Fair Value (Notes)

3 Months Ended

Mar. 31, 2016

Fair Value

Certain assets and liabilities are measured at fair value in the Condensed Consolidated Financial Statements or have fair values disclosed in the Notes to the Condensed Consolidated Financial Statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 5 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2015 10-K.

The Company elected to measure the entirety of the Supplemental Health Insurance Program (AARP Program) assets under management at fair value pursuant to the fair value option. See Note 2 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2015 10-K for further detail on the AARP Program.

The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets, excluding assets and liabilities related to the AARP Program:



(in millions)	Quoted Prices in Active Markets (Level 1)			Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)			Total Fair and Carrying Value
March 31, 2016
Cash and cash equivalents	$	10,590		$	6		$	—		$	10,596
Debt securities - available-for-sale:
U.S. government and agency obligations	2,159			171			—			2,330
State and municipal obligations	—			6,411			—			6,411
Corporate obligations	8			8,725			98			8,831
U.S. agency mortgage-backed securities	—			2,513			—			2,513
Non-U.S. agency mortgage-backed securities	—			971			—			971
Total debt securities - available-for-sale	2,167			18,791			98			21,056
Equity securities - available-for-sale	1,344			15			390			1,749
Interest rate swap assets	—			245			—			245
Total assets at fair value	$	14,101		$	19,057		$	488		$	33,646
Percentage of total assets at fair value	42		%	57		%	1		%	100		%
December 31, 2015
Cash and cash equivalents	$	10,906		$	17		$	—		$	10,923
Debt securities - available-for-sale:
U.S. government and agency obligations	1,779			198			—			1,977
State and municipal obligations	—			6,168			—			6,168
Corporate obligations	5			7,308			93			7,406
U.S. agency mortgage-backed securities	—			2,124			—			2,124
Non-U.S. agency mortgage-backed securities	—			951			5			956
Total debt securities - available-for-sale	1,784			16,749			98			18,631
Equity securities - available-for-sale	1,223			14			402			1,639
Interest rate swap assets	—			93			—			93
Total assets at fair value	$	13,913		$	16,873		$	500		$	31,286
Percentage of total assets at fair value	44		%	54		%	2		%	100		%
Interest rate swap liabilities	$	—		$	11		$	—		$	11

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs; there were no transfers between Levels 1, 2 or 3 of any financial assets or liabilities during the three months ended March 31, 2016 or 2015.

The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:



(in millions)	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Fair Value		Total Carrying Value
March 31, 2016
Debt securities - held-to-maturity:
U.S. government and agency obligations	$	178	$	—	$	—	$	178	$	175
State and municipal obligations	—		—		7		7		7
Corporate obligations	87		11		228		326		326
Total debt securities - held-to-maturity	$	265	$	11	$	235	$	511	$	508
Other assets	$	—	$	477	$	—	$	477	$	478
Long-term debt and other financing obligations	$	—	$	32,605	$	—	$	32,605	$	30,020
December 31, 2015
Debt securities - held-to-maturity:
U.S. government and agency obligations	$	164	$	—	$	—	$	164	$	163
State and municipal obligations	—		—		8		8		8
Corporate obligations	91		10		238		339		339
Total debt securities - held-to-maturity	$	255	$	10	$	246	$	511	$	510
Other assets	$	—	$	493	$	—	$	493	$	500
Long-term debt and other financing obligations	$	—	$	29,455	$	—	$	29,455	$	27,978

Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during the three months ended March 31, 2016 or 2015.

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows:



	March 31, 2016									March 31, 2015
(in millions)	Debt Securities			Equity Securities			Total			Debt Securities		Equity Securities			Total
Balance at beginning of period	$	98		$	402		$	500		$	74	$	310		$	384
Purchases	4			12			16			4		4			8
Sales	(7		)	(2		)	(9		)	—		(1		)	(1		)
Net unrealized gains (losses) in accumulated other comprehensive income	3			(6		)	(3		)	1		(5		)	(4		)
Net realized (losses) gains in investment and other income	—			(16		)	(16		)	—		1			1
Balance at end of period	$	98		$	390		$	488		$	79	$	309		$	388

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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