PRUDENTIAL FINANCIAL, INC.  Notes to Consolidated Financial Statements These items are important to an understanding of overall results of operations.
Adjusted operating income is not a substitute for income determined in accordance with U. S.  GAAP, and the Company’s definition of adjusted operating income may differ from that used by other companies.
However, the Company believes that the presentation of adjusted operating income as measured for management purposes enhances the understanding of results of operations by highlighting the results from ongoing operations and the underlying profitability factors of its businesses.
As discussed in Note 1, during 2016, the Company recorded certain out of period adjustments.
These adjustments resulted in a decrease in pre-tax adjusted operating income of $114 million for the year ended December 31, 2016, principally consisting of a net decrease of $153 million for the Individual Life Insurance segment.
Management evaluated the adjustments, both individually and in the aggregate, and concluded that they were not material to any previously reported quarterly or annual financial statements.
Beginning in the first quarter of 2018, as a result of the adoption of ASU 2016-01 (see Note 2), changes in the fair value of equity securities are included in net income, but are excluded from adjusted operating income.
These changes in fair value are classified as related adjustments within “Realized investment gains (losses), net, and related adjustments” reconciling item in the tables below.
Realized investment gains (losses), net, and related charges and adjustments Realized investment gains (losses), net Adjusted operating income excludes “Realized investment gains (losses), net,” except for certain items described below.
Significant activity excluded from adjusted operating income includes impairments and credit-related gains (losses) from sales of securities, the timing of which depends largely on market credit cycles and can vary considerably across periods, and interest rate-related gains (losses) from sales of securities, which are largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.
Additionally, adjusted operating income generally excludes realized investment gains (losses) from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset/liability management program related to the risk of those products.
However, the effectiveness of the hedging program will ultimately be reflected in adjusted operating income over time.
Trends in the underlying profitability of the Company’s businesses can be more clearly identified without the fluctuating effects of these transactions.
The following table sets forth the significant components of “Realized investment gains (losses), net” that are included in adjusted operating income and, as a result, are reflected as adjustments to “Realized investment gains (losses), net” for purposes of calculating adjusted operating income:
## Table 0 ##
(1) In addition to the items in the table above, “Realized investment gains (losses), net, and related charges and adjustments” also includes an adjustment to reflect “Realized investment gains (losses), net” related to divested and run-off businesses.
See “Divested and Run-off businesses” discussed below.
Terminated Hedges of Foreign Currency Earnings.
The amounts shown in the table above primarily reflect the impact of an intercompany arrangement between Corporate and Other operations and the International Insurance segment, pursuant to which the non-U.
S.  dollar-denominated earnings in all countries for a particular year, including its interim reporting periods, are translated at fixed currency exchange rates.
The fixed rates are determined in connection with a currency hedging program designed to mitigate the risk that unfavorable rate changes will reduce the segment’s U. S.  dollar-equivalent earnings.
Pursuant to this program, the Company’s Corporate and Other operations may execute forward currency contracts with third-parties to sell the net exposure of projected earnings from the hedged currency in exchange for U. S.  dollars at a specified exchange rate.
The maturities of these contracts correspond with the future periods in which the identified non-U.
S.  dollar-denominated earnings are expected to be generated.
These contracts do not qualify for hedge accounting under U. S.  GAAP, so the resulting profits or losses are recorded in “Realized investment gains (losses), net.
” When the contracts are terminated in the same period that the expected earnings emerge, the resulting positive or negative cash flow effect is included in adjusted operating income.
Current Period Yield Adjustments.
The Company uses interest rate and currency swaps and other derivatives to manage interest and currency exchange rate exposures arising from mismatches between assets and liabilities, including duration mismatches.
For derivative contracts that do not qualify for hedge accounting treatment, the periodic swap settlements, as well as certain other derivative related yield adjustments are recorded in “Realized investment gains (losses), net,” and are included in adjusted operating income to reflect the afterhedge yield of the underlying instruments.
In certain instances, when these derivative contracts are terminated or offset before their final maturity, the resulting realized gains or losses are recognized in adjusted operating income over periods that generally approximate the expected terms of the derivatives or underlying instruments in order for adjusted operating income to reflect the after-hedge yield of the
Fixed Maturity Securities by Contractual Maturity Date The following table sets forth the breakdown of the amortized cost of our fixed maturity securities portfolio by contractual maturity, as of the date indicated:
## Table 1 ##
Fixed Maturity Securities and Unrealized Gains and Losses by Industry Category The following table sets forth the composition of the portion of our fixed maturity securities portfolio by industry category attributable to PFI excluding the Closed Block division and the associated gross unrealized gains and losses, as of the dates indicated:
## Table 2 ##
(1) Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.
(2) Includes $359 million of gross unrealized gains and less than $1 million of gross unrealized losses, as of December 31, 2018, compared to $381 million of gross unrealized gains and less than $1 million of gross unrealized losses, as of December 31, 2017, on securities classified as held-to-maturity.
(3) As of December 31, 2018 and 2017, based on amortized cost, 76% and 75%, respectively, represent Japanese government bonds held by our Japanese insurance operations with no other individual country representing more than 11% of the balance.
Table of Contents The following performance graph is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of Valero’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively.
This performance graph and the related textual information are based on historical data and are not indicative of future performance.
The following line graph compares the cumulative total return 1 on an investment in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peer companies (that we selected) for the five-year period commencing December 31, 2008 and ending December 31, 2013.
Our peer group comprises the following 11 companies: Alon USA Energy, Inc. ; BP plc; CVR Energy, Inc. ; Delek US Holdings, Inc.  (DK); HollyFrontier Corporation; Marathon Petroleum Corporation; PBF Energy Inc.  (PBF); Phillips 66; Royal Dutch Shell plc; Tesoro Corporation; and Western Refining, Inc.  Our peer group previously included Hess Corporation, but it has exited the refining business, and was replaced in our peer group by DK and PBF who are also engaged in refining operations.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN1 Among Valero Energy Corporation, the S&P 500 Index, Old Peer Group, and New Peer Group
## Table 3 ##
1 Assumes that an investment in Valero common stock and each index was $100 on December 31, 2008.
“Cumulative total return” is based on share price appreciation plus reinvestment of dividends from December 31, 2008 through December 31, 2013.

Tables referenced above, in order (Table 0 first):
<table><tr><td></td><td colspan="3">Year Ended December 31,</td></tr><tr><td></td><td>2018</td><td>2017</td><td>2016</td></tr><tr><td></td><td colspan="3">(in millions)</td></tr><tr><td>Net gains (losses) from(1):</td><td></td><td></td><td></td></tr><tr><td>Terminated hedges of foreign currency earnings</td><td>$-15</td><td>$-15</td><td>$39</td></tr><tr><td>Current period yield adjustments</td><td>$367</td><td>$434</td><td>$466</td></tr><tr><td>Principal source of earnings</td><td>$219</td><td>$-8</td><td>$74</td></tr></table>
<table><tr><td></td><td colspan="2">December 31, 2018</td></tr><tr><td></td><td>AmortizedCost</td><td>% of Total</td></tr><tr><td></td><td colspan="2">($ in millions)</td></tr><tr><td>Corporate & government securities:</td><td></td><td></td></tr><tr><td>Maturing in 2019</td><td>$7,540</td><td>2.6%</td></tr><tr><td>Maturing in 2020</td><td>12,378</td><td>4.2</td></tr><tr><td>Maturing in 2021</td><td>11,672</td><td>4.0</td></tr><tr><td>Maturing in 2022</td><td>10,316</td><td>3.5</td></tr><tr><td>Maturing in 2023</td><td>12,705</td><td>4.3</td></tr><tr><td>Maturing in 2024</td><td>11,805</td><td>4.0</td></tr><tr><td>Maturing in 2025</td><td>11,871</td><td>4.0</td></tr><tr><td>Maturing in 2026</td><td>12,125</td><td>4.1</td></tr><tr><td>Maturing in 2027</td><td>13,044</td><td>4.4</td></tr><tr><td>Maturing in 2028</td><td>10,576</td><td>3.6</td></tr><tr><td>Maturing in 2029</td><td>7,423</td><td>2.5</td></tr><tr><td>Maturing in 2030 and beyond</td><td>151,693</td><td>51.4</td></tr><tr><td>Total corporate & government securities</td><td>273,148</td><td>92.6</td></tr><tr><td>Asset-backed securities</td><td>9,803</td><td>3.3</td></tr><tr><td>Commercial mortgage-backed securities</td><td>8,953</td><td>3.0</td></tr><tr><td>Residential mortgage-backed securities</td><td>3,205</td><td>1.1</td></tr><tr><td>Total fixed maturities</td><td>$295,109</td><td>100.0%</td></tr></table>
<table><tr><td></td><td colspan="4">December 31, 2018</td><td colspan="4">December 31, 2017</td></tr><tr><td>Industry-1</td><td>AmortizedCost</td><td>GrossUnrealizedGains-2</td><td>GrossUnrealizedLosses-2</td><td>FairValue</td><td>AmortizedCost</td><td>GrossUnrealizedGains-2</td><td>GrossUnrealizedLosses-2</td><td>FairValue</td></tr><tr><td></td><td colspan="8">(in millions)</td></tr><tr><td>Corporate securities:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Finance</td><td>$29,831</td><td>$726</td><td>$724</td><td>$29,833</td><td>$25,906</td><td>$1,646</td><td>$84</td><td>$27,468</td></tr><tr><td>Consumer non-cyclical</td><td>24,136</td><td>1,172</td><td>748</td><td>24,560</td><td>24,812</td><td>2,359</td><td>140</td><td>27,031</td></tr><tr><td>Utility</td><td>22,179</td><td>1,073</td><td>624</td><td>22,628</td><td>22,265</td><td>2,196</td><td>118</td><td>24,343</td></tr><tr><td>Capital goods</td><td>11,623</td><td>561</td><td>386</td><td>11,798</td><td>11,232</td><td>1,076</td><td>52</td><td>12,256</td></tr><tr><td>Consumer cyclical</td><td>11,001</td><td>429</td><td>330</td><td>11,100</td><td>11,011</td><td>972</td><td>77</td><td>11,906</td></tr><tr><td>Foreign agencies</td><td>5,946</td><td>785</td><td>91</td><td>6,640</td><td>5,619</td><td>996</td><td>17</td><td>6,598</td></tr><tr><td>Energy</td><td>11,753</td><td>524</td><td>553</td><td>11,724</td><td>10,621</td><td>998</td><td>137</td><td>11,482</td></tr><tr><td>Communications</td><td>6,163</td><td>455</td><td>234</td><td>6,384</td><td>6,266</td><td>782</td><td>77</td><td>6,971</td></tr><tr><td>Basic industry</td><td>5,431</td><td>238</td><td>158</td><td>5,511</td><td>6,061</td><td>590</td><td>37</td><td>6,614</td></tr><tr><td>Transportation</td><td>8,633</td><td>428</td><td>225</td><td>8,836</td><td>8,179</td><td>777</td><td>28</td><td>8,928</td></tr><tr><td>Technology</td><td>3,855</td><td>155</td><td>99</td><td>3,911</td><td>4,373</td><td>318</td><td>33</td><td>4,658</td></tr><tr><td>Industrial other</td><td>3,764</td><td>151</td><td>154</td><td>3,761</td><td>3,866</td><td>348</td><td>23</td><td>4,191</td></tr><tr><td>Total corporate securities</td><td>144,315</td><td>6,697</td><td>4,326</td><td>146,686</td><td>140,211</td><td>13,058</td><td>823</td><td>152,446</td></tr><tr><td>Foreign government-3</td><td>97,087</td><td>16,942</td><td>301</td><td>113,728</td><td>88,539</td><td>15,848</td><td>291</td><td>104,096</td></tr><tr><td>Residential mortgage-backed-4</td><td>3,205</td><td>120</td><td>31</td><td>3,294</td><td>3,801</td><td>191</td><td>10</td><td>3,982</td></tr><tr><td>Asset-backed</td><td>9,803</td><td>122</td><td>62</td><td>9,863</td><td>8,389</td><td>214</td><td>7</td><td>8,596</td></tr><tr><td>Commercial mortgage-backed</td><td>8,953</td><td>87</td><td>86</td><td>8,954</td><td>8,850</td><td>188</td><td>64</td><td>8,974</td></tr><tr><td>U.S. Government</td><td>22,290</td><td>2,563</td><td>569</td><td>24,284</td><td>16,591</td><td>3,005</td><td>306</td><td>19,290</td></tr><tr><td>State & Municipal</td><td>9,456</td><td>607</td><td>63</td><td>10,000</td><td>8,945</td><td>1,016</td><td>6</td><td>9,955</td></tr><tr><td>Total-5</td><td>$295,109</td><td>$27,138</td><td>$5,438</td><td>$316,809</td><td>$275,326</td><td>$33,520</td><td>$1,507</td><td>$307,339</td></tr></table>
<table><tr><td></td><td>12/2008</td><td>12/2009</td><td>12/2010</td><td>12/2011</td><td>12/2012</td><td>12/2013</td></tr><tr><td>Valero Common Stock</td><td>$100.00</td><td>$79.77</td><td>$111.31</td><td>$102.57</td><td>$170.45</td><td>$281.24</td></tr><tr><td>S&P 500</td><td>100.00</td><td>126.46</td><td>145.51</td><td>148.59</td><td>172.37</td><td>228.19</td></tr><tr><td>Old Peer Group</td><td>100.00</td><td>126.98</td><td>122.17</td><td>127.90</td><td>138.09</td><td>170.45</td></tr><tr><td>New Peer Group</td><td>100.00</td><td>127.95</td><td>120.42</td><td>129.69</td><td>136.92</td><td>166.57</td></tr></table>

Question: Which year has the greatest proportion of AmortizedCost ?
Answer: 2027