In August 2016, we acquired 100 percent of the shares and voting interests in H&J Capital, L.L.C., parent of Starmount Life Insurance Company and AlwaysCare Benefits (which collectively we refer to as Starmount), for a total cash purchase price of $140.3 million plus contingent cash consideration of $10.0 million to be paid in two increments of $5.0 million each, at 18 and 24 months from the date of acquisition upon satisfaction of certain conditions. Starmount Life Insurance Company is an independent provider of dental and vision insurance in the U.S. workplace, and AlwaysCare Benefits is a nationally licensed, third-party administrator. The acquisition of Starmount broadens our employee benefit offerings in the U.S. Starmount's dental and vision products and new dental and vision products marketed by Unum US are reported in our Unum US segment within our supplemental and voluntary product lines. Colonial Life dental and vision products will be introduced in 2018 and will be reported in our Colonial Life segment. This acquisition, the results of which are included in our consolidated financial statements for the period subsequent to the date of acquisition, did not have a material impact on revenue, operating results, or sales for 2016.
Effective December 31, 2017, to more clearly differentiate between the GAAP and non-GAAP financial measures, we changed the naming convention for our non-GAAP financial measures from “operating” to “adjusted operating” measures, which includes a change from "after-tax operating income" to "after-tax adjusted operating income." The definition of this label remains unchanged. In addition, although they are in accordance with GAAP guidance for segment reporting, we have also changed the naming convention for our "operating revenue" to "adjusted operating revenue" and our "operating income" to "adjusted operating income." The definition of these labels also remains unchanged.
As of December 31, 2017, the key assumptions we generally used to estimate the fair value of these types of securities included those listed below. Where appropriate, we have noted the assumption used for the prior period as well as the reason for the change.
Group disability sales decreased compared to 2015 due to lower sales to new customers in both the core and large case market segments, partially offset by an increase in sales to existing customers. Sales for group life and accidental death and dismemberment increased compared to 2015, primarily driven by higher sales in the large case market. The sales mix in the group market sector for 2017 was approximately 63 percent core market and 37 percent large case market.
Supplemental sales increased compared to 2015 due primarily to the addition of sales related to our dental product offering as well as higher sales in our group critical illness product line.
We remain committed to driving growth in the U.K. market, and during 2018, we will continue to build on those capabilities that we believe will generate growth and profitability in our businesses. Expanding our group long-term disability market position remains a significant opportunity and priority. Our key priorities in 2018 include the continuing implementation of price increases across interest sensitive product lines while maintaining solid persistency results and continuing to follow a disciplined approach to new sales activity in the competitive pricing environment. We intend to build upon the strong sales momentum we have seen in our group critical illness and dental products through increased participation rates as well as accelerate growth in our group life line of business. We will expand our distribution and build marketing and digital capabilities which we believe will drive sustainable growth. We have simplified our processes and operations to deliver efficiencies and further improvements to customer service and remain focused on risk discipline.
Fixed Maturity Securities: Fixed maturity securities include long-term bonds and redeemable preferred stocks. Our fixed maturity securities are classified as available-for-sale and reported at fair value. Changes in the fair value of available-for-sale fixed maturity securities, except for amounts related to other-than-temporary impairment losses recognized in earnings, are reported as a component of other comprehensive income. These amounts are net of income tax and valuation adjustments to deferred acquisition costs and reserves for future policy and contract benefits which would have been recorded had the related unrealized gain or loss on these securities been realized.
This update changes the accounting and disclosure requirements for certain financial instruments. These changes include a requirement to measure equity investments, other than those that result in consolidation or are accounted for under the equity method, at fair value through net income unless the investment qualifies for certain practicability exceptions. In addition, the update clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale fixed maturity securities. Changes also include the modification of certain disclosures around the fair value of financial instruments, including the requirement for separate presentation of financial assets and liabilities by measurement category, as well as the elimination of certain disclosures around methods and significant assumptions used to estimate fair value. The guidance is to be applied using a modified retrospective approach through a cumulative-effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year the guidance is adopted. Early adoption is generally not permitted, with certain exceptions as defined in the update.
Approximately 2.5 percent of our fixed maturity securities were valued based on one or more non-binding broker quotes, if validated by observable market data, or on TRACE prices for identical or similar assets absent current market activity. When only one price is available, it is used if observable inputs and analysis confirms that it is appropriate. These assets, for which we were able to validate the price using other observable market data, were classified as Level 2.
As of December 31, 2017 and 2016, we had $343.9 million and $394.1 million, respectively, notional amount of receive fixed, pay fixed, open current and forward foreign currency interest rate swaps to hedge fixed income foreign currency-denominated securities.
TCJA brought a large number of complex changes to many areas of the tax code. The final impacts of the TCJA, including the deemed repatriation transition tax and deferred tax liability revaluation, may differ from current estimates due to changes in interpretations of the legislation, changes in accounting standards or related interpretations in response to TCJA, or updates or changes in the estimates used to calculate the impacts of TCJA. The Securities and Exchange Commission has issued rules that allow for a one year measurement period after the enactment date of TCJA to finalize the calculation and recording of the related tax impacts. We anticipate finalizing and recording any adjustments to our initial estimates during 2018. Effective January 1, 2018 the TCJA creates a U.S. shareholder tax on certain foreign subsidiary income above a routine equity return on tangible depreciable business assets, or a tax on Global Intangible Low-taxed Income (GILTI). The FASB has provided additional guidance to address the accounting effects of GILTI, requiring companies to elect to either recognize deferred taxes related to GILTI or include in tax expense in the period incurred. We have elected to treat GILTI as a period cost.
We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. Our valuation allowance was $20.3 million and $17.2 million at December 31, 2017 and 2016, respectively. We recorded a cumulative deferred tax asset for future state income tax benefits of $22.0 million and $18.7 million, net of federal tax benefits, as of December 31, 2017 and 2016, respectively, and recorded a corresponding valuation allowance of $19.3 million and $16.3 million, respectively, to reduce the deferred tax asset to the amount that is more likely than not to be realized. The remaining of
In June 2017, we purchased and retired the remaining $3.4 million of principal on our senior secured floating rate notes acquired through our purchase of Starmount Life Insurance Company. In conjunction with this retirement, we also terminated the interest rate swap associated with the hedge of these notes and recorded a $0.1 million loss in our consolidated statements of income as a component of net realized investment gains and losses. See Note 4 for further discussion on the interest rate swap.
At December 31, 2017 and 2016, the annual rates of increase in the per capita cost of covered postretirement health care benefits assumed for the next calendar year are 7.00 percent for benefits payable to both retirees prior to Medicare eligibility as well as Medicare eligible retirees. The rates are assumed to change gradually to 5.00 percent by 2024 for measurement at December 31, 2017 and remain at that level thereafter. The annual rates of increase in the per capita cost of covered postretirement health benefits do not apply to retirees whose postretirement health care benefits are provided through an exchange.
The unrecognized net actuarial loss and the prior service credit included in accumulated other comprehensive income and expected to be amortized and included in net periodic pension cost during 2018 is $22.3 million and $0.2 million before tax, respectively.
We use the treasury stock method to account for the effect of outstanding stock options, nonvested restricted stock units, and nonvested performance share units on the computation of diluted earnings per share. Under this method, these potential common shares will each have a dilutive effect, as individually measured, when the average market price of Unum Group common stock during the period exceeds the exercise price of the stock options and the grant price of the nonvested restricted
As of January 1, 2016, Solvency II, a European Union directive that prescribes new capital requirements and risk management standards for the European insurance industry, replaced the previous capital requirements for Unum Limited. As derived from the most recent annual financial statements based on Solvency II requirements, regulatory net income and own funds available of our United Kingdom insurance subsidiary, Unum Limited, were £25.9 million and £242.8 million, respectively.