Amounts are impacted by accumulated other comprehensive income totaling $149.6 million in 2016, $114.5 million in 2015, $258.4 million in 2014, $119.1 million in 2013 and $289.9 million in 2012. These amounts are net of deferred income taxes and other adjustments for assumed changes in deferred acquisition costs, unearned revenue reserve, value of insurance in force acquired and policyholder liabilities.
Our business generally benefits from moderate to strong economic expansion. Conversely, a lackluster economy characterized by higher unemployment, lower family income, lower consumer spending, muted corporate earnings growth and lower business investment could adversely impact the demand for our products in the future. We also may experience a higher incidence of claims, lapses or surrenders of policies during such times. We cannot predict whether or when such actions may occur, or what impact, if any, such actions could have on our business, results of operations, cash flows or financial condition.
Gross Domestic Product increased at an annual rate of 1.6% during 2016 based on recent estimates.
The U.S. 10-year Treasury yield increased during 2016 from 2.27% at December 31, 2015 to 2.45% at December 31, 2016.
Continued uncertainty as to actions the United States Congress will take to address the national debt, including potential actions to change the tax advantages of life insurance.
The pending Department of Labor fiduciary rule, which expands the regulation of sales of insurance products used in retirement plans. See Part 1, Item 1A for further discussion of this proposal.
Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred sales inducements, deferred acquisition costs and value of insurance in force acquired, as well as changes in interest sensitive product reserves and income taxes attributable to these items.
Average invested assets and annualized yield exclude investments in securities and indebtedness of related parties.
Our net income decreased during 2016, compared to 2015, primarily due to lower realized investment gains related to higher impairment charges as well as fewer sales of investments in a gain position. Net income and operating income were positively impacted by increased earnings from an increase in the volume of business in force, partially offset by lower other investment related-income and the impact of unlocking. Our net income increased during 2015, compared to 2014, primarily due to higher realized investment gains. Net income and operating income were negatively impacted by decreased earnings from increases in death benefits and expenses, partially offset by the impact of an increase in the volume of business in force and higher other investment-related income.
The Annuity segment also includes advances on our funding agreements with the Federal Home Loan Bank of Des Moines (FHLB). Outstanding funding agreements totaled $437.4 million at December 31, 2016, $366.4 million at December 31, 2015 and $362.9 million at December 31, 2014.
Continued growth in our business in force contributes to the increase in revenues, benefits and expenses. The increase in other underwriting expenses in 2015 was also due to a $1.1 million increase in defined benefit plan expense primarily due to settlement charges and the impact of changes in pension assumptions.
Death benefits, net of reinsurance and reserves released, decreased in 2016, compared to 2015, due to decreases in the number of claims. The increase in 2015, compared with 2014, was due to increases in the number of claims and the average size of claims.
Death benefits, net of reinsurance and reserves released, increased in 2016 and 2015, compared to prior periods, due to increases in the number of claims and in the average claim size.
Other income and other expenses includes fees and expenses from sales of brokered products and operating results of our non-insurance subsidiaries, which include management, advisory, marketing and distribution services and leasing activities.
In 2016, due to changes in product offerings since the last amendment to our policy for calculating operating income, we refined our calculation of operating income to include offsets relating to changes in interest sensitive product reserves. These offsets, net of tax, not taken into account in the computation of operating income for 2015 would have increased operating income $0.1 million and for 2014 would have decreased operating income $0.1 million.
The level of realized gains (losses) is subject to fluctuation from period to period due to movements in credit spreads and prevailing interest rates, changes in the economic environment, the timing of the sales of the investments generating the realized gains and losses, as well as the timing of other than temporary impairment charges. During 2016, we sold securities to decrease our exposure to the energy sector, resulting in realized gains of $3.9 million and realized losses of $8.4 million. See "Financial Condition - Investments" and Note 2 to our consolidated financial statements included in Item 8 for details regarding our unrealized gains and losses on available-for-sale securities at December 31, 2016 and 2015.
At December 31, 2016, 79.7% of our energy holdings were investment grade. Our non-investment grade holdings included oil field services with a carrying value of $33.2 million and an unrealized loss of $4.5 million and midstream issuers with a carrying value of $21.8 million and an unrealized loss of $0.9 million.
Our direct exposure to the Alt-A home equity and subprime first-lien sectors is limited to investments in structured securities collateralized by senior tranches of residential mortgage loans. We also have a partnership interest in two funds at December 31, 2016 and at December 31, 2015, that own securities backed by Alt-A home equity, subprime first-lien and adjustable rate mortgage collateral. The funds are reported as securities and indebtedness of related parties in our consolidated balance sheets with a fair value of $8.0 million at December 31, 2016 and $7.6 million at December 31, 2015. We do not own any direct investments in subprime lenders.
Future policy benefits increased 6.2% to $6,799.4 million at December 31, 2016 primarily due to an increase in the volume of annuity and life insurance business in force. Deferred income taxes increased 21.1% to $163.5 million at December 31, 2016, primarily due to the tax impact of the change in unrealized appreciation/depreciation on investments. Liabilities related to separate accounts decreased 4.5% to $597.1 million primarily due to policy surrenders and product charges.
As discussed in Note 7 to our consolidated financial statements included in Item 8, stockholders' equity was impacted by capital deployment actions during 2016. We paid a special cash dividend of $2.00 per share on Class A common stock and Class B common stock and increased our regular quarterly dividend by 5% to $0.42 per share.
For a majority of our products, profitability is significantly affected by the spreads between interest yields on investments and interest crediting rates on our insurance liabilities. For variable annuities and variable universal life policies, profitability on the portion of the policyholder's account balance invested in the fixed general account option, if any, is also affected by the spreads earned. For the variable products, the policyholder assumes essentially all the investment earnings risk for the portion of the account balance invested in the separate accounts.
Our exposure to interest rate risk stems largely from our annuity products as the cash flows of these products can vary significantly with changes in interest rates. We have holdings in fixed maturity and mortgage loan portfolios to offset the interest rate risk of our annuity products. We actively manage the projected cash flows and duration of these assets and liabilities by minimizing the difference between the two. While it can be difficult to maintain asset and liability durations that are perfectly matched in a dynamic environment, we have identified various strategies that can be implemented if duration mismatches exceed acceptable tolerances. The effective duration of the fixed maturity and mortgage loan portfolios backing our annuity products was 6.0 years at December 31, 2016 and 6.1 years at December 31, 2015. The effective duration of our annuity liabilities was approximately 6.3 years at December 31, 2016 and 6.4 years at December 31, 2015.
If interest rates had increased 10% from levels at December 31, 2016 and 2015, the fair value of our fixed maturity securities and short-term investments would have decreased approximately $135.4 million at December 31, 2016 and $118.4 million at December 31, 2015. These hypothetical changes in value do not take into account any offsetting change in the value of insurance liabilities for investment contracts since we estimate such value to be the cash surrender value for a portion of the underlying contracts. If interest rates had decreased 10% from levels at December 31, 2016 and 2015, the fair value of our debt would increase $2.7 million at December 31, 2016 and $2.6 million at December 31, 2015.
We earn mortality and expense fee income based on the value of our separate accounts at annual rates ranging from 0.00% to 1.45% for 2016, 2015 and 2014. As a result, revenues from these sources fluctuate with changes in the fair value of the equity, fixed maturity and other securities held by the separate accounts.
During 2016, our operating activities generated cash flows totaling $239.8 million, consisting of net income of $107.2 million adjusted for non-cash operating revenues and expenses netting to $132.6 million. We used cash of $387.5 million in our investing activities during 2016. The primary uses were $1,062.9 million of investment acquisitions, mostly in fixed maturity securities, partially offset by $675.3 million in sales, maturities and repayments of investments. Our financing activities provided cash of $151.8 million during 2016. The primary financing source was $600.4 million in receipts from interest sensitive products credited to policyholder account balances, which was partially offset by $344.7 million for return of policyholder account balances on interest sensitive products and $91.6 million for dividends paid to stockholders.
Parent company cash inflows from operations consist primarily of fees that it charges various subsidiaries and affiliates for management of their operations, expense reimbursements and tax settlements from subsidiaries and affiliates, proceeds from the exercise of employee stock options, investment income and dividends from subsidiaries, if declared and paid. Revenue sources for the parent company during 2016 included management fees from subsidiaries and affiliates totaling $7.8 million and dividends of $85.9 million. Cash outflows are principally for salaries, taxes and other expenses related to providing management services, dividends on outstanding stock, stock repurchases and interest on our parent company debt.
As discussed in Note 7 to our consolidated financial statements included in Item 8, we have periodically taken advantage of opportunities to repurchase our outstanding Class A common stock through Class A common stock repurchase programs approved by our Board of Directors. There was $49.5 million remaining available for repurchases at December 31, 2016, under the current $50 million Class A common stock repurchase program. Completion of this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. We repurchased 10,322 shares of Class A common stock for $0.6 million in 2016, 66,904 shares of Class A common stock for $3.7 million in 2015 and 429,746 shares of stock Class A common stock for $18.5 million in 2014. These transactions were primarily funded with available cash and resources at the parent company, including dividends received from subsidiaries of $85.9 million in 2016, $50.0 million in 2015 and $45.0 million in 2014.
Farm Bureau Life's ability to pay dividends to the parent company is limited by law to earned profits (statutory unassigned surplus) as of the date the dividend is paid, as determined in accordance with accounting practices prescribed by insurance regulatory authorities of the State of Iowa. At December 31, 2016, Farm Bureau Life’s statutory unassigned surplus was $483.8 million. There are certain additional limits on the amount of dividends that may be paid within a year without approval of the Insurance Division, Department of Commerce of the State of Iowa (the Iowa Insurance Division) as discussed in Note 7 to our consolidated financial statements included in Item 8. During 2017, the maximum amount legally available for distribution to the parent company without further regulatory approval is $106.1 million. Timing of such dividends during the year is limited based on the timing of dividends paid within the preceding 12 months.
Primarily related to service and maintenance agreements, a portion of which are incurred in our capacity as manager of our property-casualty affiliates. We receive reimbursement from our property-casualty affiliates for such amounts.
Includes our estimated future contributions to defined and postretirement benefit plans. Contributions related to the qualified pension plan are included through 2017. No amounts related to the qualified pension plan are included beyond 2017 as the contribution amounts will be re-evaluated based on actual results.
Death and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year based on the level of claims incurred under insurance retention limits.
Pension assets and liabilities are affected by the estimated fair value of plan assets, estimates of the expected return on plan assets and/or discount rates. Actual changes in the fair value of plan assets and differences between the actual return on plan assets and the expected return on plan assets will affect the amount of pension expense ultimately recognized. The December 31, 2016 pension obligation was computed based on an average 4.29% discount rate, which was based on yields for high-quality corporate bonds with a maturity approximating the duration of our pension liability. The long-term return on plan assets is based on current and projected asset allocations. Declines in comparable bond and equity yields would increase our net
pension liability. Our net pension liability could increase or decrease depending on the extent to which returns on pension plan assets are lower or higher than the discount rate.
At December 31, 2016, our fixed maturity securities classified as available for sale had a fair value of $7,008.8 million, with gross unrealized gains totaling $421.1 million and gross unrealized losses totaling $74.1 million. Due to the large number of fixed maturity securities held, the unique attributes of each security and the complexity of valuation methods, it is not practical to estimate a potential range of fair values for different assumptions and methods that could be used in the valuation process.
Due to the large number of securities within the investment portfolio and the unique credit characteristic of each, it is not practical to estimate a range of other-than-temporary impairment losses. As discussed in Note 2 to our consolidated financial statements included in Item 8, we believe that all other-than-temporary impairment losses within the portfolio have been recognized.
Based upon a historical analysis of fluctuations in estimated gross profits, we believe it is reasonably likely that a 10% change in estimated gross profits could occur. A 10% increase in estimated gross profits for 2017 would result in $1.9 million of additional amortization expense. Correspondingly, a 10% decrease in estimated gross profits would result in a $1.9 million reduction of amortization expense. The information above is for illustrative purposes only and does not reflect our expectations regarding future changes in estimated gross profits.
To determine our net periodic pension costs for 2016, we assumed an expected long-term rate of return on plan assets of 6.75% and a discount rate of 4.65%. Details regarding the method used to determine the discount rate are summarized in Note 8 to our consolidated financial statements included in Item 8.
We have audited the accompanying consolidated balance sheets of FBL Financial Group, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), FBL Financial Group, Inc.'s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2017 expressed an unqualified opinion thereon.
In February 2015, the Financial Accounting Standards Board (FASB) issued guidance that amends existing consolidation guidance. The decision to consolidate an entity that a company has an ownership stake in is based on one of two consolidation models: the voting interest entity model and the variable interest entity model. The new guidance revises certain criteria used to determine which consolidation model to use, as well as the criteria considered in each model to determine whether consolidation is required. We adopted the new guidance on January 1, 2016. Adoption of the guidance had no impact on our financial statements as it did not alter any of our prior consolidation decisions. Adoption did result in certain entities that were previously evaluated under the voting interest entity model to be evaluated under the variable interest entity model. See Note 2 for details regarding our variable interest entities.
contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard, which becomes effective for fiscal years beginning after December 15, 2017; early adoption is not permitted. We currently expect the impact of this new guidance to be related to non-insurance contract revenues, primarily net commissions on products we broker, which are insignificant to the consolidated financial statements.
In June 2016, the FASB issued guidance amending the accounting for the credit impairment of financial instruments. Under the new guidance, impairment losses are required to be estimated using an expected loss model under which a valuation allowance is established and adjusted over time. The valuation allowance will be based on the probability of loss over the life of the instrument, considering historical, current and forecasted information. The new guidance differs significantly from the incurred loss model used today, and will result in the earlier recognition of impairment losses. The new guidance may also increase the volatility of earnings to the extent actual results differ from the assumptions used in the establishment of the valuation allowance. The financial instruments for which we will be required to use the new model include but are not limited to, mortgage loans, lease receivables and reinsurance recoverables. Our available-for-sale fixed maturities will continue to apply the incurred loss model. However, rather than impairment losses resulting in a permanent reduction of carrying value as they do today, such losses will be in the form of a valuation allowance, which can be increased in the case of future credit losses or decreased should conditions improve. The guidance becomes effective for fiscal years beginning after December 15, 2019, with early adoption permitted on January 1, 2019. We are currently evaluating the impact of this new guidance on our consolidated financial statements, but expect that it will be material.
Our real estate is held for investment and reported at cost less allowances for depreciation, as applicable. The carrying value of these assets is subject to regular review. For properties held for investment, if indicators of impairment are present and a property's expected undiscounted cash flows are not sufficient to recover the property's carrying value, an impairment loss is recognized and the property's cost basis is reduced to fair value. No properties were held for investment with impairment charges as of December 31, 2016, and one property was held for investment with an impairment charge of $0.2 million as of December 31, 2015.
Securities and indebtedness of related parties include investments in corporations and partnerships over which we may exercise significant influence and those investments for which we are required or choose to use the equity method of accounting. These corporations and partnerships operate predominately in the investment company, real estate, broker/dealer and insurance industries and include non-guaranteed low income housing tax credit entities (LIHTC). Such investments are accounted for using the equity method. In applying the equity method, we record our share of income or loss reported by the equity investees. For partnerships operating in the investment company industry, this income or loss includes changes in unrealized gains and losses in the partnerships' investment portfolios.
Realized gains and losses on sales of investments are determined on the basis of specific identification. The carrying values of all our investments are reviewed on an ongoing basis for credit deterioration. When our review indicates a decline in fair value for a fixed maturity security is an other-than-temporary impairment (OTTI) and we do not intend to sell or believe we will be required to sell the security before recovery of our amortized cost, a specific write down is charged to earnings for the credit loss and a specific charge is recognized in accumulated other comprehensive income for the non-credit loss component. If we intend to sell or believe we will be required to sell a fixed maturity security before its recovery, the full amount of the impairment write down to fair value is charged to earnings. For all equity securities, the full amount of an OTTI write down is
recognized as a realized loss on investments in the consolidated statements of operations and the new cost basis for the security is equal to its fair value.
We use reinsurance to manage certain risks associated with our insurance operations. These reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential risks arising from large claims and provide additional capacity for growth. For business ceded to other companies, reinsurance recoverable includes the reinsurers' share of policyholder liabilities, claims and expenses, net of amounts due the reinsurers for premiums. For business assumed from other companies, reinsurance recoverable includes premium receivable net of our share of benefits and expenses we owe to the ceding company.
Other assets include property and equipment, primarily comprised of capitalized software costs and furniture and equipment, which are reported at cost less allowances for depreciation and amortization. We expense costs incurred in the preliminary stages of developing internal-use software as well as costs incurred post-implementation for maintenance. Capitalization of internal-use software costs occurs after management has authorized the project and it is probable that the software will be used as intended. Amortization of software costs begins after the software has been placed in production. Depreciation and amortization expense is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from three to twenty years. Property and equipment had a carrying value of $33.5 million at December 31, 2016 and $30.2 million at December 31, 2015, and accumulated depreciation and amortization of $70.1 million at December 31, 2016 and $61.4 million at December 31, 2015. Depreciation and amortization expense for property and equipment was $8.7 million in 2016, $8.2 million in 2015 and $6.3 million in 2014.
Other assets at December 31, 2016 and 2015, also includes goodwill of $9.9 million related to the excess of the amounts paid to acquire companies over the fair value of the net assets acquired. Goodwill is not amortized but is subject to annual impairment testing. We evaluate our goodwill balance by comparing the fair value of our reporting units to the carrying value of the goodwill. We conduct a qualitative impairment review at least annually as well as when indicators suggest an impairment may have occurred to determine if indicators of deterioration in the business would suggest its value has declined below the carrying value of goodwill. Such circumstances include changes in the competitive or overall economic environment or other business condition changes that may negatively impact the value of the underlying business. On a periodic basis, as well as in the event circumstances indicate the value of the business may have declined significantly, we will estimate the value of the business using discounted cash flow techniques. We believe this approach better approximates the fair value of our goodwill than a market capitalization approach. A number of significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including future premiums, product lapses, investment yields and discount rate. Underlying assumptions are based on historical experience and our best estimates given information available at the time of testing. As a result of this analysis, we have determined our goodwill was not impaired as of December 31, 2016 or 2015.
Future policy benefit reserves for interest sensitive products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. We also have additional benefit reserves that are established for annuity or universal life-type contracts that provide benefit guarantees, or for contracts that are expected to produce profits followed by losses. The liabilities are accrued in relation to estimated contract assessments. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances. Interest crediting rates for our interest sensitive products ranged from 1.00% to 5.50% in 2016, 2015 and 2014.
The liability for future policy benefits for direct participating traditional life insurance is based on net level premium reserves, including assumptions as to interest, mortality and other factors underlying the guaranteed policy cash values. Reserve interest assumptions are level and range from 2.00% to 6.00%. The average rate of assumed investment yields used in estimating gross margins was 5.51% in 2016, 5.66% in 2015 and 5.75% in 2014. The liability for future policy benefits for non-participating traditional life insurance is computed using a net level method, including assumptions as to mortality, persistency and interest and includes provisions for possible unfavorable deviations.
Revenues for interest sensitive and variable products consist of policy charges for the cost of insurance and product guarantees, asset charges, administration charges, amortization of policy initiation fees and surrender charges assessed against policyholder account balances. The timing of revenue recognition as it relates to these charges and fees is determined based on the nature of such charges and fees. Policy charges for the cost of insurance, asset charges and policy administration charges are assessed on a daily or monthly basis and are recognized as revenue when assessed and earned. Certain policy initiation fees that represent compensation for services to be provided in the future are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are determined based upon contractual terms and are recognized upon surrender of a
contract. Policy benefits and claims charged to expense include interest amounts credited to policyholder account balances and benefit claims incurred in excess of policyholder account balances during the period. Amortization of deferred acquisition costs is recognized as expense over the life of the policy.
We also have share-based payment arrangements under our Class A Common Stock Compensation Plan, although no new awards have been made since 2011. We recognize compensation expense for all share-based payments granted, modified or settled. The stock option expense was being recognized over the shorter of our five-year vesting schedule or the period ending when the employee becomes eligible for retirement using the straight-line method. However, during 2014 we accelerated the vesting of all unvested stock options and recognized the remaining compensation expense. The impact of forfeitures is estimated and compensation expense is recognized only for those stock-based instruments expected to vest. We report tax deductions related to stock-based instruments in excess of recognized compensation expense as a financing cash flow.
Fixed maturities in the above tables include 516 securities from 404 issuers at December 31, 2016 and 542 securities from 435 issuers at December 31, 2015.
Excluding mortgage- and asset-backed securities, our largest unrealized loss was from an oil field service provider and totaled $2.1 million at December 31, 2016. With respect to mortgage- and asset-backed securities not backed by the United States
Any loan delinquent on contractual payments is considered non-performing. At December 31, 2016 and December 31, 2015, there were no non-performing loans over 90 days past due on contractual payments. At December 31, 2016, we had committed to provide additional funding for mortgage loans totaling $50.0 million. These commitments arose in the normal course of business at terms that are comparable to similar investments.
Our commercial mortgage loan portfolio includes loans that have been modified. We assess loan modifications on a loan-by-loan basis to evaluate whether a troubled-debt restructuring has occurred. Generally, the types of concessions include: reduction of the contractual interest rate to a below-market rate, extension of the maturity date and/or a reduction of accrued interest. The
amount, timing and extent of the concession granted is considered in determining if an impairment loss is needed for the restructuring.
Amount represents credit-related losses for other investments, real estate and fixed maturities written down to fair value through income.
In addition, we make passive investments in the normal course of business in structured securities issued by VIEs for which we are not the investment manager. These structured securities include all of the residential mortgage-backed securities, commercial mortgage-backed securities and other asset-backed securities included in our fixed maturities. Our maximum exposure to loss on these securities is limited to our carrying value in the investment. We have determined that we are not the primary beneficiary of these structured securities because we do not have the power to direct the activities that most significantly impact the entities' economic performance.
We invest in non-guaranteed federal LIHTC, which are included in securities and indebtedness of related parties in the balance sheet. The carrying value of these investments totaled $91.3 million at December 31, 2016 and $94.2 million at December 31, 2015. There were no impairment losses recorded on these investments during 2016, 2015 or 2014. We use the equity method of accounting for these investments and recorded the following in our consolidated statement of operations.
At December 31, 2016, we had committed to provide additional funds for limited partnerships and limited liability companies in which we invest. The amounts of these unfunded commitments totaled $31.4 million, including $3.8 million for commitments to LIHTC, which are summarized by year in the following table.
At December 31, 2016, affidavits of deposits covering investments with a carrying value totaling $7,561.9 million were on deposit with state agencies to meet regulatory requirements. Fixed maturities with a carrying value of $496.8 million were on deposit with the Federal Home Loan Bank of Des Moines (FHLB) as collateral for funding agreements.
The carrying value of investments which have been non-income producing for the twelve months preceding December 31, 2016 includes real estate totaling $2.0 million.
No investment in any entity or its affiliates (other than bonds issued by agencies of the United States Government) exceeded 10.0% of stockholders' equity at December 31, 2016.
The carrying and estimated fair values of our financial instruments are as follows:
Mortgage loans are not measured at fair value on a recurring basis. Mortgage loans are a Level 3 measurement as there is no current market for the loans. The fair value of our mortgage loans is estimated internally using a matrix pricing approach. Along with specific loan terms, two key management assumptions are required including the risk rating of the loan (our current rating system is A-highest quality, B-moderate quality, C-low quality, W-watch or F-foreclosure) and estimated spreads for new loans over the U.S. Treasury yield curve. Spreads are updated quarterly and loans are reviewed and rated annually with quarterly adjustments should significant changes occur. Our determination of each loan's risk rating as well as selection of the credit spread requires significant judgment. A higher risk rating, as well as an increase in spreads, would result in a decrease in discounted cash flows used, and accordingly the fair value of the loan.
are not measured at fair value on a recurring basis, include a promissory note that is priced internally using a discounted cash flow based on our assessment of the credit risk of the borrower.
Long-term debt is not measured at fair value on a recurring basis. Long-term debt is a Level 3 measurement. The fair value of our outstanding debt is estimated using a discounted cash flow method based on the market's assessment or our current incremental borrowing rate for similar types of borrowing arrangements adjusted, as needed, to reflect our credit risk. Our selection of the credit spread requires significant judgment. A decrease in the spread will increase the estimated fair value of the outstanding debt.
Farm Bureau Life may cede certain losses under an annual 100% quota share accidental death reinsurance agreement. Coverage includes all acts of terrorism including those of a nuclear, chemical or biological origin. Coverage is subject to an annual aggregate retention of $14.6 million. A maximum occurrence limit of $50.0 million per aircraft applies to policies written on agents of the Company who are participating in company-sponsored incentive trips. Additionally, a $200.0 million occurrence limit applies to employees in the home office building, net of reinsurance on group life policies. All other occurrence catastrophes are unlimited in amount.
We file a consolidated federal income tax return with Farm Bureau Life and FBL Financial Services, Inc. and certain of their subsidiaries. The companies included in the consolidated federal income tax return each report current income tax expense as allocated under a consolidated tax allocation agreement. This allocation typically results in profitable companies recognizing a
tax provision as if the individual company filed a separate return and loss companies recognizing a benefit to the extent their losses contribute to reduce consolidated taxes.
Short-term debt as of December 31, 2015 consisted of two short-term advances, collateralized by fixed maturity securities, payable to FHLB totaling $15.0 million. The advances included a $10.0 million advance on December 21, 2015, due January
11, 2016, with an interest rate of 0.55% and a $5.0 million advance on December 30, 2015, due January 6, 2016, with an interest rate of 0.46%.
We periodically repurchase our Class A common stock under programs approved by our Board of Directors. These repurchase programs authorize us to make repurchases in the open market or through privately negotiated transactions, with the timing and terms of the purchases to be determined by management based on market conditions. Under these programs, we repurchased 10,322 shares of stock for $0.6 million in 2016, 66,904 shares of stock for $3.7 million in 2015 and 429,746 shares of stock for $18.5 million in 2014. Completion of this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares, if any, that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. There was $49.5 million remaining available for repurchases at December 31, 2016 under the active repurchase program.
We have agreed that we will not pay dividends on the Class A or Class B Common Stock, nor on the Series B Preferred Stock, if we are in default of the Subordinated Deferrable Interest Note Agreement dated May 30, 1997 with FBL Financial Group Capital Trust. We are compliant with all terms of this agreement at December 31, 2016. See Note 6 for additional information regarding this agreement.
In March 2016, we declared a special $2.00 per share cash dividend payable to Class A and Class B common shareholders totaling $49.7 million. In March 2015, we declared a special $2.00 per share cash dividend payable to Class A and Class B common shareholders totaling $49.5 million.
We participate in various defined benefit pension plans (the Plans), including a multiemployer plan. The multiemployer plan is considered qualified under Internal Revenue Service regulations, and covers our employees and the employees of the other participating companies who had attained age 21, had one year of service, and were employed prior to January 1, 2013. We also have a plan that provides supplemental pension benefits to certain highly compensated employees who have salaries and/or pension benefits in excess of the qualified limits imposed by federal law and were employed prior to January 1, 2013. Benefits under these plans are based on years of service and the employee's compensation. The plans are discussed below.
The FBL Financial Group Retirement Plan (the Multiemployer Plan) is considered a multiemployer plan, with the participation of unaffiliated and affiliated organizations along with FBL Financial Group, Inc. and its subsidiaries. Under the multiemployer plan structure, our contributions are commingled with those of the other employers to fund the plan benefit obligations. Should a participating employer be unable to provide funding, the remaining employers would be required to continue funding all future obligations. If an employer elects to discontinue participation, prior to departure they will be required to contribute their portion of the underfunded pension obligation associated with their employees. This required contribution will be based on an actuarial estimate of future benefit obligations, which as an estimate may not ultimately be sufficient to fund future actual benefits. None of the participating employers have provided notice that they would be discontinuing participation in the Multiemployer Plan or would otherwise be unable to continue providing their share of required funding as of December 31, 2016.
Contributions are made each year, resulting in the Multiemployer Plan being partially funded for payment of projected future benefit obligations. Effective in 2013, the Multiemployer Plan was closed to new participants and those participants who had not attained age 40 and 10 years of service as of December 31, 2012 no longer accrued additional years of service in the Multiemployer Plan.
Net periodic pension cost of the Multiemployer Plan is allocated between participating employers on a basis of time incurred by the respective employees for each employer. Such allocations are reviewed annually. This Multiemployer Plan is not subject to collective bargaining agreements, a financial improvement plan or a rehabilitation plan. No surcharges were required to be paid to the Multiemployer Plan during 2016, 2015 or 2014. We are the primary employer in the Multiemployer Plan, providing more than 5 percent of the total contributions during 2016, 2015 and 2014.
For our Multiemployer Plan, the underfunded portion of the pension benefit obligation is not required to be recognized as a liability in our consolidated balance sheets. The unrecognized liability for the underfunded status of our Multiemployer Plan totaled $45.4 million at December 31, 2016 and $57.1 million at December 31, 2015.
The Multiemployer Plan assets are primarily invested in annuity products and insurance company pooled separate accounts that invest predominately in equity securities and real estate. We have certain pension obligations that are fully funded through annuity contracts with Farm Bureau Life, which are presented as funded annuity contracts below. For 2016, excluding the funded annuity contracts, we employed a long-term investment strategy of diversifying the Multiemployer Plan assets with 55% in fixed income investments, 40% in equities and 5% in alternative investments. At December 31, 2016, the Multiemployer Plan assets were invested approximately 56% in fixed income investments, 41% in diversified equities and 3% in alternative investments. The fixed income investments consist primarily of the group annuity contract and fixed income securities held in pooled separate accounts. The equity securities are in pooled separate accounts and mutual funds. The alternative investments consist of interests in limited partnerships that own various liquid and illiquid assets. Our investment strategy is to (1) achieve a long-term return sufficient to satisfy all Multiemployer Plan obligations, (2) assume a prudent level of risk and (3) maintain adequate liquidity. The expected return on Multiemployer Plan assets is set at the long-term rate expected to be earned based on the long-term investment strategy of the Multiemployer Plan. In estimating the expected rate of return for each asset class, we take into account factors such as historical rates of return, expected future risk-free rates of return and anticipated returns expected given the risk profile of each asset class.
We participate with several affiliates in a 401(k) defined contribution plan, which covers substantially all employees. We match employee contributions up to 2% or 4% of the eligible compensation contributed by the employee and at an amount equal to 50% of an employee's contributions on the next 2% of the eligible compensation contributed by the employee. As shown in the table below, certain employees will also receive an annual discretionary employer contribution based on age plus years of service ranging from 2.75% to 5.75% as a percent of pay. Costs are allocated among the affiliates on a basis of time incurred by the respective employees for each company. Our expense related to this plan totaled $2.4 million in 2016, $2.2 million in 2015 and $2.0 million in 2014.
In addition to benefits offered under the aforementioned benefit plans, we and several other affiliates participate in a plan that provides group term life insurance benefits to retirees who have worked full-time for ten years and attained age 55 while in service. Postretirement benefit expense for this plan is allocated in a manner consistent with pension expense discussed above. We also have two single-employer plans that provide health and medical benefits to a small group of retirees. Postretirement benefit (income)/expense totaled ($0.1) million in 2016 and $0.1 million in 2015 and 2014. Changes in the underfunded portion of these plans, reported in other comprehensive income, aggregated less than ($0.1) million in 2016 and 2015 and $0.1 million in 2014. In addition to the health and medical postretirement plans being frozen to new participants, the group term life plan
will no longer be offered to employees retiring after December 31, 2016. Due to this change, we recognized $0.2 million in curtailment gain in the fourth quarter of 2016.
The share-based payment arrangements under our Class A Common Stock Compensation Plan are described below. We allocate a portion of the expense for these arrangements to affiliates; expense amounts below represent our share of these expenses. Expenses have been fully recognized under this plan as of December 31, 2014. Compensation expense for these arrangements totaled $0.2 million for 2014. The income tax benefit recognized in the statements of operations for these arrangements totaled less than $0.1 million for 2014.
Prior to 2012, we granted stock options for Class A common stock to officers and employees, which have a contractual term of 10 years and vest over a period up to five years, contingent upon continued employment with us. Prior to 2009, we also granted stock options for Class A common stock to directors, which were fully vested upon grant and had a contractual term that varied with the length of time the director remained on the Board, up to 10 years. The exercise price for all options is equal to the fair value of the common stock on the grant date. The fair value of each option award was estimated on the date of grant using a Black-Scholes-Merton option valuation model. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. We used the historical realized volatility of our stock for the expected volatility assumption within the valuation model. The weighted average expected term for the majority of our options was calculated using average historical behavior.
In 2014, we accelerated the vesting of all unvested options. Accordingly, the expense related to nonvested share-based compensation granted under the stock option arrangement has been fully recognized at December 31, 2014.
Represents the difference between the share price and exercise price for each option, excluding options where the exercise price is above the share price, at December 31, 2016.
The intrinsic value of options exercised during the year totaled $3.2 million for 2016, $4.5 million for 2015 and $6.5 million for 2014.
The weighted average grant-date fair value per common share of restricted stock units granted was $60.34 in 2016, $52.19 in 2015 and $38.63 in 2014. Unrecognized compensation expense related to unvested restricted stock units based on the stock price at December 31, 2016 totaled $4.1 million. This expense is expected to be recognized over a weighted-average period of 1.83 years. Dividends are paid on restricted stock units upon vesting. Cash payments including dividends for restricted stock units totaled $2.7 million in 2016 and $1.8 million in 2015 and 2014.
We also have an Executive Salary and Bonus Deferred Compensation Plan under which certain officers of the Company were allowed to use their base salary and annual cash bonus to purchase deferred cash-based stock units. Cash-based stock units outstanding under this plan totaled 16,323 at December 31, 2016 and 16,679 at December 31, 2015. Prior to 2012, deferred stock units were used instead of deferred cash-based stock units. Under this plan, we have deferred stock units outstanding totaling 63,909 at December 31, 2016 and 66,621 at December 31, 2015. At December 31, 2016, shares of Class A common stock available for future issuance under this plan totaled 99,933. This plan was frozen to future deferrals on December 31, 2013.
We have management agreements under which we provide general business, administrative and management services to Farm Bureau Property & Casualty Insurance Company and other affiliates. Fee income for these services totaled $2.2 million in 2016, $2.3 million in 2015 and $1.9 million in 2014. In addition, as discussed in Note 1, we provide investment advisory services and lease property and equipment under agreements with Farm Bureau Property & Casualty, other affiliates and non-affiliates.
We share certain office facilities and services with the IFBF and its affiliated companies. These expenses are allocated on the basis of cost and time studies that are updated annually and primarily consist of rent, salaries and related expenses, travel and other operating costs. In addition, Farm Bureau Management Corporation, a wholly-owned subsidiary of the IFBF, provides certain services to us under a separate arrangement. We incurred related expenses totaling $1.0 million in 2016, 2015 and 2014.
We have service agreements with the Farm Bureau-affiliated property-casualty companies operating within our marketing territory, including Farm Bureau Property & Casualty Insurance Company and another affiliate. Under the service agreements, the property-casualty companies are responsible for development and management of our agency force for a fee. We incurred expenses totaling $8.6 million in 2016, $9.9 million in 2015 and $9.3 million in 2014 relating to these arrangements.
We are licensed by the IFBF to use the "Farm Bureau" and "FB" designations in Iowa. In connection with this license, we incurred royalty expense totaling $0.6 million in 2016 and 2015 and $0.5 million in 2014. We have similar arrangements with other state Farm Bureau organizations in our market territory. Total royalty expense to Farm Bureau organizations other than the IFBF totaled $1.8 million in 2016 and $1.7 million in 2015 and 2014. The royalty agreement with the IFBF provides them an option to terminate the agreement if our quarterly common stock dividend is below $0.10 per share.
In the normal course of business, we may be involved in litigation in which damages are alleged that are substantially in excess of contractual policy benefits or certain other agreements. In recent years, companies in the life insurance and annuity business have faced litigation, including class action lawsuits, alleging improper product design, improper sales practices and similar claims. We are not aware of any such claims threatened or pending against FBL Financial Group, Inc. or any of its subsidiaries for which a material loss is reasonably possible.
We lease our home office properties under a 10-year operating lease, which expires in 2021, from a wholly-owned subsidiary of the IFBF. Future remaining minimum lease payments under this lease, as of December 31, 2016, are as follows: 2017 - $2.1 million, 2018 - $2.1 million, 2019 - $2.1 million, 2020 - $2.1 million and 2021 - $2.1 million. Rent expense for the lease totaled $4.1 million in 2016, $4.0 million in 2015 and $4.3 million in 2014. These amounts are net of $0.2 million in 2016, 2015 and 2014 in amortization of a deferred gain on the exchange of our home office properties for common stock in 1998. The remaining unamortized deferred gain totaled $0.9 million at December 31, 2016 and $1.0 million at December 31, 2015.
From time to time, assessments are levied on our insurance subsidiaries by guaranty associations in most states in which the subsidiaries are licensed. These assessments, which are accrued for, are to cover losses of policyholders of insolvent or rehabilitated companies. In some states, these assessments can be partially recovered through a reduction in future premium
taxes. Expenses for guaranty fund assessments, net of related premium tax offsets, totaled less than $0.1 million in 2016, 2015 and 2014.
The statutory financial statements of Farm Bureau Life and Greenfields are prepared in accordance with the accounting practices prescribed or permitted by the Insurance Division of the state of Iowa and the Colorado Division of Insurance, respectively. Those insurance divisions have adopted the accounting guidance contained in the National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures Manual (the Manual) as the prescribed accounting practice for insurance companies domiciled in their state. The insurance divisions may permit accounting practices that differ from those prescribed by the Manual. None of our statutory accounting practices differed materially from those prescribed by the Manual. Several differences exist between GAAP and statutory accounting practices. Principally, under statutory accounting, deferred acquisition costs are not capitalized, fixed maturity securities are generally carried at amortized cost, insurance liabilities are presented net of reinsurance, contract holder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted.
Farm Bureau Life's ability to pay dividends to the parent company is restricted by the Iowa Insurance Holding Company Act to earned surplus arising from its business as of the date the dividend is paid. In addition, prior approval of the Iowa Insurance Commissioner is required for a dividend distribution of cash or other property whose fair value, together with that of other dividends made within the preceding 12 months, exceeds the greater of (i) 10% of policyholders' surplus as of the preceding year end, or (ii) the statutory net gain from operations of the insurer for the preceding calendar year. As shown in the tables above, at December 31, 2016, Farm Bureau Life’s net gain from operations of $106.1 million, exceeded 10% of statutory surplus; accordingly, that amount is the maximum available for distribution to FBL Financial Group, Inc. without regulatory approval during 2017. Timing of such dividends during the year is limited based on the timing of dividends paid within the preceding 12 months.
Operating income is not a measure used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of performance. We use operating income for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community.
We analyze our segment results based on pre-tax operating income. Accordingly, income taxes are not allocated to the segments. In addition, operating results are reported net of transactions between the segments. Operating income adjustments are net of amortization of unearned revenue reserves, deferred acquisition costs and value of insurance in force acquired, as well as changes in interest sensitive product reserves and income taxes attributable to these items. While not applicable for the periods reported herein, our operating income policy also calls for adjustments to net income relating to the following:
Depreciation and amortization related to property and equipment are allocated to the product segments while the related property, equipment and capitalized software are allocated to the Corporate and Other segment. Depreciation and amortization for the Corporate and Other segment include $4.4 million for 2016, $4.1 million for 2015 and $3.1 million for 2014 relating to leases with affiliates. In the consolidated statements of operations, we record these depreciation amounts net of related lease income from affiliates.
Premiums collected, which is not a measure used in financial statements prepared according to GAAP, include premiums received on life insurance policies and deposits on annuities and universal life-type products. Premiums collected is a common life insurance industry measure of agent productivity. Net premiums collected totaled $689.7 million in 2016, $683.1 million in 2015 and $646.6 million in 2014.