Additional Information

We have included the tables below and on the next page to provide reconciliations of certain GAAP financial measures to non-GAAP financial measures as follows: (i) a reconciliation of net income to core income, (ii) a reconciliation of shareholders’ equity to adjusted shareholders’ equity, which are components of the return on equity and core return on equity ratios, (iii) a calculation of return on equity and core return on equity, and (iv) a reconciliation of net income per share to core income per share on a diluted basis.

For the year ended December 31,

(Dollars in millions, after-tax)

2017

2016

2015

2014

2013

Reconciliation of net income to core income

Net income

$2,056

$3,014

$3,439

$3,692

$3,673

Adjustments:

Net realized investment gains

(142)

(47)

(2)

(51)

(106)

Impact of TCJA1 at enactment

129

Core income

$2,043

$2,967

$3,437

$3,641

$3,567

As of December 31,

(Dollars in millions)

2017

2016

2015

2014

2013

2012

Reconciliation of shareholders’ equity
to adjusted shareholders’ equity

Shareholders’ equity

$23,731

$23,221

$23,598

$24,836

$24,796

$25,405

Adjustments:

Net unrealized investment gains, net of tax, included in shareholders’ equity

(1,112)

(730)

(1,289)

(1,966)

(1,322)

(3,103)

Net realized investment gains, net of tax

(142)

(47)

(2)

(51)

(106)

(32)

Impact of TCJA1 at enactment

287

Adjusted shareholders’ equity

$22,764

$22,444

$22,307

$22,819

$23,368

$22,270

For the year ended December 31,

(Dollars in millions, after-tax)

2017

2016

2015

2014

2013

Calculation of return on equity and
core return on equity

Net income

$2,056

$3,014

$3,439

$3,692

$3,673

Average shareholders’ equity

23,671

24,182

24,304

25,264

25,099

Return on equity

8.7%

12.5%

14.2%

14.6%

Core income

$2,043

$2,967

$3,437

$3,641

$3,567

Adjusted average shareholders’ equity

22,743

22,386

22,681

23,477

23,004

Core return on equity

9.0%

13.3%

15.2%

15.5%

For the year ended December 31,

2017

2016

Reconciliation of net income
per share to core income
per share on a diluted basis

Diluted income per share

Net income

$7.33

$10.28

Adjustments:

Net realized investment gains, after-tax

(0.51)

(0.16)

Impact of TCJA1 at enactment

0.46

Core income

$7.28

$10.12

1Tax Cuts and Jobs Act of 2017 (TCJA)

Average shareholders’ equity is (a) the sum of total shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

Adjusted shareholders’ equity is shareholders’ equity excluding net unrealized investment gains (losses), net of tax, included in shareholders’ equity, net realized investment gains (losses), net of tax, for the period presented and the effect of a change in tax laws and tax rates at enactment (excluding the portion related to net unrealized investment gains (losses)). Adjusted average shareholders’ equity is (a) the sum of adjusted shareholders’ equity at the beginning and end of each of the quarters for the period presented divided by (b) the number of quarters in the period presented times two.

Return on equity is the ratio of (a) net income for the period presented to (b) average shareholders’ equity for the period presented. Core return on equity is the ratio of (a) core income for the period presented to (b) adjusted average shareholders’ equity for the period presented.

Definitions of other terms used in this Annual Report are included in the Glossary of Selected Insurance Terms portion of the Form 10‑K.