Fair Value and Investment Securities (Tables)

6 Months Ended

Jun. 30, 2013

Distribution of Financial Instruments, Measured at Fair Value on a Recurring Basis

The distribution of the Company’s financial instruments which are measured at fair value on a recurring basis within the Valuation Hierarchy was as follows:



	June 30, 2013
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
Municipal securities ¹	$	—	$	511	$	—	$	511
U.S. Government and Agency securities²	—		528		—		528
Taxable short-term bond funds	—		—		—		—
Corporate securities	—		1,287		—		1,287
Asset-backed securities	—		345		—		345
Auction rate securities	—		—		23		23
Other	—		77		—		77
Total	$	—	$	2,748	$	23	$	2,771

	December 31, 2012
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
Municipal securities ¹	$	—	$	531	$	—	$	531
U.S. Government and Agency securities ²	—		582		—		582
Taxable short-term bond funds	210		—		—		210
Corporate securities	—		1,246		—		1,246
Asset-backed securities	—		316		—		316
Auction rate securities	—		—		32		32
Other	—		63		—		63
Total	$	210	$	2,738	$	32	$	2,980

¹ Available-for-sale municipal securities are carried at fair value and are included in the above tables. However, a held-to-maturity municipal bond was carried at amortized cost and excluded from the above table at December 31, 2012.

² Excludes amounts held in escrow for the preliminary U.S. merchant class litigation settlement of $724 million and $726 million at June 30, 2013 and December 31, 2012, respectively, which would be included in Levels 1 and 2 of the Valuation Hierarchy. See Note 6 (Accrued Expenses) and Note 11 (Legal and Regulatory Proceedings) for further details.

Available-for-Sale Investment Securities, Unrealized Gains and Losses

The major classes of the Company’s available-for-sale investment securities, for which unrealized gains and losses are recorded as a separate component of other comprehensive income on the consolidated statement of comprehensive income, and their respective amortized cost basis and fair values as of June 30, 2013 and December 31, 2012 were as follows:



	June 30, 2013
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
	(in millions)
Municipal securities	$	507	$	6	$	(2	)	$	511
U.S. Government and Agency securities	528		—		—			528
Taxable short-term bond funds	—		—		—			—
Corporate securities	1,288		1		(2		)	1,287
Asset-backed securities	345		—		—			345
Auction rate securities ¹	26		—		(3		)	23
Other	71		—		—			71
Total	$	2,765	$	7	$	(7	)	$	2,765

	December 31, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
	(in millions)
Municipal securities	$	522	$	9	$	—		$	531
U.S. Government and Agency securities	582		—		—			582
Taxable short-term bond funds	209		1		—			210
Corporate securities	1,245		2		(1		)	1,246
Asset-backed securities	316		—		—			316
Auction rate securities¹	35		—		(3		)	32
Other	66		—		—			66
Total	$	2,975	$	12	$	(4	)	$	2,983

¹The unrealized losses related to ARS have been in an unrealized loss position longer than 12 months, but have not been deemed other-than-temporarily impaired. The ARS are included in other assets on the consolidated balance sheet. See Note 4 (Prepaid Expenses and Other Assets).

Maturity Distribution Based on Contractual Terms of Investment Securities

The maturity distribution based on the contractual terms of the Company’s investment securities at June 30, 2013 was as follows:



	Available-For-Sale
	Amortized Cost		Fair Value
	(in millions)
Due within 1 year	$	1,483	$	1,483
Due after 1 year through 5 years	1,201		1,204
Due after 5 years through 10 years	55		55
Due after 10 years	26		23
Total	$	2,765	$	2,765