HCA Holdings 2012 Annual Report Download - page 132

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HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)
Scheduled maturities of investments in debt securities at December 31, 2012 were as follows (dollars in
millions):
Amortized
Cost
Fair
Value
Due in one year or less ............................... $ 76 $ 76
Due after one year through five years ................... 173 181
Due after five years through ten years ................... 120 128
Due after ten years .................................. 93 100
462 485
Auction rate securities ............................... 74 68
Asset-backed securities ............................... 14 14
$550 $567
The average expected maturity of the investments in debt securities at December 31, 2012 was 4.5 years,
compared to the average scheduled maturity of 8.3 years. Expected and scheduled maturities may differ because
the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their
scheduled maturity date. The average expected maturities for our auction rate and asset-backed securities were
derived from valuation models of expected cash flows and involved management’s judgment. The average
expected maturities for our auction rate and asset-backed securities at December 31, 2012 were 5.5 years and
4.0 years, respectively, compared to average scheduled maturities of 24.1 years and 24.0 years, respectively.
The cost of securities sold is based on the specific identification method. Sales of securities for the years
ended December 31 are summarized below (dollars in millions):
2012 2011 2010
Debt securities:
Cash proceeds ........................................ $1 $— $329
Gross realized gains ................................... ——14
Gross realized losses .................................. ——1
Equity securities:
Cash proceeds ........................................ $5 $— $ —
Gross realized gains ................................... ———
Gross realized losses .................................. ———
NOTE 8 — FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates.
These swap agreements involve the exchange of fixed and variable rate interest payments between two parties
based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively
convert LIBOR indexed variable rate obligations to fixed interest rate obligations. The interest payments under
these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these
agreements, generally match the timing of the related liabilities, for the interest rate swap agreements which have
been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to
calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these
agreements is considered low because the swap agreements are with creditworthy financial institutions.
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