Short-term and Long-term Investments, Restricted Deposits

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Short-term and Long-term Investments, Restricted Deposits

Short-term and long-term investments and restricted deposits by investment type consist of the following ($ in millions):


	September 30, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	656	$	—	$	—	$	656	$	907	$	4	$	—	$	911
Corporate securities	7,686		178		(37)		7,827		6,560		262		(8)		6,814
Restricted certificates of deposit	4		—		—		4		105		—		—		105
Restricted cash equivalents	211		—		—		211		157		—		—		157
Short-term time deposits	78		—		—		78		53		—		—		53
Municipal securities	3,381		97		(8)		3,470		2,970		129		(2)		3,097
Asset-backed securities	1,141		8		(1)		1,148		1,154		13		(3)		1,164
Residential mortgage-backed securities	902		15		(6)		911		1,068		27		—		1,095
Commercial mortgage-backed securities	818		18		(6)		830		748		30		(5)		773
Equity securities (1)	317		—		—		317		318		—		—		318
Private equity investments	561		—		—		561		838		—		—		838
Life insurance contracts	179		—		—		179		168		—		—		168
Total	$	15,934	$	316	$	(58)	$	16,192	$	15,046	$	465	$	(18)	$	15,493

(1) Investments in equity securities primarily consists of exchange traded funds in fixed income securities.

The Company’s investments are debt securities classified as available-for-sale with the exception of equity securities, certain private equity investments and life insurance contracts. The Company’s investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets with the focus on high credit quality securities. The Company limits the size of investment in any single issuer other than U.S. treasury securities and obligations of U.S. government corporations and agencies. As of September 30, 2021, 98% of the Company’s investments in rated securities carry an investment grade rating by nationally recognized statistical rating organizations. At September 30, 2021, the Company held certificates of deposit, equity securities, private equity investments and life insurance contracts, which did not carry a credit rating. Accrued interest income on available-for-sale debt securities was $92 million and $86 million at September 30, 2021 and December 31, 2020, respectively, and is included in other current assets on the Consolidated Balance Sheets.

The Company’s residential mortgage-backed securities are primarily issued by the Federal National Mortgage Association, Government National Mortgage Association or Federal Home Loan Mortgage Corporation, which carry implicit or explicit guarantees of the U.S. government. The Company’s commercial mortgage-backed securities are primarily senior tranches with a weighted average rating of AA and a weighted average duration of 4 years at September 30, 2021.

The fair value of available-for-sale debt securities with gross unrealized losses by investment type and length of time that individual securities have been in a continuous unrealized loss position were as follows ($ in millions):


	September 30, 2021								December 31, 2020
	Less Than 12 Months				12 Months or More				Less Than 12 Months				12 Months or More
	Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value

Corporate securities	$	(35)	$	3,089	$	(2)	$	75	$	(7)	$	953	$	(1)	$	24
Municipal securities	(7)		929		(1)		26		(2)		238		—		—
Asset-backed securities	(1)		334		—		36		(2)		302		(1)		105
Residential mortgage-backed securities	(6)		428		—		1		—		59		—		2
Commercial mortgage-backed securities	(4)		272		(2)		33		(5)		147		—		13

Total	$	(53)	$	5,052	$	(5)	$	171	$	(16)	$	1,699	$	(2)	$	144

As of September 30, 2021, the gross unrealized losses were generated from 1,887 positions out of a total of 6,468 positions. The change in fair value of fixed income securities is primarily a result of movement in interest rates subsequent to the purchase of the security.

For each security in an unrealized loss position, the Company assesses whether it intends to sell the security or if it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If the security meets this criterion, the decline in fair value is recorded in earnings. The Company does not intend to sell these securities prior to maturity and it is not likely that the Company will be required to sell these securities prior to maturity; therefore, the Company did not record the unrealized loss in earnings for these securities.

In addition, the Company continuously monitors available-for-sale debt securities for credit losses. Certain investments have experienced a decline in fair value due to changes in credit quality, market interest rates and/or general economic conditions. The Company recognizes an allowance when evidence demonstrates that it is credit related. Evidence of a credit related loss may include rating agency actions, adverse conditions specifically related to the security, or failure of the issuer of the security to make scheduled payments.

In June 2019, the Company acquired 40% of Circle Health, one of the U.K.’s largest independent operators of hospitals. The initial 40% investment was accounted for as an equity method investment. In July 2021, the Company acquired the remaining 60% interest of Circle Health for $705 million. As a result of the acquisition, the Company recorded a non-cash gain of $309 million on its original investment in the three months ended September 30, 2021. The gain was included in investment and other income on the Consolidated Statement of Operations. Beginning in July 2021, the Company consolidates 100% of Circle Health.

In September 2021, the Company recorded a $229 million impairment of its equity method investment in RxAdvance, a pharmacy benefit manager. During the third quarter, the Company made a strategic decision to transition from using the RxAdvance platform and consolidate its business on an alternative external platform as a result of the Company's focus on simplification of its pharmacy operations. The impairment was based on the Company’s estimate of RxAdvance’s future cash flows and other market indicators of fair value.

The contractual maturities of short-term and long-term debt securities and restricted deposits are as follows ($ in millions):


	September 30, 2021								December 31, 2020
	Investments				Restricted Deposits				Investments				Restricted Deposits
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	1,355	$	1,361	$	507	$	508	$	1,407	$	1,414	$	817	$	818
One year through five years	5,701		5,845		355		355		4,748		4,937		221		223
Five years through ten years	3,791		3,865		243		243		3,460		3,639		18		19
Greater than ten years	56		61		8		8		81		87		—		—
Asset-backed securities	2,861		2,889		—		—		2,970		3,032		—		—
Total	$	13,764	$	14,021	$	1,113	$	1,114	$	12,666	$	13,109	$	1,056	$	1,060

Actual maturities may differ from contractual maturities due to call or prepayment options. Equity securities, private equity investments and life insurance contracts are excluded from the table above because they do not have a contractual maturity. The Company has an option to redeem at amortized cost substantially all of the securities included in the greater than ten years category listed above.