Russia and Europe.
Average sales price realizations for uncoated freesheet paper decreased in both Europe and Russia, reflecting weak economic conditions and soft market demand.
In Russia, sales prices in rubles increased, but this improvement is masked by the impact of the currency depreciation against the U. S.  dollar.
Input costs were significantly higher for wood in both Europe and Russia, partially offset by lower chemical costs.
Planned maintenance downtime costs were $11 million lower in 2014 than in 2013.
Manufacturing and other operating costs were favorable.
Entering 2015, sales volumes in the first quarter are expected to be seasonally weaker in Russia, and about flat in Europe.
Average sales price realizations for uncoated freesheet paper are expected to remain steady in Europe, but increase in Russia.
Input costs should be lower for oil and wood, partially offset by higher chemicals costs.


| 2008 2007 | Health care cost trend rate assumed for next year | Rate to which the cost trend rate is assumed to decline (ultimate trend rate) | Year rate reaches ultimate trend rate |


| ($ in millions) 2007 2006 2005 | Cash flows from operating activities | Incremental pension funding, net of tax | Capital spending | Proceeds for replacement of fire-damaged assets | Free cash flow |


| Years Ended December 31, | (Dollars in millions) | Gross reserves at beginning of period | Incurred related to: | Current year | Prior years | Total incurred losses | Paid related to: | Current year | Prior years | Total paid losses | Foreign exchange/translation adjustment | Change in reinsurance receivables on unpaid losses and LAE | Gross reserves at end of period | (Some amounts may not reconcile due to rounding.) |


| (in millions) 2006 2005 2004 | Revenues: | Spread-Based Investment Business | Institutional Asset Management | Brokerage Services and Mutual Funds | Other | Total | Operating income: | Spread-Based Investment Business(a) | Institutional Asset Management(b)(c) | Brokerage Services and Mutual Funds | Other | Total | American International | Group, Inc. | (in millions) | Year Ended December 31, 2006 | Net cash provided by operating activities | Cash flows from investing: | Invested assets disposed | Invested assets acquired | Other | Net cash used in investing activities | Cash flows from financing activities: | Issuance of debt | Repayments of debt | Other | Net cash provided by (used in) financing activities | Effect of exchange rate changes on cash | Change in cash | Cash at beginning of year | Cash at end of year | Year Ended December 31, 2005 | Net cash provided by operating activities | Cash flows from investing: | Invested assets disposed | Invested assets acquired | Other | Net cash used in investing activities | Cash flows from financing activities: | Issuance of debt | Repayments of debt | Other | Net cash provided by (used in) financing activities | Effect of exchange rate changes on cash | Change in cash | Cash at beginning of year | Cash at end of year | Year Ended December 31, 2004 | Net cash provided by operating activities | Cash flows from investing: | Invested assets disposed | Invested assets acquired | Other | Net cash used in investing activities | Cash flows from financing activities: | Issuance of debt | Repayments of debt | Other | Net cash provided by (used in) financing activities | Effect of exchange rate changes on cash | Change in cash | Cash at beginning of year | Cash at end of year | Years Ended December 31, | 2011 | (in millions) | Revenues | Management and financial advice fees | Net investment loss | Other revenues | Total revenues | Banking and deposit interest expense | Total net revenues | Expenses | Distribution expenses | Interest and debt expense | General and administrative expense | Total expenses | Operating loss |


| Years ended December 31, Change | 2006 | Salaries and related expenses | Professional fees | Rent, depreciation and amortization | Corporate insurance | Other | Expenses allocated to operating divisions | Total |


| 2010 | Fourth | (dollar amounts in thousands, except per share amounts) | Interest income | Interest expense | Net interest income | Provision for credit losses | Net interest income after provision for credit losses | Total noninterest income | Total noninterest expense | Income before income taxes | Provision (benefit) for income taxes | Net income | Dividends on preferred shares | Net income applicable to common shares | Common shares outstanding | Average — basic | Average — diluted-2 | Ending | Book value per share | Tangible book value per share-3 | Per common share | Net income — basic | Net income — diluted | Cash dividends declared | Common stock price, per share | High-4 | Low-4 | Close | Average closing price | Return on average total assets | Return on average common shareholders’ equity | Return on average tangible common shareholders’ equity-5 | Efficiency ratio-6 | Effective tax rate (benefit) | Margin analysis-as a % of average earning assets-7 | Interest income-7 | Interest expense | Net interest margin-7 | Revenue — FTE | Net interest income | FTE adjustment | Net interest income-7 | Noninterest income | Total revenue-7 |


| 2015 2014 | ($ in millions) | Commercial paper: | Prudential Financial | Prudential Funding, LLC | Subtotal commercial paper | Current portion of long-term debt-1 | Total short-term debt-2 | Supplemental short-term debt information: | Portion of commercial paper borrowings due overnight | Daily average commercial paper outstanding | Weighted average maturity of outstanding commercial paper, in days | Weighted average interest rate on outstanding short-term debt-3 |


The states of domicile of our domestic life insurance subsidiaries have in place a regulation entitled “Valuation of Life Insurance Policies,” commonly known as “Regulation XXX,” and a supporting Guideline entitled “The Application of the Valuation of Life Insurance Policies,” commonly known as “Guideline AXXX.
” The Regulation and supporting Guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life insurance policies with similar guarantees.
Many market participants believe that this level of reserves is excessive, and we have implemented reinsurance and capital management actions to mitigate the impact of Regulation XXX and Guideline AXXX on our term and universal life insurance business, including actions that are described in more detail below.
In 2006, a subsidiary of Prudential Insurance entered into a surplus note purchase agreement with an unaffiliated financial institution that provides for the issuance of up to $3.0 billion of ten-year floating rate surplus notes through 2016, if certain conditions are met (commonly referred to as XXX notes), for the purpose of financing certain regulatory reserves required to be held by subsidiary life insurers in connection with the intercompany reinsurance of certain term life insurance policies.
In connection with this financing arrangement, Prudential Financial has agreed with such subsidiary that it or certain of its affiliates will make capital contributions to such subsidiary as necessary to maintain the capital of such subsidiary at or above a prescribed minimum level.
Concurrent with the issuance of each surplus note, Prudential Financial enters into arrangements with the buyer, which are accounted for as derivative instruments, which may result in payments by, or to, Prudential Financial over the term of the surplus notes, to the extent there are significant changes in the value of the surplus notes.
Principal factors that impact the value of the surplus notes are mortality experience, interest rates and credit spreads.
As of December 31, 2010, there have been no collateral postings made under the derivative instruments.
Surplus notes issued under this facility are subordinated to policyholder obligations and are subject to regulatory approvals for principal and interest payments.
Total outstanding notes under this facility were $2.7 billion as of both December 31, 2010 and 2009.
During 2007, a subsidiary of Prudential Insurance issued $500 million of 45-year floating rate surplus notes (commonly referred to as AXXX notes) to an unaffiliated financial institution for the purpose of financing certain regulatory reserves required to be held by subsidiary life insurers in connection with the intercompany reinsurance of certain universal life insurance policies.
Surplus notes issued under this facility are subordinated to policyholder obligations and are subject to regulatory approvals for principal and interest payments.
PRUDENTIAL FINANCIAL, INC.  Notes to Consolidated Financial Statements 4.


| Years Ended | September 27, 2008 | Amount | Total Revenues | Operating Income |


| Year Ended December 31, | Assumption used in Monte Carlo lattice pricing model | Risk-free interest rate | Expected dividend yield | Expected volatility—ANSYS Stock Price | Expected volatility—NASDAQ Composite Index | Expected term | Correlation factor |


J.  Scott Wheway is Chief Executive Officer — Best Buy Europe, appointed in July 2009.
He joined us in May 2009 as Chief Operating Officer — Best Buy International.
Prior to joining us, Mr.  Wheway served as managing director of Boots the Chemist, a health and beauty chain in the U. K. , part of Alliance Boots GmbH, an international health and beauty group with both retail and wholesale operations.
Prior to joining Boots in 2005, Mr.  Wheway spent 20 years at Tesco plc, a global retailer of food, non-food and retailing services, where he worked his way up from the sales floor to senior executive leadership positions, including operations director and change director.
He also serves as a non-executive director of Aviva plc, a U. K. -based global insurer.


| Shares Average Grant DateFair Value Per Share | Beginning of year | Granted | Earned/vested | Canceled | End of year |


(1) Yields are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity.
Yields for fixed maturities are based on amortized cost.
Yields for equity securities are based on cost.
Yields for fixed maturities and short-term investments and cash equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity.
Yields exclude investment income on assets other than those included in invested assets.
Prior periods yields are presented on a basis consistent with the current period presentation.
(2) Includes investment income of securities brokerage, securities trading, banking operations, real estate and relocation services, and asset management operations.


| February 27, 2010 February 28, 2009 | Principal Balance | JPMorgan revolving credit facility | ARS revolving credit line | Europe receivables financing facility | Europe revolving credit facility | Canada revolving demand facility | China revolving demand facilities | Total short-term debt |


| Year ended December 31,(in millions) 2013 2012 2011 | Hedges of loans and lending-related commitments | CVA and hedges of CVA | Net gains/(losses) | Year ended December 31, 2013 | (in billions) | RWA at December 31, 2012 | Rule changes(a) | Model & data changes(b) | Portfolio runoff(c) | Movement in portfolio levels(d) | Increase in RWA | RWA at December 31, 2013 | December 31, | Capital ratios | Tier 1 capital | Total capital | Tier 1 leverage | Tier 1 common(a) |


| Business Records Management Off-Site Data Protection International Corporate & Other-1 Total Consolidated | 2001 | Total Revenues | Contribution | Total Assets | 2002 | Total Revenues | Contribution | Total Assets | 2003 | Total Revenues | Contribution | Total Assets |


| Fair Value Gains(Losses) Year ended | In millions | Assets | Nonaccrual loans | Loans held for sale | Equity investments (b) | Commercial mortgage servicing rights (c) | Other intangible assets | Other assets (d) | Total assets |


| 2015 2014 2013 | (in millions) | Expected federal income tax expense (benefit) | Non-taxable investment income | Foreign taxes at other than U.S. rate | Low-income housing and other tax credits | Reversal of acquisition opening balance sheet deferred tax items | Change in repatriation assertion | Minority interest | Medicare Part D | Change in tax law: active financing exception | Other | Total income tax expense (benefit) on continuing operations before equity in earnings of operating joint ventures |


| 2003 2002 | Office | Industrial | Retail | Other | Total |


| ($ in millions) Asset Retirement Obligations | Balance at January 1, 2009 | Accretion expense | Payment of asset retirement obligation | Balance at December 31, 2009 | Obligation relating to the future retirement of a facility | Accretion expense | Payment of asset retirement obligation | Balance at December 31, 2010 | Obligation relating to the future retirement of a facility | Accretion expense | Payment of asset retirement obligation | Balance at December 31, 2011 |


Humana Inc.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued) value, or the excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock awards vested during the period.
The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock vesting totaled $16.3 million in 2009, $16.9 million in 2008, and $48.0 million in 2007.
There was no capitalized stock-based compensation expense.
The stock plans provide that one restricted share is equivalent to 1.7 stock options.
At December 31, 2009, there were 12,818,855 shares reserved for stock award plans, including 4,797,304 shares of common stock available for future grants assuming all stock options or 2,821,944 shares available for future grants assuming all restricted shares.
Stock Options Stock options are granted with an exercise price equal to the average market value of the underlying common stock on the date of grant.
Our stock plans, as approved by the Board of Directors and stockholders, define average market value as the average of the highest and lowest stock prices reported by the New York Stock Exchange on a given date.
Exercise provisions vary, but most options vest in whole or in part 1 to 3 years after grant and expire 7 to 10 years after grant.
Upon grant, stock options are assigned a fair value based on the Black-Scholes valuation model.
Compensation expense is recognized on a straight-line basis over the total requisite service period, generally the total vesting period, for the entire award.
For stock options granted on or after January 1, 2010 to retirement eligible employees, the compensation expense is recognized on a straight-line basis over the shorter of the requisite service period or the period from the date of grant to an employees eligible retirement date.
The weighted-average fair value of each option granted during 2009, 2008, and 2007 is provided below.
The fair value was estimated on the date of grant using the Black-Scholes pricing model with the weighted-average assumptions indicated below:


| Net Sales | (Amounts in millions) | Product Category: | Tools | Diagnostics and repair information | Equipment | $2,937.9 |


| Years Ended March 31, | (In millions) | Distribution Solutions | Direct distribution & services | Sales to customers’ warehouses | Total U.S. pharmaceutical distribution & services | Canada pharmaceutical distribution & services | Medical-Surgical distribution & services | Total Distribution Solutions | Technology Solutions | Services | Software & software systems | Hardware | Total Technology Solutions | Total Revenues |


| December 31, | 2017 | Identified intangible assets (included in other assets): | Gross amount | Accumulated amortization | Net-1 | Identified intangible liabilities (included in deferred revenue): | Gross amount | Accumulated amortization | Net-1 |


| (Square feet in thousands) United States Other Countries Total | Owned | Leased | Total |


| Total Real Estate Private Equity/ Venture Capital Hedge Funds | October 31, 2011* | Realized gain | Change in unrealized gain (loss) | Purchases, sales and settlements - net | October 31, 2012* | Realized gain | Change in unrealized gain | Purchases, sales and settlements - net | October 31, 2013* |


CONTRACTUAL OBLIGATIONS We have entered into contracts with various third parties in the normal course of business which will require future payments.
The following table illustrates our contractual obligations (in millions):


Long-Term Debt Instruments The difference between the aggregate contractual principal amount and the related fair value of long-term other secured financings for which the fair value option was elected was not material as of December 2017, and the aggregate contractual principal amount exceeded the related fair value by $361 million as of December 2016.
The aggregate contractual principal amount of unsecured long-term borrowings for which the fair value option was elected exceeded the related fair value by $1.69 billion and $1.56 billion as of December 2017 and December 2016, respectively.
The amounts above include both principaland non-principal-protected long-term borrowings.


| In millions BenefitPayments Subsidy Receipts | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 – 2015 |


| 2014 2013 2012 | McKesson Corporation | 12% | 15% |


Expected Investment in Joint Venture On 12 August 2018, Air Products entered an agreement to form a gasification/power joint venture ("JV") with Saudi Aramco and ACWA in Jazan, Saudi Arabia.
Air Products will own at least 55% of the JV, with Saudi Aramco and ACWA Power owning the balance.
The JV will purchase the gasification assets, power block, and the associated utilities from Saudi Aramco for approximately $8 billion.
Our expected investment has been excluded from the contractual obligations table above pending closing, which is currently expected in fiscal year 2020.
The JV will own and operate the facility under a 25-year contract for a fixed monthly fee.
Saudi Aramco will supply feedstock to the JV, and the JV will produce power, hydrogen and other utilities for Saudi Aramco.


| 2007 2006 | December 31, (in billions) | Financial assets | Assets for which fair value approximates carrying value | Federal funds sold and securities purchased under resale agreements (included $19.1 at fair value at December 31, 2007) | Trading assets | Securities | Loans | Mortgage servicing rights at fair value | Other (included $22.2 at fair value at December 31, 2007) | Total financial assets | Financial liabilities | Deposits (included $6.4 at fair value at December 31, 2007) | Federal funds purchased and securities sold under repurchase agreements (included $5.8 at fair value at December 31, 2007) | Commercial paper | Other borrowed funds (included $10.8 at fair value at December 31, 2007) | Trading liabilities | Accounts payable, accrued expense and other liabilities | Beneficial interests issued by consolidated VIEs (included $3.0 at fair value at December 31, 2007) | Long-term debt and Junior subordinated deferrable interest debentures (included $70.5 and $25.4 at fair value atDecember 31, 2007 and 2006, respectively) | Total financial liabilities | Net appreciation | Year ended December 31, | (in millions, except ratios) | Balance, January 1 | Washington Mutual acquisition | Accretion into interest income | Changes in interest rates on variable rate loans | Other changes in expected cash flows(a) | Balance, December 31 | Accretable yield percentage |


| Less than 12 months 12 months or more Total | Fair Value | (in millions) | December 31, 2012 | U.S. Treasury and other U.S. government corporations and agencies: | U.S. Treasury and agency obligations | Mortgage-backed securities | Tax-exempt municipal securities | Mortgage-backed securities: | Residential | Commercial | Asset-backed securities | Corporate debt securities | Total debt securities | December 31, 2011 | U.S. Treasury and other U.S. government corporations and agencies: | U.S. Treasury and agency obligations | Mortgage-backed securities | Tax-exempt municipal securities | Mortgage-backed securities: | Residential | Commercial | Asset-backed securities | Corporate debt securities | Total debt securities |


| December 31 | (Dollars in millions) | Trading account assets | U.S. government and agency securities-1 | Corporate securities, trading loans and other | Equity securities | Foreign sovereign debt | Mortgage trading loans and asset-backed securities | Total trading account assets | Trading account liabilities | U.S. government and agency securities | Equity securities | Foreign sovereign debt | Corporate securities and other | Total trading account liabilities |


| September 30, | 2011 | (In millions) | Warranty liability, beginning of year | Warranties issued | Changes in liability for pre-existing warranties | Settlements made | Warranty liability, end of year |


| 2013 2012 2011 | (in millions) | Total cash provided by (used in): | Operating activities | Investing activities | Financing activities | Effect of exchange rate changes on cash and cash equivalents | Increase (decrease) in cash and cash equivalents |


| (Dollars in millions) 2015 2014 2013 | Contractual Backlog: | Commercial Airplanes | Defense, Space & Security: | Boeing Military Aircraft | Network & Space Systems | Global Services & Support | Total Defense, Space & Security | Total contractual backlog | Unobligated backlog |


Ameriprise Advisor Group Deferred Compensation Plan The Advisor Group Deferral Plan, which was created in April 2009, allows for employee advisors to receive share-based bonus awards which are subject to future service requirements and forfeitures.
The Advisor Group Deferral Plan is an unfunded non-qualified deferred compensation plan under section 409A of the Internal Revenue Code.
The Advisor Group Deferral Plan also gives qualifying employee advisors the choice to defer a portion of their base salary or commissions.
This deferral can be in the form of Ameriprise Financial stock or other investment options.
Deferrals are not subject to future service requirements or forfeitures.
Under the Advisor Group Deferral Plan, a maximum of 3.0 million shares may be issued.
Awards granted under the Advisor Group Deferral Plan may be settled in cash and/or shares of the Company’s common stock according to the award’s terms.
Share units receive dividend equivalents, as dividends are declared by the Company’s Board of Directors, until distribution and are subject to forfeiture until vested.


15.
COMMITMENTS AND CONTINGENCIES The Company is subject to various claims and contingencies related to, among other things, workers compensation, general liability (including product liability), automobile claims, health care claims, environmental matters and lawsuits.
The Company is also subject to various claims and contingencies related to income taxes, which are discussed in Note 12.
The Company also has contractual obligations including lease commitments, which are discussed in Note 13.
The Company records liabilities where a contingent loss is probable and can be reasonably estimated.
If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount.
The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.
Insurance Globally, the Company has insurance policies with varying deductibility levels for property and casualty losses.
The Company is insured for losses in excess of these deductibles, subject to policy terms and conditions and has recorded both a liability and an offsetting receivable for amounts in excess of these deductibles.
The Company is self-insured for health care claims for eligible participating employees, subject to certain deductibles and limitations.
The Company determines its liabilities for claims on an actuarial basis.
Litigation and Environmental Matters The Company and certain subsidiaries are party to various lawsuits, claims and environmental actions that have arisen in the ordinary course of business.
These include from time to time antitrust, commercial, patent infringement, product liability and wage hour lawsuits, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain chemical substances at various sites, such as Superfund sites and other operating or closed facilities.
The Company has established accruals for certain lawsuits, claims and environmental matters.
The Company currently believes that there is not a reasonably possible risk of material loss in excess of the amounts accrued related to these legal matters.
Because litigation is inherently uncertain, and unfavorable rulings or developments could occur, there can be no certainty that the Company may not ultimately incur charges in excess of recorded liabilities.
A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on the Companys results of operations or cash flows in the period in which they are recorded.
The Company currently believes that such future charges related to suits and legal claims, if any, would not have a material adverse effect on the Companys consolidated financial position.
Environmental Matters The Company is currently participating in environmental assessments and remediation at approximately 45 locations, the majority of which are in the U. S. , and environmental liabilities have been accrued reflecting managements best estimate of future costs.
Potential insurance reimbursements are not anticipated in the Companys accruals for environmental liabilities.
In 2005, average earning assets increased $487 million, or 12%, including increases of $250 million, or 8%, in average residential mortgage loans and $228 million, or 25%, in average home equity loans.
Average consumer deposits increased $90 million, or 1%, compared to 2004.
Treasury encompasses the securities portfolio, short-term investments, wholesale funding activities, such as borrowings and the funding center.
The income or loss for the funding center, which includes the impact of derivative financial instruments used for risk management purposes, represents the interest rate risk component of Peoples net interest income as calculated by Peoples funds transfer pricing model (FTP), to derive each operating segments net interest income.
Under this process, a money desk (the funding center) buys funds from liability-generating business lines (such as consumer deposits) and sells funds to asset-generating business lines (such as commercial lending).
The price at which funds are bought and sold on any given day is set by Peoples treasury group and is based on the wholesale cost to Peoples of assets and liabilities with similar maturities.
Liability-generating businesses sell newly originated liabilities to the money desk and recognize a funding credit, while asset-generating businesses buy funding for newly originated assets from the money desk and recognize a funding charge.
Once funding for an asset is purchased from or a liability is sold to the money desk, the price that is set by the treasury group will remain with that asset or liability until it matures or reprices, which effectively transfers responsibility for managing interest rate risk to the treasury group.


| Restricted Stock Units Outstanding Weighted-   Average Grant-   Date Fair Value   Per Share | Restricted stock units outstanding at October 31, 2009 | Units granted | Restrictions lapsed | Units forfeited | Restricted stock units outstanding at October 30, 2010 |


Copyright?2011 Standard & Poor's, a division of The McGraw-Hill Companies Inc.  All rights reserved.
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| Cost Per Million Btu | Fuel Consumed | Coal | Gas | Oil | Weighted average fuel cost |


Share-Based Compensation The Company’s share-based compensation plans consist of the Amended and Restated Ameriprise Financial 2005 Incentive Compensation Plan (the ‘‘2005 ICP’’), the Ameriprise Financial 2008 Employment Incentive Equity Award Plan (the ‘‘2008 Plan’’), the Ameriprise Financial Franchise Advisor Deferred Compensation Plan (‘‘Franchise Advisor Deferral Plan’’), the Ameriprise Advisor Group Deferred Compensation Plan (‘‘Advisor Group Deferral Plan’’) and the Threadneedle Equity Incentive Plan (‘‘EIP’’).
The components of the Company’s share-based compensation expense, net of forfeitures, were as follows:


PRUDENTIAL FINANCIAL, INC.  Notes to Consolidated Financial Statements 19.
INCOME TAXES (continued) Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:


| Company / Index 2010 2011 2012 2013 2014 2015 | Teleflex Incorporated | S&P 500 Index | S&P 500 Healthcare Equipment & Supply Index |


| 2013 2012 2011 | Balance January 1 | Additions related to current year positions | Additions related to prior year positions | Reductions for tax positions of prior years-1 | Settlements | Lapse of statute of limitations | Balance December 31 |


| 2008 $4,935 | 2009 | 2010 | 2011 | 2012 | Thereafter |


| Period Total Numberof SharesPurchased AveragePrice Paidper Share Total Number ofShares NotPurchased as Part ofPublicly AnnouncedPlans or Programs (a) Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms Approximate DollarValue of Shares thatMay Yet Be PurchasedUnder the Plans orPrograms (b) | October 2017 | November 2017 | December 2017 | Total |


Life insurance products include traditional and interest-sensitive whole life insurance as well as term life insurance.
Health products are generally guaranteed-renewable and include Medicare Supplement, Medicare Part D, cancer, accident, long-term care, and limited-benefit hospital and surgical coverages.
Annuities include fixed-benefit contracts.
Torchmark markets its insurance products through a number of distribution channels, each of which sells the products of one or more of Torchmark’s insurance segments.
The tables below present segment premium revenue by each of Torchmark’s marketing groups.


Results of Operations  RJ Bank The following table presents consolidated financial information for RJ Bank for the years indicated:


| Table 19 Long-term Debt by Major Currency December 31 | (Dollars in millions) | U.S. Dollar | Euro | Japanese Yen | British Pound | Australian Dollar | Canadian Dollar | Swiss Franc | Other | Total long-term debt | Table 38 | Outstandings | (Dollars in millions) | U.S. commercial | Commercial real estate-1 | Commercial lease financing | Non-U.S. commercial | 296,951 | U.S. small business commercial-2 | Commercial loans excluding loans accounted for under the fair value option | Loans accounted for under the fair value option-3 | Total commercial loans and leases |


| 2014 2013 | December 31, (in millions) | U.S. GAAP nettable derivative receivables | Interest rate contracts: | OTC | OTC–cleared | Exchange-traded(a) | Total interest rate contracts | Credit contracts: | OTC | OTC–cleared | Total credit contracts | Foreign exchange contracts: | OTC | OTC–cleared | Exchange-traded(a) | Total foreign exchange contracts | Equity contracts: | OTC | OTC–cleared | Exchange-traded(a) | Total equity contracts | Commodity contracts: | OTC | OTC–cleared | Exchange-traded(a) | Total commodity contracts | Derivative receivables with appropriate legal opinion | Derivative receivables where an appropriate legal opinion has not been either sought or obtained | Total derivative receivables recognized on the Consolidated balance sheets |


requirements apply both to regulated utilities such as CECONY and O&R for the customers they supply under regulated tariffs and to companies such as Con Edison Solutions that supply customers on market terms.
To address the possibility of a disruption due to the unavailability of gas, generating units located in New York City that are capable of using either gas or oil as fuel may be required to use oil as fuel for certain periods and new generating units are required to have dual fuel capability.
RECO, O&Rs New Jersey subsidiary, provides electric service in an area that has a different independent system operator  PJM Interconnection LLC (PJM).
See CECONY  Electric Operations  Electric Supply and O&R  Electric Operations  Electric Supply, below.
New York Energy Highway In October 2012, the Energy Highway Task Force appointed by the Governor of New York issued its Blueprint containing recommendations to modernize New Yorks energy systems.
The recommended actions included electric transmission construction and upgrades to electric and natural gas infrastructure.
In November 2012, the NYSPSC established a proceeding to review specific proposals from utilities and private developers for new electric transmission lines and upgrades to existing facilities that will address transmission congestion between upstate and downstate.
See Con Edison Transmission, below.
Competition Distributed generation, such as solar energy production facilities, fuel cells and micro-turbines, provide alternative sources of energy for the Utilities electric delivery customers, as does oil for the Utilities gas delivery customers.
Other distributed energy resources, such as demand reduction and energy efficiency programs, also provide alternatives for the Utilities delivery customers.
In its ongoing REV proceeding, the NYSPSC is considering the extent to which New York electric distribution utilities and their affiliates will be permitted to compete with other providers of distributed energy resources.
See Reforming the Energy Vision Proceeding above.
At December 31, 2014, there were 4,200 and 1,953 distributed generation projects interconnected with CECONY and O&R, respectively, with aggregate capacities as shown on the following table:


Transition In connection with the initial adoption of SFAS 157, the Firm recorded the following on January 1, 2007: ?
A cumulative effect increase to Retained earnings of $287 million, primarily related to the release of profit previously deferred in accordance with EITF 02-3; ?
An increase to pretax income of $166 million ($103 million after-tax) related to the incorporation of the Firms creditworthiness in the valuation of liabilities recorded at fair value; and ?
An increase to pretax income of $464 million ($288 million after-tax) related to valuations of nonpublic private equity investments.
Prior to the adoption of SFAS 157, the Firm applied the provisions of EITF 02-3 to its derivative portfolio.
EITF 02-3 precluded the recognition of initial trading profit in the absence of: (a) quoted market prices, (b) observable prices of other current market transactions or (c) other observable data supporting a valuation technique.
In accordance with EITF 02-3, the Firm recognized the deferred profit in Principal transactions revenue on a systematic basis (typically straightline amortization over the life of the instruments) and when observable market data became available.
Prior to the adoption of SFAS 157 the Firm did not incorporate an adjustment into the valuation of liabilities carried at fair value on the Consolidated balance sheet.
Commencing January 1, 2007, in accordance with the requirements of SFAS 157, an adjustment was made to the valuation of liabilities measured at fair value to reflect the credit quality of the Firm.
Prior to the adoption of SFAS 157, privately held investments were initially valued based upon cost.
The carrying values of privately held investments were adjusted from cost to reflect both positive and negative changes evidenced by financing events with third-party capital providers.
The investments were also subject to ongoing impairment reviews by private equity senior investment professionals.
The increase in pretax income related to nonpublic Private equity investments in connection with the adoption of SFAS 157 was due to there being sufficient market evidence to support an increase in fair values using the SFAS 157 methodology, although there had not been an actual third-party market transaction related to such investments.


ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Ameren Corporation: In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Ameren Corporation and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Companys management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Report on Internal Control over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Companys internal control over financial reporting based on our integrated audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions as of January 1, 2007, and the manner in which it accounts for defined benefit pension and postretirement obligations as of December 31, 2006.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
14.
Stock Compensation Plans The following table summarizes stock-based compensation expense recognized in continuing operations in the Consolidated Statements of Income in Compensation and benefits (in millions):


FISCAL 2011 COMPARED TO FISCAL 2010  Tax Services revenues decreased $62.9 million, or 2.1%, compared to the prior year.
Tax preparation fees decreased $61.0 million, or 3.1%, due primarily to the sale of companyowned offices to franchisees and the loss of certain clients as a result of not having a RAL offering in our tax offices in fiscal year 2011.
Although we gained clients through the free Federal EZ filing we began offering during fiscal year 2011, that increase did not have a significant impact on our revenues.
Royalties increased $28.6 million, or 10.4%, primarily due to the conversion of 280 company-owned offices into franchises.
Fees earned on RACs increased $94.1 million, or 107.5%, primarily due to an increase in the number of RACs issued as a portion of our clients chose to receive their refunds via RAC, as an alternative to a RAL.
RALs were historically offered to our clients by HSBC Holdings plc (HSBC).
In December 2010, HSBC terminated its contract with us based on restrictions placed on HSBC by its regulator and, therefore, RALs were not offered during the 2011 tax season.
Revenues of $17.2 million include the recognition of net deferred fees from HSBC.
This compares with revenues resulting from loans participations and related fees in fiscal year 2010 of $146.2 million.
Interest income earned on EAs increased $16.4 million, or 21.1%, over fiscal year 2010 primarily due to an increase in loan volume, which resulted from offering the product to a wider client base.
Total expenses increased $37.0 million, or 1.8%, compared to fiscal year 2010.
Compensation and benefits decreased $8.5 million, or 0.8%, primarily due to lower commission-based wages due to conversions to franchise offices, reduced headcount and related payroll taxes.
This decline was partially offset by severance costs and related payroll taxes of $27.4 million.
Occupancy costs declined $25.6 million, or 6.2%, due to office closures and cost-saving initiatives.
Bad debt expense increased $34.3 million, or 32.8%, primarily due to increased volumes on EAs, as well as a decline in tax returns prepared for those clients.
During fiscal year 2011, we recorded a $22.7 million impairment of goodwill in an ancillary reporting unit, as discussed in Item 8, note 7 to the consolidated financial statements.
Other expenses increased $11.5 million, or 4.9%, primarily due to incremental litigation expenses recorded in fiscal year 2011.
Pretax income for fiscal year 2011 decreased $99.9 million, or 11.5%, from 2010.
As a result of the declines in revenues and higher expenses, primarily bad debt expense and goodwill impairment, pretax margin for the segment decreased to 26.4% from 29.2% in fiscal year 2010.
CORPORATE, ELIMINATIONS AND INCOME TAXES ON CONTINUING OPERATIONS Corporate operating losses include net interest margin and gains or losses relating to mortgage loans held for investment, real estate owned and residual interests in securitizations, along with interest expense on borrowings and other corporate expenses.


Notes to Consolidated Financial Statements 1.
Basis of Presentation The accompanying Consolidated Financial Statements and Notes thereto have been prepared in accordance with U. S.  generally accepted accounting principles ("U. S.  GAAP").
The Consolidated Financial Statements include the accounts of Aon plc and all of its controlled subsidiaries ("Aon" or the "Company").
All intercompany accounts and transactions have been eliminated.
The Consolidated Financial Statements include, in the opinion of management, all adjustments necessary to present fairly the Company's consolidated financial position, results of operations and cash flows for all periods presented.
Reclassification Certain amounts in prior years' Consolidated Financial Statements and related notes have been reclassified to conform to the 2015 presentation.
In prior periods, long-term investments were included in Investments in the Consolidated Statement of Financial Position.
These amounts are now included in Other non-current assets in the Consolidated Statement of Financial Position, as shown in Note 3 to these Consolidated Financial Statements.
Long-term investments were $135 million at December 31, 2015 and $143 million at December 31, 2014.
In prior periods, prepaid pensions were included in Other non-current assets in the Consolidated Statement of Financial Position.
These amounts are now separately disclosed in the Consolidated Statement of Financial Position.
Prepaid pensions were $1,033 million at December 31, 2015 and $933 million at December 31, 2014.
Upon vesting of certain share-based payment arrangements, employees may elect to use a portion of the shares to satisfy tax withholding requirements, in which case Aon makes a payment to the taxing authority on the employee’s behalf and remits the remaining shares to the employee.
The Company has historically presented amounts due to taxing authorities within Cash Flows From Operating Activities in the Consolidated Statements of Cash Flows.
The amounts are now included in “Issuance of shares for employee benefit plans” within Cash Flows From Financing Activities.
The Company believes this presentation provides greater clarity into the operating and financing activities of the Company as the substance and accounting for these transactions is that of a share repurchase.
It also aligns the Company’s presentation to be consistent with industry practice.
Amounts reported in Issuance of shares for employee benefit plans were $227 million, $170 million, and $120 million, respectively, for the years ended December 31, 2015, 2014 and 2013.
These amounts, which were reclassified from Accounts payable and accrued liabilities and Other assets and liabilities, were $85 million and $85 million in 2014, and $62 million and $58 million in 2013, respectively.
Changes to the presentation in the Consolidated Statements of Cash Flows for 2014 and 2013 were made related to certain line items within financing activities.
The following line items and respective amounts have been aggregated in a new line item titled “Noncontrolling interests and other financing activities” within financing activities.


Net Investment Income Net investment income increased by $1,816 million, or 11%, to $18,063 million for the year ended December 31, 2007 from $16,247 million for the comparable 2006 period.
Management attributes $1,078 million of this increase to growth in the average asset base and $738 million to an increase in yields.
The increase in net investment income from growth in the average asset base was primarily within fixed maturity securities, mortgage loans, real estate joint ventures and other limited partnership interests.
The increase in net investment income attributable to higher yields was primarily due to higher returns on fixed maturity securities, other limited partnership interests excluding hedge funds, equity securities and improved securities lending results, partially offset by lower returns on real estate joint ventures, cash, cash equivalents and short-term investments, hedge funds and mortgage loans.
Interest Margin Interest margin, which represents the difference between interest earned and interest credited to policyholder account balances increased in the Institutional and Individual segments for the year ended December 31, 2007 as compared to 2006.
Interest earned approximates net investment income on investable assets attributed to the segment with minor adjustments related to the consolidation of certain separate accounts and other minor non-policyholder elements.
Interest credited is the amount attributed to insurance products, recorded in policyholder benefits and claims, and the amount credited to policyholder account balances for investment-type products, recorded in interest credited to policyholder account balances.
Interest credited on insurance products reflects the 2007 impact of the interest rate assumptions established at issuance or acquisition.
Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees.
This tends to move gradually over time to reflect market interest rate movements and may reflect actions by management to respond to competitive pressures and, therefore, generally does not introduce volatility in expense.
Net Investment Gains (Losses) Net investment losses decreased by $804 million to a loss of $578 million for the year ended December 31, 2007 from a loss of $1,382 million for the comparable 2006 period.
The decrease in net investment losses was primarily due to a reduction of losses on fixed maturity securities resulting principally from the 2006 portfolio repositioning in a rising interest rate environment, increased gains from asset-based foreign currency transactions due to a decline in the U. S.  dollar year over year against several major currencies and increased gains on equity securities, partially offset by increased losses from the mark-to-market on derivatives and reduced gains on real estate and real estate joint ventures.
Underwriting Underwriting results are


| December 31, 2014 December 31, 2013 | CarryingValue | Mortgages and notes payable | Senior notes and debentures |


| (in millions) MaturityAmount Unamortized Discount and Debt Issuance Costs Carrying Value Fair Value | 6.25% Notes due 2017 | 5.00% Notes due 2019 | 4.25% Notes due 2021 | 3.375% Notes due 2022 | 3.50% Notes due 2024 | 1.25% Notes due 2025 | Total Long-term Borrowings |


| 2010 2009 | December 31, (in millions) | Investment-grade(a) | Noninvestment-grade(a) | Total contractual amount(b) | Allowance for lending-related commitments | Commitments with collateral |


2017 Compared to 2016 In 2017, across our North American Full-Service segment, we added 55 properties (13,056 rooms) and 12 properties (2,912 rooms) left our system.
North American Full-Service segment profits increased by $405 million, primarily due to the following: ?
$305 million of higher base management and franchise fees, primarily reflecting $297 million of higher Legacy-Starwood fees, $14 million from Legacy-Marriott unit growth, and $8 million of stronger RevPAR at Legacy-Marriott hotels, partially offset by $17 million of lower Legacy-Marriott residential branding fees; ?
$45 million of higher incentive management fees, primarily driven by $31 million of higher Legacy-Starwood fees and higher net house profits at Legacy-Marriott managed hotels; ?
$61 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting $63 million of higher Legacy-Starwood owned and leased profits; ?
$44 million of higher depreciation, amortization, and other expenses, primarily reflecting higher-depreciation and amortization on Legacy-Starwood assets; ?
$22 million of higher gains and other income, net, primarily due to the gain on the sale of a North American Full-Service hotel in the 2017 second quarter; and ?
$16 million of higher equity in earnings, primarily due to higher earnings by Legacy-Starwood investees.
Cost reimbursements revenue and expenses for our North American Full-Service segment properties totaled $12,391 million in 2017, compared to $9,126 million in 2016.


Foreign Currency Exchange Risk Foreign currency exchange risk is the risk of financial loss due to changes in the relative value between currencies.
Sources of currency risk The Company has foreign currency exchange risk in non-U.
S.  dollar denominated investments, which primarily consist of fixed maturity and equity investments, foreign denominated cash, a yen denominated fixed payout annuity and changes in equity of a P&C run-off entity in the United Kingdom.
In addition, the Company’s Talcott Resolution segment formerly issued non-U.
S.  dollar denominated funding agreement liability contracts.
Impact Changes in relative values between currencies can create variability in cash flows and realized or unrealized gains and losses on changes in the fair value of assets and liabilities.
Based on the fair values of the Company’s non-U.
S.  dollar denominated securities and derivative instruments as of December 31, 2016 and 2015, management estimates that a hypothetical 10% unfavorable change in exchange rates would decrease the fair values by a before-tax total of $11 and $48, respectively, and as of December 31, 2016 excludes the impact of the assets that transferred to held for sale related to the U. K.  property and casualty run-off subsidiaries .
Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis.


| April 30, 2006 2005 2004 | U.S. OFFICES— | Company-owned offices | Company-owned shared locations-1 | Total company-owned offices | Franchise offices | Franchise shared locations-1 | Total franchise offices | 12,165 | INTERNATIONAL OFFICES— | Canada | Australia | Other | 1,383 |


| December 31, | 2009 | (In millions) | U.S. Business: | Guaranteed minimum accumulation benefit | Guaranteed minimum withdrawal benefit | Guaranteed minimum income benefit | International: | Guaranteed minimum accumulation benefit | Guaranteed minimum withdrawal benefit | Total |


Performance Graph The performance graph below shows the five-year cumulative total stockholder return on Applied common stock during the period from October 25, 2009 through October 26, 2014.
This is compared with the cumulative total return of the Standard & Poors 500 Stock Index and the RDG Semiconductor Composite Index over the same period.
The comparison assumes $100 was invested on October 25, 2009 in Applied common stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.
Dollar amounts in the graph are rounded to the nearest whole dollar.
The performance shown in the graph represents past performance and should not be considered an indication of future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Applied Materials, Inc. , the S&P 500 Index and the RDG Semiconductor Composite Index


However, borrowings are scheduled for repayment four years after the borrowing date to the extent that OWN has excess cash to repay the borrowings then due.
OWN will distribute its initial excess cash to the Company to repay funding then due.
Following repayment of funding then due, OWN’s subsequent cash distributions will be shared equally between the Company and Harpo Inc.  (“Harpo”).
Based upon the level of equity investment at risk, OWN is a VIE.
While the investors have an equal share in voting control, power is not shared because certain activities that significantly impact OWN’s economic performance are directed by Harpo (“Harpo”).
Harpo holds operational rights related to programming and marketing, as well as selection and retention of key management personnel.
The Company has determined that it is not the primary beneficiary of OWN, because it does not control these activities that are critical to OWN’s operating performance and success.
Accordingly, the Company accounts for its investment in OWN using the equity method.
Net losses generated by OWN are currently allocated to both investors based on their proportionate ownership interests, which are 50-50.
Prior to the contribution of the Discovery Health network to OWN at its launch, the Company recognized 100% of OWN’s net losses.
If future operating losses at OWN exceed the balance of equity contributions recorded by OWN and the equity balance of OWN is depleted, Discovery will record 100% of any future operating losses in loss from equity investees, net as long as Discovery continues to provide all funding to OWN.
Future net income generated by OWN will initially be allocated 100% to the Company for at least $104 million, the amount of pre-contribution net losses recognized, plus any additional losses absorbed in excess of Discovery’s equity ownership interest.
The carrying value of the Company’s investment in OWN, including its equity method investment and note receivable balance, was $420 million and $52 million as of December 31, 2011 and 2010, respectively.
Pursuant to the venture agreement, Harpo has the right to require the Company to purchase all or part of its interest in OWN at fair market value up to a maximum put amount every two and one half years commencing on January 1, 2016.
The maximum put amount is a range from $100 million on the first put exercise date up to $400 million on the fourth put exercise date.
The Company has recorded no amounts for the put right.
Other VIEs Other VIEs principally include various cable and satellite network ventures in which the Company holds ownership interests from 16% to 50%.
The carrying value of the Company’s investments in other VIEs accounted for using the equity method was $53 million and $57 million as of December 31, 2011 and 2010, respectively.
NOTE 5.
INVESTMENTS The Company’s investments consisted of the following (in millions).


| As of December 31, 2011 | DISH Network Awards | Stock Awards Outstanding | Held by DISH Network employees | Held by EchoStar employees | Total |


CF INDUSTRIES HOLDINGS, INC.  related to net operating loss carryforwards (NOLs) generated from business conducted with CF Industries, Inc. ’s pre-IPO owners.
These net operating loss carryforwards totaled $250 million, with expirations ranging from 2021 through 2023.
The income tax provision for the year ended December 31, 2005 includes a charge of $99.9 million to establish a 100% valuation allowance for the deferred tax asset related to these NOLs.
The valuation allowance is required because there is substantial uncertainty under existing tax law whether any tax benefits from this deferred tax asset will be realized since CF Industries, Inc.  is no longer a cooperative for federal income tax purposes.
In connection with the IPO, we entered into a net operating loss agreement with CF Industries, Inc. ’s pre-IPO owners (NOL Agreement) relating to the future treatment of the pre-IPO NOLs.
Under the NOL Agreement, if it is finally determined that CF Industries, Inc. ’s net operating loss carryforwards can be utilized subsequent to the IPO, we will pay to CF Industries, Inc. ’s pre-IPO owners an amount equal to the resulting federal and state income taxes actually saved.
CFL operates as a cooperative for Canadian income tax purposes and distributes all of its earnings as patronage dividends to its customers, including CF Industries, Inc.  For Canadian income tax purposes, CFL is permitted to deduct an amount equal to the patronage dividends it distributes to its customers, provided that certain requirements are met.
As a result, CFL records no income tax provision.12.


| Target Asset Allocation 2016 Actual Asset Allocation | Asset Category | Equity securities | Debt securities | Other | Total |


consistently reliable result.
Conversely, for the most recent three months of incurred claims, the volume of claims processed historically is not at a level sufficient to produce a reliable result, which therefore requires us to examine historical trend patterns as the primary method of evaluation.
Changes in claim processes, including receipt cycle times, claim inventory levels, recoveries of overpayments, outsourcing, system conversions, and processing disruptions due to weather or other events affect views regarding the reasonable choice of completion factors.
The receipt cycle time measures the average length of time between when a medical claim was initially incurred and when the claim form was received.
Increased electronic claim submissions from providers have decreased the receipt cycle time over the last few years.
For example, the average receipt cycle time has decreased from 16.5 days in 2005 to 15.6 days in 2007 which represents a 5.5% reduction in cycle time over the three year period.
Medical cost trends potentially are more volatile than other segments of the economy.
The drivers of medical cost trends include increases in the utilization of hospital facilities, physician services, prescription drugs, and new medical technologies, as well as the inflationary effect on the cost per unit of each of these expense components.
Other external factors such as government-mandated benefits or other regulatory changes, increases in medical services capacity, direct to consumer advertising for prescription drugs and medical services, an aging population, catastrophes, and epidemics also may impact medical cost trends.
Internal factors such as system conversions, claims processing cycle times, changes in medical management practices and changes in provider contracts also may impact our ability to accurately predict estimates of historical completion factors or medical cost trends.
All of these factors are considered in estimating IBNR and in estimating the per member per month claims trend for purposes of determining the reserve for the most recent three months.
Additionally, we continually prepare and review follow-up studies to assess the reasonableness of the estimates generated by our process and methods over time.
The results of these studies are also considered in determining the reserve for the most recent three months.
Each of these factors requires significant judgment by management.
The completion and claims per member per month trend factors are the most significant factors impacting the IBNR estimate.
The portion of IBNR estimated using completion factors for claims incurred prior to the most recent three months is less variable than the portion of IBNR estimated using trend factors.
The following table illustrates the sensitivity of these factors assuming moderate adverse experience and the estimated potential impact on our operating results caused by reasonably likely changes in these factors based on December 31, 2007 data:


| 2004 2003 2002 2001 | $23,561 |


| Years Ended December 31, (In thousands, except per share data and apartment homes owned) | 2007 | Operating Data(a) | Rental income | Loss before minority interests and discontinued operations | Income from discontinued operations, net of minority interests | Net income | Distributions to preferred stockholders | Net income available to common stockholders | Common distributions declared | Weighted average number of common shares outstanding — basic | Weighted average number of common shares outstanding — diluted | Weighted average number of common shares, OP Units, and common stock equivalents outstanding — diluted | Per share — basic and diluted: | Loss from continuing operations available to common stockholders, net of minority interests | Income from discontinued operations, net of minority interests | Net income available to common stockholders | Common distributions declared | Balance Sheet Data | Real estate owned, at cost | Accumulated depreciation | Total real estate owned, net of accumulated depreciation | Total assets | Secured debt | Unsecured debt | Total debt | Stockholders’ equity | Number of common shares outstanding | Other Data | Cash Flow Data | Cash provided by operating activities | Cash used in investing activities | Cash (used in)/provided by financing activities | Funds from Operations(b) | Funds from operations — basic | Funds from operations — diluted | Apartment Homes Owned | Total apartment homes owned at December 31 | Weighted average number of apartment homes owned during the year |


| (in millions, except per share data) 2003 2002 2001 | Basic earnings per share | Net income | Less: Preferred stock dividends | Net income applicable to common stock | Weighted-average basic shares outstanding | Net income per share | Diluted earnings per share | Net income applicable to common stock | Weighted-average basic shares outstanding | Add: Broad-based options | Key employee options | Weighted-average diluted shares outstanding | Net income per share(a) |


| Year Ended October 31, $ Change % Change $ Change % Change | 2013 | (dollars in millions) | Included in cost of revenue | Included in operating expenses | Total | Percentage of total revenue |


| December 31, 2011 December 31, 2010 | Ratings | (in millions, except percentages) | AAA | AA | A | BBB | Below investment grade | Total fixed maturities |


Commitments and Contingencies We are the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment.
Certain of these matters are discussed below.
The ultimate resolution of these contingencies could, individually or in the aggregate, be material to our consolidated financial statements.
However, management believes that we will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.
Environmental matters  We are subject to federal, state, local and foreign laws and regulations relating to the environment.
These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites.
Penalties may be imposed for noncompliance.
At December 31, 2009 and 2008, accrued liabilities for remediation totaled $116 million and $111 million.
It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed.
Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $59 and $60 million at December 31, 2009 and 2008.
Legal cases  We, along with other refining companies, settled a number of lawsuits pertaining to methyl tertiary-butyl ether (MTBE) in 2008.
Presently, we are a defendant, along with other refining companies, in 27 cases arising in four states alleging damages for MTBE contamination.
Like the cases that we settled in 2008, 12 of the remaining cases are consolidated in a multi-district litigation (MDL) in the Southern District of New York for pretrial proceedings.
The other 15 cases are in New York state courts (Nassau and Suffolk Counties).
Plaintiffs in 26 of the 27 cases allege damages to water supply wells from contamination of groundwater by MTBE, similar to the damages claimed in the cases settled in 2008.
In the remaining case, the New Jersey Department of Environmental Protection is seeking the cost of remediating MTBE contamination and natural resources damages allegedly resulting from contamination of groundwater by MTBE.
We are vigorously defending these cases.
We have engaged in settlement discussions related to the majority of these cases.
We do not expect our share of liability for these cases to significantly impact our consolidated results of operations, financial position or cash flows.
We voluntarily discontinued producing MTBE in 2002.
We are currently a party to one qui tam case, which alleges that Marathon and other defendants violated the False Claims Act with respect to the reporting and payment of royalties on natural gas and natural gas liquids for federal and Indian leases.
A qui tam action is an action in which the relator files suit on behalf of himself as well as the federal government.
The case currently pending is U. S.  ex rel Harrold E.  Wright v.  Agip Petroleum Co.  et al.
It is primarily a gas valuation case.
Marathon has reached a settlement with the Relator and the DOJ which will be finalized after the Indian Tribes review and approve the settlement terms.
Such settlement is not expected to significantly impact our consolidated results of operations, financial position or cash flows.
Guarantees  We have provided certain guarantees, direct and indirect, of the indebtedness of other companies.
Under the terms of most of these guarantee arrangements, we would be required to perform should the guaranteed party fail to fulfill its obligations under the specified arrangements.
In addition to these financial guarantees, we also have various performance guarantees related to specific agreements.


REPUBLIC SERVICES, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In December 2008, the board of directors amended and restated the Republic Services, Inc.  2006 Incentive Stock Plan (formerly known as the Allied Waste Industries, Inc.  2006 Incentive Stock Plan (the 2006 Plan)).
Allied’s stockholders approved the 2006 Plan in May 2006.
The 2006 Plan was amended and restated in December 2008 to reflect that Republic Services, Inc.  is the new sponsor of the Plan, that any references to shares of common stock is to shares of common stock of Republic Services, Inc. , and to adjust outstanding awards and the number of shares available under the Plan to reflect the acquisition.
The 2006 Plan, as amended and restated, provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, shares of phantom stock, stock bonuses, restricted stock units, stock appreciation rights, performance awards, dividend equivalents, cash awards, or other stock-based awards.
Awards granted under the 2006 Plan prior to December 5, 2008 became fully vested and nonforfeitable upon the closing of the acquisition.
Awards may be granted under the 2006 Plan, as amended and restated, after December 5, 2008 only to employees and consultants of Allied Waste Industries, Inc.  and its subsidiaries who were not employed by Republic Services, Inc.  prior to such date.
At December 31, 2012, there were approximately 15.5 million shares of common stock reserved for future grants under the 2006 Plan.
Stock Options We use a binomial option-pricing model to value our stock option grants.
We recognize compensation expense on a straight-line basis over the requisite service period for each separately vesting portion of the award, or to the employee’s retirement eligible date, if earlier.
Expected volatility is based on the weighted average of the most recent one year volatility and a historical rolling average volatility of our stock over the expected life of the option.
The risk-free interest rate is based on Federal Reserve rates in effect for bonds with maturity dates equal to the expected term of the option.
We use historical data to estimate future option exercises, forfeitures (at 3.0% for each of the period presented) and expected life of the options.
When appropriate, separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.
The weighted-average estimated fair values of stock options granted during the years ended December 31, 2012, 2011 and 2010 were $4.77, $5.35 and $5.28 per option, respectively, which were calculated using the following weighted-average assumptions:


Table 5
Preferred Stock We have 20 million shares of preferred stock authorized with a par value of $0.01 per share.
No shares of preferred stock were outstanding as of December 31, 2018 or 2017.
Treasury Stock We purchase shares of our common stock as authorized under our common stock purchase program (described below) and to meet our obligations under employee stock-based compensation plans.
On July 13, 2015, our board of directors authorized us to purchase $2.5 billion of our outstanding common stock with no expiration date, and we completed that program during 2017.
On September 21, 2016, our board of directors authorized our purchase of up to an additional $2.5 billion with no expiration date, and we completed that program during 2018.
On January 23, 2018, our board of directors authorized our purchase of up to an additional $2.5 billion (the 2018 Program) with no expiration date.
During the years ended December 31, 2018, 2017, and 2016, we purchased $1.5 billion, $1.3 billion, and $1.3 billion, respectively, of our common stock under our programs.
As of December 31, 2018, we have approval under the 2018 Program to purchase approximately $2.2 billion of our common stock.
Common Stock Dividends On January 24, 2019, our board of directors declared a quarterly cash dividend of $0.90 per common share payable on March 5, 2019 to holders of record at the close of business on February 13, 2019.
Valero Energy Partners LP Units On September 16, 2016, VLP entered into an equity distribution agreement pursuant to which VLP offered and sold from time to time their common units having an aggregate offering price of up to $350 million based on amounts, at prices, and on terms determined by market conditions and other factors at the time of


| Project Location Fuel Gross MW AES Equity Interest (Percent, Rounded) | Ballylumford | JHRH-1 | Nueva Ventanas | St. Nikola | Guacolda 4-2 | Dong Qi-3 | Huanghua II-3 | St. Patrick | North Rhins | Kepezkaya | Damlapinar-4 | Years Ended December 31, | 2008 | (In millions) | Investment return | Separate account balances | Net investment gain (loss) related | Expense | In-force/Persistency | Policyholder dividends and other | Total |


| 2009 Fair values Payable Notionals Guarantor | In millions of dollars | By industry/counterparty | Bank | Broker-dealer | Monoline | Non-financial | Insurance and other financial institutions | Total by industry/counterparty | By instrument | Credit default swaps and options | Total return swaps and other | Total byinstrument | 2008 | In millions of dollars | By industry/counterparty | Bank | Broker-dealer | Monoline | Non-financial | Insurance and other financial institutions | Total by industry/counterparty | By instrument | Credit default swaps and options | Total return swaps and other | Total byinstrument |


| 2010 $18,181 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | Benefit Payments | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 – 2019 |


| (In millions) 2008 2007 | E&P | United States | International | E&P segment income | OSM | RM&T | IG | Segment income | Items not allocated to segments, net of income taxes: | Corporate and other unallocated items | Gain (loss) on U.K. natural gas contracts(a) | Foreign currency gain on income taxes | Impairments(b) | Gain on dispositions | Gain on foreign currency derivative instruments | Deferred income taxes – tax legislation changes | Loss on early extinguishment of debt | Net income |


| In millions of dollars, except as otherwise noted 2015 2014 2013 Change2015 vs. 2014 Change2014 vs. 2013 | Interest revenue-1 | Interest expense | Net interest revenue-1(2) | Interest revenue—average rate | Interest expense—average rate | Net interest margin | Interest-rate benchmarks | Two-year U.S. Treasury note—average rate | 10-year U.S. Treasury note—average rate | 10-year vs. two-year spread |


| As of December | $ in millions | Tier 1 capital | Tier 2 capital | Total capital | Risk-weighted assets | Tier 1 capital ratio | Total capital ratio | Tier 1 leverage ratio |


| 2009 2008 2007 | Risk-free rate of return | Expected term (in years) | Expected volatility | Expected dividend yield | Weighted-average fair value per option granted |


WASTE MANAGEMENT, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) multiemployer defined benefit pension plans for the covered employees.
Refer to Note 10 for additional information about our participation in multiemployer defined benefit pension plans considered individually significant.
In connection with our ongoing renegotiation of various collective bargaining agreements, we may discuss and negotiate for the complete or partial withdrawal from one or more of these pension plans.
A complete or partial withdrawal from a multiemployer pension plan may also occur if employees covered by a collective bargaining agreement vote to decertify a union from continuing to represent them.
Any other circumstance resulting in a decline in Company contributions to a multiemployer defined benefit pension plan through a reduction in the labor force, whether through attrition over time or through a business event (such as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or discontinuance of certain operations) may also trigger a complete or partial withdrawal from one or more of these pension plans.
One of the most significant multiemployer pension plans in which we have participated is the Central States, Southeast and Southwest Areas Pension Plan (Central States Pension Plan).
In 2008, we reached agreement with all of the unions involved to cease participation in the Central States Pension Plan.
Since that time, litigation with the Central States Pension Plan had been pending over several matters, including the effective date that our contribution obligations ceased.
In the third quarter of 2015, we settled and paid all amounts due for all pending litigation with the trustees for the Central States Pension Plan regarding liability for contributions to the plan and withdrawal liability resulting from the cessation of contributions.
Similarly, in the fourth quarter of 2015, we settled and paid all amounts due for outstanding issues regarding plan contributions and withdrawal liability with the Teamsters Employers Local 945 Pension Fund.
In 2015, we recognized a $51 million charge to Operating expenses associated with withdrawal from certain underfunded multiemployer pension plans, nearly all of which was associated with the Central States Pension Plan and the Teamsters Employers Local 945 Pension Fund withdrawals discussed above.
We do not believe any additional liability above the charges we have already recognized for previous withdrawals could be material to the Companys business, financial condition, liquidity, results of operations or cash flows.
Similarly, we also do not believe that any future withdrawals, individually or in the aggregate, from the multiemployer pension plans to which we contribute, could have a material adverse effect on our business, financial condition or liquidity.
However, such withdrawals could have a material adverse effect on our results of operations or cash flows for a particular reporting period, depending on the number of employees withdrawn in any future period and the financial condition of the multiemployer pension plan(s) at the time of such withdrawal(s).
Tax Matters  We maintain a liability for uncertain tax positions, the balance of which management believes is adequate.
Results of audit assessments by taxing authorities are not currently expected to have a material adverse impact on our results of operations or cash flows.
See Note 9 for additional discussion regarding tax matters.12.
Restructuring The following table summarizes pre-tax restructuring charges, including employee severance and benefit costs and other charges, for the years ended December 31 for the respective periods (in millions):


| 2012 2011 2010 | Cost of sales | Royalties | Product development | Advertising | Amortization of intangibles | Program production cost amortization | Selling, distribution and administration |


NOTE 4 RECENT ACCOUNTING DEVELOPMENTS EMPLOYERS ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No.158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an Amendment of FASB Statements No.87, 88, 106, and 132(R).
 This statement requires a calendar year-end company with publicly traded equity securities that sponsors a postretirement benefit plan to fully recognize, as an asset or liability, the overfunded or underfunded status of its benefit plan(s) in its 2006 year-end balance sheet.
It also requires a company to measure its plan assets and benefit obligations as of its year-end balance sheet date beginning with fiscal years ending after December 15, 2008.
The Company adopted the provisions of this standard as of December 31, 2006, recording an additional liability of $492 million and an after-tax charge to Other comprehensive income of $350 million for its defined benefit and postretirement benefit plans.
FAIR VALUE MEASUREMENTS In September 2006, the FASB also issued SFAS No.157, Fair Value Measurements, which provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.
It also emphasizes that fair value is a market-based measurement, not an entityspecific measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets.
This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, and is to be applied prospectively as of the beginning of the year in which it is initially applied.
The Company is currently evaluating the provisions of this statement.


| Years Ended December 31, | (Dollars in millions) | 2012 | Attritional | Catastrophes | Total segment | 2011 | Attritional | Catastrophes | Total segment | 2010 | Attritional | Catastrophes | Total segment | Variance 2012/2011 | Attritional | Catastrophes | Total segment | Variance 2011/2010 | Attritional | Catastrophes | Total segment | (Some amounts may not reconcile due to rounding.) |


| Insurance Financial Strength Ratings Debt Ratings | Property & Casualty | CCC | Group | A.M. Best | Fitch | Moody’s | S&P |


| Asset Category Level 1 Level 2 Level 3 Total | Short-term investments: | Fixed Income Securities: | Corporate | RMBS | U.S. Treasuries | Foreign government | CMBS | Other fixed income [1] | Mortgage Loans | Equity Securities: | Domestic | International | Total pension plan assets at fair value, in the fair value hierarchy [2] | Other Investments, at net asset value [3]: | Private Market Alternatives | Hedge funds | Total pension plan assets at fair value. |


Table of Contents ITEM 2.
PROPERTIES Flight Equipment and Fleet Renewal As of December 31, 2016, American operated a mainline fleet of 930 aircraft.
In 2016, we continued our extensive fleet renewal program, which has provided us with the youngest fleet of the major U. S.  network carriers.
During 2016, American took delivery of 55 new mainline aircraft and retired 71 aircraft.
We are supported by our wholly-owned and third-party regional carriers that fly under capacity purchase agreements operating as American Eagle.
As of December 31, 2016, American Eagle operated 606 regional aircraft.
During 2016, we increased our regional fleet by 61 regional aircraft, we removed and placed in temporary storage one Embraer ERJ 140 aircraft and retired 41 other regional aircraft.
Mainline As of December 31, 2016, American’s mainline fleet consisted of the following aircraft:


| 2002 2003 2004 | Net loss, as reported | Add: Stock based employee compensation included in reported net loss | Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards | Pro forma net loss | Basic and diluted loss per share | As reported | Pro forma |


PART I Pullmantur During 2013, we operated four ships with an aggregate capacity of approximately 7,650 berths under our Pullmantur brand, offering cruise itineraries that ranged from four to 12 nights throughout South America, the Caribbean and Europe.
One of these ships, Zenith, was redeployed from Pullmantur to CDF CroisiÃ¨res de France in January 2014.
Pullmantur serves the contemporary segment of the Spanish, Portuguese and Latin American cruise markets.
Pullmanturs strategy is to attract cruise guests from these target markets by providing a variety of cruising options and onboard activities directed at couples and families traveling with children.
Over the last few years, Pullmantur has systematically increased its focus on Latin America.
In recognition of this, Pullmantur recently opened a regional head office in Panama to place the operating management closer to its largest and fastest growing market.
In order to facilitate Pullmanturs ability to focus on its core cruise business, in December 2013, Pullmantur reached an agreement to sell the majority of its interest in its land-based tour operations, travel agency and Pullmantur Air, the closing of which is subject to customary closing conditions.
In connection with the agreement, we will retain a 19% interest in the non-core businesses.
We will retain ownership of the Pullmantur aircraft which will be dry leased to Pullmantur Air.


| Amounts in millions, except per share amounts 2012 Change vs. Prior Year 2011 Change vs. Prior Year 2010 | Net Sales | Operating Income | Net Earnings from Continuing Operations | Net Earnings from Discontinued Operations | Net Earnings attributable to Procter & Gamble | Diluted Net Earnings per Common Share | Diluted Net Earnings per Share from Continuing Operations | Core Earnings per Common Share |


| In millions December 312013 December 312012 | BlackRock | Tax credit investments | Private equity | Visa | Other | Total |


| As of and for the Year Ended December 31, 2012 | (in millions) | Net interest income (expense) | Noninterest income | Total revenue | Noninterest expense | Profit (loss) before provision for credit losses | Provision for credit losses | Income before income tax expense | Income tax expense | Net income | Total Average Assets |


Failure to comply with the financial and other covenants under our Credit Facilities, as well as the occurrence of certain material adverse events, would constitute defaults and would allow the lenders under our Credit Facilities to accelerate the maturity of all indebtedness under the related agreements.
This could also have an adverse impact on the availability of financial assurances.
In addition, maturity acceleration on our Credit Facilities constitutes an event of default under our other debt instruments, including our senior notes, and, therefore, our senior notes would also be subject to acceleration of maturity.
If such acceleration were to occur, we would not have sufficient liquidity available to repay the indebtedness.
We would likely have to seek an amendment under our Credit Facilities for relief from the financial covenants or repay the debt with proceeds from the issuance of new debt or equity, or asset sales, if necessary.
We may be unable to amend our Credit Facilities or raise sufficient capital to repay such obligations in the event the maturities are accelerated.
Financial assurance We are required to provide financial assurance to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs, and related to our performance under certain collection, landfill and transfer station contracts.
We satisfy these financial assurance requirements by providing surety bonds, letters of credit, insurance policies or trust deposits.
The amount of the financial assurance requirements for capping, closure and post-closure costs is determined by applicable state environmental regulations.
The financial assurance requirements for capping, closure and post-closure costs may be associated with a portion of the landfill or the entire landfill.
Generally, states will require a third-party engineering specialist to determine the estimated capping, closure and postclosure costs that are used to determine the required amount of financial assurance for a landfill.
The amount of financial assurance required can, and generally will, differ from the obligation determined and recorded under U. S.  GAAP.
The amount of the financial assurance requirements related to contract performance varies by contract.
Additionally, we are required to provide financial assurance for our insurance program and collateral for certain performance obligations.
We do not expect a material increase in financial assurance requirements during 2010, although the mix of financial assurance instruments may change.
These financial instruments are issued in the normal course of business and are not debt of our company.
Since we currently have no liability for these financial assurance instruments, they are not reflected in our consolidated balance sheets.
However, we record capping, closure and post-closure liabilities and self-insurance liabilities as they are incurred.
The underlying obligations of the financial assurance instruments, in excess of those already reflected in our consolidated balance sheets, would be recorded if it is probable that we would be unable to fulfill our related obligations.
We do not expect this to occur.
Off-Balance Sheet Arrangements We have no off-balance sheet debt or similar obligations, other than financial assurance instruments and operating leases that are not classified as debt.
We do not guarantee any third-party debt.
Free Cash Flow We define free cash flow, which is not a measure determined in accordance with U. S.  GAAP, as cash provided by operating activities less purchases of property and equipment, plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows.
Our free cash flow for the years ended December 31, 2009, 2008 and 2007 is calculated as follows (in millions):


| Other PostretirementBenefits (in millions) | One percentage point increase | Increase in total service and interest costs | Increase in postretirement benefit obligation | One percentage point decrease | Decrease in total service and interest costs | Decrease in postretirement benefit obligation | Pension | Minimum | Asset Category | U.S. Equities | International Equities | Fixed Maturities | Short-term Investments | Real Estate | Other |


| (In Thousands) | 2005 | 2006 | 2007 | 2008 | 2009 |


| December 31, 2009 December 31, 2008 December 31, 2007 | Account Value | (in millions) | Automatic rebalancing element-1 | No automatic rebalancing element | Total variable annuity account values with living benefit features | December 31, 2009 | Account Value | (in millions) | Automatic rebalancing element | No automatic rebalancing element | Total variable annuity account values with death benefit features |


expense is equal to the contribution called for by the plan formula and is composed of the cash contributed for the purchase of common stock on the open market or the fair value of the shares contributed from treasury stock.
Dividends on shares held by the ESOP are charged to retained earnings, and shares are treated as outstanding for the calculation of earnings per common share.
Note 19.
Occupancy Expense and Information Systems and Communications Expense Occupancy expense and information systems and communications expense include expense for depreciation of buildings, leasehold improvements, computers, equipment and furniture and fixtures.
Total depreciation expense for the years ended December 31, 2011, 2010 and 2009 was $368 million, $373 million and $380 million, respectively.
We lease 1,025,000 square feet at One Lincoln Street, our headquarters building located in Boston, Massachusetts, and a related 366,000-square-foot underground parking garage, under 20-year, non-cancelable capital leases expiring in September 2023.
A portion of the lease payments is offset by subleases for 153,390 square feet of the building.
In addition, we lease approximately 362,000 square feet at 20 Churchill Place, an office building located in the U. K. , under a 20-year capital lease expiring in December 2028, with the option to cancel the lease after the first 15 years.
As of December 31, 2011 and 2010, an aggregate net book value of $565 million and $606 million, respectively, related to the above-described capital leases was recorded in premises and equipment, with the related liability recorded in long-term debt in our consolidated statement of condition.
Capital lease asset amortization is recorded in occupancy expense in our consolidated statement of income over the respective lease term.
Lease payments are recorded as a reduction of the liability, with a portion recorded as imputed interest expense.
For the years ended December 31, 2011, 2010 and 2009, interest expense related to these capital lease obligations, reflected in net interest revenue, was $43 million, $44 million and $47 million, respectively.
As of December 31, 2011 and 2010, accumulated amortization of capital lease assets was $273 million and $230 million, respectively.
We have entered into non-cancelable operating leases for premises and equipment.
Nearly all of these leases include renewal options.
Costs related to operating leases for office space are recorded in occupancy expense.
Costs related to operating leases for computers and equipment are recorded in information systems and communications expense.
Total rental expense, net of sublease revenue, amounted to $232 million, $241 million and $230 million for the years ended December 31, 2011, 2010 and 2009, respectively.
Total rental expense was reduced by sublease revenue of $12 million for the years ended December 31, 2011 and 2010 and $17 million for the year ended December 31, 2009.
The following table presents a summary of future minimum lease payments under non-cancelable capital and operating leases as of December 31, 2011.


| Year Ended December 31, | 2016 | Basic weighted average shares outstanding | Weighted average dilutive options outstanding | Diluted weighted average shares outstanding |


| Year Ended December 31, 2015 | PFI ExcludingClosed Block Division | Yield-1 | ($ in millions) | Fixed maturities | Trading account assets supporting insurance liabilities | Equity securities | Commercial mortgage and other loans | Policy loans | Short-term investments and cash equivalents | Other investments | Gross investment income before investment expenses | Investment expenses | Investment income after investment expenses | Investment results of other entities and operations-2 | Total investment income |


Interest Rate Derivatives.
In connection with the issuance of floating rate debt in August and October 2008, the company entered into three interest rate swap contracts, designated as cash flow hedges, for purposes of hedging against a change in interest payments due to fluctuations in the underlying benchmark rate.
In December 2010, the company approved a plan to refinance the term loan in January 2011 resulting in an $8.6 million loss on derivative instruments as a result of ineffectiveness on the associated interest rate swap contract.
To mitigate counterparty credit risk, the interest rate swap contracts required collateralization by both counterparties for the swaps’ aggregate net fair value during their respective terms.
Collateral was maintained in the form of cash and adjusted on a daily basis.
In February 2010, the company entered into a forward starting interest rate swap contract, designated as a cash flow hedge, for purposes of hedging against a change in interest payments due to fluctuations in the underlying benchmark rate between the date of the swap and the forecasted issuance of fixed rate debt in March 2010.
The swap was highly effective.


The tax benefit recognized in our consolidated financial statements is based on the amount of compensation expense recorded for book purposes.
The actual tax benefit realized in our tax return is based on the intrinsic value, or the excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock awards vested during the period.
The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock vesting totaled $16.9 million in 2008, $48.0 million in 2007, and $47.8 million in 2006.
There was no capitalized stock-based compensation expense.
The stock plans provide that one restricted share is equivalent to 1.7 stock options.
At December 31, 2008, there were 14,708,198 shares reserved for stock award plans, including 7,714,499 shares of common stock available for future grants assuming all stock options or 4,537,941 shares available for future grants assuming all restricted shares.
acquired in connection with the Arcadian acquisition effective March 31, 2012.
Individual Medicare stand-alone PDP premiums revenue increased $270 million, or 11.7%, in 2012 compared to 2011 primarily due to a 20.0% increase in average individual PDP membership, partially offset by a decrease in individual Medicare stand-alone PDP per member premiums.
This was primarily a result of sales of our Humana-Walmart plan that we began offering for the 2011 plan year.
Benefits expense ?
The Retail segment benefit ratio increased 290 basis points from 81.2% in 2011 to 84.1% in 2012.
During 2012, we experienced a significant increase in the benefit ratio for our individual Medicare Advantage products primarily due to a planned increase in the target benefit ratio associated with positioning for Health Insurance Reform Legislation funding changes and minimum benefit ratio requirements, a higher benefit ratio experienced on new membership than the assumptions used in our 2012 Medicare bids, and increased outpatient utilization for both new and existing members.
In addition, year-over-year comparisons of the benefit ratio were negatively impacted by lower favorable prior-period medical claims reserve development in 2012 than in 2011 and a year-over-year increase in clinicians and other health care quality expenditures given our continuing growth in membership.
The Retail segments pretax income for 2012 included the beneficial effect of $192 million in favorable prior-period medical claims reserve development versus $245 million in 2011.
This favorable priorperiod medical claims reserve development decreased the Retail segment benefit ratio by approximately 80 basis points in 2012 versus approximately 110 basis points in 2011.
Operating costs ?
The Retail segment operating cost ratio of 11.0% for 2012 decreased 20 basis points from 11.2% for 2011 primarily due to scale efficiencies associated with servicing higher year-over-year membership together with our continued focus on operating cost efficiencies, partially offset by higher year-overyear clinical, provider, and technological infrastructure spending.
Employer Group Segment