per visit, inpatient hospital care per admission, physician fees per office visit and prescription drug prices. Utilization rates represent the volume of consumption of health services and typically vary with the age and health status of our members and their social and lifestyle choices, along with clinical protocols and medical practice patterns in each of our markets. A portion of benefit expense recognized in each reporting period consists of actuarial estimates of claims incurred but not yet paid by us. Any changes in these estimates are recorded in the period the need for such an adjustment arises. While we offer a diversified mix of managed care products and services through our managed care plans, our aggregate cost of care can fluctuate based on a change in the overall mix of these products and services. Our managed care plans include: Preferred Provider Organizations, or PPOs; Health Maintenance Organizations, or HMOs; Point-of-Service plans, or POS plans; traditional indemnity plans and other hybrid plans, including Consumer-Driven Health Plans, or CDHPs; and hospital only and limited benefit products.
Our diluted earnings per share, or EPS, for the year ended December 31, 2017 was $14.35, an increase of $5.14, or 55.8%, from the year ended December 31, 2016. Our diluted shares for the year ended December 31, 2017 were 267.8, a decrease of 0.3, or 0.1% compared to the year ended December 31, 2016. The increase in EPS resulted from the increase in net income, and to a lesser extent, the lower number of shares outstanding in 2017.
Board of Directors declaration of dividends on common stock (2013 through January 2018); authorization for repurchases of our common stock (2017 and prior); and debt repurchases and new debt issuance (2017 and prior).
Medicare customers are Medicare-eligible individual members age 65 and over who have enrolled in Medicare Supplement plans; Medicare Advantage, including Special Needs Plans; Medicare Part D; and dual-eligible programs through Medicare-Medicaid Plans, or MMPs. Medicare Supplement plans typically pay the difference between healthcare costs incurred by a beneficiary and amounts paid by Medicare. Medicare Advantage plans provide Medicare beneficiaries with a managed care alternative to traditional Medicare and often include a Medicare Part D benefit. In addition, our Medicare Advantage Special Needs Plans provide tailored benefits to Medicare beneficiaries who have chronic diseases and also cover certain dual-eligible customers, who are low-income seniors and persons under age 65 with disabilities. Medicare Part D offers a prescription drug plan to Medicare and MMP beneficiaries. MMP is a demonstration program focused on serving members who are dually eligible for Medicaid and Medicare, which was established as a result of the passage of the ACA. Medicare Supplement and Medicare Advantage products are marketed in the same manner, primarily through independent agents and brokers. Medicare business accounted for 3.8%, 3.6% and 3.7% of our medical members at December 31, 2017, 2016 and 2015, respectively.
Our benefit expense ratio increased 160 basis points to 86.4% in 2017. The increase in the ratio was largely driven by the loss of revenue associated with the HIP Fee suspension for 2017, higher medical cost experience in our Medicare business and adjustments to prior year estimates for the ACA risk adjustment premium stabilization program. The increase in the ratio was partially offset by improved medical cost experience in our Individual business.
Our selling, general and administrative expense ratio decreased 70 basis points to 14.2% in 2017. The decrease in the ratio was due, in part, to the lower ACA fees discussed above, lower selling, general and administrative costs related to expense efficiency initiatives and growth in operating revenue. These decreases were partially offset by an increase in spend to support our growth initiatives, the impact of the Penn Treaty guaranty fund assessment, an increase in performance-based incentive compensation and the accrual related to the settlement of the 2015 cyber attack class action litigation.
Operating gain decreased $354.1, or 19.8%, to $1,430.2 in 2017, primarily due to the impact of the HIP Fee suspension for 2017 and higher medical cost experience in our Medicare business. The decrease was further due to an increase in performance-based incentive compensation and an increase in spend to support our growth initiatives. These decreases were partially offset by lower selling, general and administrative costs related to expense efficiency initiatives and fixed costs leverage from higher operating revenue.
The following table shows the variance between total net incurred medical claims as reported in Note 11, “Medical Claims Payable,” to our audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for each of 2016 and 2015 and the incurred claims for such years had it been determined retrospectively (computed as the difference between “net incurred medical claims - current year” for the year shown and “net incurred medical claims - prior years redundancies” for the immediately following year):
The 2016 variance to total net incurred medical claims, as reported of 0.5% was greater than the 2015 percentage of 0.1%. The lower 2015 variance was driven by a similar level of prior year redundancies in 2016 associated with 2015 claim payments to the prior year redundancies in 2015 associated with 2014 claims payments. Prior year redundancies in 2017 associated with 2016 claim payments were higher by comparison to the previous year, thus creating a higher 2016 variance.
In certain circumstances, it may not be possible to derive pricing model inputs from observable market activity, and therefore, such inputs are estimated internally. Such securities are designated Level III in accordance with FASB guidance. Securities designated Level III at December 31, 2017 totaled $537.5 and represented approximately 2.2% of our total assets measured at fair value on a recurring basis. Our Level III securities primarily consisted of certain corporate securities, equity securities and structured securities for which observable inputs were not always available and the fair values of these securities were estimated using internal estimates for inputs including, but not limited to, prepayment speeds, credit spreads, default rates and benchmark yields.
Health Insurance Provider Fee: The ACA imposed an annual Health Insurance Provider Fee, or HIP Fee, on health insurers that write certain types of health insurance on U.S. risks. The annual HIP Fee is allocated to health insurers based on the ratio of the amount of an insurer's net premium revenues written during the preceding calendar year to an adjusted amount of health insurance for all U.S. health risk for those certain lines of business written during the preceding calendar year. We
The preliminary fair value of the net assets acquired from HealthSun includes $572.0 of other intangible assets at December 31, 2017, which primarily consist of finite-lived customer relationships with amortization periods ranging from 7 to 20 years. The results of operations of HealthSun are included in our consolidated financial statements within our Government Business segment for the period following December 21, 2017. The pro forma effects of this acquisition for prior periods were not material to our consolidated results of operations.
The changes in the amount of the credit component of OTTI losses on fixed maturity securities recognized in income, for which a portion of the OTTI losses was recognized in other comprehensive income, was not material for the years ended December 31, 2017, 2016 or 2015.
At December 31, 2017 and 2016, the carrying value of fixed maturity investments that did not produce income during the years then ended were $8.8 and $0.5, respectively.
At December 31, 2017 and 2016, securities with carrying values of approximately $560.8 and $524.4, respectively, were deposited by our insurance subsidiaries under requirements of regulatory authorities.
On December 22, 2017, the federal government enacted a tax bill, H.R.1, An act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, or the Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act contains significant changes to corporate taxation, including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21% and modifying or limiting many business deductions. At December 31, 2017, we had not completed our accounting for the tax effects resulting from the enactment of the Tax Cuts and Jobs Act; however, we have made a reasonable estimate of the effects on our existing deferred tax balances. We remeasured deferred tax assets and liabilities based on the rates at which they are expected to be utilized in the future, which is generally 21%. However, we are still analyzing certain aspects of the Tax Cuts and Jobs Act and refining our calculations, which could potentially affect the measurement of those balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was a benefit of $1,108.3, or $4.14 per diluted share, and is included as a component of income tax expense.
The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be reclassified from accumulated other comprehensive loss into net periodic benefit costs over the next year are $22.4 and $0.2, respectively. The estimated net actuarial loss and prior service credit for postretirement benefit plans that will be reclassified from accumulated other comprehensive loss into net periodic benefit costs over the next year are $3.5 and $12.4, respectively.
During the years ended December 31, 2017, 2016 and 2015 we incurred total settlement losses of $7.4, $7.3 and $6.5, respectively, as lump-sum payments exceeded the service cost and interest cost components of net periodic benefit cost for certain of our plans.
At December 31, 2017, the cumulative number of reported claims for the Commercial & Specialty Business was 124.5, 115.5 and 113.1 for the claims years 2015 and prior, 2016 and 2017, respectively.
As of December 31, 2017, our common stock was last traded at a price of $225.01 per share. If the remaining Debentures had been converted or matured at December 31, 2017, we would have been obligated to pay the principal of the Debentures plus an amount in cash or shares equal to $829.1. The Debentures and underlying shares of our common stock have not been and will not be registered under the Securities Act, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
possible losses is based upon currently available information taking into account our best estimate of such losses for which such an estimate can be made.
During the year ended December 31, 2017, we granted approximately 0.4 restricted stock units that are contingent upon us achieving earning targets over the three year period of 2017 to 2019. These grants have been included in the activity shown above, but will be subject to adjustment at the end of 2019, based on results in the three year period.
As of December 31, 2017, there were approximately 29.3 shares of common stock available for future grants under the 2017 Incentive Plan.