will be linear? If we end the year in between 22%-23%, do you think you'll get close to the 24% next year and then 25%? How do you kind of think about the drag from where we end 2016 to the end of 2018?
Yeah. Okay. I'll take the first part, then I'll let Roger deal with the linearity or non-linearity of the development. When we think about the exchanges By the way, the message we have here is really consistent with, I think, what we were saying at the end of last year, was after we'd come out with some of our projections of revenue synergies and everything. It was sometime around this time when there was the delay in the Cadillac Tax and the ACA, we said to folks, "We don't think this is going to change the enrollment activity, say, 10 years from now.
In the long run, we don't think this has any impact on how exchanges develop, but it will slow things up in the next couple of years. When Roger's saying we're going to be in the lower half of that's just recognizing what we were already saying, that was going to be slowing up there. I think as we're looking at exchanges, we expect to see some slight improvement in the margins over the years. Gene's committed to that, or he'll retire. I think there's not a lot of distinction between those as to where we see the business being in the overall. That's a marginal difference, I think.
Okay. Just on the linear margin, the margin expansion from 2016 to 2018, just overall for the overall company?
For the overall company, right.
Look, we're not giving guidance for 2017 at this point, but I'll say the mentality that we've gone into our budget discussions with is that we will show meaningful progress in 2017. Yeah. Well, why don't we go through this row and then we'll turn to here.
Thank you so much. Kai Pan with Morgan Stanley. Two questions. One is on the revenue synergy. If you bake in the full like $375-$675, that's probably about anywhere between 5%-8% of the revenue growth. Is that pretty much your organic growth forecast for the next few year, or these are additional to whatever underlying base is going to grow?
Yeah. The synergies are meant to be additional. I will remind you as you look at those growth rates, that the revenue synergies are the target to exit 2018, right? If you're looking at kind of growth rates, it's really out to 2019.
Okay. The second question, just to clarify net share reduction up to $8 million. At today's price, this is probably a little bit over a billion dollars. Is that the maximum you plan to buy back or given your free cash flow is going to grow?
Well.
That's a solving equation just by buying up to eight, you get a 10.10.
The danger with putting any number out there to illustrate something is you get asked is it the minimum or the maximum or whatever. It was an illustration of, if you think about that, we're talking about 8 million as the reduction in the share count for FY 2018 for EPS purposes. It's not what we would be buying through the end of 2018. It's what we would buying to reduce the share count by that amount during 2018 for EPS purposes. If you think about the free cash flow that Roger showed there, and you're talking about $1 billion of share repurchase, that's pretty close to what that maximum is there.
Thank you very much.
Yeah.
Hi. Thank you. Could you talk a little bit more about the $50 million of investment in exchanges that were kind of weighing on the margin? Usually I would expect if you have a lot lower enrollment going into the next year, you should have a pretty big bump in those margins, just because the investment is not going to be the same. Is that recurring, and what's incremental that we should be expecting going forward?
Yeah. I'll say two things. I'll see if Gene wants to fill in some more color on this. When you think about that $50 million, we were accomplishing. Actually, not two things. We were really accomplishing three things. One is we were doing some investment in our basic exchange capabilities anyway. We've been saying to the market for a long time that we see being investing in this every year now for the foreseeable future as this ramps up. We had to really increase for the early retiree group. We found that that's an area that we think we really need to deliver. We need to be more efficient at the way we deliver there. That was what we got a big wave of last year, and we felt was slowing ours down and causing us problems with the wait times.
We definitely had to do that. Finally, we're investing in Acclaris, which is another one of these future investments to make sure that we can take advantage of that burgeoning HSA market. We're accomplishing a couple things. One is to address what we think are some longer wait times and slower processing that we've had in the past. We'll get over that pretty quickly. We think things will be fine for this year. We are really investing for the future in some of the others.
The other one, as I mentioned, one of the things that surprised us last year, how many of the enrollments for prior years kept calling. Oh, okay. How many of the enrollments for prior years called in? When you look and say, "Well, you're not going to enroll as many this year, so you won't have to have the staffing," we have the staffing comparable to what we had before so that we're prepared if, of those 267,000 from last year, we still get lots of calls. We're working hard on communication so that they know they don't need to call, but last year we got an unbelievable number of phone calls that we're prepared for.
Right.
What we hope is we get systems in place and get the retirees to use them so there's more self-service, but we're prepared. We didn't cut the staffing back this year. That's part of the investment. We hope next year we won't have to have that level of staffing to take care of it.
Some of those we believe are idiosyncratic, though.
Correct.
Naturally though, there is a certain level that was stepped up, and then don't expect it to step up that same way next year with increased enrollment, so there should be a lever, kind of leverage over there.
Yeah.
Yeah.
We do see improved margins. Yeah.
Okay. Just the revenue synergies that you talked initially on the insurance side. The only commentary you guys made is kind of what you're thinking about on the exchange side. Just given what you've seen after nine months of being together, is there any commentary just to how things have progressed in the insurance that you want to make any commentary over there?
The problem with these things and slow on giving a lot of color on this is that it's a long-run play. Let's take the large company P&C market. We said we want to get to $200 million of extra revenue by the end of 2018. If we start thinking about what does that mean for the first year, we're talking about maybe $10 million. You're really building on these relationships. It's the build in the first couple of years, and then you're getting the advantage out of them on the end. If I say that we're at $7 million at the end of August instead of $6, we may be 16% ahead of where we were, but it's not really that meaningful a number.
Thank you.
Why don't we take some in here?
Thanks for all the color. Can you talk about the guidance range just on the upside? 10.10-11.50 guidance range. Would achieving the 11.50 mean that you'd sort of be above the 25% EBITDA margin? Do you have to hit the high end of the revenue synergies? What has to break right to sort of see that kind of potential?
I think if we hit the high end of our revenue growth, we buy back about 8 million shares, and we hit the earnings target, then I think we're up above $11.50, probably closer to $12.
Okay. Great.
Can we all hold it to one question for each person and sort of go through? I want to make sure everybody gets a chance. Sorry. We'll come back, Kiff.
Sure. I guess the question probably is for Tim, but you guys can take a stab at it. One of the issues in CRB from a revenue standpoint was some of the distraction that occurred during the first year of a merger. The question I have is, should that be over by now, or will that filter into the next year?
It should be over. Let's see what Tim says.
It should be over.
Hi, it's James Naklicki with Citi. My question is on the free cash flow build from 2016, $650 million this year, $1.3 billion-$1.4 billion it looks like in 2018. Obviously net income is a component of that. What are the other components to get you to $1.3 or $1.4?
Well, anyway, go ahead.
Yeah, it was exciting.
Exciting. Yeah, really 2019.
The big components again are getting out from under the restructuring costs related to OIP and the integration costs. They'll go down a bit next year. I noted the decrease in integration costs, not that big a change in the OIP costs. The OIP costs sunset, they go away in 2018. You'll see that gradually those go down, gradually earnings go up, and those are the levers.
Mark?
Mark Marcon, Robert W. Baird. John, Roger, you obviously have a ton of experience in terms of bringing mergers together, different cultures, et cetera. What are you doing on this particular occasion in terms of monitoring the levels of engagement, retention, et cetera, across the globe with so many disparate business units? How are you tracking that, and what are you seeing? Retention, at least the popular conversation, is that it was a bit of an issue on the legacy Willis side. Should we see that improve relatively soon? As you said earlier, it's a three-year process, we're going to work through it, but it'll take a while.
Let me deal with the end of that, the attrition issue, and then really we're managing a lot of this issue around engagement and everything. It's the whole operating committee that is focused on it, but the leaders are really Dominic and Gene, and so I'll just turn to them in a second to maybe make a comment about that. The attrition, so we have two businesses that have very different attrition profiles. The legacy Towers Watson had a much lower attrition rate than legacy Willis did just because they're in different businesses, and that's the way that works. When we brought the two organizations together, I was expecting that we would end up seeing attrition in the rate of 12%-15%.
I actually thought we'd see a few high-profile folks leave in the first 6 months, or the last 6 months of 2015, from announcement to when we consummated the merger, and then I thought we'd probably see a few folks leave this year. In fact, we didn't lose any high-profile folks last year during that 6-month period. This year we've lost one. We've hired a few ourselves. Our overall turnover rate is running about 10%. You can compile a list of folks who've left because 10% of 39,000 still gives you a lot of people. But actually, our overall turnover statistics don't suggest any real problem, and we had one high-profile guy leave in the U.K., but I think that was it. Overall, I'm not too worried about that.
We want to make sure that we have an organization that. One of the earlier slides talked about us being a magnet for talent in the industry, and we. We want to build that reputation. I feel like we're on the way towards doing that. Whenever there's a merger, of course, or any kind of a big change, there's always some folks that don't like the new deal that you've had. So it's right and proper for them to leave and to move. We've seen a little bit of that, but again, when you look at the overall numbers, it's not a problem at all so far. On integration, Dominic, you want?
On your general point, obviously we track this closely, right, as you'd expect business by business and also look across geographies to understand what's going on. John has told you the broad numbers, right? As expected, we have lost a few people who said, "Actually, this isn't the place I want to be. Nothing against you, but I want to operate in a simpler environment," whatever. But critically, what we're not seeing is revenue producers departing in numbers which are unusual, right? So, we feel pretty good about it. But I assure you, for all the reasons you would expect, the integration office tracks this very closely.
Why don't we do one here, and then we'll.
Jay Gelb from Barclays. This might be a question more for Gene. I'd be interested in the middle market active exchange. Mercer's offering in the health exchange seems to line up most closely with Willis' from a competitive standpoint. Could you talk about that? Is the market just so big that there's plenty of room for both of you?
Yeah. Gene, do you want to?
Yeah. Mercer's does line up well with what we have. If you think, we were really excited. I showed you the numbers on Willis, the potential they give us and the distribution channel they give us, and Willis probably has a 4% or 5% market share. There is more business that Willis could bring in that right now we have the capabilities of dealing with. It is really just how expansive that middle market is and how big it is. A lot of the clients we're getting aren't even in a competitive situation. A lot of what Mercer's getting isn't in a competitive situation. We're both thriving. I think that's a key part of it, is just the absolute size of the market.
I would just add that as we were thinking about the merger, one of the things that was attractive to the Towers Watson side was the ability to access the Willis middle market, and in fact, the model we had in mind was the way Marsh and Mercer were accessing the middle market. We thought they had done a particularly good job of that. Why don't we do this one here and then we'll
Hi. Yeah, Brian Meredith, UBS. Just one clarification in my question. Roger, I think you said that in the 2.5%-4.5%, that does not include the revenue synergies or does it include the revenue synergies? The slide seems to indicate it does.
Yeah, that anticipated revenues.
I just wanted to clarify that. Okay.
Maybe I misinterpreted the earlier questions, we do view revenue synergies as incremental to what the base business is doing, and they're included in that range.
Okay, good. I guess my second question for John. Having followed insurance brokers for a long time, I've always heard revenue synergies, cross-sell opportunities, and stuff, and it's never seemed to work. What's different here? Why can you achieve it, cross-sell here, vis-a-vis Marsh McLennan, Aon, all these other ones that have said they could do it?
Yeah. Well, you've just been misinformed. I think, let me talk a little bit, and I've talked with some folks about this to prepare for this. When we came to do the revenue synergy I have a similar approach to what you just articulated. Revenue synergies are always things that sound great, but are actually hard to achieve. You have some real doubts about them. One of the things I didn't want to do was put out revenue synergies there that were the normal sort of unrealistic things that you had. When we looked at the revenue synergies, we applied two principles. One was to say, we wanted to make sure that when we were asking people to do things, we were getting revenue synergies from people that were pretty much doing things they were already doing.
For example, if I had a revenue synergy that said, I'm going to be asking retirement actuaries to help sell large company P&C brokerage, that's just not worth the paper it's written on. I'm an actuary by background, and they're just wonderful people, but they're not the best salesmen in the world, right? We know that that's not going to happen. The second one was, we wanted to make sure we had reasonable ones. Let me use large company P&C, but we did this in all the revenue synergies. First of all, what we said was the way Willis has about 3.5% in North America of the large company P&C market. Towers Watson has relationships with about 85% of the large companies in the U.S.
We said we can leverage off those relationships to help get us in front of the decision makers. It will give us a bit of a leg up. Just a simple matter of one of the things that often happens is, if you don't have a relationship with a client before an RFP comes out, the best you can do is finish second. If we can leverage off the Towers Watson relationship, maybe proposals that Willis would've had that would've been sufficient to win except they were missing a relationship, now all of a sudden they're in a position where they can win on those. The way Towers Watson managed its relationships with these large companies was through account managers, and they were responsible.
They weren't subject matter experts necessarily, but what they were responsible for was understanding the client, understanding their business, and introducing the subject matter experts. Now that we bring in the large company P&C, they have to introduce yet another subject matter expert. It's not fundamentally different than the job they were already doing. The subject matter is different, but the job itself is not fundamentally different. We had that principle. The second principle was we looked at it and we said, if I look at the large company P&C market we have in the U.K., it's in between 15%-20% market share. We didn't say we're going to try to get up to that. We said we're going to grow from 3.5%-5.5%, so we're going to add 2%. We had realistic goals there.
Now, it doesn't mean that we're going to have to work hard to get these revenue synergies, but we tried very hard to put out things that we think are achievable.
Michael Nittoli, Goldman Sachs. I guess one question maybe I'll start with Roger on the margins, and the OIP savings. I'm sorry to keep going back to this, but can you just reiterate what has been the capture of OIP savings so far? Of total savings, what percentage has fallen to the bottom line so far?
Look, one, I think we really don't want to relitigate the past few years and what's been said, you really can't find any margin progress in the company. We gave the numbers of savings driven by the discrete program itself, right?
It's about, what is it, $230 million or so to date expected this year. That's again, tracked very disciplined. People have come out. There's both elimination of positions as well as labor arbitrage, particularly with India. Those costs have come out. The net benefit, you don't see it in margin. Because I think of a lot of things going on, it's not just reinvestment.
So I guess my-
Can we move on. I did want to keep it to one question, right? We can follow up more at lunch or so.
Sure.
Thanks. Back to revenue growth, if you could. You described at the beginning a change in incentive compensation geared more towards operational profitability and margin expansion. Does that represent a de-emphasis of revenue growth, and if so, could you reconcile your scenarios which envision higher revenue growth than we currently have, John?
Yeah. It does. I think that's what I was trying to say, that the most important thing for us is the stagnant profitability. We got to adjust the stagnant profitability. Once we get that fixed, then we're going to focus on making sure we grow from that base. The last thing I want is to be growing revenue that's not adding profit at the margin. We got to fix the stagnant profitability issue first. That doesn't mean that the split that we have here will be the same for next year or the year after, but that's the important thing we got to do at the moment. Yeah. Go ahead, Tim, you can shout.
I guess somewhat following up on this, I know you're focused on getting to what you're saying for 2018, but given the incentives you're putting in place around focusing on margins now, how do you think about what the business is, kind of the efficiency at which it's at 25% and are you basically peaking out the business from a profitability perspective at that point?
That's an interesting question because when we look at it as a matter of theory, we look at different levers we could pull, and we can get up a good bit above that. If we did, we would be well above what our competitors are. I'm reluctant to think that we can get there. I think you may remember our history at Towers Watson when we first did this. We set some goals of getting to 18%, and at the time, if we'd gotten 18%, it would have been the industry-leading margin. We got there, and then we went to 19% and then to 20%, and then we were getting close to 21% at the end. I think we'll see what happens, but my focus is getting to 25% first. Go ahead. Okay, one more question after this then. Ida's giving me the Yeah.
Thanks, Dave.
Styblo from Jefferies. Just to come back again to the margin bridge. I think the integration savings is pretty straightforward. I guess the OIP, what you're saying is basically no savings now, net savings, but of that 3.25% growth going into 2018, about a third of that is going to be net, is ultimately kind of the bridge that implies. I thought I heard you say in the beginning about 50%. Can you clarify that?
Of future savings.
Of future savings. Okay. The other part of the bridge there for the underlying business, you've kind of, Dan, talked a bit about it, but the extra 1% that you're getting there, what is necessary for that to happen? Do you think about that in terms of a certain, we have to have at least this amount of organic growth or certain market conditions need to happen? I'm assuming that probably includes the things like rightsizing the international business that you guys talked about earlier. How much visibility do you feel like you have on that 1%?
I'll say that was meant to communicate two things. One, you've already heard from Julie and Tim specific actions that are underway now to address the headwinds that we have this year. That was communicating around that, but also then communicating going forward. Look, the only thing that we know sitting here today is things are not going to roll out exactly as we'd like them to over the next couple of years. There will be challenges, and we're going to be agile relative to those challenges and continue to look to balancing cost relative to revenue generation in the businesses. I think that bullet actually said up to a point. It's really a combination of what we're doing this year and actions that might be needed going forward.
Let's take one last question.
Thank you. Joshua Shanker from Deutsche Bank. This might be a question for Dominic, but I'm sure John may be able to answer it. Back after Willis acquired Miller, it was going to sell a large stake of that acquisition to BB&T because they were a large channel partner and wanted to ensure that relationship stayed in place for a long period of time. Now that BB&T has acquired their own wholesaler, how much of a risk is that of Miller losing BB&T revenues to Swett & Crawford over time, and what should we think about in terms of that impact on the revenue goal?
Sounds like that's a question for Dominic.
As you know, what they purchased was building out their further, their U.S. wholesale capability, right? In fact, we see this as an opportunity for increased revenues to Miller. Miller is a London wholesaler. They have not entered the London wholesaling market. They've just expanded their activities onshore in the United States, which in theory creates more opportunities to build that relationship between BB&T and Miller.
Okay. Again, thank you very much, everybody. I'm sorry. I wish we'd left more time for questions now. In any event, we do have lunch here. Again, thank you all for joining us.