The charts on the following pages provide a comparison of our 2017 and 2016 results compared with each prior year.
Further discussion of detailed components of revenues and expenses can be found in the "Consolidated Results of Operations" section of this MD&A beginning on page 38. For further analysis and explanation of individual segment results, see the "Segment Reporting" section of this MD&A beginning on page 47.
Health Care Industry Developments and Other Matters Affecting Our Global Health Care Segment
The following table presents the after-tax (charges) and benefits to shareholders' net income from these programs for the years ended December 31, 2017, 2016 and 2015 and our net (payable) receivable balances as of December 31, 2017 and 2016.
In 2016, we recorded an allowance for the balance of our risk corridor receivable based on court decisions and the large risk corridor program deficit. As of December 31, 2017, we continued to hold an allowance for the balance of our risk corridor receivable of $109 million based on the current status of court decisions. However, we continue to believe that the government has a binding obligation to satisfy the risk corridor receivable.
Interest expense on long-term debt, short-term debt and capital leases was as follows:
• operating expense and acquisition expense as a percentage of operating revenues (expense ratio and acquisition cost ratio); and
Operating revenues were relatively flat in 2017 compared with 2016 with higher investment income driven by higher asset levels offset by cancelations in non-core products.
Operating expense ratio. The 2017 operating expense ratio increased compared with 2016 due to higher overhead costs.
•Supplemental health, life and accident insurance products (primarily individual products) that comprise the majority of the Company's deferred policy acquisition costs and group health and accident insurance products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.
• The risk corridor program (also discontinued as of December 31, 2016) was designed to limit insurer gains and losses by comparing allowable medical costs to a target amount as defined by HHS. The Company recorded receivables or payables as adjustments to premium revenue based on year-to-date experience when the amounts were reasonably estimable and collection was reasonably assured. In 2016, the Company also recorded an allowance against these risk corridor receivables that is discussed further in Note 22. Premiums for individual life, accident and supplemental health insurance and annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums.
On September 14, 2017, the Company issued new long-term debt as follows:
• 100% of the principal amount of the applicable Notes; or
separate accounts are excluded from the following discussion because associated gains and losses generally accrue directly to separate account policyholders.
Components of net pension and other postretirement benefits cost for the years ended December 31 were as follows:
The Company calculates depreciation and amortization principally using the straight-line method generally based on the estimated useful life of each asset as follows: buildings and improvements, 10 to 40 years; purchased software, three to five years; internally developed software, three to seven years; and furniture and equipment (including computer equipment), three to 10 years. Improvements to leased facilities are depreciated over the lesser of the remaining lease term or the estimated life of the improvement. The Company considers events and circumstances that would indicate the carrying value of property, equipment or capitalized software might not be recoverable. If the Company determines the carrying value of any of these assets is not recoverable, an impairment charge is recorded.
In the Company's segment disclosures, we present "operating revenues," defined as total revenues excluding realized investment results. The Company excludes realized investment results from this measure because its portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment. As a result, gains or losses created in this process may not be indicative of past or future underlying performance of the business.
The following unaudited quarterly financial data is presented on a consolidated basis for each of the years ended December 31, 2017 and December 31, 2016. Quarterly financial results necessarily rely heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business, suggest the need to exercise caution in drawing specific conclusions from quarterly consolidated results.