FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at September 30, 2014 and December 31, 2013, respectively, for financial assets measured at fair value on a recurring basis:



	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
September 30, 2014
Cash equivalents	$	2,606	$	2,606	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	852		—		852		—
Mortgage-backed securities	1,569		—		1,569		—
Tax-exempt municipal securities	3,151		—		3,138		13
Mortgage-backed securities:
Residential	18		—		18		—
Commercial	696		—		696		—
Asset-backed securities	41		—		40		1
Corporate debt securities	3,708		—		3,684		24
Total debt securities	10,035		—		9,997		38
Total invested assets	$	12,641	$	2,606	$	9,997	$	38

December 31, 2013
Cash equivalents	$	876	$	876	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	584		—		584		—
Mortgage-backed securities	1,820		—		1,820		—
Tax-exempt municipal securities	2,971		—		2,958		13
Mortgage-backed securities:
Residential	22		—		22		—
Commercial	673		—		673		—
Asset-backed securities	63		—		62		1
Corporate debt securities	3,667		—		3,644		23
Total debt securities	9,800		—		9,763		37
Total invested assets	$	10,676	$	876	$	9,763	$	37

There were no material transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2014 or September 30, 2013.

Our Level 3 assets had a fair value of $38 million at September 30, 2014, or 0.3% of our total invested assets. During the three and nine months ended September 30, 2014 and 2013, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:



	For the three months ended September 30,
	2014						2013
	Private Placements		Auction Rate Securities		Total		Private Placements			Auction Rate Securities		Total
	(in millions)
Beginning balance at April 1	$	24	$	13	$	37	$	23		$	13	$	36
Total gains or losses:
Realized in earnings	—		—		—		—			—		—
Unrealized in other comprehensive income	1		—		1		1			—		1
Purchases	—		—		—		—			—		—
Sales	—		—		—		—			—		—
Settlements	—		—		—		—			—		—
Balance at September 30	$	25	$	13	$	38	$	24		$	13	$	37



	For the nine months ended September 30,
	2014						2013
	Private Placements		Auction Rate Securities		Total		Private Placements			Auction Rate Securities		Total
	(in millions)
Beginning balance at January 1	$	24	$	13	$	37	$	25		$	13	$	38
Total gains or losses:
Realized in earnings	—		—		—		—			—		—
Unrealized in other comprehensive income	1		—		1		—			—		—
Purchases	—		—		—		—			—		—
Sales	—		—		—		—			—		—
Settlements	—		—		—		(1		)	—		(1		)
Balance at September 30	$	25	$	13	$	38	$	24		$	13	$	37

Financial Liabilities

Our long-term debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our long-term debt outstanding, including the current portion, was $4,338 million at September 30, 2014 and $2,600 million at December 31, 2013. The fair value of our long-term debt, including the current portion, was $4,565 million at September 30, 2014 and $2,751 million at December 31, 2013. The fair value of our long-term debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

As disclosed in Note 3, the acquisitions of American Eldercare and other health and wellness companies were completed during 2014 and 2013. The values of net tangible assets acquired and the resulting goodwill and other intangible assets were recorded at fair value using Level 3 inputs. The majority of the related tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were internally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the three and nine months ended September 30, 2014 or 2013.