Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Schedule of assets and liabilities measured on recurring basis

The following tables present information about our assets and liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):



	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of September 30, 2013:
Assets:
Cash and cash equivalents	$	686.1	$	—	$	—	$	—	$	686.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	208.6	$	—	$	—	$	208.6
Commercial mortgage-backed securities	—		156.8		0.7		—		157.5
Other asset-backed securities	—		42.0		—		—		42.0
U.S. government and agencies:
U.S. Treasury securities	26.5		—		—		—		26.5
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		719.2		42.9		—		762.1
Corporate debt securities	—		426.9		9.0		—		435.9
Total investments at fair value	$	26.5	$	1,553.5	$	52.6	$	—	$	1,632.6
Embedded contractual derivative	—		—		—		12.7		12.7
State-sponsored health plans settlement account deficit	—		—		—		51.7		51.7
Total assets at fair value	$	712.6	$	1,553.5	$	52.6	$	64.4	$	2,383.1



	Level 3
As of September 30, 2013:
Liability:
Embedded contractual derivative	$	0.7
Total liability at fair value	$	0.7



	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of December 31, 2012:
Assets:
Cash and cash equivalents	$	340.1	$	—	$	—	$	—	$	340.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	272.4	$	—	$	—	$	272.4
Commercial mortgage-backed securities	—		223.1		—		—		223.1
Other asset-backed securities	—		23.6		—		—		23.6
U.S. government and agencies:
U.S. Treasury securities	25.9		—		—		—		25.9
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		841.9		—		0.2		842.1
Corporate debt securities	—		425.4		—		—		425.4
Total investments at fair value	$	25.9	$	1,786.4	$	—	$	0.2	$	1,812.5
Embedded contractual derivative	—		—		—		11.2		11.2
Total assets at fair value	$	366.0	$	1,786.4	$	—	$	11.4	$	2,163.8



	Level 3
As of December 31, 2012:
Liability:
Embedded contractual derivative	$	3.2
Total liability at fair value	$	3.2

Changes in the Balances of Level 3 Financial Assets on Recurring Basis

The changes in the balances of Level 3 financial assets for the three months ended September 30, 2013 and 2012 were as follows (dollars in millions):



	Three months ended September 30,
	2013								2012
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total		Available-For-Sale Investments		Embedded Contractual Derivative			Total
Opening balance	$	—	$	10.8	$	35.4	$	46.2	$	0.2	$	15.0		$	15.2
Transfers into Level 3	—		—		—		—		—		—			—
Transfers out of Level 3	—		—		—		—		—		—			—
Total gains or losses for the period:
Realized in net income	—		1.9		16.3		18.2		—		(7.8		)	(7.8		)
Unrealized in accumulated other comprehensive income	—		—		—		—		—		—			—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—		—		—		—			—
Issues	—		—		—		—		—		—			—
Sales	—		—		—		—		—		—			—
Settlements			—		—		—		—		—			—
Closing balance	$	—	$	12.7	$	51.7	$	64.4	$	0.2	$	7.2		$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—	$	—	$	—	$	—	$	—	$	—		$	—

The changes in the balances of Level 3 financial assets for the nine months ended September 30, 2013 and 2012 were as follows (dollars in millions):



	Nine months ended September 30,
	2013										2012
	Available-For-Sale Investments			Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit		Total			Available-For-Sale Investments		Embedded Contractual Derivative		Total
Opening balance	$	0.2		$	11.2	$	—	$	11.4		$	0.2	$	5.3	$	5.5
Transfers into Level 3	—			—		—		—			—		—		—
Transfers out of Level 3	—			—		—		—			—		—		—
Total gains or losses for the period:
Realized in net income	—			1.5		51.7		53.2			—		1.9		1.9
Unrealized in accumulated other comprehensive income	—			—		—		—			—		—		—
Purchases, issues, sales and settlements:
Purchases/additions	—			—		—		—			—		—		—
Issues	—			—		—		—			—		—		—
Sales	(0.2		)	—		—		(0.2		)	—		—		—
Settlements	—			—		—		—			—		—		—
Closing balance	$	—		$	12.7	$	51.7	$	64.4		$	0.2	$	7.2	$	7.4
Change in unrealized gains (losses) included in net income for assets held at the end of the reporting period	$	—		$	—	$	—	$	—		$	—	$	—	$	—

Changes in the Balances of Level 3 Financial Liabilities on Recurring Basis

The changes in the balance of the Level 3 financial liability for the three and nine months ended September, 2013 were as follows (dollars in millions):



	Three months ended September 30, 2013			Nine months ended September 30, 2013
	Embedded Contractual Derivative
Opening balance, July 1 and January 1	$	4.8		$	3.2
Transfers into Level 3	—			—
Transfers out of Level 3	—			—
Total gains or losses for the period:
Realized in net income	(4.1		)	(2.5		)
Unrealized in accumulated other comprehensive income	—			—
Purchases, issues, sales and settlements:
Purchases	—			—
Issues	—			—
Sales	—			—
Settlements	—			—
Closing balance	$	0.7		$	0.7

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents information about financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized by us to determine such fair value (dollars in millions):



As of December 31, 2012	Level 1		Level 2		Level 3		Total
Lease impairment obligation	$	—	$	—	$	7.4	$	7.4

Quantitative information about level 3 assets and liabilities fair value measurements

The following tables present quantitative information about Level 3 Fair Value Measurements as of September 30, 2013 and December 31, 2012 (dollars in millions):



	Fair Value as of September 30, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	12.7	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-5.34	%	—	7.91%	(0.69%)
Embedded contractual derivative asset	$	12.7	Monte Carlo Simulation Approach	National Health Care Expenditures	-0.55	%	—	7.04%	(3.35%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	2.59	%	—	6.10%	(4.26%)
Embedded contractual derivative liability	$	0.7	Monte Carlo Simulation Approach	National Health Care Expenditures	-1.80	%	—	8.85%	(4.00%)
State-sponsored health plans settlement account deficit	$	51.7	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	10.0	%	—	10.0%	(10.0%)



	Fair Value as of December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	11.2	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-1.7	%	—	0.8%	-(0.4%)
Embedded contractual derivative asset	$	11.2	Monte Carlo Simulation Approach	National Health Care Expenditures	3.7	%	—	3.7%	(3.7%)
Embedded contractual derivative liability			Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-0.3	%	—	10.1%	(4.9%)
Embedded contractual derivative liability	$	3.2	Monte Carlo Simulation Approach	National Health Care Expenditures	-0.1	%	—	7.3%	(3.3%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	9.0	%	—	9.0%	(9.0%)
Lease impairment obligation	$	7.4	Income Approach	Discount Rate	3.26	%	—	3.26%	(3.26%)

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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