UNITEDHEALTH GROUP INC | 2013 | FY | 3

Investments
A summary of short-term and long-term investments by major security type is as follows:
(in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
December 31, 2013
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
2,211

 
$
5

 
$
(21
)
 
$
2,195

State and municipal obligations
 
6,902

 
147

 
(72
)
 
6,977

Corporate obligations
 
7,265

 
130

 
(60
)
 
7,335

U.S. agency mortgage-backed securities
 
2,256

 
23

 
(61
)
 
2,218

Non-U.S. agency mortgage-backed securities
 
697

 
12

 
(7
)
 
702

Total debt securities - available-for-sale
 
19,331

 
317

 
(221
)
 
19,427

Equity securities - available-for-sale
 
1,576

 
9

 
(13
)
 
1,572

Debt securities - held-to-maturity:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
181

 
1

 
—

 
182

State and municipal obligations
 
28

 
—

 
—

 
28

Corporate obligations
 
334

 
—

 
—

 
334

Total debt securities - held-to-maturity
 
543

 
1

 
—

 
544

Total investments
 
$
21,450

 
$
327

 
$
(234
)
 
$
21,543

December 31, 2012
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
2,501

 
$
38

 
$
(1
)
 
$
2,538

State and municipal obligations
 
6,282

 
388

 
(3
)
 
6,667

Corporate obligations
 
6,930

 
283

 
(4
)
 
7,209

U.S. agency mortgage-backed securities
 
2,168

 
70

 
—

 
2,238

Non-U.S. agency mortgage-backed securities
 
538

 
36

 
—

 
574

Total debt securities - available-for-sale
 
18,419

 
815

 
(8
)
 
19,226

Equity securities - available-for-sale
 
668

 
10

 
(1
)
 
677

Debt securities - held-to-maturity:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
168

 
6

 
—

 
174

State and municipal obligations
 
30

 
—

 
—

 
30

Corporate obligations
 
641

 
2

 
—

 
643

Total debt securities - held-to-maturity
 
839

 
8

 
—

 
847

Total investments
 
$
19,926

 
$
833

 
$
(9
)
 
$
20,750



The fair values of the Company’s mortgage-backed securities by credit rating (when multiple credit ratings are available for an individual security, the average of the available ratings is used) and origination date as of December 31, 2013 were as follows:
(in millions)
 
AAA
 
AA
 
Non-Investment
Grade
 
Total Fair
Value
2013
 
$
130

 
$
—

 
$
—

 
$
130

2012
 
106

 
—

 
—

 
106

2011
 
20

 
—

 
—

 
20

2010
 
26

 
—

 
—

 
26

2009
 
2

 
—

 
—

 
2

2007
 
63

 
—

 
2

 
65

Pre - 2007
 
340

 
3

 
10

 
353

U.S. agency mortgage-backed securities
 
2,218

 
—

 
—

 
2,218

Total
 
$
2,905

 
$
3

 
$
12

 
$
2,920


The Company includes any securities backed by Alt-A or sub-prime mortgages and any commercial mortgage loans in default in the non-investment grade column in the table above.
The amortized cost and fair value of available-for-sale debt securities as of December 31, 2013, by contractual maturity, were as follows:
(in millions)
 
Amortized
Cost
 
Fair
Value
Due in one year or less
 
$
2,042

 
$
2,054

Due after one year through five years
 
7,121

 
7,235

Due after five years through ten years
 
5,164

 
5,182

Due after ten years
 
2,051

 
2,036

U.S. agency mortgage-backed securities
 
2,256

 
2,218

Non-U.S. agency mortgage-backed securities
 
697

 
702

Total debt securities - available-for-sale
 
$
19,331

 
$
19,427


The amortized cost and fair value of held-to-maturity debt securities as of December 31, 2013, by contractual maturity, were as follows:
(in millions)
 
Amortized
Cost
 
Fair
Value
Due in one year or less
 
$
78

 
$
78

Due after one year through five years
 
231

 
230

Due after five years through ten years
 
154

 
156

Due after ten years
 
80

 
80

Total debt securities - held-to-maturity
 
$
543

 
$
544


The fair value of available-for-sale investments 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
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
1,055

 
$
(19
)
 
$
17

 
$
(2
)
 
$
1,072

 
$
(21
)
State and municipal obligations
 
2,491

 
(62
)
 
128

 
(10
)
 
2,619

 
(72
)
Corporate obligations
 
2,573

 
(51
)
 
103

 
(9
)
 
2,676

 
(60
)
U.S. agency mortgage-backed securities
 
1,393

 
(51
)
 
105

 
(10
)
 
1,498

 
(61
)
Non-U.S. agency mortgage-backed securities
 
289

 
(6
)
 
26

 
(1
)
 
315

 
(7
)
Total debt securities - available-for-sale
 
$
7,801

 
$
(189
)
 
$
379

 
$
(32
)
 
$
8,180

 
$
(221
)
Equity securities - available-for-sale
 
$
180

 
$
(13
)
 
$
—

 
$
—

 
$
180

 
$
(13
)
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
183

 
$
(1
)
 
$
—

 
$
—

 
$
183

 
$
(1
)
State and municipal obligations
 
362

 
(3
)
 
—

 
—

 
362

 
(3
)
Corporate obligations
 
695

 
(4
)
 
—

 
—

 
695

 
(4
)
Total debt securities - available-for-sale
 
$
1,240

 
$
(8
)
 
$
—

 
$
—

 
$
1,240

 
$
(8
)
Equity securities - available-for-sale
 
$
13

 
$
(1
)
 
$
—

 
$
—

 
$
13

 
$
(1
)

The unrealized losses from all securities as of December 31, 2013 were generated from approximately 6,400 positions out of a total of 19,700 positions. The Company believes that it will collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit ratings associated with these securities. At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a significant deterioration since purchase nor other factors leading to an other-than-temporary impairment (OTTI). Therefore, the Company believes these losses to be temporary. As of December 31, 2013, the Company did not have the intent to sell any of the securities in an unrealized loss position.
The Company’s investments in equity securities consist of investments in Brazilian real denominated fixed-income funds, employee savings plan related investments, private equity funds, and dividend paying stocks. The Company evaluated its investments in equity securities for severity and duration of unrealized loss, overall market volatility and other market factors.
Net realized gains reclassified out of accumulated other comprehensive income were from the following sources:
 
 
For the Years Ended December 31,
(in millions)
 
2013
 
2012
 
2011
Total OTTI
 
$
(8
)
 
$
(6
)
 
$
(12
)
Portion of loss recognized in other comprehensive income
 
—

 
—

 
—

Net OTTI recognized in earnings
 
(8
)
 
(6
)
 
(12
)
Gross realized losses from sales
 
(9
)
 
(13
)
 
(11
)
Gross realized gains from sales
 
198

 
175

 
136

Net realized gains (included in Investment and Other Income on the Consolidated Statements of Operations)
 
181

 
156

 
113

Income tax effect (included in Provision for Income Taxes on the Consolidated Statements of Operations)
 
(66
)
 
(57
)
 
(41
)
Realized gains, net of taxes
 
$
115

 
$
99

 
$
72

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