Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2022

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

The following tables summarize our financial instruments by significant categories and fair value measurement on a recurring basis as of September 30, 2022 and December 31, 2021 and the amortized cost, gross unrealized gains, gross unrealized losses, fair value of our AFS investments:


(in millions)	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash, Cash Equivalents and Investments
September 30, 2022
Cash equivalents:
Money market mutual funds	Level 1	$	777	$	—	$	—	$	777	$	685	$	—	$	92
U.S. treasuries	Level 2	3		—		—		3		—		—		3
Total cash equivalents		780		—		—		780		685		—		95
AFS Investments:
Asset-backed securities	Level 2	43		—		(2)		41		—		41		—
Corporate bonds	Level 2	141		—		(1)		140		—		114		26
Agency securities	Level 2	25		—		(1)		24		—		2		22
U.S. treasuries	Level 2	239		—		(1)		238		—		72		166
Certificate of deposit	Level 2	11		—		—		11		—				11
Other debt securities	Level 2	8		—		—		8		—		8		—
Total AFS Investments		$	467	$	—	$	(5)	$	462	$	—	$	237	$	225


(in millions)	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Investments		Restricted Cash, Cash Equivalents and Investments
December 31, 2021
Cash equivalents:
Money market mutual funds	Level 1	$	97	$	—	$	—	$	97	$	4	$	—	$	93
U.S. treasuries	Level 2	22		—		—		22		21		—		1
Total cash equivalents		119		—		—		119		25		—		94
AFS Investments:
Asset-backed securities	Level 2	49		—		—		49		—		49		—
Corporate bonds	Level 2	167		1		(1)		167		—		137		30
Agency securities	Level 2	17		—		—		17		—		2		15
U.S. treasuries	Level 2	285		1		(1)		285		—		106		179
Certificate of deposit	Level 2	11		—		—		11		—		—		11
Other debt securities	Level 2	9		—		—		9		—		9		—
Total AFS Investments		$	538	$	2	$	(2)	$	538	$	—	$	303	$	235

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our securities. The independent pricing source utilizes various pricing models for each asset class, including the market approach. The inputs and assumptions for the pricing models are market observable inputs including trades of comparable securities, dealer quotes, credit spreads, yield curves and other market-related data.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

The carrying value of the Company's cash equivalents and restricted cash equivalents approximate their fair values due to their short-term maturities.

We did not have any Level 3 financial instruments recognized in our balance sheet as of September 30, 2022 and December 31, 2021. There were no transfers between levels as of September 30, 2022 and December 31, 2021.

Sales and Maturities

The fair value of debt investments by contractual maturity are shown below:


(in millions)	September 30, 2022
One year or less	$	162
Over one year through five years	267
Over five years through ten years	10
Over ten years	23
Total fair value	$	462

The gross proceeds from sales and maturities of AFS securities for the three and nine months ended September 30, 2022 and September 30, 2021 are presented below. We had $11 million of gross realized losses and immaterial gross realized gains for the three and nine months ended September 30, 2022 and immaterial gross realized gains and losses from sales of investments for the three and nine months ended September 30, 2021.


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2022		2021		2022		2021


Gross proceeds from sales	$	177	$	51	$	219	$	131
Gross proceeds from maturities	49		26		181		101
Total	$	226	$	77	$	400	$	232

Unrealized Losses on AFS Investments

Unrealized losses on fixed income securities are principally caused by changes in market interest rates and the financial condition of the issuer. In analyzing an issuer's financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by credit rating agencies have occurred, and industry analysts' reports. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

As of September 30, 2022, management recorded an impairment loss of $7 million on fixed income securities due to the probability that management could sell these securities before they recover in value. None of this impairment was credit-related. After this recognized impairment, gross unrealized losses related to AFS investments in an unrealized loss position were $5 million. Gross unrealized losses were immaterial at December 31, 2021.

Fair Value of Long-Term Debt

The fair value of our 2029 Notes was obtained from a third-party pricing service and is based on observable market inputs. As such, the fair value of the senior notes is considered Level 2 in the hierarchy for fair value measurement. As of September 30, 2022, our 2029 Notes were carried at their cost, net of issuance costs, and had a fair value of $409 million and $500 million as of September 30, 2022 and December 31, 2021, respectively.