FAIR VALUE

6 Months Ended

Jun. 30, 2021

Financial Assets

The following table summarizes our fair value measurements at June 30, 2021 and December 31, 2020, 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, 2021
Cash equivalents	$	3,191	$	3,191	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	641		—		641		—
Mortgage-backed securities	3,530		—		3,530		—
Tax-exempt municipal securities	1,094		—		1,094		—
Mortgage-backed securities:
Residential	256		—		256		—
Commercial	1,453		—		1,453		—
Asset-backed securities	1,458		—		1,458		—
Corporate debt securities	5,428		—		5,428		—
Total debt securities	13,860		—		13,860		—
Common stock	793		793		—		—
Total invested assets	$	17,844	$	3,984	$	13,860	$	—

December 31, 2020
Cash equivalents	$	4,548	$	4,548	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	616		—		616		—
Mortgage-backed securities	3,254		—		3,254		—
Tax-exempt municipal securities	1,447		—		1,447		—
Mortgage-backed securities:
Residential	17		—		17		—
Commercial	1,318		—		1,318		—
Asset-backed securities	1,372		—		1,372		—
Corporate debt securities	4,927		—		4,927		—
Total debt securities	12,951		—		12,951		—
Common stock	815		815		—		—
Total invested assets	$	18,314	$	5,363	$	12,951	$	—

Financial Liabilities

Our debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our senior notes debt outstanding, net of unamortized debt issuance costs, was $6.1 billion at June 30, 2021 and December 31, 2020. The fair value of our senior notes debt was $7.1 billion at June 30, 2021 and $7.4 billion at December 31, 2020. The fair value of our senior notes 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. Due to the short-term nature, carrying value approximates fair value for our term note and commercial paper borrowings. The commercial paper borrowings were $1.1 billion and $0.6 billion as of June 30, 2021 and December 31, 2020, respectively.

Put and Call Options Measured at Fair Value

Effective April 27, 2021, with the signing of the definitive agreement to acquire the remaining 60% interest of KAH, the put and call options were terminated. As such, the $63 million put and $440 million call fair values as of the first quarter of 2021 were reduced to zero, resulting in $377 million in "Other (income) expense, net" in our condensed consolidated statements of income during the three months ended June 30, 2021.

The put and call options were measured at fair value using a Monte Carlo simulation which resulted in fair values of $45 million and $503 million, respectively, at December 31, 2020. The put option is included within other long-term liabilities and the call option is included within other long-term assets at December 31, 2020. The change in fair value of the put and call options is reflected as "Other (income) expense, net" in our condensed consolidated statements of income.

Other Assets and Liabilities Measured at Fair Value

Other than the immaterial assets acquired and liabilities assumed in the acquisitions in Note 3, there were no other material assets or liabilities measured at fair value on a recurring or nonrecurring basis during 2021.

- 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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