Fair Value

6 Months Ended

Jun. 30, 2013

Fair Value

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at June 30, 2013 and December 31, 2012, 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)
June 30, 2013
Cash equivalents	$	1,410	$	1,410	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		571		0		571		0
Mortgage-backed securities		1,440		0		1,440		0
Tax-exempt municipal securities		3,028		0		3,015		13
Mortgage-backed securities:
Residential		28		0		28		0
Commercial		573		0		573		0
Asset-backed securities		53		0		52		1
Corporate debt securities		3,633		0		3,611		22
Total debt securities		9,326		0		9,290		36
Total invested assets	$	10,736	$	1,410	$	9,290	$	36
December 31, 2012
Cash equivalents	$	1,177	$	1,177	$	0	$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations		618		0		618		0
Mortgage-backed securities		1,603		0		1,603		0
Tax-exempt municipal securities		3,071		0		3,058		13
Mortgage-backed securities:
Residential		34		0		34		0
Commercial		659		0		659		0
Asset-backed securities		68		0		67		1
Corporate debt securities		3,794		0		3,770		24
Total debt securities		9,847		0		9,809		38
Total invested assets	$	11,024	$	1,177	$	9,809	$	38

There were no material transfers between Level 1 and Level 2 during the three and six months ended June 30, 2013 or June 30, 2012.

Our Level 3 assets had a fair value of $36 million at June 30, 2013, or less than 0.4% of our total invested assets. During the three and six months ended June 30, 2013 and 2012, 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 June 30,
	2013								2012
	Private Placements/ Venture Capital			Auction Rate Securities		Total			Private Placements/ Venture Capital		Auction Rate Securities		Total
	(in millions)
Balance at April 1	$	25		$	13	$	38		$	25	$	15	$	40
Total gains or losses:
Realized in earnings		0			0		0			0		0		0
Unrealized in other comprehensive income		(2	)		0		(2	)		0		0		0
Purchases		0			0		0			0		0		0
Sales		0			0		0			0		0		0
Settlements		0			0		0			0		0		0
Balance at June 30	$	23		$	13	$	36		$	25	$	15	$	40

	For the six months ended June 30,
	2013								2012
	Private Placements/ Venture Capital			Auction Rate Securities		Total			Private Placements/ Venture Capital		Auction Rate Securities			Total
	(in millions)
Balance at January 1	$	25		$	13	$	38		$	25	$	16		$	41
Total gains or losses:
Realized in earnings		0			0		0			0		0			0
Unrealized in other comprehensive income		(1	)		0		(1	)		0		0			0
Purchases		0			0		0			0		0			0
Sales		0			0		0			0		(1	)		(1	)
Settlements		(1	)		0		(1	)		0		0			0
Balance at June 30	$	23		$	13	$	36		$	25	$	15		$	40

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 was $2,606 million at June 30, 2013 and $2,611 million at December 31, 2012. The fair value of our long-term debt was $2,772 million at June 30, 2013 and $2,923 million at December 31, 2012. 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, we completed our acquisitions of Metropolitan, SeniorBridge, and Arcadian during 2012. 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 in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2013 or 2012.