The American Income Exclusive Agency has historically marketed primarily to members of labor unions. While labor unions are still the core market for this agency, American Income has diversified in recent years by focusing heavily on other affinity groups and referrals to help ensure sustainable growth. This agency is Torchmark’s largest contributor to life premium of any distribution channel at 42% of Torchmark’s 2016 total. This group produced premium income of $913 million, an increase of 10% over the prior year total of $831 million, after having risen 8% in 2015. First-year collected premium was $174 million compared to $156 million in 2015, an increase of 11%. First-year collected premium rose 16% in 2015. Net sales increased 6% to $210 million in 2016 over the 2015 total of $198 million. Net sales increased 15% in 2015 over the 2014 total of $172 million. Sales growth in our captive agencies is generally dependent on growth in the size of the agency force. The American Income Agency's average agent count rose 2% to 6,671 for the year ended December 31, 2016 compared with 6,529 for the same period in 2015. The average producing agent count is based on the actual count at the end of each week during the period. The American Income Exclusive Agency has been focusing on growing and strengthening middle management to support sustainable growth of the agency force. To accomplish this, the agency has placed an increased emphasis on agent training programs and financial incentives that appropriately reward agents at all levels for helping develop and train its agents, including more home-office and webinar training programs. These programs are designed to provide each agent, from new recruits to top level managers, coaching and instruction specifically designed for their level of experience and responsibility. We are also making considerable investments in information technology in support of the agency, including the launching of a lead mapping and management tool to the agency force in 2017. We anticipate this tool will enhance overall productivity of agents and improve agent retention.
The net unrealized gain of the fixed maturity portfolio increased $552 million from December 31, 2015. The utility, energy, and basic materials sectors experienced increases of $42 million, $249 million, and $129 million respectively, in net unrealized gains from December 31, 2015 to December 31, 2016, while the financial industry decreased $13 million. The fair value of the entire portfolio increased 11% for the period. Over the past year, oil and many other commodity prices have increased meaningfully to the benefit of our holdings in the energy and basic materials sectors. While a sustained period of low prices might lead to some downgrades in ratings, we do not currently anticipate any losses from defaults or write-downs in the foreseeable future.
Parent Company Liquidity. Cash flows from the insurance subsidiaries are used to pay interest and principal repayments on Parent Company debt, operating expenses of the Parent, and Parent Company dividends to Torchmark shareholders. In 2016, the Parent received $438 million of cash dividends from its subsidiaries, compared with $466 million in 2015 and $479 million in 2014. Including transfers from other subsidiaries and after paying debt obligations, shareholder dividends, and other expenses (but before share repurchases), the Parent Company had excess cash flow in 2016 of approximately $311 million, compared with $358 million in 2015 and $377 million in 2014. Parent Company cash flow in excess of its operating requirements is available for other corporate purposes, such as insurance subsidiary capital or financing needs, strategic acquisitions or share repurchases. In 2017, it is expected that the Parent Company will receive approximately $450 million in dividends and transfers from subsidiaries and that approximately $325 to $335 million will be available as excess cash flow. Certain restrictions exist on the payment of these dividends. For more information on the restrictions on the payment of dividends by subsidiaries, see the Restrictions section of Note 12-Shareholders’ Equity in the Notes to Consolidated Financial Statements. Although these restrictions exist, dividend availability from subsidiaries historically has been more than sufficient for the cash flow needs of the Parent Company.
Defined benefit pension plans: We maintain funded defined benefit plans covering most full-time employees. We also have unfunded nonqualified defined benefit plans covering certain key and other employees. Our obligations under these plans are determined actuarially based on specified actuarial assumptions. In accordance with GAAP, an expense is recorded each year as these pension obligations grow due to the increase in the service period of employees and the interest cost associated with the passage of time. These obligations are offset, at least in part, by the growth in value of the assets in the funded plans. At December 31, 2016, our gross liability under these plans was $528 million, but was offset by assets of $329 million.
The discount rate was 4.64% for 2016 expense and 4.27% for the projected benefit obligation at December 31, 2016.
Goodwill: The excess cost of a business acquired over the fair value of net assets acquired is reported as goodwill. Goodwill is subject to impairment testing in accordance with GAAP on an annual basis, or whenever potential impairment triggers occur. The Company may perform a qualitative analysis under certain circumstances, or perform a two-step quantitative analysis.
Property and Equipment: Property and equipment, included in “Other assets,” is reported at cost less allowances for depreciation. Depreciation is recorded primarily on the straight line method over the estimated useful lives of these assets which range from three to ten years for equipment and five to forty years for buildings and improvements. Ordinary maintenance and repairs are charged to income as incurred. Impairments, if any, are recorded when certain events and circumstances become evident that the fair value of the asset is less than its carrying amount. Original cost of property and equipment was $196 million at December 31, 2016 and $175 million at December 31, 2015. Accumulated depreciation was $99 million at year end 2016 and $92 million at the end of 2015. Depreciation expense was $9.8 million in 2016, $8.0 million in 2015, and $7.4 million in 2014.
taxes for an intra-entity transfer until the asset has been sold to an outside party. This new guidance should be applied on a modified retrospective approach and will become effective on January 1, 2018. The Company does not expect the adoption to have a significant impact on the financial statements.
The excess, if any, of shareholder’s equity of the insurance subsidiaries on a GAAP basis over that determined on a statutory basis is not available for distribution by the insurance subsidiaries to Torchmark without regulatory approval. Insurance subsidiaries’ statutory capital and surplus necessary to satisfy regulatory requirements in the aggregate was $477 million at December 31, 2016. More information on the restrictions on the payment of dividends can be found in Note 12-Shareholders’ Equity.
The initial sale price was based on the number of enrollees as of the end of the second quarter 2016 and will be adjusted based on the number of enrollees as of January 1, 2017 as determined by the Center for Medicare Services (CMS) in March 2017. Estimated ultimate net proceeds from the sale resulted in a gain of $1.8 million ($1.2 million, net of tax). The deferred acquisition costs write-off of $16.4 million and the contingent sale price reserve of $3.6 million are included in the net gain calculation. The gain is recognized in income from discontinued operations as of December 31, 2016.
Acquisition of Common Shares: Torchmark shares are acquired from time to time through open market purchases under the Torchmark stock repurchase program when it is believed to be the best use of Torchmark’s excess cash flows. Share repurchases under this program were 5.2 million shares at a cost of $311 million in 2016, 6.3 million shares at a cost of $359 million in 2015, and 7.2 million shares at a cost of $375 million in 2014. When stock options are exercised, proceeds from the exercises are generally used to repurchase approximately the number of shares available with those funds in order to reduce dilution. Shares repurchased for dilution purposes were 1.5 million shares at a cost of $93 million in 2016, 1.0 million shares at a cost of $60 million in 2015, and 1.4 million shares at a cost of $74 million in 2014.
Assets for each segment are reported based on a specific identification basis. The insurance segments’ assets contain deferred acquisition costs (including the value of insurance purchased). The investment segment includes the investment portfolio, cash, and accrued investment income. Goodwill is assigned to the insurance segments at the time of purchase based on the excess of cost over the fair value of assets acquired for the benefit of that segment. All other assets are included in the Other category. The table below reconciles segment assets to total assets as reported in the consolidated financial statements.