Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

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 June 30, 2014 and December 31, 2013, 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 June 30, 2014:
Assets:
Cash and cash equivalents	$	603.1	$	—	$	—	$	—	$	603.1
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	218.3	$	—	$	—	$	218.3
Commercial mortgage-backed securities	—		124.4		0.7		—		125.1
Other asset-backed securities	—		79.4		—		—		79.4
U.S. government and agencies:
U.S. Treasury securities	23.7		—		—		—		23.7
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		731.1		—		—		731.1
Corporate debt securities	—		492.0		—		—		492.0
Total investments at fair value	$	23.7	$	1,645.2	$	0.7	$	—	$	1,669.6
Embedded contractual derivative	—		—		—		13.3		13.3
State-sponsored health plans settlement account deficit	—		—		—		9.6		9.6
Total assets at fair value	$	626.8	$	1,645.2	$	0.7	$	22.9	$	2,295.6



	Level 1		Level 2		Level 2- noncurrent		Level 3		Total
As of December 31, 2013:
Assets:
Cash and cash equivalents	$	433.2	$	—	$	—	$	—	$	433.2
Investments—available-for-sale
Asset-backed debt securities:
Residential mortgage-backed securities	$	—	$	203.5	$	0.4	$	—	$	203.9
Commercial mortgage-backed securities	—		144.1		0.7		—		144.8
Other asset-backed securities	—		41.8		—		—		41.8
U.S. government and agencies:
U.S. Treasury securities	23.7		—		—		—		23.7
U.S. Agency securities	—		—		—		—		—
Obligations of states and other political subdivisions	—		709.9		47.1		—		757.0
Corporate debt securities	—		444.0		11.6		—		455.6
Total investments at fair value	$	23.7	$	1,543.3	$	59.8	$	—	$	1,626.8
Embedded contractual derivative	—		—		—		7.2		7.2
State-sponsored health plans settlement account deficit	—		—		—		62.9		62.9
Total assets at fair value	$	456.9	$	1,543.3	$	59.8	$	70.1	$	2,130.1

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 June 30, 2014 and 2013 were as follows (dollars in millions):



	Three months ended June 30,
	2014										2013
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit			Total			Available-For-Sale Investments		Embedded Contractual Derivative			State-Sponsored Health Plans Settlement Account Deficit		Total
Opening balance	$	—	$	11.4	$	50.0		$	61.4		$	—	$	10.9		$	20.8	$	31.7
Transfers into Level 3	—		—		—			—			—		—			—		—
Transfers out of Level 3	—		—		—			—			—		—			—		—
Total gains or losses for the period:
Realized in net income	—		1.9		(40.4		)	(38.5		)	—		(0.1		)	14.6		14.5
Unrealized in accumulated other comprehensive income	—		—		—			—			—		—			—		—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—			—			—		—			—		—
Issues	—		—		—			—			—		—			—		—
Sales	—		—		—			—			—		—			—		—
Settlements	—		—		—			—			—		—			—		—
Closing balance	$	—	$	13.3	$	9.6		$	22.9		$	—	$	10.8		$	35.4	$	46.2
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 six months ended June 30, 2014 and 2013 were as follows (dollars in millions):



	Six months ended June 30,
	2014										2013
	Available-For-Sale Investments		Embedded Contractual Derivative		State-Sponsored Health Plans Settlement Account Deficit			Total			Available-For-Sale Investments			Embedded Contractual Derivative			State-Sponsored Health Plans Settlement Account Deficit		Total
Opening balance	$	—	$	7.2	$	62.9		$	70.1		$	0.2		$	11.2		$	—	$	11.4
Transfers into Level 3	—		—		—			—			—			—			—		—
Transfers out of Level 3	—		—		—			—			—			—			—		—
Total gains or losses for the period:
Realized in net income	—		6.1		(53.3		)	(47.2		)	—			(0.4		)	35.4		35.0
Unrealized in accumulated other comprehensive income	—		—		—			—			—			—			—		—
Purchases, issues, sales and settlements:
Purchases/additions	—		—		—			—			—			—			—		—
Issues	—		—		—			—			—			—			—		—
Sales	—		—		—			—			(0.2		)	—			—		(0.2		)
Settlements	—		—		—			—			—			—			—		—
Closing balance	$	—	$	13.3	$	9.6		$	22.9		$	—		$	10.8		$	35.4	$	46.2
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 balances of Level 3 financial liability for the three and six months ended June 30, 2013 were as follows (dollars in millions):



	Three months ended June 30, 2013		Six months ended June 30, 2013
	Embedded Contractual Derivative
Opening balance, April 1 and January 1	$	4.2	$	3.2
Transfers into Level 3	—		—
Transfers out of Level 3	—		—
Total gains or losses for the period:
Realized in net income	0.6		1.6
Unrealized in accumulated other comprehensive income	—		—
Purchases, issues, sales and settlements:
Purchases	—		—
Issues	—		—
Sales	—		—
Settlements	—		—
Closing balance	$	4.8	$	4.8

Quantitative information about level 3 assets fair value measurements

The following tables present quantitative information about Level 3 Fair Value Measurements as of June 30, 2014 and December 31, 2013 (dollars in millions):



	Fair Value as of June 30, 2014		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	13.3	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-5.58	%	—	8.13%	(1.64%)
Embedded contractual derivative asset	$	13.3	Monte Carlo Simulation Approach	National Health Care Expenditures	-1.13	%	—	10.95%	(2.52%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	9.0	%	—	9.0%	(9.0%)
State-sponsored health plans settlement account deficit	$	9.6	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)



	Fair Value as of December 31, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Embedded contractual derivative asset	$	7.2	Monte Carlo Simulation Approach	Health Net Health Care Expenditures	-3.34	%	—	7.34%	(2.20%)
Embedded contractual derivative asset	$	7.2	Monte Carlo Simulation Approach	National Health Care Expenditures	-0.77	%	—	9.46%	(3.63%)
Goodwill - Western Region reporting unit	$	565.9	Income Approach	Discount Rate	10.0	%	—	10.0%	(10.0%)
State-sponsored health plans settlement account deficit	$	62.9	Income Approach	Discount Rate	1.135	%	—	1.135%	(1.135%)

- 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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