5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at June 30, 2012 and December 31, 2011, respectively, for financial assets measured at fair value on a recurring basis:

 

						Fair Value Measurements Using
		Fair Value				Quoted Prices in Active Markets (Level 1)				Other Observable Inputs (Level 2)				Unobservable Inputs (Level 3)
		(in millions)
June 30, 2012
Cash equivalents		$	3,646			$	3,646			$	0			$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations			553				0				553				0
Mortgage-backed securities			1,955				0				1,955				0
Tax-exempt municipal securities			2,886				0				2,871				15
Mortgage-backed securities:
Residential			38				0				38				0
Commercial			448				0				448				0
Asset-backed securities			44				0				43				1
Corporate debt securities			3,741				0				3,717				24
Total debt securities			9,665				0				9,625				40
Total invested assets		$	13,311			$	3,646			$	9,625			$	40
December 31, 2011
Cash equivalents		$	1,205			$	1,205			$	0			$	0
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations			725				0				725				0
Mortgage-backed securities			1,784				0				1,784				0
Tax-exempt municipal securities			2,856				0				2,840				16
Mortgage-backed securities:
Residential			44				0				44				0
Commercial			381				0				381				0
Asset-backed securities			83				0				82				1
Corporate debt securities			3,580				0				3,556				24
Total debt securities			9,453				0				9,412				41
Total invested assets		$	10,658			$	1,205			$	9,412			$	41

There were no material transfers between Level 1 and Level 2 during the three and six months ended June 30, 2012 or June 30, 2011.

Our Level 3 assets had a fair value of $40 million at June 30, 2012, or less than 0.5% of our total invested assets. During the three and six months ended June 30, 2012 and 2011, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:

 

		For the three months ended June 30,
		2012												2011
		Private Placements/ Venture Capital				Auction Rate Securities				Total				Private Placements/ Venture Capital				Auction Rate Securities				Total
		(in millions)
Beginning balance at April 1		$	25			$	15			$	40			$	14			$	51			$	65
Total gains or losses:
Realized in earnings			0				0				0				0				0				0
Unrealized in other comprehensive income			0				0				0				0				2				2
Purchases			0				0				0				17				0				17
Sales			0				0				0				0				(33	)			(33	)
Settlements			0				0				0				0				1				1
Balance at June 30		$	25			$	15			$	40			$	31			$	21			$	52

 

		For the six months ended June 30,
		2012												2011
		Private Placements/ Venture Capital				Auction Rate Securities				Total				Private Placements/ Venture Capital				Auction Rate Securities				Total
		(in millions)
Beginning balance at January 1		$	25			$	16			$	41			$	14			$	52			$	66
Total gains or losses:
Realized in earnings			0				0				0				0				0				0
Unrealized in other comprehensive income			0				0				0				0				2				2
Purchases			0				0				0				17				0				17
Sales			0				(1	)			(1	)			0				(33	)			(33	)
Settlements			0				0				0				0				0				0
Balance at June 30		$	25			$	15			$	40			$	31			$	21			$	52

Financial Liabilities

Our long-term debt, recorded at carrying value in our consolidated balance sheets, was $1,618 million at June 30, 2012 and $1,659 million at December 31, 2011. The fair value of our long-term debt was $1,867 million at June 30, 2012 and $1,834 million at December 31, 2011. The fair value of our long-term debt is determined based on Level 2 inputs including quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.