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 4 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2014 10-K.

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 a Supplemental Health Insurance Program (AARP Program), which are presented in a separate table below:



(in millions)	Quoted Prices in Active Markets (Level 1)			Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)			Total Fair and Carrying Value
September 30, 2015
Cash and cash equivalents	$	7,865		$	118		$	—		$	7,983
Debt securities - available-for-sale:
U.S. government and agency obligations	1,705			199			—			1,904
State and municipal obligations	—			6,142			—			6,142
Corporate obligations	15			7,368			88			7,471
U.S. agency mortgage-backed securities	—			2,047			—			2,047
Non-U.S. agency mortgage-backed securities	—			874			5			879
Total debt securities - available-for-sale	1,720			16,630			93			18,443
Equity securities - available-for-sale	1,137			12			363			1,512
Interest rate swap assets	—			168			—			168
Total assets at fair value	$	10,722		$	16,928		$	456		$	28,106
Percentage of total assets at fair value	38		%	60		%	2		%	100		%
Interest rate swap liabilities	$	—		$	1		$	—		$	1
December 31, 2014
Cash and cash equivalents	$	7,472		$	23		$	—		$	7,495
Debt securities - available-for-sale:
U.S. government and agency obligations	1,427			193			—			1,620
State and municipal obligations	—			6,668			—			6,668
Corporate obligations	2			7,257			68			7,327
U.S. agency mortgage-backed securities	—			2,056			—			2,056
Non-U.S. agency mortgage-backed securities	—			874			6			880
Total debt securities - available-for-sale	1,429			17,048			74			18,551
Equity securities - available-for-sale	1,200			12			310			1,522
Interest rate swap assets	—			62			—			62
Total assets at fair value	$	10,101		$	17,145		$	384		$	27,630
Percentage of total assets at fair value	37		%	62		%	1		%	100		%
Interest rate swap liabilities	$	—		$	55		$	—		$	55

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 nine months ended September 30, 2015 or 2014.

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
September 30, 2015
Debt securities - held-to-maturity:
U.S. government and agency obligations	$	164	$	—	$	—	$	164	$	162
State and municipal obligations	—		—		15		15		15
Corporate obligations	91		13		241		345		345
Total debt securities - held-to-maturity	$	255	$	13	$	256	$	524	$	522
Other assets	$	—	$	478	$	—	$	478	$	480
Long-term debt and other financing obligations	$	—	$	30,309	$	—	$	30,309	$	28,796
December 31, 2014
Debt securities - held-to-maturity:
U.S. government and agency obligations	$	180	$	—	$	—	$	180	$	178
State and municipal obligations	—		—		19		19		19
Corporate obligations	46		10		242		298		298
Total debt securities - held-to-maturity	$	226	$	10	$	261	$	497	$	495
Other assets	$	—	$	478	$	—	$	478	$	484
Long-term debt and other financing obligations	$	—	$	18,863	$	—	$	18,863	$	17,085

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 nine months ended September 30, 2015 or 2014.

The carrying amounts reported on the Condensed Consolidated Balance Sheets for other current financial assets and liabilities approximate fair value because of their short-term nature. These assets and liabilities are not listed in the table above.

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:



	Three Months Ended									Nine Months Ended
(in millions)	Debt Securities			Equity Securities			Total			Debt Securities			Equity Securities			Total
September 30, 2015
Balance at beginning of period	$	84		$	319		$	403		$	74		$	310		$	384
Purchases	12			45			57			22			59			81
Sales	(2		)	(6		)	(8		)	(4		)	(20		)	(24		)
Net unrealized gains in accumulated other comprehensive income	—			6			6			2			1			3
Net realized (losses) gains in investment and other income	(1		)	(1		)	(2		)	(1		)	13			12
Balance at end of period	$	93		$	363		$	456		$	93		$	363		$	456

September 30, 2014
Balance at beginning of period	$	57		$	302		$	359		$	42		$	269		$	311
Purchases	11			36			47			24			86			110
Sales	—			(18		)	(18		)	—			(169		)	(169		)
Net unrealized (losses) gains in accumulated other comprehensive income	(2		)	(4		)	(6		)	—			6			6
Net realized (losses) gains in investment and other income	—			(15		)	(15		)	—			109			109
Balance at end of period	$	66		$	301		$	367		$	66		$	301		$	367

The following table presents quantitative information regarding unobservable inputs that were significant to the valuation of assets measured at fair value on a recurring basis using Level 3 inputs:

Range

(in millions, except ranges)

Fair Value

Valuation Technique

Unobservable Input

Low

High

September 30, 2015

Equity securities - available-for-sale:

Venture capital portfolios

322

Market approach - comparable companies

Revenue multiple

1.0

5.0

EBITDAmultiple

9.0

10.0

Market approach - recent transactions

Inactive market transactions

N/A

Total equity securities

available-for-sale

363

Also included in the Company’s assets measured at fair value on a recurring basis using Level 3 inputs were $93 million of available-for-sale debt securities as of September 30, 2015, which were not significant.

The Company elected to measure the entirety of the 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 Company’s 2014 10-K for further detail on the AARP Program. The following table presents fair value information about the AARP Program-related financial assets and liabilities:



(in millions)	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Total Fair and Carrying Value
September 30, 2015
Cash and cash equivalents	$	292	$	—	$	292
Debt securities:
U.S. government and agency obligations	444		142		586
State and municipal obligations	—		105		105
Corporate obligations	—		1,292		1,292
U.S. agency mortgage-backed securities	—		391		391
Non-U.S. agency mortgage-backed securities	—		199		199
Total debt securities	444		2,129		2,573
Other investments	—		83		83
Total assets at fair value	$	736	$	2,212	$	2,948
Other liabilities	$	7	$	6	$	13
December 31, 2014
Cash and cash equivalents	$	415	$	—	$	415
Debt securities:
U.S. government and agency obligations	409		245		654
State and municipal obligations	—		95		95
Corporate obligations	—		1,200		1,200
U.S. agency mortgage-backed securities	—		340		340
Non-U.S. agency mortgage-backed securities	—		177		177
Total debt securities	409		2,057		2,466
Other investments	—		81		81
Total assets at fair value	$	824	$	2,138	$	2,962
Other liabilities	$	5	$	13	$	18