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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 355 added, 364 removed, 493 unchanged (59% of the section changed)

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Segment Reporting

Cigna Healthcar e

Evernorth Health Services

Cigna Healthcare

Other Operations

Investment Assets

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating our financial condition as of December 31, 2021 compared with December 31, 2020 and our results of operations for 2021 compared with 2020 and 2019 and is intended to help you understand the ongoing trends in our business.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating The Cigna Group's financial condition as of December 31, 2022 compared with December 31, 2021 and our results of operations for 2022 compared with 2021 and 2020 and is intended to help you understand the ongoing trends in our business.

For comparisons of our results of operations for 2021 compared with 2020, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021.

We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K ("Form 10-K") and the "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

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The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability.

We define adjusted income from operations as shareholders' net income (or income before income taxes for the segment metric) excluding net realized investment results, amortization of acquired intangible assets, results of transitioning clients prior to 2020 and special items.

Cigna's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.

We define adjusted income from operations as shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net realized investment results, amortization of acquired intangible assets, and special items.

The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.

Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size.

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The Company defines adjusted revenues as total revenues excluding the following adjustments:

special items, revenue contribution from transitioning clients prior to 2020 and Cigna's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

special items and The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size.

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EXECUTIVE OVERVIEW

Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as "Cigna," the "Company," "we," "our" or "us") is a global health services organization with a mission of helping those we serve improve their health, well-being and peace of mind by making health care affordable, predictable and simple.

Our subsidiaries offer a differentiated set of pharmacy, medical, dental and related products and services.

The Cigna Group, together with its subsidiaries, is a global health company.

On February 13, 2023, we changed our corporate name from Cigna Corporation to The Cigna Group.

We will not distinguish between our prior and current corporate name and will refer to our current corporate name throughout this Annual Report on Form 10-K.

As such, unless expressly indicated or the context requires otherwise, the terms "Company," "we," "us," and "our" in this document refer to The Cigna Group, a Delaware corporation, and, where appropriate, its subsidiaries.

On February 13, 2023, we also changed the name of our Evernorth segment to Evernorth Health Services.

We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.

Our common stock continues to be listed with, and trades on, the New York Stock Exchange under the ticker symbol "CI".

The Cigna Group has a mission of helping those we serve improve their health and vitality.

Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental and related products and services.

For further information on our business and strategy, see Item 1, "Business" in this Form 10-K.

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See Note 1 to the Consolidated Financial Statements for a description of our segments.

Summarized below are certain key measures of our performance by segment for the years ended December 31, 2021, 2020 and 2019:

Summarized below are certain key measures of our performance by segment:

Financial highlights by segment

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Adjusted revenues by segment

Evernorth $ 131,912 $ 116,130 $ 96,447 14 % 20 %

Evernorth Health Services $ 140,335 $ 131,912 $ 116,130 6 % 14 %

Cigna Healthcare 45,036 44,652 41,135 1 9

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Adjusted revenues 180,642 174,078 160,067 4 9

Revenue contribution from transitioning clients — — 13,347 N/M N/M

Net realized investment results from certain equity method investments — 130 44 N/M 195

Net realized investment results from certain equity method investments (126) — 130 N/M N/M

Special item related to contractual adjustment for a former client — — 204 N/M N/M

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Pre-tax adjusted income (loss) from operations by segment

Evernorth $ 5,818 $ 5,363 $ 5,092 8 % 5 %

Evernorth Health Services $ 6,127 $ 5,818 $ 5,363 5 % 8 %

Cigna Healthcare 4,072 3,609 4,031 13 (10)

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Consolidated pre-tax adjusted income from operations 9,233 8,977 8,808 3 2

Adjustment for transitioning clients — — 1,726 N/M N/M

Income attributable to noncontrolling interests 84 58 37 45 57

Net realized investment gains (losses) (1)

196 279 221 (30) 26

Net realized investment (losses) gains (1)

(621) 196 279 N/M (30)

Amortization of acquired intangible assets (1,876) (1,998) (1,982) 6 (1)

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Debt extinguishment costs — (141) (199) 141 N/M 58 29

Gain (loss) on sale of business — 4,203 — (4,203) N/M 4,203 N/M

Net realized investment gains (losses) 196 149 177 47 32 (28) (16)

Gain on sale of businesses 1,662 — 4,203 1,662 N/M (4,203) N/M

Net realized investment (losses) gains (495) 196 149 (691) N/M 47 32

Income before income taxes 8,353 6,782 10,868 1,571 23 (4,086) (38)

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Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations

Dollars in Millions Diluted Earnings Per Share

For the Years Ended December 31, For the Years Ended December 31,

For the Years Ended December 31,

2022 2021 2020

(Dollars in millions) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax

Shareholders' net income $ 6,668 $ 5,365 $ 8,458

After-tax adjustments required to reconcile to adjusted income from operations

Net realized investment (gains) losses (1)

Adjustments to reconcile to adjusted income from operations

Net realized investment losses (gains) (1)

$ 621 503 $ (196) (158) $ (279) (244)

Amortization of acquired intangible assets 1,876 1,345 1,998 1,494 1,982 1,431

Adjustment for transitioning clients — — (1,316) — — (3.46)

Special items

Integration and transaction-related costs 135 103 169 71 527 404

Charge for organizational efficiency plan 22 17 168 119 31 24

(Benefits) charges associated with litigation matters (28) (20) (27) (21) 25 19

(Gain) on sale of businesses (1,662) (1,332) — — (4,203) (3,217)

Debt extinguishment costs — — 141 110 199 151

Integration and transaction-related (benefits) costs 71 404 427 0.21 1.10 1.11

Risk corridors recovery — — — — (101) (76)

Contractual adjustment for a former client — — — — (204) (155)

Total special items $ (1,533) (1,232) $ 451 279 $ (3,726) (2,850)

Adjusted income from operations $ 7,284 $ 6,980 $ 6,795

(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations

For the Years Ended December 31,

2022 2021 2020

(Diluted Earnings Per Share) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax

Shareholders' net income $ 21.30 $ 15.73 $ 22.96

Adjustments to reconcile to adjusted income from operations

Net realized investment losses (gains) (1)

$ 1.98 1.61 $ (0.57) (0.46) $ (0.76) (0.66)

Amortization of acquired intangible assets 5.99 4.30 5.86 4.38 5.38 3.88

Special items

Integration and transaction-related costs 0.43 0.33 0.50 0.21 1.43 1.10

Charge for organizational efficiency plan 0.07 0.05 0.49 0.35 0.08 0.07

(Benefits) charges associated with litigation matters (0.09) (0.06) (0.08) (0.06) 0.07 0.05

(Gain) on sale of businesses (5.31) (4.26) — — (11.41) (8.73)

Debt extinguishment costs — — 0.41 0.32 0.54 0.41

Risk corridors recovery — — — — (0.27) (0.21)

Contractual adjustment for a former client — — — — (0.55) (0.42)

(Gain) on sale of business — (3,217) — — (8.73) —

Total special items $ (4.90) (3.94) $ 1.32 0.82 $ (10.11) (7.73)

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(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

COVID-19 Update

Cigna's commitment to the health, well-being and peace of mind of our employees and the people we serve remains the primary focus as the pandemic continues to impact all aspects of daily life.

Cigna is leveraging its resources, expertise, data and actionable intelligence to assist customers, clients and care providers navigate the evolving dynamics of the pandemic.

The Company continues to encourage COVID-19 vaccinations across all eligible populations to help control the spread of the virus, limit the severity of the disease and save lives.

Cigna has also expanded access to testing, care and supportive resources to help everyone it serves take care of their physical and mental health during this time, and will continue to do so.

For the fourth quarter of 2021, our Cigna Healthcare segment reflected net unfavorable COVID-19 related impacts, although not as significant when compared to those recognized in the same period in 2020.

For the year ended December 31, 2021 compared to 2020, the net unfavorable impacts reflect increased direct costs of COVID-19 testing, treatment and vaccines as well as the significant deferral of care by our customers in 2020.

These impacts were partially offset by the absence of the premium relief programs implemented in 2020.

We continue to optimize purchasing volume across the pharmaceutical supply chain in order to mitigate risk of disruption with prescription drug supply due to ongoing global supply disruptions.

The situation surrounding COVID-19 remains fluid with continued uncertainty and a wide range of potential outcomes.

We continue to actively manage our response and assess impacts to our financial position and operating results, as well as mitigate adverse developments in our business.

There continues to be uncertainty surrounding the pace, duration and extent of the COVID-19 pandemic and its related impacts — including vaccination efforts and new COVID-19 variants (including the delta and omicron variants) — on our results for 2022 and beyond.

We believe that such financial results may continue to be impacted by, among other things, higher medical costs to treat those affected by the virus, vaccine-related costs, test reimbursement costs, lower risk adjustment revenue due to disrupted care impeding appropriate documentation of customer risk profiles in our Medicare Advantage plans, the pace at which costs return as well as the severity of costs for those who had previously deferred care, the potential for future deferral of care, lower customer volumes due to a disrupted employment market, or volatility in the economic markets.

For further information regarding the potential impact of COVID-19 on the Company, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

Recent Events

The United States economy continues to be impacted by rising inflation.

We are proactively addressing potential impacts from inflation on our workforce, third party relationships (including relationships with vendors and health care providers) and drug pricing.

We are also monitoring the potential impact inflation may have on client and customer health care needs.

We have not experienced material impacts from inflation on our results of operations or cash flows for the year ended December 31, 2022.

For further information regarding risks we encounter in our business due to economic conditions including inflationary pressures, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

Russian Invasion of Ukraine

The war in Ukraine has significantly affected individuals, economic activity and financial markets on a global scale.

The Cigna Group does not have operations or employees in Ukraine or Russia and serves a limited number of customers and clients in these countries.

We have not experienced significant impacts to date on our investment portfolio, financial position or results of operations.

For a more complete discussion of the risks we encounter in our business, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

The Cigna Group's commitment to the health and vitality of our employees and the people we serve remains our focus as the pandemic environment evolves.

We continue to actively manage our response as the COVID-19 pandemic environment evolves and assess impacts to our financial position and operating results, as well as mitigate adverse developments in our business.

For further information regarding the potential impact of the COVID-19 pandemic on the Company, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

2022 versus 2021

The commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2022 with results for the year ended December 31, 2021.

Shareholders' net income decreased, reflecting the absence of the gain on sale of the Group Disability and Life business reported in 2020, partially offset by higher adjusted income from operations.

Adjusted income from operations increased, primarily resulting from higher earnings in Evernorth and lower net interest expense.

Improved results in our international businesses held for sale (reported in Other Operations) also contributed to the increase.

These favorable effects were partially offset by lower earnings in Cigna Healthcare and the absence of earnings in 2021 from the sold Group Disability and Life business.

The increase in earnings in the Evernorth segment was primarily attributable to continued contract affordability improvements and business growth (see "Evernorth Segment" section of this MD&A).

Lower earnings in Cigna Healthcare were primarily driven by the unfavorable impacts of COVID-19, partially offset by higher net investment income (see "Cigna Healthcare Segment" section of this MD&A).

Medical customers grew, reflecting a higher customer base in Individual and Medicare Advantage, as well as our Middle Market, Select and International Health market segments, offset by a decline in customers in our National Accounts market segment.

Pharmacy revenues increased, reflecting inflation on branded drugs and higher claim volume, primarily due to our collaboration with Prime Therapeutics.

See the "Evernorth Segment" section of this MD&A for further discussion of Pharmacy revenues.

Premiums were lower, reflecting the impact of the sale of the Group Disability and Life business.

This effect was partially offset by an increase in Cigna Healthcare premiums resulting from customer growth in our insured businesses, higher premium rates due to anticipated underlying medical cost trend and the absence of premium relief programs implemented in the second quarter of 2020 in response to deferred care due to the COVID-19 pandemic.

Fees and other revenues increased, primarily driven by customer growth (see "Evernorth Segment" section of this MD&A).

Net investment income increased due to strong returns on our securities limited partnership investments, partially offset by lower average assets due to the sale of the Group Disability and Life business.

Shareholders' net income increased 24% due to the gain on the sale of our life, accident and supplemental benefits businesses in six countries (the "Chubb transaction"), higher adjusted income from operations and the absence of debt extinguishment costs.

These favorable effects were partially offset by lower realized investment results due to declines in equity securities resulting in unfavorable mark to market adjustments in 2022.

Adjusted income from operations increased 4%, driven by a lower medical care ratio and increased specialty contributions in Cigna Healthcare, as well as within Evernorth Health Services, increased earnings primarily reflecting continued contract affordability improvements and growth in our accelerated businesses.

These favorable effects were partially offset by the absence of earnings in the second half of 2022 from the businesses sold in the Chubb transaction and lower net investment income.

Medical customers increased 5%, reflecting growth in our fee-based products from Middle Market and Select market segments as well as growth in International Health, partially offset by a decrease in U.S.

Government customers, including the disposition of the Medicaid business.

See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.

Pharmacy revenues increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services' collaboration with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs.

See the "Evernorth Health Services segment" section of this MD&A for further discussion.

Premiums declined 3%, reflecting the impact of the Chubb transaction and the disposition of the Medicaid business in Cigna Healthcare.

Partially offsetting these decreases were the favorable impact of increased specialty contributions and higher premium rates in Cigna Healthcare due to anticipated underlying medical cost trend.

See the "Cigna Healthcare segment" section of this MD&A for further discussion.

Fees and other revenues increased 9%, primarily reflecting customer growth from our continued contract affordability services.

See the "Evernorth Health Services segment" section of this MD&A for further discussion.

Net investment income decreased 25%, primarily reflecting lower returns on our partnership investments and the impact of the Chubb transaction.

See the "Investment Assets" section of this MD&A for further discussion.

Pharmacy and other service costs increased, reflecting inflation on branded drugs and higher claim volume, primarily due to our collaboration with Prime Therapeutics.

Medical costs and other benefit expenses increased, resulting from higher medical costs in Cigna Healthcare primarily driven by net unfavorable COVID-19 related impacts, underlying medical cost trend and customer growth in our insured business.

These unfavorable effects were substantially offset by the impact of the sale of the Group Disability and Life business.

Selling, general and administrative expenses decreased, primarily reflecting the impact of the sale of the Group Disability and Life business, lower integration and transaction costs and the repeal of the health insurance industry tax.

These favorable effects were partially offset by expense growth in Evernorth and Cigna Healthcare reflecting business growth.

Interest expense and other decreased primarily due to a lower average interest rate and lower levels of average outstanding debt resulting from debt repayments.

Debt extinguishment costs were lower because the debt repaid in 2021 had lower interest rates than the debt repaid in 2020.

Realized investment results improved, primarily due to gains on sales of real estate joint ventures in 2021, favorable market value adjustments on equity securities in 2021 compared with 2020 and lower credit loss reserves on debt securities.

These favorable effects were partially offset by lower gains on sales of debt securities in 2021 compared with 2020.

Income tax expense decreased in 2021, reflecting the absence of taxes recorded in 2020 on the sale of the Group Disability and Life business.

The consolidated effective tax rate decreased, primarily driven by the repeal of the nondeductible health insurance industry tax in 2021 and the absence of incremental tax expense associated with the sale of the Group Disability and Life business in 2020.

Due to the segment changes made in 2021, the following commentary comparing consolidated 2020 results to 2019 is provided as an update to the commentary provided in our 2020 Form 10-K.

Shareholders' net income increased, driven by the gain on sale of the Group Disability and Life business, lower amortization of acquired intangible assets and higher adjusted income from operations, partially offset by the absence of earnings from transitioning clients.

Adjusted income from operations increased, driven in part by higher earnings in the Evernorth segment reflecting customer growth and increased script volumes and lower interest costs in Corporate due to a lower level of outstanding debt.

These favorable effects were partially offset by lower earnings from the sold Group Disability and Life business (reported in Other Operations) primarily reflecting significantly elevated life claims related to the effects of COVID-19.

Medical customers decreased due to declines in the Middle Market and National Accounts market segments and increased disenrollment driven by the impacts of COVID-19.

Those decreases were partially offset by growth in the Select and International Health market segments, as well as Medicare Advantage customers.

Pharmacy revenues increased, reflecting the transition of Cigna Healthcare's customers to Evernorth, higher claims volumes, driven by the Evernorth collaboration with Prime Therapeutics and increased prices, primarily due to inflation on branded drugs.

These factors were substantially offset by the absence of revenues from the transitioning clients and, to a lesser extent, an increase in the generic fill rate.

See the "Evernorth Segment" section of this MD&A for further discussion of pharmacy revenues.

Premiums increased, reflecting customer growth in insured products and rate increases reflecting expected medical cost inflation and the return of the health insurance industry tax.

These factors were partially offset by the impact of premium relief programs implemented in response to significantly lower than historical utilization as customers deferred care in 2020 due to the COVID-19 pandemic.

Fees and other revenues decreased, primarily reflecting the transition of Cigna Healthcare's commercial customers to Evernorth's retail pharmacy network beginning in the third quarter of 2019 (see Note 3(J) to the Consolidated Financial Statements for further information).

Net investment income decreased, driven by lower yields, including lower income from partnership investments due to current economic conditions.

These effects were partially offset by higher average assets.

Pharmacy and other service costs increased, reflecting the transition of Cigna Healthcare's customers to Evernorth, higher claims volumes, driven by the Evernorth collaboration with Prime Therapeutics and an increase in pricing, primarily due to inflation on branded drugs.

These factors were substantially offset by the impact of the absence of the transitioning clients and, to a lesser extent, continued contract affordability improvements and the favorable impact of the mix of claims.

Medical costs and other benefit expenses increased, reflecting both customer growth and direct costs associated with COVID-19, partially offset by care deferrals in insured products in Cigna Healthcare and higher life claims in the sold Group Disability and Life business due to the effects of the COVID-19 pandemic.

Selling, general and administrative expenses were essentially flat, primarily reflecting lower charges in 2020 for the 2019 organizational efficiency plan and resolving our Affordable Care Act risk corridors claim against the United States Federal Government in the third quarter of 2020.

These decreases were offset by the return of the health insurance industry tax.

Amortization of acquired intangible assets decreased, primarily reflecting lower amortization of customer-related intangibles associated with the transitioning clients.

Income tax expense increased for 2020, largely attributable to the sale of Cigna's Group Disability and Life business.

The consolidated effective tax rate decreased slightly, driven by recognition of certain incremental federal and state tax benefits, largely offset by the return of the nondeductible health insurance industry tax.

Pharmacy and other service costs increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services' collaboration with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs.

Medical costs and other benefit expenses decreased 4%, primarily reflecting the impact of the Chubb transaction and the disposition of the Medicaid business in Cigna Healthcare.

Decreases also reflect lower direct COVID-19 testing, treatment and vaccine costs and are partially offset by medical cost trend in Cigna Healthcare.

Selling, general and administrative expenses increased 1%, primarily driven by higher expenses in Cigna Healthcare and strategic investments in expanding our services portfolio and digital capabilities in Evernorth Health Services, partially offset by decreased expenses in Other Operations driven by the impact of the Chubb transaction.

Interest expense and other increased 2%, primarily reflecting higher interest rates on our indebtedness.

Debt extinguishment costs.

We did not incur debt extinguishment costs in 2022 as we did not early retire any debt in 2022.

Gain on sale of businesses primarily reflects the Chubb transaction, which closed on July 1, 2022.

Realized investment results were substantially lower, primarily due to declines in equity securities resulting in unfavorable mark to market adjustments on investments in 2022.

See Note 11 to the Consolidated Financial Statements for further discussion.

The effective tax rate decreased by 100 basis points, driven largely by the foreign tax rate differential, including the impact of the Chubb transaction.

Key Transactions and Business Developments

Organizational Efficiency Plan

As discussed in Note 15 to the Consolidated Financial Statements, during the fourth quarter of 2021, the Company approved a strategic plan to drive operational efficiencies.

We believe this plan, coupled with the previously announced divestiture of the international life, accident and supplemental health benefits businesses (described below), will further leverage the Company's ongoing growth to drive operational efficiency through enhancements to organizational structure and increased use of automation and shared services.

In connection with these plans, Cigna has updated its reporting segments to align with the new business reporting structure and recognized a charge in the fourth quarter of 2021 in the amount of $168 million, pre-tax ($119 million, after-tax).

We expect to realize annualized after-tax savings of approximately $180 million.

A substantial portion of the savings is expected to be realized in 2022.

Although a substantial portion of the actions associated with these strategic steps have been reflected in the charge recognized in the fourth quarter of 2021, additional amounts are expected to be recorded in the second quarter of 2022 as we finalize our plans following the completion of the divestiture.

See Note 15 for further information regarding our organizational efficiency charge.

Agreement to Sell International Life, Accident and Supplemental Benefits Businesses

We entered into a definitive agreement in October 2021 to sell our life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc.

("Chubb") for $5.75 billion cash (the "Chubb Transaction").

Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a joint venture in Turkey in the second quarter of 2022.

The "Liquidity and Capital Resources" section of this MD&A provides discussion of the expected impact of this transaction to liquidity.

Purchase of MDLIVE

As discussed in Note 4 to the Consolidated Financial Statements, on April 19, 2021 Cigna's Evernorth segment completed the acquisition of MDLIVE, Inc.

("MDLIVE"), a 24/7 virtual care platform (the "MDLIVE Acquisition").

The acquisition of MDLIVE will enable Evernorth to continue expanding access to virtual care and delivering a more affordable, convenient and connected care experience for consumers.

The "Liquidity and Capital Resources" section of this MD&A provides discussion of the impact of the MDLIVE Acquisition on liquidity.

As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion in VillageMD preferred equity.

In January 2023, we invested $2.5 billion of the $2.7 billion.

VillageMD is an independent primary care group committed to offering high-quality, accessible primary care options for communities across the country through Village Medical.

VillageMD partners with physicians to provide the tools, technology, operations, staffing support and industry relationships to deliver high-quality clinical care and better patient outcomes, while reducing the total cost of care.

VillageMD and Village Medical operate in 22 markets and are responsible for more than 1.6 million patients.

Risk Adjustment Data Validation Audit Rule

On January 30, 2023, the Centers for Medicare and Medicaid Services ("CMS") issued the Final Rule titled "Medicare and Medicaid Programs;

Policy and Technical Changes to the Medicare Advantage, Medicare Prescription Drug Benefit, Program for All-inclusive Care for the Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 2021", effective April 3, 2023.

The Final Rule addresses CMS's audit methodology and related policies for the Risk Adjustment Data Validation ("RADV").

RADV is the primary mechanism for CMS to determine risk adjustment revenue overpayments to Medicare Advantage organizations.

Although CMS did not specify their sampling or extrapolation methodology the rule did codify that CMS will use a statistically valid method for sampling and extrapolation of error rates and the decision not to apply a fee for service adjuster when determining RADV audit findings.

CMS will not apply extrapolation to RADV audits until the 2018 payment year with payment recoveries for those RADV audits expected in 2025.

Audits for payment years prior to 2018 are not subject to extrapolation and the Company expects the impact for these years will not be material.

The Company is not currently subject to RADV audits for the 2018 and subsequent payment years and is unable to estimate the potential impacts of RADV audits subject to extrapolation in the Final Rule.

Although the Final Rule provides additional clarity regarding the structure of the methodology for RADV audits and quantification of RADV audit findings, further analysis is required to determine all potential implications.

The Company continues to evaluate the recently announced Final Rule including potential legal developments which could impact the ultimate application of the regulation.

See Part I, Item 1 of this Form 10-K for further discussion of RADV.

Centene Corporation

In October 2022, Evernorth Health Services and Centene Corporation ("Centene") announced a multi-year agreement effective January 2024 to manage pharmacy benefit services and make prescription medications more accessible and affordable for Centene's approximately 20 million customers.

In addition to greater savings on prescription drugs, Centene customers will also have access to Express Scripts' extensive national network of retail pharmacies.

We expect to spend approximately $200 million in 2023 preparing for the implementation of our multi-year agreement with Centene.

We will continue to refine this estimate during 2023.

Inflation Reduction Act

The Inflation Reduction Act of 2022, which was signed into law in August 2022, contains a variety of provisions that impact our business, including:

• providing a one percent excise tax on repurchases of stock made after December 31, 2022, which would generally be recorded in Treasury stock in the Consolidated Balance Sheets;

• extending the American Rescue Plan Act of 2021's enhanced Premium Tax Credits for three years from January 2023 to January 2026;

• instituting caps on insulin cost sharing in federal Medicare Part B medical insurance ("Part B") and federal Medicare Part D prescription drug program ("Part D") beginning in 2023 and removing deductibles for insulin provided via durable medical equipment under Part B beginning in July 2023;

• adding a requirement that drug manufacturers pay rebates beginning in 2023 if prescription drug prices for certain Part B and Part D drugs increase beyond inflation;

• redesigning of the Part D benefit in 2024 and capping of annual out-of-pocket costs starting in 2025;

• allowing CMS to select Part D and Part B drugs for the drug price negotiation program beginning in 2023 and 2026, respectively, with the maximum fair prices for select Part D drugs taking effect in 2026;

• delaying implementation of the 2020 Medicare drug rebate rule to 2032.

We currently do not expect the Inflation Reduction Act to have a material impact on our 2023 Consolidated Financial Statements.

We continue to analyze the impact on future periods.

Sale of International Life, Accident and Supplemental Benefits Businesses in Six Countries

As discussed in Note 4 to the Consolidated Financial Statements, on July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc.

("Chubb") for approximately $5.4 billion in cash (the "Chubb transaction").

The "Liquidity and Capital Resources" section of this MD&A provides further information on the impact of this transaction to liquidity.

See "Other Operations" section of this MD&A for further information on the results of these businesses prior to the divestiture.

Sale of Group Disability and Life Business

As discussed in Note 4 to the Consolidated Financial Statements, Cigna sold its U.S.

Group Disability and Life business to New York Life Insurance Company for $6.2 billion on December 31, 2020 (the "New York Life Divestiture").

The "Liquidity and Capital Resources" section of this MD&A provides discussion of the use of proceeds from the New York Life Divestiture.

Merger with Express Scripts

Cigna acquired Express Scripts on December 20, 2018.

Costs related to this transaction are reported in "integration and transaction-related costs" as a special item and excluded from adjusted income from operations because they are not indicative of future underlying performance of the business.

The integration of this acquisition has been completed.

On January 30, 2019, Anthem, Inc.

("Anthem"), a former client of Express Scripts, exercised its early termination right and terminated its pharmacy benefit management services agreement with us, effective March 1, 2019.

There was a twelve-month transition period that ended March 1, 2020.

We excluded the results of Express Scripts' contract with Anthem (and also Coventry Health Care, Inc.) from our non-GAAP reporting metrics adjusted revenues and adjusted income from operations for 2019 and refer to these clients as transitioning clients.

As of December 31, 2019, the transition was substantially complete;

therefore, beginning in 2020, we no longer exclude results of transitioning clients from our reported adjusted revenues and adjusted income from operations.

Additionally, for the year ended December 31, 2020, we recorded an adjustment related to this contract that was excluded from adjusted revenues and adjusted income from operations.

The Cigna Group sold its Group Disability and Life business to New York Life Insurance Company for $6.2 billion on December 31, 2020.

Medicare Star Quality Ratings ("Star Ratings")

The Centers for Medicare & Medicaid Services ("CMS") uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform, scoring how well plans perform in several categories, including quality of care and customer service.

CMS uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform.

Categories of measurement include quality of care and customer service.

Star Ratings range from one to five stars.

CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits.

Approximately 87% of our MA customers were in four star or greater plans for bonus payments received in 2021 and approximately 89% were in four star or greater plans for bonus payments to be received in 2022;

we expect this percentage to decrease to 86% for bonus payments to be received in 2023 based upon the mix of new and existing MA plans.

Medicare Advantage ("MA") Rates

On January 15, 2021, CMS published the Calendar Year 2022 Medicare Advantage and Part D Rate Announcement (the "2022 Final Notice"), finalizing reimbursement rates for 2022.

On February 2, 2022, CMS released the Calendar Year 2023 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the "Advance Notice").

We do not expect the new rates to have a material impact on our consolidated results of operations in 2022 or 2023.

Approximately 89% of our MA customers were in four star or greater plans for bonus payments received in 2022 and we expect 84% to be in four star or greater plans for bonus payments to be received in 2023.

On October 7, 2022, CMS announced Medicare Star Ratings for bonus payments to be received in 2024.

Based upon the current customer mix associated with the announced Star Ratings, we estimate 67% of our MA customers will be in four star or greater plans.

See Part 1, "Business - Regulation" section of this Form 10-K for further discussion of Star Ratings.

Medicare Advantage Rates

On April 4, 2022, CMS released the final Calendar Year 2023 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the "2023 Final Notice").

On February 1, 2023, CMS released the Calendar Year 2024 Advance Notice for Medicare Advantage and Part D Prescription Drug Programs (the "Advance Notice").

CMS will accept comments on the Advance Notice through March 3, 2023, before publishing the final rate announcement by April 3, 2023.

The Advance Notice is subject to the required notice and comment period, and we cannot predict when or to what extent CMS will adopt the proposals in the Advance Notice.

We are in the process of analyzing the potential implications of the Advance Notice .

LIQUIDITY AND CAPITAL RESOURCES

(In millions)

Financial Summary

For the Years Ended December 31,

(In millions) 2022 2021 2020

Short-term investments $ 139 $ 428 $ 359

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See Note 21 to the Consolidated Financial Statements in this Form 10-K for additional information regarding these restrictions.

Most of the Evernorth segment operations are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to Cigna.

Cash flows for the years ended December 31 were as follows:

Most of the Evernorth Health Services segment operations are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to The Cigna Group.

Cash flows were as follows:

For the Years Ended December 31,

(In millions) 2022 2021 2020

Net cash provided by operating activities $ 8,656 $ 7,191 $ 10,350

Net cash (used in) provided by investing activities:

Cash proceeds from sale of U.S.

Group Disability and Life business, net of cash sold (61) 5,592 —

Other acquisitions (1,833) (139) (153)

Net investment sales (purchases) (660) (1,406) 480

Net cash provided by (used in) investing activities:

Cash proceeds from sales of businesses, net of cash sold 4,835 (61) 5,592

Acquisitions — (1,833) (139)

Net investment (purchases) (272) (660) (1,406)

Purchases of property and equipment, net (1,295) (1,154) (1,094)

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Change in cash, cash equivalents and restricted cash $ 428 $ (4,697) $ 4,834

The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2021 compared with the year ended December 31, 2020.

The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2022 compared with the same period in 2021.

For comparisons of liquidity and capital resources for the year ended December 31, 2021 compared with the year ended December 31, 2020, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021.

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Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs, premiums, fees, investment income, taxes, benefit costs and other expenses.

Cash provided by operating activities decreased, driven by increases in accounts receivable due to higher pharmacy claim volume and business growth and a delay in the annual CMS Part D settlement, the timing of pharmacy and other service cost payables as well as higher tax payments largely related to the sale of the Group Disability and Life business.

These decreases were partially offset by the absence of the health insurance industry tax payments.

Investing and Financing activities

Cash used in investing activities increased, primarily due to the acquisition of MDLIVE in 2021, the absence of the net proceeds from the sale of the Group Disability and Life business in 2020, partially offset by lower net investment activities.

Cash used in financing activities decreased primarily due to lower debt repayments, offset by higher stock repurchases including shares purchased pursuant to the ASR agreements (described below) and an increase in dividends paid.

Operating cash flows for the year ended December 31, 2022 include the benefits from the delayed 2021 CMS Part D settlement.

The remaining increase was driven by timing of accrued liabilities and lower income tax payments, partially offset by lower insurance liabilities and higher inventories.

Investing activities

In 2022, the Company received cash proceeds from the Chubb transaction.

In 2021, the Company had cash outflows related to the acquisition of MDLIVE.

These factors, along with lower net purchases of investments in 2022, resulted in higher cash inflow from investing activities in 2022 compared with 2021.

Financing activities

The Company repaid more debt, in 2022, which resulted in an increase in cash used in financing activities in 2022.

Capital Resources

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Dividends from U.S.

regulated subsidiaries were $2.8 billion and $2.3 billion for the years ended December 31, 2021 and 2020, respectively.

regulated subsidiaries were $1.9 billion for the year ended December 31, 2022 and $2.8 billion for the year ended December 31, 2021.

Non-regulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to the parent company for general corporate purposes.

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Commercial Paper Program .

Cigna maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time not to exceed an aggregate amount of $5.0 billion.

The Cigna Group maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker-dealers at any time not to exceed an aggregate amount of $5.0 billion.

The net proceeds of issuances have been and are expected to be used for general corporate purposes.

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Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above.

Cigna's revolving credit agreements include:

As of December 31, 2022, The Cigna Group's revolving credit agreements include:

a $3.0 billion five-year revolving credit and letter of credit agreement that expires in April 2027;

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See Note 7 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.

At December 31, 2021, our debt-to-capitalization ratio was 41.7%, an increase from 39.5% at December 31, 2020, reflecting higher commercial paper balances and the impact of share repurchase on shareholders' equity.

Our debt-to-capitalization ratio was 40.9% at December 31, 2022 and 41.7% at December 31, 2021.

We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy.

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In addition to the sources of liquidity discussed above, the parent company can borrow an additional $3.0 billion from its subsidiaries without further approvals as of December 31, 2022.

Other Sources of Funds

Sale of international life, accident and supplemental benefits businesses in six countries.

On July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash.

Net after-tax proceeds of approximately $5.1 billion were utilized primarily for share repurchases, with $3.5 billion used to fund the purchases of our common stock pursuant to the ASR agreements (as described below).

Use of Capital Resources

Capital expenditures .

Capital expenditures for property, equipment and computer software were $1.2 billion in 2021 compared to $1.1 billion in 2020.

We expect to continue to invest in technology that we believe will drive future growth.

Capital expenditures for property, equipment and computer software were $1.3 billion in 2022 compared to $1.2 billion in the year ended December 31, 2021.

This increase reflects our continued strategic investment in technology for future growth.

We expect to deploy approximately $1.4 billion to capital expenditures in 2023.

Anticipated capital expenditures will be funded primarily from operating cash flow.

For 2021, Cigna declared and paid quarterly cash dividends of $1.00 per share of Cigna common stock.

For 2022, The Cigna Group declared and paid quarterly cash dividends of $1.12 per share of its common stock, compared to $1.00 per share in 2021.

See Note 8 to the Consolidated Financial Statements for further information on our dividend payments.

On February 3, 2022, the Board of Directors declared and increased the quarterly cash dividend to $1.12 per share of Cigna common stock to be paid on March 24, 2022 to shareholders of record on March 9, 2022.

Cigna currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of Cigna and its shareholders.

The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board of Directors may deem relevant.

Acquisition .

In April 2021, Cigna completed its acquisition of MDLIVE, which was funded with cash on hand and commercial paper borrowings.

See Note 4 to the Consolidated Financial Statements for additional information.

On February 2, 2023, the Board of Directors declared the first quarter cash dividend of $1.23 per share of The Cigna Group common stock to be paid on March 23, 2023 to shareholders of record on March 8, 2023.

The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders.

Share repurchases .

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The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital.

The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including through Rule 10b5-1 trading plans or privately negotiated transactions.

The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including through Rule 10b5-1 trading plans or privately negotiated transactions.

The program may be suspended or discontinued at any time.

On August 23, 2021, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements to repurchase $2.0 billion of common stock.

The total number of shares repurchased under the ASR agreements was 9.5 million.

See Note 8 to the Consolidated Financial Statements for additional information.

For the year ended December 31, 2021, we repurchased 35.2 million shares for approximately $7.7 billion including the $2.0 billion paid under the ASR agreements.

From January 1, 2022 through February 23, 2022, we repurchased 5.0 million shares for approximately $1.2 billion.

In June 2022, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements ("2022 ASR agreements") to repurchase $3.5 billion of common stock in aggregate.

In July 2022, in accordance with the 2022 ASR agreements, we remitted $3.5 billion and received an initial delivery of 10.4 million shares of our common stock.

Upon final settlement of the 2022 ASR agreements in November 2022, we received an additional 1.9 million shares of our common stock for no additional consideration.

In August 2021, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements to repurchase $2.0 billion of common stock.

The total number of shares repurchased under the agreements was 9.5 million.

We repurchased 27.4 million shares for approximately $7.6 billion during the year ended December 31, 2022, including the $3.5 billion paid under ASR agreements, compared to 35.2 million shares for approximately $7.7 billion during the year ended December 31, 2021 including the $2.0 billion paid under ASR agreements.

From January 1, 2023, through February 22, 2023, we repurchased 2.1 million shares for approximately $646 million.

Share repurchase authority was $2.9 billion as of February 22, 2023.

Pension liability.

As of December 31, 2021, our unfunded pension liability was $377 million, a decrease of $600 million from December 31, 2020, primarily attributable to strong investment asset returns and an increase in discount rates of 33 basis points.

See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.

Strategic investments.

As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion in VillageMD preferred equity.

In January 2023, we invested $2.5 billion of the $2.7 billion.

VillageMD is an independent primary care group with expertise in value-based care and operates primary care practices across 22 markets.

Pension plans.

Our pension plans were overfunded by $238 million and reported in Other assets in our Consolidated Balance Sheets as of December 31, 2022.

This represents a funding improvement of $615 million from an underfunded pension liability of $377 million primarily reported in Other non-current liabilities in our Consolidated Balance Sheets as of December 31, 2021.

This improvement was primarily attributable to an increase in discount rates of 261 basis points, partially offset by investment asset losses in 2022.

In 2022, we made immaterial contributions to the qualified pension plans as required under the Pension Protection Act of 2006 and we expect the required contributions for 2023 to be immaterial.

See Note 17 to the Consolidated Financial Statements for additional information.

Group Disability and Life Sale .

In connection with the sale of this business that closed on December 31, 2020, we deployed approximately $3.0 billion to debt repayment by:

(i) repaying in full our $1.4 billion 364-Day Term Loan Credit Agreement entered into on April 1, 2020, on December 31, 2020;

(ii) redeeming in full the $1.0 billion aggregate principal amount of Cigna's Senior Floating Rate Notes due 2021 on January 15, 2021 at a redemption price calculated in accordance with the terms and conditions of the indenture governing the Notes;

and (iii) repaying certain balances of our outstanding commercial paper in January 2021.

Sale of life, accident and supplemental benefits businesses in seven countries.

Cigna entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb for $5.75 billion cash.

Cigna estimates it will receive approximately $5.4 billion of net after-tax proceeds from this transaction and expects to utilize the after-tax proceeds from the transaction primarily for share repurchases.

Risks to our liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the "Risk Factors" section of this Form 10-K.

Though we believe we have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase costs.

Supply Chain Financing Program

We facilitate a voluntary supply chain finance program (the "program") that provides suppliers the opportunity to sell their receivables due from us (i.e., our payment obligations to the suppliers) to a financial institution, on a non-recourse basis in order to be paid earlier than our payment terms provide.

The Cigna Group is not a party to the program and agrees to commercial terms with its suppliers independently of their participation in the program.

A supplier's participation in the program has no impact on our payment terms and the Company has no economic interest in a supplier's decision to participate in the program.

The suppliers, at their sole discretion, determine which invoices, if any, to sell to the financial institution.

No guarantees are provided by the Company or any of our subsidiaries under the program.

We have been informed by the financial institution that $471 million as of December 31, 2022 and $331 million as of December 31, 2021 of our outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the program.

These amounts are reflected in Accounts payable in our Consolidated Balance Sheets.

Guarantees and Contractual Obligations

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• Insurance liabilities

◦ Insurance liabilities inclusive of the businesses held for sale are $21.5 billion, which include contractholder deposit funds, future policy benefits and unpaid claims and claim expenses.

◦ Of the total obligation amount, $4.3 billion of insurance liabilities are associated with the sold retirement benefits, individual life insurance and annuity businesses, as well as the group life and personal accident businesses as their related net cash flows are not expected to impact our cash flows.

◦ Insurance liabilities are $16.3 billion, which include contractholder deposit funds, future policy benefits and unpaid claims and claim expenses.

◦ Of the total obligation amount, $4.9 billion of insurance liabilities are associated with the sold retirement benefits, individual life insurance and annuity businesses, guaranteed minimum death benefit ("GMDB") business, as well as the group life and personal accident businesses as their related net cash flows are not expected to impact our cash flows.

◦ The $14.0 billion of total obligations exceeds the corresponding insurance and contractholder liabilities of $11.4 billion recorded on the balance sheet.

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◦ Total scheduled payments on long-term debt are $46.9 billion, which include scheduled interest payments and maturities of long-term debt.

◦ We expect $1.7 billion of long-term debt payments, which include scheduled interest payments and current maturities of long-term debt to be paid within the next twelve months beginning January 1, 2022.

◦ We expect $4.2 billion of long-term debt payments (including scheduled interest payments) to be paid within the next twelve months beginning January 1, 2023.

◦ Finance leases are included in Long-term debt and primarily represent obligations for information technology network storage, servers and equipment.

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◦ See Note 7 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.

• Other noncurrent liabilities

◦ These include approximately $704 million of estimated payments for guaranteed minimum income benefit ("GMIB") contracts (without considering any related reinsurance arrangements), other postretirement and postemployment benefit obligations, pension, supplemental and deferred compensation plans, interest rate and foreign currency swap contracts and reinsurance liabilities.

◦ We expect $121 million of other noncurrent liabilities to be paid within the next twelve months beginning January 1, 2022.

◦ See Note 16 to the Consolidated Financial Statements for further information on pension obligations.

• Other non-current liabilities

◦ These include approximately $415 million of estimated payments for other postretirement and postemployment benefit obligations, non-qualified pension plans, reinsurance liabilities, supplemental and deferred compensation plans and interest rate and foreign currency swap contracts.

◦ We expect $85 million of other liabilities to be paid within the next twelve months beginning January 1, 2023.

◦ See Note 17 to the Consolidated Financial Statements for further information on pension obligations and funded status.

• Operating leases

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• Uncertain tax positions

◦ In the event we are unable to sustain all of our $1.2 billion of uncertain tax positions, it could result in future tax payments of approximately $900 million.

◦ In the event we are unable to sustain all of our $1.3 billion of uncertain tax positions, it could result in future tax payments of approximately $1.0 billion.

We are adequately reserved for such positions.

As a result, there is minimal

direct risk to earnings should we fail to sustain our positions.

We cannot reasonably estimate the timing of such future payments.

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This includes:

▪ $3.4 billion of investment commitments, primarily comprised of other-long-term investments and equity securities.

▪ $932 million of future service commitments, primarily comprised of contracts for certain outsourced businesses process and information technology maintenance and support.

◦ We expect $2.0 billion of purchase obligations to be paid within the next twelve months beginning January 1, 2022, of which $1.6 billion relates to investment commitments and $368 million relates to future service commitments.

▪ $5.1 billion of investment commitments, primarily comprised of commitment to purchase up to $2.7 billion of preferred equity in VillageMD as well as other long-term investments.

▪ $1.4 billion of future service commitments, primarily comprised of contracts for certain outsourced businesses processes and information technology maintenance and support.

◦ We expect $3.9 billion of purchase obligations to be paid within the next twelve months beginning January 1, 2023.

This includes:

▪ $3.5 billion relates to investment commitments, which includes commitment to purchase up to $2.7 billion in VillageMD preferred equity.

In January 2023, we invested $2.5 billion of the $2.7 billion.

▪ $402 million relates to future service commitments.

◦ See Note 11 of the Consolidated Financial Statements for additional information on investment commitments.

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The tables below present the adverse impacts of certain possible changes in assumptions.

The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of

operations, liquidity or financial condition, except for assessing impairment of goodwill.

The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of operations, liquidity or financial condition, except for assessing impairment of goodwill.

Balance Sheet Caption /

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A discount rate is selected to correspond with each reporting unit's weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within each reporting unit.

Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategy and projection processes.

Future cash flows for Evernorth are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates.

Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections.

Future cash flows for Evernorth Health Services are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates.

Future cash flows for our other reporting units are primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term growth rates.

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Funding levels for these programs are dependent on many factors including changes to the risk adjustment payment methodology, government efforts to contain health care costs, budgetary constraints and general political issues and priorities.

In 2022, we experienced a decrease in U.S.

Government customers, including the disposition of the Medicaid business, while investing to support future growth.

Government reporting unit goodwill balance was $4.0 billion as of December 31, 2022 and December 31, 2021.

The Company conducts its quantitative evaluation for goodwill impairment at least annually during the third quarter at the reporting unit level and performs qualitative impairment assessments on a quarterly basis to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value.

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We completed our normal annual evaluations for impairment of goodwill and intangible assets during the third quarter of 2022.

The evaluations indicated that the fair value estimates of our reporting units exceed their carrying values by significant margins.

The evaluations indicated that the fair value estimates of our reporting units exceed their carrying values by sufficient margins.

Changes in assumptions concerning future financial results or other underlying assumptions, including macroeconomic factors, government legislation, changes in the competitive landscape or other market conditions could impact our ability to achieve profitability projections.

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Specific to the U.S.

Government reporting unit, in 2021 we experienced elevated medical claims and lower risk adjustment revenues primarily due to the COVID-19 pandemic.

If these factors were to worsen or continue beyond our current expectations, profitability could be further impacted and significantly reduce the fair value of this reporting unit.

Government reporting unit, the two most critical factors affecting our future cash flows assumptions are customer growth and profit margins.

If we do not realize our targeted customer growth or profit margins, the cash flow projections could be impacted and significantly reduce the fair value of the reporting unit.

Balance Sheet Caption /

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These amounts primarily relate to federal and state uncertain positions of the value and timing of deductions and uncertain positions of attributing taxable income to states.

Balances that are included in the Consolidated Balance Sheets are as follows (in millions):

Balances that are included in the Consolidated Balance Sheets within Accrued expenses and other liabilities are as follows (in millions):

· 2022 – $1,343

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Valuation of debt security investments

Most debt securities are classified as available for sale and are carried at fair value with changes in fair value recorded in accumulated other comprehensive income (loss) within shareholders' equity.

Most debt securities are classified as available for sale and are carried at fair value with changes in fair value recorded in Accumulated other comprehensive loss within Shareholders' equity.

Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date.

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In addition, these factors are inherently variable in nature as they change frequently in response to market conditions.

Approximately two-thirds of our debt securities are public securities and one-third are private placement securities.

Approximately 60% of our debt securities are public securities and approximately 40% are private placement securities.

Typically, the most significant input in the measurement of fair value is the market interest rate used to discount the estimated future cash flows of the instrument.

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Treasury securities, based on the credit quality, industry and structure of the asset.

Balances that are included in the Consolidated Balance Sheets within Investments and Long-term investments are as follows, inclusive of amounts held for sale as of December 31, 2021 (in millions):

· 2022 - $9,872

· 2021 - $16,958

See Notes 11A.

and 12 to the Consolidated Financial Statements for a discussion of our fair value measurements, the procedures performed by management to determine that the amounts represent appropriate estimates and our accounting policy regarding unrealized appreciation on debt securities.

If the derived interest rates used to calculate fair value increased by 100 basis points, the fair value of the total debt security portfolio of $17 billion would decrease by approximately $1.3 billion, resulting in an after-tax decrease to shareholders' equity of approximately $0.7 billion as of December 31, 2021.

If the derived market rates used to calculate fair value increased by 100 basis points, the fair value of the total debt security portfolio of $9.9 billion would decrease by approximately $0.6 billion, resulting in an after-tax decrease to shareholders' equity of approximately $0.4 billion as of December 31, 2022.

SEGMENT REPORTING

The following section of this MD&A discusses the results of each of our segments.

Cigna entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb for $5.75 billion cash.

In connection with the pending Chubb Transaction, we revised our business reporting structure.

As such, we adjusted our segment reporting effective in the fourth quarter of 2021 so that the results previously reported in the International Markets segment are now reported as follows:

• The businesses to be retained by Cigna are now reported in the newly created International Health operating segment that will be aggregated with our existing U.S.

Commercial and U.S.

Government operating segments in the renamed Cigna Healthcare reporting segment (previously named U.S.

• The businesses to be sold pursuant to the Chubb Transaction are now reported in Other Operations.

On February 13, 2023, we changed the name of our Evernorth segment to Evernorth Health Services.

We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.

See Note 1 to the Consolidated Financial Statements for further description of our segments.

In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss) before income taxes excluding net realized investment results, amortization of acquired intangible assets, results of transitioning clients prior to 2020 and special items.

Cigna's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.

In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results, amortization of acquired intangible assets and special items.

The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.

Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size.

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See the "Executive Overview" section of this MD&A for summarized financial results of each of our segments.

Evernorth Segment

Evernorth includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the healthcare system, in pharmacy solutions, benefits management solutions, care delivery and care management solutions and intelligence solutions.

As described in the introduction to Segment Reporting, Evernorth's performance is measured using adjusted revenues and pre-tax adjusted income from operations.

The key factors that impact Evernorth's pharmacy revenues and pharmacy and other service costs are volume, mix of claims and price.

Evernorth Health Services Segment

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and Care Delivery and Management Solutions.

As described in the introduction to Segment Reporting, Evernorth Health Services' performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.

The key factors that impact Evernorth Health Services' Pharmacy revenues and Pharmacy and other service costs are volume, mix of claims and price.

These key factors are discussed further below.

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• As our clients' claim volumes increase or decrease, our resulting revenues and cost of revenues correspondingly increase or decrease.

Our gross profit could also increase or decrease as a result of changes in purchasing discounts.

Our gross profit, defined as Total revenues less Pharmacy and other service costs, could also increase or decrease as a result of changes in purchasing discounts.

• The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling.

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• Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates.

As we seek to improve the effectiveness of our

integrated solutions for the benefit of our clients, we are continuously innovating and improving affordability.

As we seek to improve the effectiveness of our integrated solutions for the benefit of our clients, we are continuously innovating and improving affordability.

Our gross profit could also increase or decrease as a result of drug purchasing contract initiatives implemented.

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Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients continues to be a significant driver of our revenues and cost of revenues in the current environment.

In this MD&A, we present revenues and gross profit, as well as adjusted revenues and adjusted gross profit, consistent with our segment reporting metrics, which exclude special items and, for periods prior to 2020, contributions from transitioning clients.

As of December 31, 2019, the transition of these clients was substantially complete;

therefore, beginning in 2020, we no longer exclude results of transitioning clients from our adjusted metrics.

Additionally, for the year ended December 31, 2020, we recorded an adjustment related to a former client contract that was excluded from our adjusted metrics.

See the "Key Transactions and Business Developments" section of this Form 10-K MD&A for further discussion of transitioning clients and why we present this information.

In this MD&A, we present revenues and gross profit, as well as adjusted revenues and adjusted gross profit, consistent with our segment reporting metrics, which exclude special items.

For the year ended December 31, 2020, we recorded an adjustment related to a former client contract that was excluded from our adjusted metrics.

Results of Operations

Financial Summary For the Years Ended December 31, Change Favorable

Financial Summary

For the Years Ended December 31, Change Favorable

(Unfavorable) Change Favorable

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Total revenues $ 140,335 $ 131,912 $ 116,334 $ 8,423 6 % $ 15,578 13 %

Transitioning clients — — (13,347) — N/M 13,347 N/M

Contractual adjustment for a former client — — (204) — N/M 204 N/M

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$ 140,335 $ 131,912 $ 116,130 $ 8,423 6 % $ 15,782 14 %

Pharmacy and other service costs $ 131,284 $ 123,504 $ 108,537 $ 7,780 6 % $ 14,967 14 %

Gross profit (2)

$ 9,051 $ 8,408 $ 7,797 $ 643 8 % $ 611 8 %

Adjusted gross profit (1),(2)

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Adjusted expense ratio (3)

1.9 % 1.9 % 2.0 % –

2.0 % 1.9 % 1.9 % (10) bps — bps

Selected Financial Information

For the Years Ended December 31, Change Favorable

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2021 2021 vs.

Selected Financial Information (1)

Pharmacy revenue by distribution channel

Adjusted network revenues (1)

$ 64,946 $ 64,992 $ 56,181 — % 16 %

Adjusted home delivery and specialty revenues (1)

61,283 54,391 49,886 13 9

Other pharmacy revenues 6,753 6,428 5,403 5 19

Total adjusted pharmacy revenues (1)

$ 132,982 $ 125,811 $ 111,470 6 % 13 %

Adjusted fees and other revenues (1)

Net investment income 17 32 60 (47) % (47) %

7,267 6,084 4,628 19 31

Net investment income 86 17 32 N/M (47)

Adjusted revenues (1)

$ 140,335 $ 131,912 $ 116,130 6 % 14 %

Pharmacy script volume (4)

Adjusted network scripts 1,295 1,355 1,206 (4) % 12 %

1,355 1,206 941 12 % 28 %

Adjusted home delivery and specialty scripts 280 283 287 (1) (1)

283 287 283 (1) % 1 %

Total adjusted scripts 1,575 1,638 1,493 (4) % 10 %

1,638 1,493 1,224 10 % 22 %

Generic fill rate (5)

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Overall generic fill rate 86.3 % 85.5 % 87.2 % 80 bps (170) bps

(1) Amounts exclude special items and for periods prior to 2020, contributions from transition clients for the year ended December 31, 2019.

(2) Adjusted expense ratio is calculated as selling, general and administrative expense excluding contributions from transition clients for the year ended December 31, 2019 as a percentage of adjusted revenues.

(1) Total revenues and gross profit were equal to adjusted revenues and adjusted gross profit for the years ended December 31, 2022 and December 31, 2021 as there were no special items in those periods.

Amounts exclude special items for the year ended December 31, 2020.

(2) Gross profit and adjusted gross profit are calculated as total revenues or adjusted total revenues less pharmacy and other services costs.

(3) Adjusted expense ratio is calculated as selling, general and administrative expenses as a percentage of adjusted revenues.

(4) Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three.

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2022 versus 2021

Adjusted network revenues increased, reflecting increased prices, due to inflation on branded drugs and higher claims volume, primarily due to our collaboration with Prime Therapeutics.

These increases were partially offset by claims mix due to an increase in the generic fill rate after excluding the impact of COVID-19 vaccines.

Adjusted home delivery and specialty revenues increased, reflecting higher specialty claims volume due in part to our collaboration with Prime Therapeutics, as well as increased prices, primarily due to inflation on branded drugs.

These increases were partially offset by slightly lower home delivery claims volume.

Other pharmacy revenues increased, reflecting higher volume from our CuraScript Specialty Distribution business.

Adjusted fees and other revenues increased, reflecting customer growth from our services supporting benefits management solutions, including customer growth from certain fee based contractual arrangements and the acquisition of MDLIVE.

Adjusted gross profit and pre-tax adjusted income from operations increased, reflecting continued contract affordability improvements and business growth.

Pre-tax adjusted income from operations increase was partially offset by strategic investments in expanding partnerships, new businesses and solutions, and digital technology.

The expense ratio was flat reflecting higher revenues as well as increased strategic investments in expanding partnerships, new businesses and solutions, and digital technology in the year ended December 31, 2021 offset by increased operating expenses due to client transitions in the year ended December 31, 2020.

2020 versus 2019

In the first quarter of 2020, U.S.

Government operating segment customers transitioned to Express Scripts' retail pharmacy network.

In the third quarter of 2019, U.S.

Commercial operating segment customers transitioned to Express Scripts' retail pharmacy network.

Adjusted network revenues increased, reflecting the transition of Cigna Healthcare's customers, higher claims volume due to our collaboration with Prime Therapeutics and increased prices due to inflation on branded drugs.

These favorable effects were partially offset by claims mix due to the increase in the generic fill rate.

Adjusted home delivery and specialty revenues increased, reflecting higher prices, due to inflation on branded drugs and higher home delivery and specialty claims volume.

These increases were partially offset by claims mix due to an increase in the generic fill rate.

Adjusted gross profit and pre-tax adjusted income from operations increased, reflecting customer growth, higher adjusted pharmacy scripts volumes, continued contract affordability improvements and the favorable impact of claims mix as a result of the types of drugs dispensed, the distribution method used for dispensing and fulfilling and an increase in the generic fill rate.

Pre-tax adjusted income from operations increase was partially offset by an increase in operating expenses due to client transitions.

The expense ratio was lower, reflecting higher revenues and increased operating expenses due to client transitions.

Adjusted network revenues slightly decreased, reflecting a decrease in claims volume;

partially offset by inflation on branded drugs.

Adjusted home delivery and specialty revenues increased 13%, reflecting higher specialty claims volume, due in part to our collaboration with Prime Therapeutics, inflation on, and higher sales of, branded drugs.

These increases were partially offset by lower home delivery claims volume.

Other pharmacy revenues increased 5%, reflecting higher volume from our CuraScript SD business.

Adjusted fees and other revenues increased 19%, reflecting customer growth from our continued contract affordability services and the growth of our Care Delivery and Management Solutions.

Adjusted gross profit and pre-tax adjusted income from operations increased 8% and 5%, respectively, reflecting continued contract affordability improvements and growth in our accelerated businesses;

partially offset by strategic investments in expanding our services portfolio and digital capabilities, as well as lower volume in our network and home delivery businesses.

The adjusted expense ratio increased 10 bps, reflecting higher revenues and expense discipline, which enabled us to increase strategic investments in expanding our services portfolio and digital capabilities.

Cigna Healthcare Segment

Cigna Healthcare includes Cigna's U.S.

Cigna Healthcare includes the U.S.

Commercial, U.S.

Government and International Health businesses, which provide comprehensive medical and coordinated solutions to clients and customers to support whole-person health needs.

Commercial products and services include medical, pharmacy, behavioral health, dental, vision, health advocacy programs and other products and services for insured and self-insured customers.

Government solutions include Medicare Advantage, Medicare Supplement and Medicare Part D plans for seniors and individual health insurance plans both on and off the public exchanges.

International Health solutions include health care coverage in our international markets, as well as health care benefits for globally mobile individuals and employees of multinational organization.

The Cigna Healthcare segment is comprised of the previously named U.S.

Medical segment and the businesses to be retained from the previous International Markets segment.

The addition of International Health to the Cigna Healthcare segment did not have a material impact on the business drivers which contributed to changes in results of operations when comparing 2020 to 2019.

Government and International Health businesses, which provide comprehensive medical and coordinated solutions to clients and customers.

As described in the introduction to Segment Reporting, performance of the Cigna Healthcare segment is measured using adjusted revenues and pre-tax adjusted income from operations.

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• medical costs as a percentage of premiums (medical care ratio or "MCR") for our insured businesses;

• selling, general and administrative expense as a percentage of adjusted revenues (expense ratio).

• selling, general and administrative expenses as a percentage of adjusted revenues (adjusted expense ratio).

Results of Operations

Financial Summary For the Years Ended December 31, Change Favorable

Financial Summary

For the Years Ended December 31, Change Favorable

(Unfavorable) Change Favorable

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Medical care ratio 81.7 % 84.0 % 78.3 % 230 bps (570) bps

Expense ratio 21.0 % 23.5 % 23.4 % 250 bps (10) bps

2021 versus 2020

Adjusted revenues increased, reflecting Medicare Advantage and Individual customer growth, higher premium rates due to anticipated underlying medical cost trend, higher net investment income and the absence of the 2020 premium relief programs for clients implemented in response to significantly lower than historical utilization as individuals deferred care due to the COVID-19 pandemic.

Pre-tax adjusted income from operations decreased due to increased utilization of health care services by our customers, including increased direct costs of COVID-19 testing, treatment and vaccines;

partially offset by higher net investment income, increased specialty contributions, the absence of the premium relief programs and the repeal of the health insurance industry tax.

The impacts of COVID-19 remain uncertain and could vary significantly as discussed in the "COVID-19 Update" section of this MD&A.

The medical care ratio increased due to increased utilization of health care services by our customers, including increased direct costs of COVID-19 testing, treatment and vaccines as well as the repeal of the health insurance industry tax;

partially offset by the absence of the premium relief programs.

The expense ratio decreased, reflecting increased revenues, the repeal of the health insurance industry tax, favorable litigation developments and efficiencies from continued disciplined expense management.

Adjusted expense ratio 21.8 % 21.0 % 23.5 % (80) bps 250 bps

2022 versus 2021

Adjusted revenues increased, reflecting Medicare Advantage and U.S.

Commercial insured customer growth, as well as higher premium rates due to anticipated underlying medical cost trend and the resumption of the health insurance industry tax.

These favorable effects were partially offset by the impact of 2020 premium relief programs for clients implemented in response to significantly lower than historical utilization as individuals deferred care due to the COVID-19 pandemic.

Pre-tax adjusted income from operations increased, reflecting net favorable COVID-19 related impacts as well as U.S.

Commercial insured and Medicare Advantage customer growth;

partially offset by the resumption of the health insurance industry tax and less favorable prior period development.

COVID-19 related impacts include deferral of care by our customers;

partially offset by direct COVID-19 costs, costs of actions we have taken to support customers, providers and employees, and increased disenrollment resulting from the economic impacts of the pandemic.

The medical care ratio decreased driven by COVID-19 related impacts and the pricing effect of the health insurance industry tax.

COVID-19 related impacts include deferral of care by our customers;

partially offset by direct COVID-19 costs and premium relief programs extended to employer clients.

The expense ratio was flat reflecting higher insured revenues as well as efficiencies from continued disciplined expense management and the resumption of the health insurance industry tax.

Adjusted revenues increased 1%, primarily reflecting increased specialty contributions, higher premium rates due to anticipated underlying medical cost trend and customer growth in International Health and U.S.

Commercial, mostly offset by a decrease in U.S.

Government customers, including the disposition of the Medicaid business, as well as lower net investment income.

Pre-tax adjusted income from operations increased 13%, primarily due to lower medical care ratios in U.S.

Commercial and U.S.

Government and increased specialty contributions in U.S.

Commercial, partially offset by lower net investment income.

The medical care ratio decreased 230 bps, primarily due to lower medical costs, reflecting decreased direct COVID-19 testing, treatment and vaccine costs in U.S.

Commercial and U.S.

Government, as well as effective pricing execution, including affordability initiatives, partially offset by U.S.

Government risk adjustment updates related to prior years.

The adjusted expense ratio increased 80 bps, primarily due to a higher expense ratio in U.S.

Government reflecting increased investments to support future growth as well as the disposition of the Medicaid business, partially offset by revenue growth and expense efficiencies in U.S.

Commercial and International Health.

Medical Customers

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• has medical claims that are administered by us.

Cigna Healthcare Medical Customers

As of December 31, Change Favorable

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2021 2021 vs.

Cigna Healthcare Medical Customers

Insured 4,756 4,757 4,538 (1) — % 219 5 %

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Commercial 12,614 11,688 11,485 926 8 203 2

5 — — 5 N/M — N/M

International Health (1)

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Total 18,004 17,081 16,650 923 5 % 431 3 %

(1) International Health excludes medical customers served by less than 100% owned subsidiaries and customers that are part of the businesses to be sold pursuant to the Chubb Transaction.

2021 versus 2020

Our medical customer base increased at December 31, 2021 compared with December 31, 2020 reflecting a higher customer base in our Middle Market, Select and International Health segments as well as our Individual business and Medicare Advantage plans;

partially offset by a lower customer base in our National segment.

2020 versus 2019

Our medical customer base decreased at December 31, 2020 compared with December 31, 2019, reflecting a lower customer base in our Middle Market and National Accounts segments and increased disenrollment resulting from the economic impacts of the COVID-19 pandemic;

partially offset by growth in our Select segment, Medicare Advantage plans and International Health.

(1) International Health excludes medical customers served by less than 100% owned subsidiaries.

Our medical customer base increased 5%, reflecting growth in our fee-based products from Middle Market and Select market segments as well as growth in International Health, partially offset by a decrease in U.S.

Government customers, including the disposition of the Medicaid business.

See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.

Unpaid Claims and Claim Expenses

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$ 4,176 $ 4,261 $ 3,695 $ (85) (2) % $ 566 15 %

2021 versus 2020

Our unpaid claims and claim expenses liability was higher as of December 31, 2021 compared with December 31, 2020, primarily due to Medicare Advantage and Individual customer growth and increased claim volumes.

2 020 versus 2019

Our unpaid claims and claim expenses liability was higher as of December 21, 2020 compared with December 31, 2019, primarily due to Medicare Advantage and U.S.

Commercial insured customer growth.

Our unpaid claims and claim expenses liability decreased 2%, primarily driven by lower Medicare Advantage volumes and the disposition of the Medicaid business, partially offset by higher U.S.

Commercial volumes.

Other Operations

For 2021, 2020 and 2019, Other Operations includes International businesses to be sold, Corporate Owned Life Insurance ("COLI") and the Company's run-off operations.

Prior to the sale of the Group Disability and Life business on December 31, 2020, Other Operations also included Cigna's Group Disability and Life business which offered group long-term and short-term disability and group life, accident, voluntary and specialty insurance products and services.

Other Operations was previously named Group

Disability and Other.

Other Operations includes corporate owned life insurance ("COLI"), the International businesses sold to Chubb on July 1, 2022, our interest in a joint venture in Türkiye sold to our partner in December 2022, the Group Disability and Life business sold on December 31, 2020 and the Company's run-off operations.

As described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax adjusted income from operations.

Results of Operations

Financial Summary For the Years Ended December 31, Change Favorable

Financial Summary

For the Years Ended December 31, Change Favorable

(Unfavorable) Change Favorable

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2022 versus 2021

Adjusted revenues decreased due to the sale of the Group Disability and Life business on December 31, 2020.

Because the sold business constituted a significant portion of Other Operations, adjusted revenues substantially declined in 2021 compared to 2020.

Pre-tax adjusted income from operations also declined due to the sale of the Group Disability and Life Insurance business.

That decrease was partially offset by an increase in earnings from the International businesses held for sale.

2020 versus 2019

Adjusted revenues increased, reflecting business growth in the International businesses held for sale and the sold Group Disability and Life business.

Partially offsetting those favorable effects were lower net investment income in the sold Group Disability and Life business and unfavorable foreign currency movements in the International businesses held for sale.

Pre-tax adjusted income from operations decreased due to lower earnings in the sold Group Disability and Life business reflecting unfavorable life claims experience related to the COVID-19 pandemic, unfavorable disability claim experience and lower investment income, partially offset by favorable results in the voluntary products.

Those unfavorable effects were partially offset by improved earnings in the International businesses held for sale reflecting improved margin and business growth.

Other Items Related to International Businesses Subject to Definitive Purchase Agreement

For the year ended, December 31, 2021, 86% of the segment's adjusted revenues and 89% of the segment's pre-tax adjusted income from operations was associated with International businesses held for sale.

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, severance, certain overhead and enterprise-wide project costs and intersegment eliminations for products and services sold between segments.

Financial Summary For the Years Ended December 31, Change Favorable (Unfavorable) Change Favorable (Unfavorable)

Adjusted revenues and pre-tax adjusted income from operations decreased 43% and 44%, respectively, primarily due to the absence of revenues and earnings from the businesses divested in the Chubb transaction.

Other Items Related to the Divested International Businesses

Other Operations' adjusted revenues associated with the divested International businesses were 77% and 86% for 2022 and 2021, respectively.

Other Operation's pre-tax adjusted income from operations associated with the divested International businesses were 83% and 89% for 2022 and 2021, respectively.

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and intersegment eliminations for products and services sold between segments.

Financial Summary

For the Years Ended December 31, Change Favorable (Unfavorable) Change Favorable (Unfavorable)

(In millions) 2022 2021 2020 2022 vs.

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2022 versus 2021

Pre-tax adjusted loss from operations was lower, primarily reflecting lower interest expense due to a lower average interest rate and lower levels of outstanding debt resulting from debt repayments.

2 020 versus 2019

Pre-tax adjusted loss from operations was lower, primarily reflecting lower interest expense due to lower levels of debt.

Pre-tax adjusted loss from operations increased 9%, reflecting an increase in operating expenses for enterprise-wide initiatives.

INVESTMENT ASSETS

The following table presents our investment asset portfolio excluding separate account assets as of December 31, 2021 and December 31, 2020.

Additional information regarding our investment assets is included in Notes 11, 12, 13 and 14 to the Consolidated

Financial Statements.

For comparisons of investment assets portfolio excluding separate account assets as of December 31, 2020 compared with December 31, 2019, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2020.

The following table presents our investment asset portfolio excluding separate account assets.

Additional information regarding our investment assets is included in Notes 11, 12, 13 and 15 to the Consolidated Financial Statements.

(In millions) December 31,

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Investments per Consolidated Balance Sheets $ 17,193 $ 19,358

(1) Investments related to the international life, accident and supplemental benefits businesses that are held for sale.

(1) Investments related to the divested International businesses that were held for sale.

See Note 4 to the Consolidated Financial Statements for additional information.

Investment Outlook

We continue to actively monitor economic conditions including the impact of inflation, higher interest rates and the potential for a recession in 2023 on the portfolio.

Future realized and unrealized investment results will be driven largely by market conditions and these future conditions are not reasonably predictable.

We believe that the vast majority of our investments will continue to perform under their contractual terms.

We manage the portfolio for long-term economics and therefore we expect to hold a significant portion of these assets for the long term.

The following discussion addresses the strategies and risks associated with our various classes of investment assets.

Although future declines in investment fair values remain possible due to interest rate movements and credit deterioration due to both investment-specific uncertainties and global economic uncertainties as discussed below, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.

Debt Securities

Investments in debt securities include publicly traded and privately placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor.

These investments are classified as available for sale and are carried at fair value on our balance sheet.

These investments are classified as available for sale and are carried at fair value in our Consolidated Balance Sheets.

Additional information regarding valuation methodologies, key inputs and controls is included in Note 12 to the Consolidated Financial Statements.

More detailed information about debt securities by type of issuer and maturity dates is included in Note 11 to the Consolidated Financial Statements.

The following table reflects our portfolio of debt securities by type of issuer as of December 31, 2021 and December 31, 2020:

The following table reflects our portfolio of debt securities by type of issuer:

(In millions) December 31,

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Foreign government 365 2,616

13,266 14,562

Mortgage and other asset-backed 348 518

Total $ 9,872 $ 16,958

Our debt securities portfolio decreased during 2021, reflecting a decrease in valuations due to increasing yields and net sale activity.

Our debt securities portfolio decreased during the year ended December 31, 2022 primarily due to the completion of the Chubb transaction during the third quarter (see Note 4 to the Consolidated Financial Statements) and a decrease in valuations due to a significant rise in interest rates, causing our portfolio to change to a net unrealized depreciation position at December 31, 2022, from a net unrealized appreciation position at December 31, 2021.

More detailed information about debt securities by type of issuer, maturity dates and net unrealized position is included in Note 11 to the Consolidated Financial Statements.

As of December 31, 2022, $8.0 billion, or 81%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.9 billion were below investment grade.

The majority of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum.

The majority of the bonds that are below investment grade were rated at the higher end of the non-investment grade spectrum.

These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.

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however, yields on these investments tend to be higher than yields on publicly traded bonds with comparable credit risk.

We perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.

perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.

Investments in debt securities are diversified by issuer, geography and industry.

On an aggregate basis, the debt securities portfolio continues to perform according to original investment expectations.

However, due to the economic impacts of the COVID-19 pandemic, there are certain issuers, particularly within the aviation, energy and hospitality sectors, that have shown signs of distress, primarily in the form of requests for temporary covenant relief.

There were no material unrealized losses in any of these sectors as of the reporting date.

We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various factors in determinin g the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.

Foreign government obligations are concentrated in Asia, primarily South Korea and Taiwan, consistent with our risk management practice and local regulatory requirements of our international business operations.

We expect the amount of these foreign government

obligations to decrease significantly during 2022 upon the close of our sale of certain international businesses as discussed in Note 5 to the Consolidated Financial Statements.

On an aggregate basis, the debt securities portfolio continues to perform according to original expectations, which includes a long-term economic investment strategy.

Elevated global inflation and rising interest rates experienced during 2022, as well as continuing supply chain disruptions are the primary risks that many of the issuers in our portfolio are facing.

To date, most issuers have been successful in managing the cost escalation and product shortages without undue margin pressure.

We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.

Commercial Mortgage Loans

As of December 31, 2021, the $1.6 billion commercial mortgage loan portfolio consisted of approximately 50 loans that are in good standing.

Our commercial mortgage loans are fixed rate loans, diversified by property type, location and borrower.

As of December 31, 2022, our $1.6 billion commercial mortgage loan portfolio consisted of approximately 50 fixed-rate loans, diversified by property type, location and borrower.

These loans are carried in our Consolidated Balance Sheets at their unpaid principal balance, net of an insignificant allowance for expected credit losses.

As a result of increasing market interest rates since the majority of these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2022.

See Note 12 to the Consolidated Financial Statements for further details.

Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested in the property generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms.

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We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.

Our annual in-depth review of our commercial mortgage loan investments is the primary mechanism for monitoring the overall quality rating of the mortgage portfolio.

We completed the annual in-depth review in the second quarter of 2021 which included an analysis of each underlying property's most recent annual financial statements, rent rolls and operating plans, as well as a physical inspection of the property and a review of applicable market reports.

The results of this annual review confirmed that the overall credit quality of our portfolio remains strong and was generally in line with the previous year's results.

COVID-19 has negatively impacted commercial real estate fundamentals and capital market activity with concentrated weakness in hotels and regional malls.

Our mortgage loan portfolio is well diversified by property type and geography with no material exposure to hotels and no exposure to regional shopping malls.

We continue to monitor the long-term impacts surrounding the office sector fundamentals due to multiple headwinds that may impact future valuations:

We assess the credit quality of our commercial mortgage loan portfolio annually, generally in the second fiscal quarter by reviewing each holding's most recent financial statements, rent rolls, budgets and relevant market reports.

The review performed in the second quarter of 2022 confirmed ongoing strong overall credit quality in line with the previous year's results.

Office sector fundamentals have been and continue to be weak and values are experiencing stress due to multiple headwinds:

expanded work from home flexibility, shorter term leases, elevated tenant improvement allowances and corporate migration to lower cost states.

Our mortgage loans secured by office properties are in good standing.

Additionally, the current macroeconomic headwinds are impacting capital markets and reducing investor appetite for capital intensive assets (e.g., offices and regional shopping malls).

Our commercial mortgage loan portfolio has no exposure to regional shopping malls and less than 30% exposure to office properties.

Other Long-term Investments

Other long-term investments of $3.7 billion as of December 31, 2022 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses.

The increase in other long-term investments of $0.7 billion since December 31, 2020 is primarily driven by net additional funding activity and value creation in the underlying investments.

Accounting policies for these investments are discussed in Note 11 to the Consolidated Financial Statements.

The increase in other long-term investments of $0.2 billion since December 31, 2021 is primarily driven by net additional funding activity partially offset by the effects of completing the Chubb transaction during the third quarter of 2022 (see Note 4 to the Consolidated Financial Statements) .

These limited partnership entities typically invest in mezzanine debt or equity of privately-held companies and equity real estate.

Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns.

To mitigate risk, these investments are diversified across approximately 210 separate partnerships and approximately 110 general partners who manage one or more of these partnerships.

To mitigate risk, these investments are diversified across approximately 190 separate partnerships and 90 general partners who manage one or more of these partnerships.

Also, the underlying investments are diversified by industry sector or property type and geographic region.

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Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.

Our net investment income increased significantly versus 2020 driven by the strong performance of assets underlying our limited partnership investments.

The broad recovery since the beginning of the outbreak of the COVID-19 pandemic has resulted in strong corporate earnings and higher public and private asset valuations.

Our Net investment income during 2022 was strong, but decreased significantly year over year as 2021 reflected even stronger corporate earnings and higher public and private asset valuations as a result of the broad recovery coming out of the COVID-19 pandemic.

We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions.

Less than 5% of our other long-term investments are exposed to real estate in the office sector.

We participate in an insurance joint venture in China with a 50% ownership interest.

We account for this joint venture under the equity method of accounting and report our share of the net assets of $0.9 billion in Other assets.

Our 50% share of the investment portfolio supporting the joint venture's liabilities is approximately $8.4 billion as of December 31, 2021.

Our 50% share of the investment portfolio

supporting the joint venture's liabilities is approximately $9.2 billion as of December 31, 2022.

These investments were comprised of approximately 75% debt securities, including government and corporate debt diversified by issuer, industry and geography;

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and 10% long-term deposits and policy loans.

Approximately 1% of the joint venture's investment assets are exposed to private real estate property developers in the China market.

We participate in the approval of the joint venture's investment strategy and continuously review its execution.

There were no investments with a material unrealized loss as of December 31, 2022.

Investment Outlook

We continue to actively monitor the economic impact of the pandemic, including supply chain, labor market and inflation dynamics, as well as fiscal and monetary responses and their potential impact on the portfolio.

Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date.

These future conditions are not reasonably predictable;

however, we believe that the vast majority of our investments will continue to perform under their contractual terms.

Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the long-term.

Although future declines in investment fair values resulting from interest rate movements and credit deterioration due to both investment-specific and the global economic uncertainties discussed above remain possible, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.

Financial Instruments

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Because they are not financial instruments, their primary risks are other than market risk.

Excluding these items, our primary market risk exposures from financial instruments are:

• Interest-rate risk on fixed-rate, medium-term instruments.

Our primary market risk exposures changed significantly since December 31, 2021 as a result of completing the Chubb transaction during the third quarter 2022, as described in Note 4 to the Consolidated Financial Statements.

Our exposure to foreign currency exchange rate risk from financial instruments is no longer significant.

Excluding the items noted in the paragraph above, our primary market risk exposure from financial instruments is our interest-rate risk exposure to fixed-rate, medium-term instruments.

Changes in market interest rates affect the value of instruments that promise a fixed return.

• Foreign currency exchange rate risk of the U.S.

dollar, net of derivatives used for hedging, is primarily to the Chinese yuan renminbi and South Korean won.

An unfavorable change in exchange rates reduces the carrying value of net assets denominated in foreign currencies.

Our Management of Market Risks

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Effect of Market Fluctuations

Assuming a 100 basis point increase in interest rates and 10% strengthening in the U.S.

dollar to foreign currencies, the effect of hypothetical changes in market rates or prices on the fair value of certain financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have been as follows as of December 31:

Market scenario for certain non-insurance financial instruments Loss in Fair Value

(in billions) 2021 2020

100 basis point increase in interest rates (excluding long-term debt) $ 1.4 $ 1.4

10% strengthening in U.S.

dollar to foreign currencies $ 0.3 $ 0.4

The effect of a hypothetical increase in interest rates, primarily on debt securities and commercial mortgage loans, was determined by estimating the present value of future cash flows using various models, primarily duration modeling.

We determine the sensitivity of our financial instruments, primarily debt securities and commercial mortgage loans, to our primary market risk exposure by estimating the present value of future cash flows using various models, primarily duration modeling.

According to this analysis, assuming a 100 basis point increase in interest rates, the effect of hypothetical changes in market rates on the fair value of certain financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have been as follows:

Market scenario for certain non-insurance financial instruments

Loss in Fair Value

(in billions) December 31, 2022 December 31, 2021

100 basis point increase in interest rates (excluding the Company's long-term debt) $ 0.7 $ 1.4

In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $1.8 billion at December 31, 2022 and $2.9 billion at December 31, 2021.

Changes in the fair value of our long-term debt do not impact our financial position or operating results.

Changes in the fair value of our long-term debt do not impact our financial position or operating results since long-term debt is not required to be recorded at fair value.

See Note 7 to the Consolidated Financial Statements for additional information about the Company's debt.

The effect of a hypothetical strengthening of the U.S.

dollar relative to the foreign currencies of certain financial instruments held by us was estimated to be 10% of the fair value of these instruments, translated to the U.S.

Our foreign operations hold investment assets, such as debt securities, cash and cash equivalents that are generally invested in the currency of the related liabilities.

The decrease in the effect of this hypothetical change in interest rates is a result of decreases in the fair value of our debt securities and long-term debt since December 31, 2021, as well as disposals associated with completing the Chubb transaction during the third quarter of 2022, see Note 4 to the Consolidated Financial Statements for further details.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-K

Item 7. Management’s Discussion and Analysis