CVS HEALTH CorpCVS
CVS HEALTH Corp Fair Value Disclosure
Fair Value
The preparation of the Company’s consolidated financial statements requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values. The Company presents this information for those financial instruments that are measured at fair value for which the change in fair value impacts net income attributable to CVS Health or other comprehensive income separately from other financial assets and liabilities.
Financial Instruments Measured at Fair Value on the Consolidated Balance Sheets
Certain of the Company’s financial instruments are measured at fair value on the consolidated balance sheets. The fair values of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:
•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.
•Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.
•Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.
Financial assets and liabilities are classified based upon the lowest level of input that is significant to the valuation. When quoted prices in active markets for identical assets and liabilities are available, the Company uses these quoted market prices to determine the fair value of financial assets and liabilities and classifies these assets and liabilities in Level 1. In other cases where a quoted market price for identical assets and liabilities in an active market is either not available or not observable, the Company estimates fair value using valuation methodologies based on available and observable market information or by using a matrix pricing model. These financial assets and liabilities are classified in Level 2. If quoted market prices are not available, the Company determines fair value using broker quotes or an internal analysis of each investment’s financial performance and cash flow projections. Thus, financial assets and liabilities may be classified in Level 3 even though there may be some significant inputs that may be observable.
The following is a description of the valuation methodologies used for the Company’s financial assets and liabilities that are measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Cash and Cash Equivalents – The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months. When quoted prices are available in an active market, cash equivalents are classified in Level 1 of the fair value hierarchy. Fair values of cash equivalent instruments that do not trade on a regular basis in active markets are classified as Level 2.
Debt Securities – Where quoted prices are available in an active market, debt securities are classified in Level 1 of the fair value hierarchy. The Company’s Level 1 debt securities consist primarily of U.S. Treasury securities.
The fair values of the Company’s Level 2 debt securities are obtained using models, such as matrix pricing, which use quoted market prices of debt securities with similar characteristics or discounted cash flows to estimate fair value. The Company reviews these prices to ensure they are based on observable market inputs that include quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets and inputs that are observable that are not prices (such as interest rates and credit risks). The Company also reviews the methodologies and the
assumptions used to calculate prices from these observable inputs. On a quarterly basis, the Company selects a sample of its Level 2 debt securities’ prices and compares them to prices provided by a secondary source. Variances over a specified threshold are identified and reviewed to confirm the price provided by the primary source represents an appropriate estimate of fair value. In addition, the Company’s internal investment team consistently compares the prices obtained for select Level 2 debt securities to the team’s own independent estimates of fair value for those securities. The Company obtained one price for each of its Level 2 debt securities and did not adjust any of those prices at December 31, 2025 or 2024.
The Company also values certain debt securities using Level 3 inputs. For Level 3 debt securities, fair values are determined by outside brokers or, in the case of certain private placement securities, are priced internally. Outside brokers determine the value of these debt securities through a combination of their knowledge of the current pricing environment and market flows. The Company did not have any broker quoted debt securities for the years ended December 31, 2025 and 2024. For some private placement securities, the Company’s internal staff determines the value of these debt securities by analyzing spreads of corporate and sector indices as well as interest spreads of comparable public bonds. Examples of these private placement Level 3 debt securities include certain U.S. and foreign securities and certain tax-exempt municipal securities.
Equity Securities – The Company currently has two classifications of equity securities: those that are publicly traded and those that are privately placed. Publicly-traded equity securities are classified in Level 1 or Level 2. Publicly-traded equity securities where quoted prices are available in an active market are classified as Level 1. The fair values of the Company’s Level 2 publicly-traded equity securities are obtained using models, such as matrix pricing, which use quoted market prices of securities with similar characteristics or discounted cash flows to estimate fair value. For privately placed equity securities, there is no active market; therefore, these securities are classified in Level 3 because the Company prices these securities through an internal analysis of each investment’s financial statements and cash flow projections. Significant unobservable inputs consist of earnings and revenue multiples, discount for lack of marketability and comparability adjustments. An increase or decrease in any of these unobservable inputs would have resulted in a change in the fair value measurement.
There were no financial liabilities measured at fair value on a recurring basis on the consolidated balance sheets at December 31, 2025 or 2024. Financial assets measured at fair value on a recurring basis on the consolidated balance sheets at December 31, 2025 and 2024 were as follows:
| In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 4,030 | $ | 4,423 | $ | — | $ | 8,453 | |||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| U.S. government securities | 2,713 | 9 | — | 2,722 | |||||||||||||||||||
| States, municipalities and political subdivisions | — | 292 | — | 292 | |||||||||||||||||||
| U.S. corporate securities | — | 14,682 | 6 | 14,688 | |||||||||||||||||||
| Foreign securities | — | 3,028 | — | 3,028 | |||||||||||||||||||
| Residential mortgage-backed securities | — | 1,050 | — | 1,050 | |||||||||||||||||||
| Commercial mortgage-backed securities | — | 1,979 | — | 1,979 | |||||||||||||||||||
| Other asset-backed securities | — | 4,944 | — | 4,944 | |||||||||||||||||||
| Redeemable preferred securities | — | 15 | — | 15 | |||||||||||||||||||
| Total debt securities | 2,713 | 25,999 | 6 | 28,718 | |||||||||||||||||||
| Equity securities | 105 | 30 | 198 | 333 | |||||||||||||||||||
| Total | $ | 6,848 | $ | 30,452 | $ | 204 | $ | 37,504 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
Cash and cash equivalents | $ | 4,948 | $ | 3,638 | $ | — | $ | 8,586 | |||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| U.S. government securities | 2,777 | 18 | — | 2,795 | |||||||||||||||||||
| States, municipalities and political subdivisions | — | 698 | — | 698 | |||||||||||||||||||
| U.S. corporate securities | — | 12,687 | 38 | 12,725 | |||||||||||||||||||
| Foreign securities | — | 2,524 | — | 2,524 | |||||||||||||||||||
| Residential mortgage-backed securities | — | 740 | — | 740 | |||||||||||||||||||
| Commercial mortgage-backed securities | — | 1,673 | — | 1,673 | |||||||||||||||||||
| Other asset-backed securities | — | 4,862 | — | 4,862 | |||||||||||||||||||
| Redeemable preferred securities | — | 16 | — | 16 | |||||||||||||||||||
| Total debt securities | 2,777 | 23,218 | 38 | 26,033 | |||||||||||||||||||
| Equity securities | 234 | — | 126 | 360 | |||||||||||||||||||
| Total | $ | 7,959 | $ | 26,856 | $ | 164 | $ | 34,979 | |||||||||||||||
The changes in the balances of Level 3 financial assets during the year ended December 31, 2025 were as follows:
| In millions | Commercial mortgage- backed securities | U.S. corporate securities | Equity securities | Redeemable preferred securities | Total | ||||||||||||||||||||||||
| Beginning balance | $ | — | $ | 38 | $ | 126 | $ | — | $ | 164 | |||||||||||||||||||
| Net realized and unrealized capital gains (losses): | |||||||||||||||||||||||||||||
| Included in net income | — | 7 | 26 | — | 33 | ||||||||||||||||||||||||
| Included in other comprehensive income | — | (2) | — | — | (2) | ||||||||||||||||||||||||
| Purchases | 19 | 40 | 52 | 23 | 134 | ||||||||||||||||||||||||
| Sales | — | (33) | (6) | — | (39) | ||||||||||||||||||||||||
| Transfers out of Level 3, net | (19) | (44) | — | (23) | (86) | ||||||||||||||||||||||||
| Ending balance | $ | — | $ | 6 | $ | 198 | $ | — | $ | 204 | |||||||||||||||||||
During the year ended December 31, 2025, there was no change in net unrealized capital losses included in other comprehensive income associated with Level 3 financial assets which were held as of December 31, 2025.
The changes in the balances of Level 3 financial assets during the year ended December 31, 2024 were as follows:
| In millions | Commercial mortgage- backed securities | U.S. corporate securities | Other asset- backed securities | Equity securities | Total | ||||||||||||||||||||||||
| Beginning balance | $ | — | $ | 29 | $ | — | $ | 79 | $ | 108 | |||||||||||||||||||
Net realized and unrealized capital gains (losses): | |||||||||||||||||||||||||||||
Included in net income | — | (5) | — | 28 | 23 | ||||||||||||||||||||||||
| Included in other comprehensive income | — | (1) | — | — | (1) | ||||||||||||||||||||||||
| Purchases | 52 | 15 | 15 | 19 | 101 | ||||||||||||||||||||||||
| Sales | — | — | — | — | — | ||||||||||||||||||||||||
| Transfers out of Level 3, net | (52) | — | (15) | — | (67) | ||||||||||||||||||||||||
| Ending balance | $ | — | $ | 38 | $ | — | $ | 126 | $ | 164 | |||||||||||||||||||
The change in net unrealized capital losses included in other comprehensive income associated with Level 3 financial assets which were held as of December 31, 2024 was $1 million during the year ended December 31, 2024.
The total gross transfers into (out of) Level 3 during the years ended December 31, 2025 and 2024 were as follows:
| In millions | 2025 | 2024 | |||||||||
| Gross transfers into Level 3 | $ | — | $ | — | |||||||
| Gross transfers out of Level 3 | (86) | (67) | |||||||||
| Net transfers out of Level 3 | $ | (86) | $ | (67) | |||||||
Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets
The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the consolidated balance sheets at adjusted cost or contract value at December 31, 2025 and 2024 were as follows:
| Carrying Value | Estimated Fair Value | ||||||||||||||||||||||||||||
| In millions | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Mortgage loans | $ | 1,524 | $ | — | $ | — | $ | 1,524 | $ | 1,524 | |||||||||||||||||||
Equity securities (1) | 555 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Investment contract liabilities: | |||||||||||||||||||||||||||||
| With a fixed maturity | 1 | — | — | 1 | 1 | ||||||||||||||||||||||||
| Without a fixed maturity | 270 | — | — | 251 | 251 | ||||||||||||||||||||||||
| Long-term debt | 64,570 | 62,321 | — | — | 62,321 | ||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Mortgage loans | $ | 1,505 | $ | — | $ | — | $ | 1,468 | $ | 1,468 | |||||||||||||||||||
Equity securities (1) | 490 | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Investment contract liabilities: | |||||||||||||||||||||||||||||
| With a fixed maturity | 1 | — | — | 1 | 1 | ||||||||||||||||||||||||
| Without a fixed maturity | 312 | — | — | 272 | 272 | ||||||||||||||||||||||||
Long-term debt | 64,151 | 58,724 | — | — | 58,724 | ||||||||||||||||||||||||
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(1)It was not practical to estimate the fair value of these investments as it represents shares of unlisted companies. See Note 1 ‘‘Significant Accounting Policies’’ for additional information regarding the valuation of investments accounted for under the measurement alternative method.
Separate Accounts Measured at Fair Value on the Consolidated Balance Sheets
Separate Accounts assets relate to the Company’s large case pensions products which represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Net investment income and capital gains and losses on Separate Accounts assets accrue directly to such contract holders. The assets of each account are legally segregated and are not subject to claims arising from the Company’s other businesses. Deposits, withdrawals, net investment income and realized and unrealized capital gains and losses on Separate Accounts assets are not reflected in the consolidated statements of operations, shareholders’ equity or cash flows.
Separate Accounts assets include debt and equity securities. The valuation methodologies used for these assets are similar to the methodologies described above in this Note 5 ‘‘Fair Value.’’ Separate Accounts assets also include investments in common/collective trusts that are carried at fair value. Common/collective trusts invest in other investment funds otherwise known as the underlying funds. The Separate Accounts’ interests in the common/collective trust funds are based on the fair values of the investments of the underlying funds and therefore are classified in Level 2. The assets in the underlying funds primarily consist of equity securities, U.S. corporate securities and U.S. government securities. Investments in common/collective trust funds are valued at their respective net asset value (“NAV”) per share/unit on the valuation date.
Separate Accounts financial assets at December 31, 2025 and 2024 were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| In millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1 | $ | 155 | $ | — | $ | 156 | $ | 1 | $ | 164 | $ | — | $ | 165 | |||||||||||||||||||||||||||||||
| Debt securities | 30 | 361 | 2 | 393 | 186 | 669 | 1 | 856 | |||||||||||||||||||||||||||||||||||||||
| Common/collective trusts | — | 1,445 | — | 1,445 | — | 2,478 | — | 2,478 | |||||||||||||||||||||||||||||||||||||||
Total (1) | $ | 31 | $ | 1,961 | $ | 2 | $ | 1,994 | $ | 187 | $ | 3,311 | $ | 1 | $ | 3,499 | |||||||||||||||||||||||||||||||
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(1)Excludes $188 million of other payables at December 31, 2024.
During the years ended December 31, 2025 and 2024, the Company had no gross transfers of Separate Accounts financial assets into or out of Level 3.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 8, 2023 | |
| 2021 | Feb 9, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 28, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.