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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________
FORM 10-Q
____________________________________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to
____________________________________________
Commission file number: 001-31826
____________________________________________
CENTENE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware42-1406317
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
7700 Forsyth Boulevard 
St. Louis,Missouri63105
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (314) 725-4477 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock $0.001 Par ValueCNCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer ☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statement of the registrant included in the filing reflect the correction of an error to the previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐     No  ☒
As of April 21, 2023, the registrant had 548,769,258 shares of common stock outstanding.


CENTENE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 PAGE
  
Part I
Financial Information
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II
Other Information
Item 1.
Item 1A.
Item 2.
Item 6.

Table of Contents

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

All statements, other than statements of current or historical fact, contained in this filing are forward-looking statements. Without limiting the foregoing, forward-looking statements often use words such as "believe," "anticipate," "plan," "expect," "estimate," "intend," "seek," "target," "goal," "may," "will," "would," "could," "should," "can," "continue," and other similar words or expressions (and the negative thereof). Centene Corporation and its subsidiaries (Centene, the Company, our or we) intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe-harbor provisions. In particular, these statements include, without limitation, statements about our future operating or financial performance, market opportunity, value creation strategy, competition, expected activities in connection with completed and future acquisitions and dispositions, our investments, and the adequacy of our available cash resources. These statements may be found in the various sections of this filing, such as Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1. "Legal Proceedings."

These forward-looking statements reflect our current views with respect to future events and are based on numerous assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, business strategies, operating environments, future developments, and other factors we believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties and are subject to change because they relate to events and depend on circumstances that will occur in the future, including economic, regulatory, competitive, and other factors that may cause our or our industry's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions.

All forward-looking statements included in this filing are based on information available to us on the date of this filing. Except as may be otherwise required by law, we undertake no obligation to update or revise the forward-looking statements included in this filing, whether as a result of new information, future events, or otherwise, after the date of this filing. You should not place undue reliance on any forward-looking statements, as actual results may differ materially from projections, estimates, or other forward-looking statements due to a variety of important factors, variables, and events including, but not limited to:

•our ability to design and price products that are competitive and/or actuarially sound including but not limited to any impacts resulting from Medicaid redeterminations;
•our ability to maintain or achieve improvement in the Centers for Medicare and Medicaid Services (CMS) Star ratings and maintain or achieve improvement in other quality scores in each case that can impact revenue and future growth;
•our ability to accurately predict and effectively manage health benefits and other operating expenses and reserves, including fluctuations in medical utilization rates;
•competition, including our ability to reprocure our contracts and grow organically;
•the timing and extent of benefits from our value creation strategy, including the possibility that the benefits received may be lower than expected, may not occur, or will not be realized within the expected time periods;
•our ability to manage our information systems effectively;
•disruption, unexpected costs, or similar risks from business transactions, including acquisitions, divestitures, and changes in our relationships with third parties;
•impairments to real estate, investments, goodwill, and intangible assets;
•the risk that the election of new directors, changes in senior management, and any inability to retain key personnel may create uncertainty or negatively impact our ability to execute quickly and effectively;
•membership and revenue declines or unexpected trends;
•rate cuts or other payment reductions or delays by governmental payors and other risks and uncertainties affecting our government businesses;
•changes in healthcare practices, new technologies, and advances in medicine;
•increased healthcare costs;
•inflation;
•changes in economic, political, or market conditions;
•changes in federal or state laws or regulations, including changes with respect to income tax reform or government healthcare programs as well as changes with respect to the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act (collectively referred to as the ACA) and any regulations enacted thereunder;
•tax matters;
•disasters or major epidemics;
i
Table of Contents
•changes in expected contract start dates;
•provider, state, federal, foreign, and other contract changes and timing of regulatory approval of contracts;
•the expiration, suspension, or termination of our contracts with federal or state governments (including, but not limited to, Medicaid, Medicare, TRICARE, or other customers);
•the difficulty of predicting the timing or outcome of legal or regulatory proceedings or matters, including, but not limited to, our ability to resolve claims and/or allegations made by states with regard to past practices, including at Centene Pharmacy Services (formerly Envolve Pharmacy Solutions, Inc. (Envolve)), as our pharmacy benefits manager (PBM) subsidiary, within the reserve estimate we previously recorded and on other acceptable terms, or at all, or whether additional claims, reviews or investigations will be brought by states, the federal government or shareholder litigants, or government investigations;
•challenges to our contract awards;
•cyber-attacks or other privacy or data security incidents;
•the exertion of management's time and our resources, and other expenses incurred and business changes required in connection with complying with the undertakings in connection with any regulatory, governmental, or third party consents or approvals for acquisitions or dispositions;
•any changes in expected closing dates, estimated purchase price, or accretion for acquisitions or dispositions;
•restrictions and limitations in connection with our indebtedness;
•a downgrade of the credit rating of our indebtedness;
•the availability of debt and equity financing on terms that are favorable to us; and
•foreign currency fluctuations.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain other factors that may affect our business operations, financial condition, and results of operations, in our filings with the Securities and Exchange Commission (SEC), including our annual report on Form 10-K, other quarterly reports on Form 10-Q and current reports on Form 8-K. Due to these important factors and risks, we cannot give assurances with respect to our future performance, including without limitation our ability to maintain adequate premium levels or our ability to control our future medical and selling, general and administrative costs.


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Non-GAAP Financial Presentation

The Company is providing certain non-GAAP financial measures in this report as the Company believes that these figures are helpful in allowing investors to more accurately assess the ongoing nature of the Company's operations and measure the Company's performance more consistently across periods. The Company uses the presented non-GAAP financial measures internally in evaluating the Company's performance and for planning purposes, by allowing management to focus on period-to-period changes in the Company's core business operations, and in determining employee incentive compensation. Therefore, the Company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Specifically, the Company believes the presentation of non-GAAP financial information that excludes amortization of acquired intangible assets and acquisition and divestiture related expenses, as well as other items, allows investors to develop a more meaningful understanding of the Company's core performance over time.

The tables below provide reconciliations of non-GAAP items ($ in millions, except per share data):
Three Months Ended March 31,
20232022
GAAP net earnings attributable to Centene$1,130 $849 
Amortization of acquired intangible assets183 199 
Acquisition and divestiture related expenses23 97 
Other adjustments (1)
(53)2 
Income tax effects of adjustments (2)
(114)(67)
Adjusted net earnings $1,169 $1,080 
GAAP diluted earnings per share (EPS) attributable to Centene$2.04 $1.44 
Amortization of acquired intangible assets0.33 0.34 
Acquisition and divestiture related expenses0.04 0.16 
Other adjustments (1)
(0.09)— 
Income tax effects of adjustments (2)
(0.21)(0.11)
Adjusted diluted EPS$2.11 $1.83 
(1) Other adjustments include the following pre-tax items:
2023:
(a) Magellan Specialty Health divestiture gain of $79 million, or $0.14 per share ($0.12 after-tax) and real estate impairments of $26 million, or $0.05 per share ($0.04 after-tax).

2022:
(b) Costs related to the PBM legal settlement of $2 million, or $0.00 per share ($0.00 after-tax).

(2) The income tax effects of adjustments are based on the effective income tax rates applicable to each adjustment. In addition, the three months ended March 31, 2023, includes a one-time income tax benefit of $69 million, or $0.13 per share, resulting from the distribution of long-term stock awards to the estate of the Company's former CEO.


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Three Months Ended March 31,
20232022
GAAP selling, general and administrative expenses$3,011 $2,745 
Less:
Acquisition and divestiture related expenses23 99 
Costs related to the PBM legal settlement— 2 
Real estate optimization6 — 
Adjusted selling, general and administrative expenses$2,982 $2,644 
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PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.
CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares in thousands and per share data in dollars)
March 31, 2023December 31, 2022
(Unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$15,853 $12,074 
Premium and trade receivables15,210 13,272 
Short-term investments2,135 2,321 
Other current assets1,811 2,461 
Total current assets35,009 30,128 
Long-term investments15,833 14,684 
Restricted deposits1,313 1,217 
Property, software and equipment, net2,478 2,432 
Goodwill18,836 18,812 
Intangible assets, net6,730 6,911 
Other long-term assets2,783 2,686 
Total assets$82,982 $76,870 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY 
Current liabilities:  
Medical claims liability$17,504 $16,745 
Accounts payable and accrued expenses10,781 9,525 
Return of premium payable2,077 1,634 
Unearned revenue2,398 478 
Current portion of long-term debt97 82 
Total current liabilities32,857 28,464 
Long-term debt18,223 17,938 
Deferred tax liability522 615 
Other long-term liabilities6,194 5,616 
Total liabilities57,796 52,633 
Commitments and contingencies
Redeemable noncontrolling interests20 56 
Stockholders' equity:  
Preferred stock, $0.001 par value; authorized 10,000 shares; no shares issued or outstanding at March 31, 2023 and December 31, 2022
— — 
Common stock, $0.001 par value; authorized 800,000 shares; 614,355 issued and 551,714 outstanding at March 31, 2023, and 607,847 issued and 550,754 outstanding at December 31, 2022
1 1 
Additional paid-in capital20,121 20,060 
Accumulated other comprehensive earnings (loss)(915)(1,132)
Retained earnings10,471 9,341 
Treasury stock, at cost (62,641 and 57,093 shares, respectively)
(4,636)(4,213)
Total Centene stockholders' equity25,042 24,057 
Nonredeemable noncontrolling interest124 124 
Total stockholders' equity25,166 24,181 
Total liabilities, redeemable noncontrolling interests and stockholders' equity$82,982 $76,870 

The accompanying notes to the consolidated financial statements are an integral part of these statements. 
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CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
 Three Months Ended March 31,
 20232022
Revenues:
Premium$33,825 $31,889 
Service1,127 2,343 
Premium and service revenues34,952 34,232 
Premium tax3,937 2,953 
Total revenues38,889 37,185 
Expenses:
Medical costs29,434 27,838 
Cost of services870 1,988 
Selling, general and administrative expenses3,011 2,745 
Depreciation expense142 156 
Amortization of acquired intangible assets183 199 
Premium tax expense4,011 3,006 
Impairment20 — 
Total operating expenses37,671 35,932 
Earnings from operations1,218 1,253 
Other income (expense):
Investment and other income353 52 
Debt extinguishment— 3 
Interest expense(180)(160)
Earnings before income tax1,391 1,148 
Income tax expense261 296 
Net earnings1,130 852 
(Earnings) loss attributable to noncontrolling interests— (3)
Net earnings attributable to Centene Corporation$1,130 $849 

Net earnings per common share attributable to Centene Corporation:
Basic earnings per common share$2.05 $1.46 
Diluted earnings per common share$2.04 $1.44 

Weighted average number of common shares outstanding:
Basic550,779 583,230 
Diluted553,845 590,658 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
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CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(In millions)
(Unaudited)
 Three Months Ended March 31,
 20232022
Net earnings$1,130 $852 
Change in unrealized gain (loss) on investments253 (715)
Change in unrealized gain (loss) on investments, tax effect(61)171 
Change in unrealized gain (loss) on investments, net of tax192 (544)
Reclassification adjustment, net of tax2 2 
Foreign currency translation adjustments, net of tax23 (20)
Other comprehensive earnings (loss)217 (562)
Comprehensive earnings1,347 290 
Comprehensive (earnings) loss attributable to noncontrolling interests— (3)
Comprehensive earnings attributable to Centene Corporation$1,347 $287 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

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CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions, except shares in thousands and per share data in dollars)
(Unaudited)
Three Months Ended March 31, 2023
 Centene Stockholders' Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par Value Shares
AmtAdditional Paid-in CapitalAccumulated Other Comprehensive
Earnings (Loss)		Retained Earnings
$0.001 Par Value Shares
AmtNoncontrolling
Interest		Total
Balance, December 31, 2022607,847 $1 $20,060 $(1,132)$9,341 57,093 $(4,213)$124 $24,181 
Net earnings— — — — 1,130 — — — 1,130 
Other comprehensive earnings, net of $61 tax
— — — 217 — — — — 217 
Common stock issued for employee benefit plans6,508 — 12 — — — — — 12 
Common stock repurchases— — — — — 5,548 (423)— (423)
Stock compensation expense— — 61 — — — — — 61 
Purchase of redeemable noncontrolling interest— — (12)— — — — — (12)
Balance, March 31, 2023614,355 $1 $20,121 $(915)$10,471 62,641 $(4,636)$124 $25,166 

Three Months Ended March 31, 2022
 Centene Stockholders' Equity  
 Common Stock   Treasury Stock  
 
$0.001 Par Value Shares
AmtAdditional Paid-in CapitalAccumulated Other Comprehensive
Earnings (Loss)		Retained Earnings
$0.001 Par Value Shares
AmtNoncontrolling
Interest		Total
Balance, December 31, 2021602,704 $1 $19,672 $77 $8,139 20,225 $(1,094)$145 $26,940 
Net earnings (loss)— — — — 849 — — (1)848 
Other comprehensive loss, net of $(171) tax
— — — (562)— — — — (562)
Common stock issued for employee benefit plans3,221 — 28 — — — — — 28 
Fair value of unvested equity awards in connection with acquisition— — 60 — — — — — 60 
Common stock repurchases— — — — — 846 (71)— (71)
Stock compensation expense— — 70 — — — — — 70 
Balance, March 31, 2022605,925 $1 $19,830 $(485)$8,988 21,071 $(1,165)$144 $27,313 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
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CENTENE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, unaudited)
 Three Months Ended March 31,
 20232022
Cash flows from operating activities:  
Net earnings$1,130 $852 
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization346 390 
Stock compensation expense61 70 
Impairment20 — 
(Gain) loss on debt extinguishment— (3)
Deferred income taxes(159)12 
(Gain) on divestiture(79)— 
Other adjustments, net7 22 
Changes in assets and liabilities  
Premium and trade receivables(1,938)(3,099)
Other assets(315)(299)
Medical claims liabilities759 1,767 
Unearned revenue1,919 81 
Accounts payable and accrued expenses1,548 957 
Other long-term liabilities970 401 
Net cash provided by operating activities4,269 1,151 
Cash flows from investing activities:  
Capital expenditures(225)(242)
Purchases of investments(1,619)(1,700)
Sales and maturities of investments1,148 1,047 
Acquisitions, net of cash acquired— (1,504)
Divestiture proceeds, net of divested cash443 — 
Other investing activities, net— (2)
Net cash (used in) investing activities(253)(2,401)
Cash flows from financing activities:  
Proceeds from long-term debt287 100 
Payments and repurchases of long-term debt— (526)
Common stock repurchases(423)(71)
Proceeds from common stock issuances— 27 
Payments for debt extinguishment— (27)
Purchase of noncontrolling interest(58)— 
Other financing activities, net11 (1)
Net cash (used in) financing activities(183)(498)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash2 33 
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents3,835 (1,715)
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of period
12,330 13,214 
Cash, cash equivalents, and restricted cash and cash equivalents, end of period
$16,165 $11,499 
Supplemental disclosures of cash flow information:  
Interest paid$144 $139 
Income taxes paid$11 $11 
The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above:
March 31,
20232022
Cash and cash equivalents$15,853 $11,237 
Restricted cash and cash equivalents, included in restricted deposits312 262 
Total cash, cash equivalents, and restricted cash and cash equivalents$16,165 $11,499 

The accompanying notes to the consolidated financial statements are an integral part of these statements.
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CENTENE CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Operations

Basis of Presentation

The accompanying interim financial statements have been prepared under the presumption that users of the interim financial information have either read or have access to the audited financial statements included in the Form 10-K for the fiscal year ended December 31, 2022. The unaudited interim financial statements herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, footnote disclosures that would substantially duplicate the disclosures contained in the December 31, 2022 audited financial statements have been omitted from these interim financial statements, where appropriate. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of the interim periods presented.

Certain 2022 amounts in the consolidated financial statements and notes to the consolidated financial statements have been reclassified to conform to the 2023 presentation, including reclassifications related to the Company's new segment reporting structure as outlined below. These reclassifications have no effect on net earnings or stockholders' equity as previously reported.

Segment Reporting

In the first quarter of 2023, and in conjunction with the Company's updated strategic plan, executive leadership realignment, and corresponding 2023 divestitures, the Company has revised the way it manages the business, evaluates performance, and allocates resources, resulting in an updated segment structure comprised of (1) a Medicaid segment, (2) a Medicare segment, (3) a Commercial segment, and (4) an Other segment.

The Medicaid, Medicare, and Commercial segments represent the government-sponsored or subsidized programs under which the Company offers managed healthcare services. Specifically, the Medicaid segment includes the Temporary Assistance for Needy Families (TANF) program, Medicaid Expansion programs, the Aged, Blind, or Disabled (ABD) program, the Children's Health Insurance Program (CHIP), Long-Term Services and Supports (LTSS), Foster Care, Medicare-Medicaid Plans (MMP), which cover beneficiaries who are dually eligible for Medicaid and Medicare, and other state-based programs. The Medicare segment includes Medicare Advantage, Medicare Supplement, Dual Eligible Special Needs Plans (D-SNPs), and Medicare Prescription Drug Plans (PDPs), also known as Medicare Part D. The Commercial segment includes the Health Insurance Marketplace along with individual, small group, and large group commercial healthcare products. The Other segment includes the Company's pharmacy operations, vision and dental services, clinical healthcare, behavioral health, international operations, and corporate management companies, among others.

Accounting Guidance Not Yet Adopted

The Company has determined that there are no recently issued accounting pronouncements that will have a material impact on its consolidated financial position, results of operations, or cash flows.

2. Acquisitions and Divestitures

On January 5, 2023, the Company completed the divestiture of HealthSmart, its third-party health plan administration business.

On January 10, 2023, the Company signed and closed on a definitive agreement to divest Centurion, its prison healthcare business. During 2022, the Company recorded impairment charges related to goodwill and other current assets associated with the pending divestitures. The Company could receive up to an additional $35 million in cash based on the reprocurements of certain Centurion contracts. The Company will recognize the appropriate amount of contingent consideration related to the additional $35 million when realized or realizable.

On January 20, 2023, the Company completed the divestiture of Magellan Specialty Health for approximately $646 million in cash and stock, including an estimated working capital adjustment and recognized a pre-tax gain of $79 million. The stock consideration was subsequently sold in April 2023 for cash proceeds of $245 million. The Company could also receive up to an additional $150 million in cash and stock in 2024 based on certain 2023 performance metrics. The Company will recognize the appropriate amount of contingent consideration related to the additional $150 million when realized or realizable.
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3. Short-term and Long-term Investments, Restricted Deposits

Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):
 March 31, 2023December 31, 2022
 Amortized CostGross
Unrealized Gains		Gross
Unrealized Losses		Fair ValueAmortized CostGross
Unrealized Gains		Gross
Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies$489 $— $(12)$477 $695 $— $(16)$679 
Corporate securities10,523 32 (668)9,887 10,127 12 (778)9,361 
Restricted certificates of deposit
4 — — 4 4 — — 4 
Restricted cash equivalents
312 — — 312 256 — — 256 
Short-term time deposits
198 — — 198 204 — — 204 
Municipal securities4,131 15 (213)3,933 4,055 6 (280)3,781 
Asset-backed securities1,492 2 (57)1,437 1,396 — (70)1,326 
Residential mortgage-backed securities1,187 4 (105)1,086 1,165 2 (121)1,046 
Commercial mortgage-backed securities
1,067 1 (87)981 961 — (99)862 
Equity securities (1)
250 — — 250 5 — — 5 
Private equity investments
540 — — 540 529 — — 529 
Life insurance contracts
176 — — 176 169 — — 169 
Total$20,369 $54 $(1,142)$19,281 $19,566 $20 $(1,364)$18,222 
(1) Investments in equity securities as of March 31, 2023 primarily consisted of shares received as part of the Magellan Specialty Health divestiture consideration. These shares were subsequently sold in April 2023.

The Company's investments are debt securities classified as available-for-sale with the exception of equity securities, certain private equity investments and life insurance contracts. The Company's investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of March 31, 2023, 99% of the Company's investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At March 31, 2023, the Company held certificates of deposit, equity securities, private equity investments, and life insurance contracts, which did not carry a credit rating. Accrued interest income on available-for-sale debt securities was $141 million and $132 million at March 31, 2023 and December 31, 2022, respectively, and is included in other current assets on the Consolidated Balance Sheets.

The Company's residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association, or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company's commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AAA and a weighted average duration of 4 years at March 31, 2023.

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The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):
 March 31, 2023December 31, 2022
 Less Than 12 Months12 Months or MoreLess Than 12 Months12 Months or More
 Unrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies
$(2)$249 $(10)$170 $(5)$342 $(11)$184 
Corporate securities(72)2,755 (596)5,683 (340)5,368 (438)3,400 
Municipal securities(18)1,161 (195)1,945 (142)2,437 (138)995 
Asset-backed securities(5)310 (52)928 (29)786 (41)486 
Residential mortgage-backed securities(10)319 (95)652 (55)629 (66)352 
Commercial mortgage-backed securities(8)188 (79)697 (49)513 (50)330 
Total$(115)$4,982 $(1,027)$10,075 $(620)$10,075 $(744)$5,747 

As of March 31, 2023, the gross unrealized losses were generated from 6,109 positions out of a total of 6,936 positions. The change in fair value of available-for-sale debt securities is primarily a result of movement in interest rates subsequent to the purchase of the security.

For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual, or regulatory purposes. If the security meets this criterion, the decline in fair value is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, the Company did not record an impairment for these securities.

In addition, the Company monitors available-for-sale debt securities for credit losses. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates, and/or general economic conditions. The Company recognizes an allowance when evidence demonstrates that the decline in fair value is credit related. Evidence of a credit related loss may include rating agency actions, adverse conditions specifically related to the security, or failure of the issuer of the security to make scheduled payments.

The contractual maturities of short-term and long-term debt securities and restricted deposits are as follows ($ in millions):
 March 31, 2023December 31, 2022
 InvestmentsRestricted DepositsInvestmentsRestricted Deposits
 Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
One year or less$2,011 $1,981 $570 $569 $2,207 $2,179 $534 $532 
One year through five years8,008 7,556 546 518 7,651 7,147 524 490 
Five years through ten years4,131 3,821 245 224 4,066 3,613 224 195 
Greater than ten years144 140 2 2 135 129 — — 
Asset-backed securities3,746 3,504 — — 3,522 3,234 — — 
Total$18,040 $17,002 $1,363 $1,313 $17,581 $16,302 $1,282 $1,217 
 
Actual maturities may differ from contractual maturities due to call or prepayment options. Equity securities, private equity investments and life insurance contracts are excluded from the table above because they do not have a contractual maturity. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.
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4. Fair Value Measurements

Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are categorized based upon observable or unobservable inputs used to estimate fair value. Level inputs are as follows:
Level Input:Input Definition:
Level IInputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
 
Level IIInputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
 
Level IIIUnobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following table summarizes fair value measurements by level at March 31, 2023, for assets and liabilities measured at fair value on a recurring basis ($ in millions):
 Level ILevel IILevel IIITotal
Assets    
Cash and cash equivalents$15,853 $