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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
Form 10-Q
__________________________________________________________
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED September 30, 2020
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: 1-10864
__________________________________________________________
UnitedHealth Group Incorporated
(Exact name of registrant as specified in its charter)
__________________________________________________________
| | | | | | | | | | | |
Delaware | | 41-1321939 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
UnitedHealth Group Center | | 55343 |
9900 Bren Road East | |
Minnetonka, | Minnesota | |
(Address of principal executive offices) | | (Zip Code) |
(952) 936-1300
(Registrant’s telephone number, including area code)
_________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $.01 par value | | UNH | | NYSE |
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. ☐
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 October 30, 2020, there were 948,820,710 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.
UNITEDHEALTH GROUP
Table of Contents
PART I
ITEM 1. FINANCIAL STATEMENTS
UnitedHealth Group
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | | | | |
(in millions, except per share data) | | September 30, 2020 | | December 31, 2019 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 17,550 | | | $ | 10,985 | |
Short-term investments | | 3,259 | | | 3,260 | |
Accounts receivable, net | | 12,171 | | | 11,822 | |
Other current receivables, net | | 13,231 | | | 9,640 | |
Assets under management | | 3,788 | | | 3,076 | |
Prepaid expenses and other current assets | | 4,822 | | | 3,851 | |
Total current assets | | 54,821 | | | 42,634 | |
Long-term investments | | 39,184 | | | 37,209 | |
Property, equipment and capitalized software, net | | 8,151 | | | 8,704 | |
Goodwill | | 68,088 | | | 65,659 | |
Other intangible assets, net | | 10,373 | | | 10,349 | |
Other assets | | 10,352 | | | 9,334 | |
Total assets | | $ | 190,969 | | | $ | 173,889 | |
Liabilities, redeemable noncontrolling interests and equity | | | | |
Current liabilities: | | | | |
Medical costs payable | | $ | 21,167 | | | $ | 21,690 | |
Accounts payable and accrued liabilities | | 21,173 | | | 19,005 | |
Short-term borrowings and current maturities of long-term debt | | 3,899 | | | 3,870 | |
Unearned revenues | | 2,391 | | | 2,622 | |
Other current liabilities | | 17,967 | | | 14,595 | |
Total current liabilities | | 66,597 | | | 61,782 | |
Long-term debt, less current maturities | | 39,895 | | | 36,808 | |
Deferred income taxes | | 3,340 | | | 2,993 | |
Other liabilities | | 11,186 | | | 10,144 | |
Total liabilities | | 121,018 | | | 111,727 | |
Commitments and contingencies (Note 7) | | | | |
Redeemable noncontrolling interests | | 1,847 | | | 1,726 | |
Equity: | | | | |
Preferred stock, $0.001 par value - 10 shares authorized; no shares issued or outstanding | | — | | | — | |
Common stock, $0.01 par value - 3,000 shares authorized; 949 and 948 issued and outstanding | | 10 | | | 9 | |
Additional paid-in capital | | — | | | 7 | |
Retained earnings | | 69,715 | | | 61,178 | |
Accumulated other comprehensive loss | | (4,494) | | | (3,578) | |
Nonredeemable noncontrolling interests | | 2,873 | | | 2,820 | |
Total equity | | 68,104 | | | 60,436 | |
Total liabilities, redeemable noncontrolling interests and equity | | $ | 190,969 | | | $ | 173,889 | |
UnitedHealth Group
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions, except per share data) | | 2020 | | 2019 | | 2020 | | 2019 |
Revenues: | | | | | | | | |
Premiums | | $ | 50,863 | | | $ | 47,397 | | | $ | 150,897 | | | $ | 142,074 | |
Products | | 8,777 | | | 7,546 | | | 25,455 | | | 23,971 | |
Services | | 5,124 | | | 4,942 | | | 14,265 | | | 13,756 | |
Investment and other income | | 351 | | | 466 | | | 1,057 | | | 1,453 | |
Total revenues | | 65,115 | | | 60,351 | | | 191,674 | | | 181,254 | |
Operating costs: | | | | | | | | |
Medical costs | | 41,636 | | | 39,041 | | | 117,314 | | | 117,164 | |
Operating costs | | 10,174 | | | 8,960 | | | 30,190 | | | 25,892 | |
Cost of products sold | | 7,935 | | | 6,627 | | | 23,123 | | | 21,606 | |
Depreciation and amortization | | 719 | | | 709 | | | 2,159 | | | 2,002 | |
Total operating costs | | 60,464 | | | 55,337 | | | 172,786 | | | 166,664 | |
Earnings from operations | | 4,651 | | | 5,014 | | | 18,888 | | | 14,590 | |
Interest expense | | (395) | | | (449) | | | (1,262) | | | (1,267) | |
Earnings before income taxes | | 4,256 | | | 4,565 | | | 17,626 | | | 13,323 | |
Provision for income taxes | | (1,000) | | | (936) | | | (4,209) | | | (2,752) | |
Net earnings | | 3,256 | | | 3,629 | | | 13,417 | | | 10,571 | |
Earnings attributable to noncontrolling interests | | (84) | | | (91) | | | (226) | | | (273) | |
Net earnings attributable to UnitedHealth Group common shareholders | | $ | 3,172 | | | $ | 3,538 | | | $ | 13,191 | | | $ | 10,298 | |
Earnings per share attributable to UnitedHealth Group common shareholders: | | | | | | | | |
Basic | | $ | 3.34 | | | $ | 3.73 | | | $ | 13.90 | | | $ | 10.82 | |
Diluted | | $ | 3.30 | | | $ | 3.67 | | | $ | 13.73 | | | $ | 10.65 | |
Basic weighted-average number of common shares outstanding | | 950 | | | 949 | | | 949 | | | 952 | |
Dilutive effect of common share equivalents | | 12 | | | 14 | | | 12 | | | 15 | |
Diluted weighted-average number of common shares outstanding | | 962 | | | 963 | | | 961 | | | 967 | |
Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents | | 6 | | | 12 | | | 9 | | | 10 | |
UnitedHealth Group
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
(in millions) | | 2020 | | 2019 | | 2020 | | 2019 |
Net earnings | | $ | 3,256 | | | $ | 3,629 | | | $ | 13,417 | | | $ | 10,571 | |
Other comprehensive income (loss): | | | | | | | | |
Gross unrealized gains on investment securities during the period | | 148 | | | 230 | | | 919 | | | 1,243 | |
Income tax effect | | (37) | | | (53) | | | (214) | | | (285) | |
Total unrealized gains, net of tax | | 111 | | | 177 | | | 705 | | | 958 | |
Gross reclassification adjustment for net realized gains included in net earnings | | (21) | | | (69) | | | (50) | | | (70) | |
Income tax effect | | 5 | | | 16 | | | 12 | | | 16 | |
Total reclassification adjustment, net of tax | | (16) | | | (53) | | | (38) | | | (54) | |
Total foreign currency translation losses | | (39) | | | (560) | | | (1,583) | | | (453) | |
Other comprehensive income (loss) | | 56 | | | (436) | | | (916) | | | 451 | |
Comprehensive income | | 3,312 | | | 3,193 | | | 12,501 | | | 11,022 | |
Comprehensive income attributable to noncontrolling interests | | (84) | | | (91) | | | (226) | | | (273) | |
Comprehensive income attributable to UnitedHealth Group common shareholders | | $ | 3,228 | | | $ | 3,102 | | | $ | 12,275 | | | $ | 10,749 | |
UnitedHealth Group
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Nonredeemable Noncontrolling Interests | | Total Equity |
Three months ended September 30, (in millions) | | Shares | | Amount | | | | Net Unrealized Gains on Investments | | Foreign Currency Translation Losses | | |
Balance at June 30, 2020 | | 950 | | | $ | 10 | | | $ | 388 | | | $ | 67,776 | | | $ | 1,161 | | | $ | (5,711) | | | $ | 2,891 | | | $ | 66,515 | |
Net earnings | | | | | | | | 3,172 | | | | | | | 62 | | | 3,234 | |
Other comprehensive income (loss) | | | | | | | | | | 95 | | | (39) | | | | | 56 | |
Issuances of common stock, and related tax effects | | 2 | | | — | | | 321 | | | | | | | | | | | 321 | |
Share-based compensation | | | | | | 131 | | | | | | | | | | | 131 | |
Common share repurchases | | (3) | | | — | | | (805) | | | (45) | | | | | | | | | (850) | |
Cash dividends paid on common shares ($1.25 per share) | | | | | | | | (1,188) | | | | | | | | | (1,188) | |
Redeemable noncontrolling interests fair value and other adjustments | | | | | | (35) | | | | | | | | | | | (35) | |
Acquisition and other adjustments of nonredeemable noncontrolling interests | | | | | | | | | | | | | | (8) | | | (8) | |
Distribution to nonredeemable noncontrolling interests | | | | | | | | | | | | | | (72) | | | (72) | |
Balance at September 30, 2020 | | 949 | | | $ | 10 | | | $ | — | | | $ | 69,715 | | | $ | 1,256 | | | $ | (5,750) | | | $ | 2,873 | | | $ | 68,104 | |
| | | | | | | | | | | | | | | | |
Balance at June 30, 2019 | | 948 | | | $ | 9 | | | $ | — | | | $ | 56,367 | | | $ | 516 | | | $ | (3,789) | | | $ | 2,751 | | | $ | 55,854 | |
Net earnings | | | | | | | | 3,538 | | | | | | | 82 | | | 3,620 | |
Other comprehensive income (loss) | | | | | | | | | | 124 | | | (560) | | | | | (436) | |
Issuances of common stock, and related tax effects | | 2 | | | — | | | 277 | | | | | | | | | | | 277 | |
Share-based compensation | | | | | | 130 | | | | | | | | | | | 130 | |
Common share repurchases | | (3) | | | — | | | (415) | | | (185) | | | | | | | | | (600) | |
Cash dividends paid on common shares ($1.08 per share) | | | | | | | | (1,024) | | | | | | | | | (1,024) | |
Redeemable noncontrolling interests fair value and other adjustments | | | | | | 8 | | | | | | | | | | | 8 | |
Acquisition and other adjustments of nonredeemable noncontrolling interests | | | | | | | | | | | | | | (7) | | | (7) | |
Distribution to nonredeemable noncontrolling interests | | | | | | | | | | | | | | (66) | | | (66) | |
Balance at September 30, 2019 | | 947 | | | $ | 9 | | | $ | — | | | $ | 58,696 | | | $ | 640 | | | $ | (4,349) | | | $ | 2,760 | | | $ | 57,756 | |
UnitedHealth Group
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Nonredeemable Noncontrolling Interests | | Total Equity |
Nine months ended September 30, (in millions) | | Shares | | Amount | | | | Net Unrealized Gains (Losses) on Investments | | Foreign Currency Translation Losses | | |
Balance at January 1, 2020 | | 948 | | | $ | 9 | | | $ | 7 | | | $ | 61,178 | | | $ | 589 | | | $ | (4,167) | | | $ | 2,820 | | | $ | 60,436 | |
Adjustment to adopt ASU 2016-13 | | | | | | | | (28) | | | | | | | | | (28) | |
Net earnings | | | | | | | | 13,191 | | | | | | | 159 | | | 13,350 | |
Other comprehensive income (loss) | | | | | | | | | | 667 | | | (1,583) | | | | | (916) | |
Issuances of common stock, and related tax effects | | 10 | | | 1 | | | 928 | | | | | | | | | | | 929 | |
Share-based compensation | | | | | | 509 | | | | | | | | | | | 509 | |
Common share repurchases | | (9) | | | — | | | (1,315) | | | (1,226) | | | | | | | | | (2,541) | |
Cash dividends paid on common shares ($3.58 per share) | | | | | | | | (3,400) | | | | | | | | | (3,400) | |
Redeemable noncontrolling interests fair value and other adjustments | | | | | | (129) | | | | | | | | | | | (129) | |
Acquisition and other adjustments of nonredeemable noncontrolling interests | | | | | | | | | | | | | | 42 | | | 42 | |
Distribution to nonredeemable noncontrolling interests | | | | | | | | | | | | | | (148) | | | (148) | |
Balance at September 30, 2020 | | 949 | | | $ | 10 | | | $ | — | | | $ | 69,715 | | | $ | 1,256 | | | $ | (5,750) | | | $ | 2,873 | | | $ | 68,104 | |
| | | | | | | | | | | | | | | | |
Balance at January 1, 2019 | | 960 | | | $ | 10 | | | $ | — | | | $ | 55,846 | | | $ | (264) | | | $ | (3,896) | | | $ | 2,623 | | | $ | 54,319 | |
Adjustment to adopt ASU 2016-02 | | | | | | | | (13) | | | | | | | (5) | | | (18) | |
Net earnings | | | | | | | | 10,298 | | | | | | | 196 | | | 10,494 | |
Other comprehensive income (loss) | | | | | | | | | | 904 | | | (453) | | | | | 451 | |
Issuances of common stock, and related tax effects | | 8 | | | — | | | 438 | | | | | | | | | | | 438 | |
Share-based compensation | | | | | | 521 | | | | | | | | | | | 521 | |
Common share repurchases | | (21) | | | (1) | | | (573) | | | (4,527) | | | | | | | | | (5,101) | |
Cash dividends paid on common shares ($3.06 per share) | | | | | | | | (2,908) | | | | | | | | | (2,908) | |
Redeemable noncontrolling interests fair value and other adjustments | | | | | | (277) | | | | | | | | | | | (277) | |
Acquisition and other adjustments of nonredeemable noncontrolling interests | | | | | | (109) | | | | | | | | | 157 | | | 48 | |
Distribution to nonredeemable noncontrolling interests | | | | | | | | | | | | | | (211) | | | (211) | |
Balance at September 30, 2019 | | 947 | | | $ | 9 | | | $ | — | | | $ | 58,696 | | | $ | 640 | | | $ | (4,349) | | | $ | 2,760 | | | $ | 57,756 | |
UnitedHealth Group
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
(in millions) | | 2020 | | 2019 |
Operating activities | | | | |
Net earnings | | $ | 13,417 | | | $ | 10,571 | |
Noncash items: | | | | |
Depreciation and amortization | | 2,159 | | | 2,002 | |
Deferred income taxes | | 119 | | | 177 | |
Share-based compensation | | 527 | | | 525 | |
Other, net | | 48 | | | (181) | |
Net change in other operating items, net of effects from acquisitions and changes in AARP balances: | | | | |
Accounts receivable | | (194) | | | 957 | |
Other assets | | (2,697) | | | (2,181) | |
Medical costs payable | | (615) | | | 223 | |
Accounts payable and other liabilities | | 3,441 | | | 105 | |
Unearned revenues | | (132) | | | 60 | |
Cash flows from operating activities | | 16,073 | | | 12,258 | |
Investing activities | | | | |
Purchases of investments | | (11,570) | | | (13,386) | |
Sales of investments | | 4,887 | | | 6,198 | |
Maturities of investments | | 5,297 | | | 5,160 | |
Cash paid for acquisitions, net of cash assumed | | (4,326) | | | (8,200) | |
Purchases of property, equipment and capitalized software | | (1,477) | | | (1,421) | |
Other, net | | (165) | | | 338 | |
Cash flows used for investing activities | | (7,354) | | | (11,311) | |
Financing activities | | | | |
Common share repurchases | | (2,541) | | | (5,101) | |
Cash dividends paid | | (3,400) | | | (2,908) | |
Proceeds from common stock issuances | | 1,206 | | | 740 | |
Repayments of long-term debt | | (1,500) | | | (1,250) | |
(Repayments of) proceeds from short-term borrowings, net | | (423) | | | 3,998 | |
Proceeds from issuance of long-term debt | | 4,864 | | | 5,444 | |
Customer funds administered | | 249 | | | 420 | |
Other, net | | (449) | | | (756) | |
Cash flows (used for) from financing activities | | (1,994) | | | 587 | |
Effect of exchange rate changes on cash and cash equivalents | | (160) | | | (37) | |
Increase in cash and cash equivalents | | 6,565 | | | 1,497 | |
Cash and cash equivalents, beginning of period | | 10,985 | | | 10,866 | |
Cash and cash equivalents, end of period | | $ | 17,550 | | | $ | 12,363 | |
UnitedHealth Group
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
UnitedHealth Group Incorporated (individually and together with its subsidiaries, “UnitedHealth Group” and “the Company”) is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone.
Through its diversified family of businesses, the Company leverages core competencies in data and health information, advanced technology and clinical expertise. These core competencies are deployed within two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
The Company has prepared the Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. The year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements. Therefore, these Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and the Notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC (2019 10-K). The accompanying Condensed Consolidated Financial Statements include all normal recurring adjustments necessary to present the interim financial statements fairly.
Use of Estimates
These Condensed Consolidated Financial Statements include certain amounts based on the Company’s best estimates and judgments. The Company’s most significant estimates include medical costs payable and goodwill. Certain of these estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.
Revenue from Products
For the three and nine months ended September 30, 2020, the Company recognized revenue and cost of products sold for retail pharmacy co-payments related to its OptumRx business. Revenue recognized in prior periods related to retail pharmacy transactions excludes the member’s applicable co-payment. There was no impact on earnings from operations, net earnings, earnings per share or total equity.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (ASU 2016-13). ASU 2016-13 requires the use of the current expected credit loss impairment model to develop an estimate of expected credit losses for certain financial assets. ASU 2016-13 also requires expected credit losses on available-for-sale debt securities to be recognized through an allowance for credit losses and revises certain disclosure requirements. The Company adopted ASU 2016-13 on January 1, 2020 using a cumulative effect upon adoption approach. The adoption of ASU 2016-13 was immaterial to the Company’s consolidated balance sheet, results of operations, equity and cash flows.
Under the current expected credit loss impairment model, the Company evaluates an available-for-sale debt security for credit-related impairment by considering the present value of expected cash flows relative to a security’s amortized cost, the extent to which fair value is less than amortized cost, the financial condition and near-term prospects of the issuer and specific events or circumstances that may influence the operations of the issuer. Credit-related impairments are recorded as an allowance, with an offset to investment and other income. Non-credit related impairments are recorded through other comprehensive income. If the Company intends to sell an impaired security, or will likely be required to sell a security before recovery of the entire amortized cost, the entire impairment is included in net earnings.
The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its Condensed Consolidated Financial Statements.
2. Investments
A summary of debt securities by major security type is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
September 30, 2020 | | | | | | | | |
Debt securities - available-for-sale: | | | | | | | | |
U.S. government and agency obligations | | $ | 3,374 | | | $ | 160 | | | $ | — | | | $ | 3,534 | |
State and municipal obligations | | 6,311 | | | 377 | | | (4) | | | 6,684 | |
Corporate obligations | | 18,461 | | | 778 | | | (35) | | | 19,204 | |
U.S. agency mortgage-backed securities | | 6,523 | | | 270 | | | (3) | | | 6,790 | |
Non-U.S. agency mortgage-backed securities | | 2,033 | | | 98 | | | (6) | | | 2,125 | |
Total debt securities - available-for-sale | | 36,702 | | | 1,683 | | | (48) | | | 38,337 | |
Debt securities - held-to-maturity: | | | | | | | | |
U.S. government and agency obligations | | 422 | | | 7 | | | — | | | 429 | |
State and municipal obligations | | 31 | | | 2 | | | — | | | 33 | |
Corporate obligations | | 245 | | | 1 | | | — | | | 246 | |
Total debt securities - held-to-maturity | | 698 | | | 10 | | | — | | | 708 | |
Total debt securities | | $ | 37,400 | | | $ | 1,693 | | | $ | (48) | | | $ | 39,045 | |
December 31, 2019 | | | | | | | | |
Debt securities - available-for-sale: | | | | | | | | |
U.S. government and agency obligations | | $ | 3,502 | | | $ | 55 | | | $ | (4) | | | $ | 3,553 | |
State and municipal obligations | | 5,680 | | | 251 | | | (5) | | | 5,926 | |
Corporate obligations | | 17,910 | | | 343 | | | (11) | | | 18,242 | |
U.S. agency mortgage-backed securities | | 6,425 | | | 109 | | | (6) | | | 6,528 | |
Non-U.S. agency mortgage-backed securities | | 1,811 | | | 37 | | | (3) | | | 1,845 | |
Total debt securities - available-for-sale | | 35,328 | | | 795 | | | (29) | | | 36,094 | |
Debt securities - held-to-maturity: | | | | | | | | |
U.S. government and agency obligations | | 402 | | | 2 | | | — | | | 404 | |
State and municipal obligations | | 32 | | | 2 | | | — | | | 34 | |
Corporate obligations | | 538 | | | — | | | (1) | | | 537 | |
Total debt securities - held-to-maturity | | 972 | | | 4 | | | (1) | | | 975 | |
Total debt securities | | $ | 36,300 | | | $ | 799 | | | $ | (30) | | | $ | 37,069 | |
The Company held $2.1 billion and $2.0 billion of equity securities as of September 30, 2020 and December 31, 2019, respectively. The Company’s investments in equity securities primarily consist of employee savings plan related investments and shares of Brazilian real denominated fixed-income funds with readily determinable fair values. Additionally, the Company’s investments included $1.3 billion and $1.4 billion of equity method investments in operating businesses in the health care sector as of September 30, 2020 and December 31, 2019, respectively. The allowance for credit losses on held-to-maturity securities at September 30, 2020 was not material.
The amortized cost and fair value of debt securities as of September 30, 2020, by contractual maturity, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Available-for-Sale | | Held-to-Maturity |
(in millions) | | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Due in one year or less | | $ | 3,388 | | | $ | 3,407 | | | $ | 400 | | | $ | 401 | |
Due after one year through five years | | 11,253 | | | 11,678 | | | 246 | | | 252 | |
Due after five years through ten years | | 9,179 | | | 9,826 | | | 30 | | | 31 | |
Due after ten years | | 4,326 | | | 4,511 | | | 22 | | | 24 | |
U.S. agency mortgage-backed securities | | 6,523 | | | 6,790 | | | — | | | — | |
Non-U.S. agency mortgage-backed securities | | 2,033 | | | 2,125 | | | — | | | — | |
Total debt securities | | $ | 36,702 | | | $ | 38,337 | | | $ | 698 | | | $ | 708 | |
The fair value of available-for-sale debt securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less Than 12 Months | | 12 Months or Greater | | Total |
(in millions) | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
September 30, 2020 | | | | | | | | | | | | |
Debt securities - available-for-sale: | | | | | | | | | | | | |
| | | | | | | | | | | | |
State and municipal obligations | | $ | 366 | | | $ | (4) | | | $ | — | | | $ | — | | | $ | 366 | | | $ | (4) | |
Corporate obligations | | 2,314 | | | (30) | | | 400 | | | (5) | | |