Aon plc reported results for the fourth quarter ended December 31, 2014. Total revenue increased 3% to $3.3 billion compared to the prior year quarter driven primarily by 6% organic revenue growth, partially offset by a 3% unfavorable impact from foreign currency translation.
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Total operating expenses for the fourth quarter decreased 1% to $2.7 billion compared to the prior year quarter due primarily to a $79 million favorable impact from foreign currency translation, a $65 million decrease in formal restructuring costs, and a $10 million decrease in intangible asset amortization, partially offset by an increase in expense associated with 6% organic revenue growth, $35 million of expense related to legacy litigation, and a $17 million increase in expenses related to acquisitions, net of divestitures.
Depreciation expense decreased 6%, or $4 million, to $59 million compared to the prior year quarter.
Intangible asset amortization expense decreased 10%, or $10 million, to $89 million compared to the prior year quarter, due to a $10 million decrease in HR Solutions primarily related to the Hewitt acquisition.
Restructuring savings in the fourth quarter related to the Aon Hewitt restructuring program are estimated at $101 million compared to $94 million in the prior year quarter.
Of the estimated savings in the fourth quarter, approximately $76 million were related to the HR Solutions segment compared to $73 million in the prior year quarter, and approximately $25 million were related to the Risk Solutions segment compared to $21 million in the prior year quarter.
The company completed all remaining restructuring activities related to the Aon Hewitt restructuring program in the fourth quarter. Before any potential reinvestment of savings, the Aon Hewitt restructuring program delivered annual cumulative expense savings of approximately $402 million in 2014.
Of the $402 million in annual cumulative expense savings, approximately $303 million of savings were achieved in HR Solutions and $99 million of savings were achieved in Risk Solutions.
Foreign currency exchange rates in the fourth quarter had a $0.06 per share, or $23 million, pretax unfavorable impact (-$22 million in Risk Solutions, -$2 million in HR Solutions, +$1 million in Unallocated expenses) on adjusted net income from continuing operations if the company were to translate prior year quarter results at current quarter foreign exchange rates.
Average diluted shares outstanding decreased to 293.4 million in the fourth quarter compared to 311.4 million in the prior year quarter. The company repurchased 5.4 million Class A Ordinary Shares for approximately $500 million in the fourth quarter.
The company has $5.6 billion of remaining authorization under its share repurchase program after giving effect to a $5.0 billion increase in authorization during the fourth quarter.
Cash flow from operations for 2014 increased 1% to a record $1.6 billion driven primarily by growth in net income and a decline in pension contributions, partially offset by an unfavorable impact from timing of significant receivable collections in the prior year period.
Free cash flow, as defined as cash flow from operations less capital expenditures, for 2014 decreased 1% to $1.4 billion driven by an increase in cash flow from operations, offset by a $27 million increase in capital expenditures. ■