Fair value measurements

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Fair value measurements

Note 18. Fair value measurements

Our financial assets and liabilities are summarized below as of June 30, 2023 and December 31, 2022, with fair values shown according to the fair value hierarchy (in millions). The carrying values of cash and cash equivalents, U.S. Treasury Bills, other receivables and accounts payable, accruals and other liabilities are considered to be reasonable estimates of or otherwise approximate the fair values.

	Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	9,052	$	9,052	$	9,017	$	35	$	—
Foreign governments		11,481		11,481		11,170		311		—
Corporate bonds		1,554		1,554		—		908		646
Other		266		266		—		266		—
Investments in equity securities		353,409		353,409		342,596		11		10,802
Investments in Kraft Heinz & Occidental common stock		27,060		24,732		24,732		—		—
Loans and finance receivables		23,530		24,020		—		1,097		22,923
Derivative contract assets (1)		355		355		74		256		25
Derivative contract liabilities (1)		309		309		48		73		188
Notes payable and other borrowings:
Insurance and other		41,389		36,100		—		36,071		29
Railroad, utilities and energy		83,958		77,040		—		77,040		—
December 31, 2022
Investments in fixed maturity securities:
U.S. Treasury, U.S. government corporations    and agencies	$	9,802	$	9,802	$	9,733	$	69	$	—
Foreign governments		10,327		10,327		9,854		473		—
Corporate bonds		2,195		2,195		—		1,546		649
Other		2,804		2,804		—		2,804		—
Investments in equity securities		308,793		308,793		296,610		9		12,174
Investments in Kraft Heinz & Occidental common stock		24,421		25,491		25,491		—		—
Loans and finance receivables		23,208		23,428		—		1,513		21,915
Derivative contract assets (1)		589		589		56		474		59
Derivative contract liabilities (1)		242		242		8		122		112
Notes payable and other borrowings:
Insurance and other		46,538		41,961		—		41,061		900
Railroad, utilities and energy		76,206		67,651		—		67,651		—

——————

(1)Assets are included in other assets and liabilities are included in accounts payable, accruals and other liabilities.

Notes to Consolidated Financial Statements (Continued)

Note 18. Fair value measurements (Continued)

The fair values of substantially all of our financial instruments were measured using market or income approaches. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.

Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the six months ended June 30, 2023 and 2022 follow (in millions).

	Balance at beginning of year		Gains (losses) included in earnings			Acquisitions, dispositions and settlements			Transfers out of Level 3		Balance at June 30
Investments in equity securities:
2023	$	12,169	$	(86	)	$	(1,286	)	$	—	$	10,797
2022		11,480		455			—			—		11,935

Quantitative information as of June 30, 2023 for the significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) follows (dollars in millions).

	Fair Value		Principal Valuation Techniques	Unobservable Inputs	Weighted Average
Investments in equity securities:
Preferred stock	$	8,994	Discounted cash flow	Expected duration	6 years
				Discounts for liquidity    and subordination	372 bps
Common stock warrants		1,803	Warrant pricing model	Expected duration	6 years
				Volatility	40%

Investments in equity securities in the preceding table include our investments in certain preferred stock and common stock warrants that do not have readily determinable market values as defined under GAAP. These investments are private placements with contractual terms that restrict transfers and currently prevent us from economically hedging our investments. We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of liquidity and subordination in liquidation. In valuing the common stock warrants, we used a warrant valuation model. While most of the inputs to the model are observable, we made assumptions regarding the expected duration and volatility of the warrants.