What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-05 · 303 added, 162 removed, 995 unchanged (32% of the section changed)

2 unchanged sentences

Consolidated Statements of Income

Three Months Ended March 31,

Unaudited Unaudited

Three Months Ended June 30, Six Months Ended June 30,

(In millions, except per share amounts) 2023 2022 (1)

2023 2022 (1)

Pharmacy revenues $ 33,964 $ 31,972 $ 66,108 $ 62,669

11 unchanged sentences

Interest expense and other ( 363 ) ( 301 ) ( 721 ) ( 600 )

Net realized investment losses

Net realized investment gains (losses)

26 ( 89 ) ( 30 ) ( 411 )

12 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

Unaudited Unaudited

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 (1)

2023 2022 (1)

Net income $ 1,510 $ 1,570 $ 2,816 $ 2,782

2 unchanged sentences

Net long-duration insurance and contractholder liabilities measurement adjustments ( 117 ) 6 ( 448 ) 465

Net translation gains (losses) on foreign currencies 16 ( 63 )

Net translation losses on foreign currencies ( 19 ) ( 207 ) ( 3 ) ( 270 )

Postretirement benefits liability adjustment 7 27 17 40

12 unchanged sentences

Consolidated Balance Sheets

March 31, As of

June 30, As of

(In millions) 2023 2022 (1)

40 unchanged sentences

(2) Par value per share, $ 0.01 ;

shares issued, 399 million as of March 31, 2023 and 398 million as of December 31, 2022;

shares issued, 399 million as of June 30, 2023 and 398 million as of December 31, 2022;

authorized shares, 600 million.

2 unchanged sentences

Consolidated Statements of Changes in Total Equity

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders' Equity Other Non- controlling Interests Total Equity Redeemable Noncontrolling Interests

Balance at March 31, 2023 $ 4 $ 30,332 $ ( 1,769 ) $ 38,841 $ ( 22,906 ) $ 44,502 $ 16 $ 44,518 $ 78

Effects of issuing stock for employee benefits plans 106 ( 1 ) 105 105

Other comprehensive loss ( 109 ) ( 109 ) ( 109 ) —

Net income 1,460 1,460 5 1,465 45

Common dividends declared (per share:

( 365 ) ( 365 ) ( 365 )

Repurchase of common stock — ( 146 ) ( 146 ) ( 146 )

Other transactions impacting noncontrolling interests ( 2 ) ( 2 ) ( 2 ) ( 4 ) ( 61 )

Balance at June 30, 2023 $ 4 $ 30,436 $ ( 1,878 ) $ 39,936 $ ( 23,053 ) $ 45,445 $ 19 $ 45,464 $ 62

Three Months Ended June 30, 2022 (1)

Balance at March 31, 2022, as retrospectively restated (1)

4 29,736 ( 1,500 ) 33,464 ( 15,581 ) 46,123 22 46,145 55

Effect of issuing stock for employee benefit plans 194 ( 1 ) 193 193

Other comprehensive loss ( 843 ) ( 843 ) ( 843 ) ( 1 )

Net income 1,557 1,557 11 1,568 2

Common dividends declared (per share:

( 353 ) ( 353 ) ( 353 )

Repurchase of common stock — ( 1,006 ) ( 1,006 ) ( 1,006 )

Other transactions impacting noncontrolling interests — — ( 3 ) ( 3 ) ( 11 )

Balance at June 30, 2022 $ 4 $ 29,930 $ ( 2,343 ) $ 34,668 $ ( 16,588 ) $ 45,671 $ 30 $ 45,701 $ 45

(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.

See Note 2 to the Consolidated Financial Statements for further information .

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

The Cigna Group

Consolidated Statements of Changes in Total Equity

Six Months Ended June 30, 2023

Balance at December 31, 2022, as retrospectively restated (1)

7 unchanged sentences

Other transactions impacting noncontrolling interests ( 2 ) ( 2 ) ( 4 ) ( 6 ) ( 83 )

Balance at March 31, 2023 $ 4 $ 30,332 $ ( 1,769 ) $ 38,841 $ ( 22,906 ) $ 44,502 $ 16 $ 44,518 $ 78

Three Months Ended March 31, 2022 (1)

Balance at June 30, 2023 $ 4 $ 30,436 $ ( 1,878 ) $ 39,936 $ ( 23,053 ) $ 45,445 $ 19 $ 45,464 $ 62

Six Months Ended June 30, 2022 (1)

8 unchanged sentences

Other transactions impacting noncontrolling interests — — ( 11 ) ( 11 ) ( 11 )

Balance at March 31, 2022 $ 4 $ 29,736 $ ( 1,500 ) $ 33,464 $ ( 15,581 ) $ 46,123 $ 22 $ 46,145 $ 55

Balance at June 30, 2022 $ 4 $ 29,930 $ ( 2,343 ) $ 34,668 $ ( 16,588 ) $ 45,671 $ 30 $ 45,701 $ 45

(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.

See Note 2 to the Consolidated Financial Statements to the Consolidated Financial Statements for further information.

See Note 2 to the Consolidated Financial Statements for further information.

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In millions) 2023 2022 (1)

45 unchanged sentences

Cash, cash equivalents and restricted cash January 1, (2)

Cash, cash equivalents and restricted cash, March 31,

Cash, cash equivalents and restricted cash, June 30,

Cash and cash equivalents reclassified to Assets of businesses held for sale

Cash, cash equivalents and restricted cash March 31, per Consolidated Balance Sheets (3)

Cash, cash equivalents and restricted cash June 30, per Consolidated Balance Sheets (3)

$ 9,636 $ 4,468

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The following information provides updates on recently adopted accounting pronouncements that have occurred since the Company filed its 2022 Form 10-K.

There are no accounting pronouncements not yet adopted as of March 31, 2023.

There are no significant accounting pronouncements not yet adopted as of June 30, 2023.

Targeted Improvements to the Accounting for Long-Duration Contracts ("LDTI"), Accounting Standards Update ("ASU") 2018-12 and related amendments

29 unchanged sentences

The following amounts were included within Accounts receivable, net:

(In millions) March 31, 2023 December 31, 2022

Noninsurance customer receivables $ 7,845 $ 6,899

(In millions) June 30, 2023 December 31, 2022

Pharmaceutical manufacturers receivables $ 7,922 $ 7,108

Noninsurance customer receivables 7,799 6,899

Insurance customer receivables 2,360 2,963

1 unchanged sentence

Total $ 18,333 $ 17,218

These receivables are reported net of our allowances of $ 2.1 billion as of March 31, 2023 and $ 1.9 billion as of December 31, 2022.

These receivables are reported net of our allowances of $ 2.8 billion as of June 30, 2023 and $ 1.9 billion as of December 31, 2022.

These allowances include contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain receivables from third-party payors, discounts and claims adjustments issued to customers in the form of client credits, an allowance for current expected credit losses and other non-credit adjustments.

The Company's allowance for current expected credit losses was $ 87 million as of March 31, 2023 and $ 86 million as of December 31, 2022.

The Company's allowance for current expected credit losses was $ 99 million as of June 30, 2023 and $ 86 million as of December 31, 2022.

Note 4 – Supplier Finance Program

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

As of March 31, 2023 and December 31, 2022, $ 1.5 billion and $ 1.3 billion, respectively, of the Company's outstanding payment obligations were confirmed as valid within the program by the financial institution and reflected in Accounts payable in the Consolidated Balance Sheets.

As of June 30, 2023 and December 31, 2022, $ 1.6 billion and $ 1.3 billion, respectively, of the Company's outstanding payment obligations were confirmed as valid within the program by the financial institution and reflected in Accounts payable in the Consolidated Balance Sheets.

The amounts confirmed as valid for both periods are predominately associated with one supplier.

We have been informed by the financial institution that $ 324 million as of March 31, 2023 of the Company's outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the program.

We have been informed by the financial institution that $ 263 million as of June 30, 2023 of the Company's outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the program.

Note 5 – Mergers, Acquisitions and Divestitures

Investment in CarepathRx Health Systems Solutions

In July 2023, Evernorth Health, Inc.

became a minority owner in CarepathRx Health Systems Solutions ("CHSS"), through a $ 437 million equity method investment in CHSS JV LLC (a holding company for the CHSS business and a CarepathRx company).

CarepathRx provides integrated hospital pharmacy solutions to support patients across their complete health care journey.

By pairing Evernorth Health Services' diverse specialty and care expertise with CHSS' robust pharmacy and infusion management capabilities, technology solutions and health system relationships, we can further improve, expand and accelerate pharmacy care delivery for the growing number of patients with chronic and complex care needs.

Divestiture of International Businesses

3 unchanged sentences

Integration and Transaction-related Costs

In 2023 and 2022, the Company incurred net costs mainly related to the Chubb transaction.

In the first three months of 2022, the Company also incurred net costs related to the sale of the Group Disability and Life business and acquisition of MDLIVE.

costs were $ 1 million pre-tax ($ 1 million after-tax) for the three months ended March 31, 2023 and $ 52 million pre-tax ($ 37 million after-tax) for the three months ended March 31, 2022.

In the first six months of 2023 and 2022, the Company incurred net costs related to the Chubb transaction and continued strategic realignment.

In 2022, the Company also incurred net costs related to the sale of the Group Disability and Life business and acquisition of MDLIVE, Inc.

These net costs were $ 6 million pre-tax ($ 5 million after-tax) for the three months ended and $ 7 million pre-tax ($ 6 million after-tax) for the six months ended June 30, 2023, compared with $ 36 million pre-tax ($ 26 million after-tax) for the three months ended and $ 88 million pre-tax ($ 63 million after-tax) for the six months ended June 30, 2022.

These costs consisted primarily of certain projects to separate or integrate the Company's systems, products and services, fees for legal, advisory and other professional services and certain employment-related costs.

2 unchanged sentences

Three Months Ended

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of

6 unchanged sentences

Earnings per share $ 4.96 $ ( 0.04 ) $ 4.92 $ 4.94 $ ( 0.05 ) $ 4.89

Amounts reflected above for the three months ended March 31, 2022 have been restated to reflect the impact of adopting amended accounting guidance for long-duration insurance contracts (discussed in Note 2 to the Consolidated Financial Statements).

Six Months Ended

June 30, 2023 June 30, 2022

(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of

Dilution Diluted Basic Effect of

Dilution Diluted

Shareholders' net income $ 2,727 $ 2,727 $ 2,754 $ 2,754

Weighted average 295,105 295,105 316,795 316,795

Common stock equivalents 2,831 2,831 2,989 2,989

Total shares 295,105 2,831 297,936 316,795 2,989 319,784

Earnings per share $ 9.24 $ ( 0.09 ) $ 9.15 $ 8.69 $ ( 0.08 ) $ 8.61

Amounts reflected above for the three and six months ended June 30, 2022 have been restated to reflect the impact of adopting amended accounting guidance for long-duration insurance contracts (discussed in Note 2 to the Consolidated Financial Statements).

The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

Anti-dilutive options 0.9 1.3 0.9 2.0

The Company held approximately 102.7 million shares of common stock in treasury at March 31, 2023, 99.1 million shares as of December 31, 2022 and 77.3 million shares as of March 31, 2022.

The Company held approximately 103.3 million shares of common stock in treasury at June 30, 2023, 99.1 million shares as of December 31, 2022 and 81.3 million shares as of June 30, 2022.

Note 7 – Debt

The outstanding amounts of debt, net of issuance costs, discounts or premiums, and finance leases were as follows:

(In millions) March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022

Short-term debt

Commercial paper $ 200 $ —

$ 17 million, 8.300 % Notes due January 2023

4 unchanged sentences

$ 500 million, 0.613 % Notes due March 2024

$ 1,000 million, 3.500 % Notes due June 2024

Other, including finance leases 39 33

51 unchanged sentences

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

As of March 31, 2023, The Cigna Group had a $ 3.0 billion five-year revolving credit and letter of credit agreement maturing in April 2027;

a $ 1.0 billion three-year revolving credit agreement maturing in April 2025;

and a $ 1.0 billion 364-day revolving credit agreement maturing in April 2023.

There were no outstanding balances under these revolving credit agreements as of March 31, 2023.

In April 2023, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"), which replaced the agreements discussed above:

As of June 30, 2023, there were no outstanding balances under these revolving credit agreements.

In April 2023, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"):

• a $ 4.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2028 with an option to extend the maturity date for additional one-year periods, subject to consent of the banks.

5 unchanged sentences

The Credit Agreements allow for borrowings at either a base rate or an adjusted term Secured Overnight Funding Rate ("SOFR") plus, in each case, an applicable margin based on the Company's senior unsecured credit ratings.

Each of the two facilities is diversified among 21 large commercial banks, all of which had an A- equivalent or higher rating by at least one Nationally Recognized Statistical Rating Organization as of March 31, 2023.

Each facility also contains customary covenants and restrictions, including a financial covenant that the Company's leverage ratio, as defined in the Credit Agreements, may not exceed 60 % subject to certain exceptions upon the consummation of an acquisition.

The Credit Agreements replaced a prior $ 3.0 billion five-year revolving credit and letter of credit agreement maturing in April 2027;

a $ 1.0 billion three-year revolving credit agreement maturing in April 2025;

and a $ 1.0 billion 364-day revolving credit agreement maturing in April 2023.

Commercial Paper.

2 unchanged sentences

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

There was no commercial paper outstanding balance as of March 31, 2023.

The average interest rate of our commercial paper was 5.41 % at June 30, 2023.

Debt Covenants.

The Company was in compliance with its debt covenants as of March 31, 2023.

The Company was in compliance with its debt covenants as of June 30, 2023.

Interest Expense

Interest expense on long-term and short-term debt was $ 345 million for the three months ended March 31, 2023 and $ 314 million for the three months ended March 31, 2022.

Interest expense on long-term and short-term debt was $ 350 million for the three months ended and $ 695 million for the six months ended June 30, 2023, compared with $ 316 million for the three months ended and $ 630 million for the six months ended June 30, 2022.

Note 8 – Common and Preferred Stock

In the first quarter of 2023, The Cigna Group declared quarterly cash dividends of $ 1.23 per share of the Company's common stock.

In the first quarter of 2022, The Cigna Group declared quarterly cash dividends of $ 1.12 per share of the Company's common stock.

In the first six months of 2023, The Cigna Group declared quarterly cash dividends of $ 1.23 per share of the Company's common stock.

In the first six months of 2022, The Cigna Group declared quarterly cash dividends of $ 1.12 per share of the Company's common stock.

The following table provides details of the Company's dividend payments:

1 unchanged sentence

March 8, 2023 March 23, 2023 $ 1.23 $ 368

June 7, 2023 June 22, 2023 $ 1.23 $ 362

March 9, 2022 March 24, 2022 $ 1.12 $ 357

On April 26, 2023, the Board of Directors declared the second quarter cash dividend of $ 1.23 per share of The Cigna Group common stock to be paid on June 22, 2023 to shareholders of record on June 7, 2023.

The Company 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 Cigna Group and its shareholders.

June 8, 2022 June 23, 2022 $ 1.12 $ 352

On July 26, 2023, the Board of Directors declared the third quarter cash dividend of $ 1.23 per share of The Cigna Group common stock to be paid on September 21, 2023 to shareholders of record on September 6, 2023.

The Company 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 Cigna Group 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 may deem relevant.

2 unchanged sentences

The Company's insurance and contractholder liabilities were comprised of the following:

March 31, 2023 December 31, 2022 March 31, 2022

June 30, 2023 December 31, 2022 June 30, 2022

(In millions) Current Non-current Total Current Non-current Total Total

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Total insurance and contractholder liabilities $ 7,539 $ 11,575 $ 19,114 $ 5,409 $ 11,976 $ 17,385 $ 18,292

(1) Amounts classified as Liabilities of businesses held for sale primarily include $ 3.7 billion of Future policy benefits, $ 0.4 billion of Unpaid claims and $ 0.4 billion of Unearned premiums as of March 31, 2022.

(1) Amounts classified as Liabilities of businesses held for sale primarily include $ 3.6 billion of Future policy benefits, $ 0.4 billion of Unpaid claims and $ 0.4 billion of Unearned premiums as of June 30, 2022.

Insurance and contractholder liabilities expected to be paid within one year are classified as current.

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This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities.

The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was $ 4.6 billion at March 31, 2023 and $ 4.2 billion at March 31, 2022.

The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was $ 5.0 billion at June 30, 2023 and $ 4.1 billion at June 30, 2022.

Activity, net of intercompany transactions, in the unpaid claims liability for the Cigna Healthcare segment was as follows:

Three Months Ended

(In millions) March 31, 2023 March 31, 2022

Six Months Ended

(In millions) June 30, 2023 June 30, 2022

Beginning balance $ 4,176 $ 4,261

15 unchanged sentences

Variances in incurred costs related to prior years' unpaid claims and claim expenses that resulted from the differences between actual experience and the Company's key assumptions were as follows:

Three Months Ended

March 31, 2023 March 31, 2022

Six Months Ended

June 30, 2023 June 30, 2022

(Dollars in millions) $ % (1)

5 unchanged sentences

Favorable prior year development in both years reflects lower than expected utilization of medical services as compared to our assumptions.

Future Policy Benefits

F uture Policy Benefits

Accounting Policy.

Future policy benefits represent the present value of estimated future obligations, estimated using actuarial methods, for long-term insurance policies and annuity products currently in force, consisting primarily of reserves for annuity contracts, life insurance benefits, and certain supplemental health products that are guaranteed renewable beyond one year.

Future policy benefits represent the present value of estimated future obligations, estimated using actuarial methods, for long-duration insurance policies and annuity products currently in force, consisting primarily of reserves for annuity contracts, life insurance benefits, and certain supplemental health products that are guaranteed renewable beyond one year.

Contracts are grouped at a level no higher than issue year, based on the original contract issue date, and at lower levels of disaggregation within each issue year for certain businesses to reflect factors including product type, plan type and currency.

1 unchanged sentence

Mortality, morbidity and surrender assumptions are based on the Company's own experience and published actuarial tables, and are updated at least annually, to the extent changes in circumstances require.

Interest rate assumptions are based on market-level yields for low credit risk fixed income instruments ("upper-medium grade fixed-income instrument").

Interest rate

assumptions are based on market-level yields for low credit risk fixed income instruments ("upper-medium grade fixed income instrument").

For interest accretion purposes, interest rates are fixed at the year of the cohort's inception, however for purposes of liability measurement, are updated to the current rate quarterly, with all changes in the interest rate from inception to current period reported through Accumulated other comprehensive loss.

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The weighted average interest rates applied and duration for future policy benefits in the Cigna Healthcare segment, consisting primarily of supplemental health products including individual Medicare supplement, limited benefit health products and individual private medical insurance, were as follows:

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

Interest accretion rate 2.20 % 2.72 %

3 unchanged sentences

The present values of expected net premiums and expected future policy benefits for the Cigna Healthcare segment are as follows:

Three Months Ended

(In millions) March 31, 2023 March 31, 2022

Six Months Ended

(In millions) June 30, 2023 June 30, 2022

Present value of expected net premiums

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The flooring impact is calculated at the cohort level after discounting the reserves at the current discount rate.

(2) As of March 31, 2023 and March 31, 2022, respectively, undiscounted expected future gross premiums were $ 17.6 billion and $ 13.5 billion.

As of March 31, 2023 and March 31, 2022, respectively, discounted expected future gross premiums were $ 12.5 billion and $ 10.7 billion.

(3) As of March 31, 2023 and March 31, 2022, respectively, undiscounted expected future policy benefits were $ 12.8 billion and $ 11.2 billion.

(2) As of June 30, 2023 and June 30, 2022, respectively, undiscounted expected future gross premiums were $ 17.7 billion and $ 13.7 billion.

As of June 30, 2023 and June 30, 2022, respectively, discounted expected future gross premiums were $ 12.3 billion and $ 10.2 billion.

(3) As of June 30, 2023 and June 30, 2022, respectively, undiscounted expected future policy benefits were $ 12.9 billion and $ 11.2 billion.

(4) The liability for future policyholder benefits includes immaterial businesses shown as reconciling items above, most of which are in run-off.

(5) $ 154 million and $ 171 million of reinsurance recoverable asset reported in the Consolidated Balance Sheets as of March 31, 2023 and March 31, 2022, respectively, relate to the liability for future policy benefits.

(5) $ 154 million and $ 150 million of reinsurance recoverable asset reported in the Consolidated Balance Sheets as of June 30, 2023 and June 30, 2022, respectively, relate to the liability for future policy benefits.

Other Operations

The weighted average interest rates applied and duration for future policy benefits in Other Operations, consisting of annuity and life insurance products, were as follows:

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

Interest accretion rate 5.64 % 5.64 %

4 unchanged sentences

therefore, future policy benefit reserves represent the present value of expected future policy benefits, discounted using the current discount rate and the remaining amortizable DPL.

Future policy benefits for Other Operations includes DPL of $ 392 million as of March 31, 2023 and $ 384 million as of March 31, 2022.

Future policy benefits excluding DPL, were $ 3.2 billion as of both March 31, 2023 and December 31, 2022 and $ 3.9 billion and $ 4.3 billion as of March 31, 2022 and December 31, 2021, respectively.

These balances exclude amounts classified as Liabilities of businesses held for sale of $ 3.7 billion as of March 31, 2022 and $ 3.8 billion as of December 31, 2021.

Future policy benefits for Other Operations includes DPL of $ 386 million as of June 30, 2023 and $ 380 million as of June 30, 2022.

Future policy benefits excluding DPL were $ 3.2 billion as of both June 30, 2023 and December 31, 2022 and $ 3.5 billion and

$ 4.3 billion as of June 30, 2022 and December 31, 2021, respectively.

These balances exclude amounts classified as Liabilities of businesses held for sale of $ 3.6 billion as of June 30, 2022 and $ 3.8 billion as of December 31, 2021.

The change in future policy benefits reserves year-to-date was primarily driven by changes in the current discount rate.

Undiscounted expected future policy benefits were $ 4.6 billion as of March 31, 2023 and $ 4.7 billion as of March 31, 2022.

As of March 31, 2023 and March 31, 2022, $ 1.0 billion and $ 1.2 billion of the future policy benefit reserve was recoverable through treaties with external reinsurers.

Undiscounted expected future policy benefits were $ 4.5 billion as of June 30, 2023 and $ 4.7 billion as of June 30, 2022.

As of June 30, 2023 and June 30, 2022, $ 1.0 billion and $ 1.1 billion of the future policy benefit reserve was recoverable through treaties with external reinsurers.

Contractholder Deposit Funds

Accounting Policy.

Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-related and universal life products and investment earnings on their fund balances in Other Operations.

Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-related and universal life products as well as investment earnings on their fund balances in Other Operations.

These liabilities are adjusted to reflect administrative charges and, for universal life fund balances, mortality charges.

Interest credited on these funds is accrued ratably over the contract period.

Contractholder deposit fund liabilities within Other Operations were $ 6.7 billion as of both March 31, 2023 and December 31, 2022 and $ 6.8 billion and $ 6.9 billion as of March 31, 2022 and December 31, 2021, respectively.

Contractholder deposit fund liabilities within Other Operations were $ 6.6 billion as of June 30, 2023 and $ 6.7 billion as of December 31, 2022 and $ 6.8 billion and $ 6.9 billion as of June 30, 2022 and December 31, 2021, respectively.

Approximately 38 % of the balance is reinsured externally.

1 unchanged sentence

The net year-to-date decrease in contractholder deposit fund liabilities generally relates to withdrawals and benefit payments from contractholder deposit funds, partially offset by deposits and interest credited to contractholder deposit funds.

As of March 31, 2023, the weighted average crediting rate, net amount at risk and cash surrender value for contractholder deposit fund liabilities not externally reinsured were 3.25 %, $ 3.2 billion and $ 2.8 billion, respectively.

The comparative amounts as of March 31, 2022 were 3.18 %, $ 3.5 billion and $ 2.9 billion, respectively.

As of both March 31, 2023 and March 31, 2022, more than 99 % of the $ 4.1 billion liability not reinsured externally is for contracts with guaranteed interest rates of 3 % - 4 %, and approximately $ 1.2 billion represented contracts with policies at the guarantee.

At both of these same period ends, $ 1.2 billion was 50-150 bps above the guarantee and the remaining $ 1.7 billion represented contracts above the guarantee that pay the policyholder based on the greater of a guaranteed minimum cash value or the actual cash value.

As of June 30, 2023, the weighted average crediting rate, net amount at risk and cash surrender value for contractholder deposit fund liabilities not externally reinsured were 3.26 %, $ 3.2 billion and $ 2.8 billion, respectively.

The comparative amounts as of June 30, 2022 were 3.20 %, $ 3.4 billion and $ 2.8 billion, respectively.

As of both June 30, 2023 and June 30, 2022, more than 99 % of the $ 4.1 billion liability not reinsured externally is for contracts with guaranteed interest rates of 3 % - 4 %, and approximately $ 1.2 billion represented contracts with policies at the guarantee.

At both of these same period ends, $ 1.2 billion was 50-150 basis points ("bps") above the guarantee and the remaining $ 1.7 billion represented contracts above the guarantee that pay the policyholder based on the greater of a guaranteed minimum cash value or the actual cash value.

More than 90 % of these contracts have actual cash values of at least 110% of the guaranteed cash value.

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Accounting Policy.

Variable annuity reinsurance liabilities are measured as MRBs at fair value, net of nonperformance risk, with fluctuations in value gross of reinsurer nonperformance risk reported in benefits expense while fluctuations in the Company's own

nonperformance risk (own credit risk) are reported in Accumulated other comprehensive loss.

Nonperformance risk reflects risk that a party might default and therefore not fulfill its obligations (i.e.

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The Company classifies variable annuity assets and liabilities in Level 3 of the fair value hierarchy described in Note 12 to the Consolidated Financial Statements because assumptions related to future annuitant behavior are largely unobservable.

As discussed further in Note 10 to the Consolidated Financial Statements, due to the reinsurance agreements covering these liabilities, the liabilities do not generally impact net income except for the change in nonperformance risk on the reinsurance recoverable, which is reported in benefits expense and does not offset the nonperformance risk valuation on the liability.

As discussed further in Note 10 to the Consolidated Financial Statements, due to the reinsurance agreements covering these liabilities, the liabilities do not generally impact net income except for the change in nonperformance risk on the reinsurance recoverable, which is reported in benefit expenses and does not offset the nonperformance risk valuation on the liability.

Variable annuity liabilities are established using capital market assumptions and assumptions related to future annuitant behavior (including mortality, lapse and annuity election rates).

Market risk benefits activity was as follows:

Three Months Ended

(Dollars in millions) March 31, 2023 March 31, 2022

Six Months Ended

(In millions) June 30, 2023 June 30, 2022

Balance, beginning of year $ 1,268 $ 1,824

4 unchanged sentences

Assumption changes ( 32 ) 39

Balance, end of year, before the effect of changes in nonperformance risk (own credit risk) 1,305 1,689

Balance, end of period, before the effect of changes in nonperformance risk (own credit risk) 1,147 1,506

Nonperformance risk (own credit risk), end of period ( 78 ) ( 103 )

4 unchanged sentences

The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded, as discussed further in Note 10 to the Consolidated Financial Statements.

(Dollars in millions, excludes impact of reinsurance ceded) March 31, 2023 March 31, 2022

(Dollars in millions, excludes impact of reinsurance ceded) June 30, 2023 June 30, 2022

Net amount at risk $ 1,871 $ 2,728

9 unchanged sentences

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company.

The Company reviews its reinsurance arrangements and establishes reserves against the recoverables.

The Company's reinsurance recoverables as of March 31, 2023 are presented at amount due by range of external credit rating and collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value:

The Company reviews its reinsurance arrangements and establishes reserves against the recoverables primarily for expected credit losses.

The Company's reinsurance recoverables as of June 30, 2023 are presented at amount due by range of external credit rating and collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value:

(In millions) Fair value of collateral contractually required to meet or exceed carrying value of recoverable

25 unchanged sentences

(4) Total Berkshire and certain Other recoverables reflected under acquisition, disposition or run-off activities in the Company's 2022 Form 10-K that relate to the Company's variable annuity reinsurance products discussed in section B below are now reported at fair market value as MRBs, as further discussed in Note 9 to the Consolidated Financial Statements.

At December 31, 2022, we reported $ 711 million related to these recoverables related to the GMDB variable annuity reinsurance product.

At December 31, 2022, we reported $ 711 million of recoverables related to the GMDB variable annuity reinsurance product.

The restated December 31, 2022 variable annuity reinsurance recoverable balance is $ 1.4 billion, which also includes the GMIB variable annuity reinsurance product that was classified in Other assets prior to the adoption of LDTI.

2 unchanged sentences

The Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance transaction in 2013.

Variable annuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk

benefits as discussed in Note 9 to the Consolidated Financial Statements.

Variable annuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk benefits as discussed in Note 9 to the Consolidated Financial Statements.

Berkshire reinsured 100 % of the Company's future cash flows in this business, net of other reinsurance arrangements existing at that time.

The reinsurance agreement is subject to an overall limit with approximately $ 3.1 billion remaining at March 31, 2023.

As a result of the reinsurance transaction, reserve increases are offset by a corresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit.

The reinsurance agreement is subject to an overall limit with approximately $ 3.1 billion remaining at June 30, 2023.

As a result of the reinsurance transaction, amounts payable are offset by a corresponding reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit.

(In millions)

Reinsurer (1)

March 31, 2023 December 31, 2022 Collateral and Other Terms at March 31, 2023

June 30, 2023 December 31, 2022 Collateral and Other Terms

at June 30, 2023

Berkshire $ 917 $ 1,116 95 % were secured by assets in a trust.

7 unchanged sentences

(2) Includes IBNR and outstanding claims of $ 28 million offset by premium due of $ 3 million.

These amounts are excluded from market risk benefits at March 31, 2023 in Note 9 and Note 10A to the Consolidated Financial Statements.

These amounts are excluded from market risk benefits at June 30, 2023 in Note 9 and Note 10A to the Consolidated Financial Statements.

At December 31, 2022, IBNR and outstanding claims of $ 27 million offset by premium due of $ 3 million were excluded from the market risk benefits as restated due to the adoption of LDTI.

The impact of nonperformance risk (i.e.

the risk that a counterparty might default) on the variable annuity reinsurance asset was immaterial for the three months ended March 31, 2023 and March 31, 2022.

the risk that a counterparty might default) on the variable annuity reinsurance asset was immaterial for the three and six months ended June 30, 2023 and June 30, 2022.

Note 11 – Investments

4 unchanged sentences

The following table summarizes the Company's investments by category and current or long-term classification:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(In millions) Current Long-term Total Current Long-term Total

11 unchanged sentences

However, with the adoption of amended accounting guidance for long-duration insurance contracts on January 1, 2023 (discussed in Note 2 to the Consolidated Financial Statements), net unrealized appreciation on debt securities supporting the Company's run-off settlement annuity business is no longer reported in Non-current insurance and contractholder liabilities but rather is reported in Accumulated other comprehensive loss.

See Note 14 to the Consolidated Financial Statements for the impact to Accumulated other comprehensive loss.

The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of March 31, 2023:

See Note 14 to the Consolidated Financial Statements for the retrospectively restated Accumulated other comprehensive loss.

The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of June 30, 2023:

(In millions) Amortized

11 unchanged sentences

Depreciation Fair

March 31, 2023

June 30, 2023

Federal government and agency $ 276 $ — $ 26 $ ( 11 ) $ 291

18 unchanged sentences

Unrealized depreciation on these debt securities is primarily due to declines in fair value resulting from increasing interest rates since these securities were purchased.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(Dollars in millions) Fair

14 unchanged sentences

Equity Securities

The following table provides the values of the Company's equity security investments as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

The following table provides the values of the Company's equity security investments as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

(In millions) Cost Carrying Value Cost Carrying Value

2 unchanged sentences

Total $ 3,852 $ 3,362 $ 1,053 $ 622

In 2023, we became a minority owner in VillageMD by investing $ 2.7 billion in VillageMD preferred equity.

VillageMD is a provider of primary, multi-specialty and urgent care services that is majority-owned by Walgreens Boots Alliance, Inc.

These securities are included in Equity securities with no readily determinable fair value in the above table.

A dividend of 5.5 % accrues annually on $ 2.2 billion of these shares.

Consistent with our strategy to invest in targeted startup and growth-stage companies in the health care industry, approximately 95 % of our investments in equity securities are in the health care sector.

5 unchanged sentences

The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio:

(Dollars in millions) March 31, 2023 December 31, 2022

(Dollars in millions) June 30, 2023 December 31, 2022

Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio

11 unchanged sentences

Carrying Value as of

(In millions) March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022

Real estate investments $ 1,464 $ 1,319

4 unchanged sentences

The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities.

The Company also uses

derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.

As of March 31, 2023, there have been no material changes to the Company's derivative financial instruments.

The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated Financial Statements as of March 31, 2023 and December 31, 2022.

The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.

As of June 30, 2023, there have been no material changes to the Company's derivative financial instruments.

The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated Financial Statements as of June 30, 2023 and December 31, 2022.

The gross fair values of our derivative financial instruments are presented in Note 12 to the Consolidated Financial Statements.

6 unchanged sentences

The following realized gains and losses on investments exclude realized gains and losses attributed to the Company's separate accounts because those gains and losses generally accrue directly to separate account policyholders:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

Net realized investment (losses), excluding credit loss expense and asset write-downs

Net realized investment gains (losses), excluding credit loss expense and asset write-downs

$ 31 $ ( 65 ) $ ( 20 ) $ ( 387 )

Credit loss recoveries

Credit loss (expense) recoveries

( 1 ) ( 24 ) 2 ( 24 )

Other investment asset write-downs ( 4 ) — ( 12 ) —

Net realized investment (losses), before income taxes

Net realized investment gains (losses), before income taxes

$ 26 $ ( 89 ) $ ( 30 ) $ ( 411 )

Net realized investment losses for the three months ended March 31, 2023 and March 31, 2022 were primarily due to mark-to-market losses on a strategic health care equity securities investment.

Net realized investment losses for the six months ended June 30, 2023 and June 30, 2022 were primarily due to mark-to-market losses on a strategic health care equity securities investment.

Note 12 – Fair Value Measurements

16 unchanged sentences

(Level 3) Total

March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Financial assets at fair value

19 unchanged sentences

The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and used in pricing these debt securities.

The range and weighted average basis point ("bps") amounts for liquidity reflect the Company's best estimates of the unobservable adjustments a market participant would make to calculate these fair values.

The range and weighted average basis point amounts for liquidity reflect the Company's best estimates of the unobservable adjustments a market participant would make to calculate these fair values.

Fair Value as of Unobservable Adjustment Range (Weighted Average by Quantity) as of

(Fair value in millions) March 31, 2023 December 31, 2022 Unobservable input March 31, 2023 March 31, 2023 December 31, 2022

(Fair value in millions) June 30, 2023 December 31, 2022 Unobservable Input June 30, 2023 June 30, 2023 December 31, 2022

Debt securities

Corporate and government debt securities $ 433 $ 412 Liquidity 60 - 1060 ( 300 )

Corporate $ 404 $ 412 Liquidity 60 - 1060 ( 300 )

bps 60 - 1060 ( 270 )

1 unchanged sentence

bps 105 - 520 ( 310 )

Other debt securities 2 —

Total Level 3 debt securities $ 454 $ 447

4 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Beginning balance $ 471 $ 686 $ 447 $ 796

Gains included in Shareholders' net income

Gains (losses) included in Other comprehensive loss

Losses required to adjust future policy benefits for settlement annuities (1)

(Losses) gains included in Shareholders' net income

( 1 ) ( 2 ) — 10

Losses included in Other comprehensive loss

( 5 ) ( 24 ) — ( 51 )

Purchases, sales and settlements

7 unchanged sentences

Ending balance $ 454 $ 512 $ 454 $ 512

Total gains included in Shareholders' net income attributable to instruments held at the reporting date

Total losses included in Shareholders' net income attributable to instruments held at the reporting date

$ ( 1 ) $ ( 3 ) $ — $ ( 2 )

Change in unrealized gain or (loss) included in Other comprehensive loss for assets held at the end of the reporting period

(1) Amounts do not accrue to shareholders.

Total gains and losses included in Shareholders' net income in the tables above are reflected in the Consolidated Statements of Income as Net realized investment losses and Net investment income.

$ ( 6 ) $ ( 11 ) $ ( 5 ) $ ( 25 )

Total gains and losses included in Shareholders' net income in the tables above are reflected in the Consolidated Statements of Income as Net realized investment gains (losses) and Net investment income.

Gains and losses included in Other comprehensive loss, net of tax in the tables above are reflected in Net unrealized appreciation (depreciation) on securities and derivatives in the Consolidated Statements of Comprehensive Income.

6 unchanged sentences

The investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company's Consolidated Statements of Income and Cash Flows.

The separate account activity for the six months ended June 30, 2023 and 2022 was primarily driven by changes in the market values of the underlying separate account investments.

Fair values of Separate account assets were as follows:

3 unchanged sentences

(Level 3) Total

(In millions) March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Guaranteed separate accounts (See Note 16)

5 unchanged sentences

Total $ 7,324 $ 7,278

(1) Non-guaranteed separate accounts include $ 4.0 billion as of March 31, 2023 and December 31, 2022 in assets supporting the Company's pension plans, including $ 0.2 billion classified in Level 3 as of March 31, 2023 and December 31, 2022.

(1) Non-guaranteed separate accounts include $ 4.0 billion as of June 30, 2023 and December 31, 2022 in assets supporting the Company's pension plans, including $ 0.2 billion classified in Level 3 as of June 30, 2023 and December 31, 2022.

Separate account assets classified in Level 3 primarily support the Company's pension plans and include certain newly-issued, privately-placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans.

Activity, including transfers into and out of Level 3, was not material for the three months ended March 31, 2023 or 2022.

Activity, including transfers into and out of Level 3, was not material for the three and six months ended June 30, 2023 or 2022.

Separate account investments in securities partnerships, real estate and hedge funds are generally valued based on the separate account's ownership share of the equity of the investee (NAV as a practical expedient), including changes in the fair values of its underlying investments .

1 unchanged sentence

The following table provides additional information on these investments:

Fair Value as of Unfunded Commitment as of March 31, 2023 Redemption Frequency

Fair Value as of Unfunded Commitment as of June 30, 2023 Redemption Frequency

(if currently eligible) Redemption Notice

(In millions) March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022

Securities partnerships $ 425 $ 451 $ 211 Not applicable Not applicable

2 unchanged sentences

Total $ 702 $ 757 $ 211

As of March 31, 2023, the Company does not have plans to sell any of these assets at less than fair value.

As of June 30, 2023, the Company does not have plans to sell any of these assets at less than fair value.

These investments are structured to satisfy longer-term investment objectives.

3 unchanged sentences

However, these financial assets and liabilities may be measured using fair value under certain conditions, such as when investments become impaired and are written down to their fair value, or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.

For the three months ended March 31, 2023 and 2022, impairments recognized requiring these assets to be measured at fair value were not material.

Realized investment gains and losses from these observable price changes for the three months ended March 31, 2023 and March 31, 2022 were not material.

For the six months ended June 30, 2023 and 2022, impairments recognized requiring these assets to be measured at fair value were not material.

Realized investment gains and losses from these observable price changes for the three and six months ended June 30, 2023 and June 30, 2022 were not material.

Fair Value Disclosures for Financial Instruments Not Carried at Fair Value

1 unchanged sentence

In addition to universal life products and finance leases, financial instruments that are carried in the Company's Consolidated Balance Sheets at amounts that approximate fair value are excluded from the following table:

Classification in Fair Value Hierarchy March 31, 2023 December 31, 2022

Classification in Fair Value Hierarchy June 30, 2023 December 31, 2022

(In millions) Fair Value Carrying Value Fair Value Carrying Value

3 unchanged sentences

We perform ongoing qualitative analyses of our involvement with variable interest entities to determine if consolidation is required.

The Company determined that it was no t a primary beneficiary in any material variable interest entity as of March 31, 2023 or December 31, 2022.

The Company's involvement with variable interest entities for which it is not the primary beneficiary has not changed materially from December 31, 2022.

The Company determined that it was no t a primary beneficiary in any material variable interest entity as of June 30, 2023 or December 31, 2022.

For details of our accounting policy for variable interest entities and the composition of variable interest entities with which the Company is involved, refer to Note 13 in the Company's 2022 Form 10-K.

The Company has not provided, and does not intend to provide, financial support to any of these variable interest entities in excess of its maximum exposure.

The Company's maximum exposure to loss from securities limited partnerships and real estate limited partnerships is $ 5.2 billion as of June 30, 2023 compared to $ 4.8 billion as of December 31, 2022 and the maximum exposure from real estate joint ventures is $ 0.8 billion as of June 30, 2023 compared to $ 0.6 billion as of December 31, 2022.

Note 14 – Accumulated Other Comprehensive Income (Loss) ("AOCI")

2 unchanged sentences

Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized.

Changes in the components of AOCI, including the impact of adopting amended accounting guidance for long-duration insurance contracts (discussed in Note 2 to the Consolidated Financial Statements), were as follows:

Three Months Ended March 31,

Shareholders' other comprehensive (loss), net of tax, for both the three and six months ended June 30, 2023 and June 30, 2022, is primarily driven by the change in discount rates for certain long duration liabilities and unrealized changes in the market values of securities and derivatives, including the impacts from unconsolidated entities reported on the equity method.

Changes in the components of AOCI, including the restatement for amended accounting guidance for long-duration insurance contracts (discussed in Note 2 to the Consolidated Financial Statements), are as follows:

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

4 unchanged sentences

Tax (expense) benefit

Net unrealized appreciation (depreciation) on securities and derivatives

Reclassification adjustment for (gains) included in Shareholders' net income (Net realized investment losses)

Reclassification adjustment for tax expense included in Shareholders' net income

Net (gains) reclassified from AOCI to Shareholders' net income

( 12 ) 169 ( 66 ) 400

Net unrealized (depreciation) appreciation on securities and derivatives

( 5 ) ( 700 ) 193 ( 1,534 )

Reclassification adjustment for losses included in Shareholders' net income (Net realized investment gains (losses))

Reclassification adjustment for tax (benefit) included in Shareholders' net income

( 6 ) ( 8 ) ( 5 ) ( 6 )

Net losses reclassified from AOCI to Shareholders' net income

Other comprehensive income (loss), net of tax

20 ( 670 ) 214 ( 1,513 )

Ending balance $ ( 118 ) $ ( 247 ) $ ( 118 ) $ ( 247 )

3 unchanged sentences

Tax benefit (expense)

36 9 137 ( 121 )

Net current period change in discount rate for certain long duration liabilities ( 111 ) 29 ( 421 ) 483

Current period change in instrument-specific credit risk for market risk benefits ( 7 ) ( 28 ) ( 33 ) ( 22 )

Tax benefit (expense)

Net current period change in instrument-specific credit risk for market risk benefits ( 6 ) ( 23 ) ( 27 ) ( 18 )

Other comprehensive (loss) income, net of tax

( 117 ) 6 ( 448 ) 465

Ending balance $ ( 704 ) $ ( 300 ) $ ( 704 ) $ ( 300 )

3 unchanged sentences

Tax benefit (expense)

1 ( 25 ) 2 ( 28 )

Net translation of foreign currencies ( 19 ) ( 207 ) ( 3 ) ( 270 )

Net translation (loss) on foreign currencies attributable to noncontrolling interests

Shareholders' other comprehensive income (loss), net of tax

— ( 1 ) — ( 3 )

Shareholders' other comprehensive (loss), net of tax

( 19 ) ( 206 ) ( 3 ) ( 267 )

Ending balance $ ( 157 ) $ ( 500 ) $ ( 157 ) $ ( 500 )

3 unchanged sentences

Reclassification adjustment for tax (benefit) included in Shareholders' net income

( 3 ) ( 4 ) ( 6 ) ( 7 )

Net adjustments reclassified from AOCI to Shareholders' net income

Valuation update ( 2 ) 18 ( 2 ) 18

Tax benefit (expense)

1 ( 4 ) 1 ( 4 )

Net change due to valuation update ( 1 ) 14 ( 1 ) 14

Other comprehensive income, net of tax

9 unchanged sentences

Income Tax Expense

The 18.4 % effective tax rate for the three months ended March 31, 2023 was lower than the 22.7 % rate for the three months ended March 31, 2022.

This decrease was driven largely by favorable results relative to the Company's foreign operations, partially offset by an increase pertaining to the year over year impact of remeasurement of deferred taxes.

As of March 31, 2023, we had approximately $ 255 million in deferred tax assets ("DTAs") associated with unrealized investment losses that are partially recorded in Accumulated other comprehensive loss.

We have determined that a valuation allowance against the DTAs is not currently required based on the Company's ability to carryback losses and our ability and intent to hold certain securities until recovery.

The 19.9 % effective tax rate for the three months ended June 30, 2023 and the 19.2 % effective tax rate for the six months ended June 30, 2023 were each lower than the 20.7 % rate for the three months ended June 30, 2022 and the 21.6 % rate for the six months ended June 30, 2022.

These decreases are driven largely by favorable results relative to the Company's foreign operations and the release of uncertain tax positions resulting from favorable audit developments.

As of June 30, 2023, we had approximately $ 274 million in deferred tax assets ("DTAs") associated with unrealized investment losses that are partially recorded in Accumulated other comprehensive loss.

We have determined that a valuation allowance against the DTAs is not currently required based on the Company's ability to carry back losses and our ability and intent to hold certain securities until recovery.

We continue to monitor and evaluate the need for any valuation allowance in the future.

6 unchanged sentences

If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business has the right to redirect the management of the related assets to provide for benefit payments.

As of March 31, 2023, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately $ 420 million.

As of June 30, 2023, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately $ 420 million.

An additional liability is established if management believes that the Company will be required to make payments under the guarantees;

there were no additional liabilities required for these guarantees, net of reinsurance, as of March 31, 2023.

there were no additional liabilities required for these guarantees, net of reinsurance, as of June 30, 2023.

Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy.

1 unchanged sentence

Certain Other Guarantees

The Company had indemnification obligations as of March 31, 2023 in connection with acquisition and disposition transactions.

The Company had indemnification obligations as of June 30, 2023 in connection with acquisition and disposition transactions.

These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, filing of tax returns, compliance with law or identification of outstanding litigation.

2 unchanged sentences

The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation.

There were no liabilities for these indemnification obligations as of March 31, 2023.

There were no liabilities for these indemnification obligations as of June 30, 2023.

Guaranty Fund Assessments

1 unchanged sentence

The Company's exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.

There were no material charges or credits resulting from existing or new guaranty fund assessments for the three months ended March 31, 2023.

There were no material charges or credits resulting from existing or new guaranty fund assessments for the six months ended June 30, 2023.

Legal and Regulatory Matters

25 unchanged sentences

Express Scripts' pending Motions were fully briefed at the end of July 2022.

On March 8, 2023, the Court granted Express Scripts' Motion for Partial Summary Judgement, excluding in full the testimony of four of Elevance's experts and in part the testimony of two additional experts, and granted Elevance leave to submit a supplemental expert report.

On March 8, 2023, the Court granted Express Scripts' Motion for Partial Summary Judgment, excluding in full the testimony of four of Elevance's experts and in part the testimony of two additional experts, and granted Elevance leave to submit a supplemental expert report.

On April 5, 2023, the Court entered a scheduling order setting a trial on Elevance's remaining prior authorization claims to commence on December 4, 2023.

Medicare Advantage.

A qui tam action that was filed by a private individual on behalf of the government in the United States District Court for the Southern District of New York in 2017 was unsealed on August 6, 2020.

A qui tam action that was filed by a private individual (the "relator") on behalf of the government in the United States District Court for the Southern District of New York in 2017 was unsealed on August 6, 2020.

The action asserts claims related to risk adjustment practices arising from certain health exams conducted as part of the Company's Medicare Advantage business.

4 unchanged sentences

On October 14, 2022, the DOJ filed its complaint-in-intervention alleging that certain diagnoses made during in-home exams were invalid for risk adjustment purposes, seeking unspecified damages and penalties under the federal False Claims Act.

The Company filed motions to dismiss the DOJ's complaint and the remainder of the qui tam complaint on December 16, 2022.

Briefing is complete and the matter is pending before the court.

The Company's motion to dismiss the DOJ's complaint is fully briefed and pending before the court.

The Company's motion to dismiss relator's complaint was denied as moot after relator asked for and was granted permission to amend his complaint.

Relator filed an amended complaint on July 28, 2023.

The Company's response to the complaint is due September 11, 2023.

Regulatory Matters

18 unchanged sentences

The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance.

Special items charges (benefits) recorded by the Company were $ 1 million both pre-tax and after-tax for the three months ended March 31, 2023 and $ 52 million pre-tax ($ 37 million after-tax) for the three months ended March 31, 2022.

The following table presents the special items charges (benefits) recorded by the Company, as well as the respective financial statement line items impacted:

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(In millions) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax

Integration and transaction-related costs

(Selling, general and administrative expenses) $ 6 $ 5 $ 36 $ 26 $ 7 $ 6 $ 88 $ 63

Charge for organizational efficiency plan

(Selling, general and administrative expenses) — — 22 17 — — 22 17

(Benefits) associated with litigation matters

(Selling, general and administrative expenses) — — ( 28 ) ( 20 ) — — ( 28 ) ( 20 )

Total impact from special items $ 6 $ 5 $ 30 $ 23 $ 7 $ 6 $ 82 $ 60

Effective January 1, 2023, we adopted amended accounting guidance for long-duration insurance contracts.

6 unchanged sentences

Corporate and Eliminations

Three months ended March 31, 2023

Three months ended June 30, 2023

Revenues from external customers $ 36,721 $ 11,505 $ 82 $ — $ 48,308

4 unchanged sentences

Net realized investment results from certain equity method investments — 30 — — 30

Adjusted revenues $ 38,205 $ 12,714 $ 158 $ ( 2,461 ) $ 48,616

Income (loss) before income taxes

$ 1,128 $ 1,156 $ 29 $ ( 429 ) $ 1,884

Pre-tax adjustments to reconcile to adjusted income from operations

(Income) attributable to noncontrolling interests

( 54 ) ( 1 ) — — ( 55 )

Net realized investment (gains) losses (1)

( 1 ) 5 — — 4

Amortization of acquired intangible assets 443 12 — — 455

Special items

Integration and transaction-related costs — — — 6 6

Pre-tax adjusted income (loss) from operations $ 1,516 $ 1,172 $ 29 $ ( 423 ) $ 2,294

(In millions) Evernorth Health Services

Cigna Healthcare

Other Operations

Corporate and Eliminations

Three months ended June 30, 2022

Revenues from external customers $ 33,716 $ 10,620 $ 817 $ — $ 45,153

Intersegment revenues 1,131 586 — ( 1,717 )

Net investment income

16 178 131 — 325

Total revenues 34,863 11,384 948 ( 1,717 ) 45,478

Net realized investment results from certain equity method investments — ( 49 ) — — ( 49 )

Adjusted revenues $ 34,863 $ 11,335 $ 948 $ ( 1,717 ) $ 45,429

4 unchanged sentences

( 13 ) — ( 2 ) — ( 15 )

Net realized investment losses (gains) (1)

Net realized investment (gains) losses (1)

— ( 22 ) 62 — 40

2 unchanged sentences

Integration and transaction-related costs — — — 36 36

Charge for organizational efficiency plan — — — 22 22

(Benefits) associated with litigation matters — — — ( 28 ) ( 28 )

Pre-tax adjusted income (loss) from operations $ 1,475 $ 1,235 $ 228 $ ( 401 ) $ 2,537

(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.

(In millions) Evernorth Health Services

2 unchanged sentences

Corporate and Eliminations

Three months ended March 31, 2022

Six months ended June 30, 2023

Revenues from external customers $ 71,232 $ 23,155 $ 161 $ — $ 94,548

Intersegment revenues 3,040 2,007 — ( 5,047 )

Net investment income

112 278 154 11 555

Total revenues 74,384 25,440 315 ( 5,036 ) 95,103

Net realized investment results from certain equity method investments

— ( 8 ) — — ( 8 )

Adjusted revenues $ 74,384 $ 25,432 $ 315 $ ( 5,036 ) $ 95,095

Income (loss) before income taxes

$ 2,046 $ 2,233 $ 50 $ ( 844 ) $ 3,485

Pre-tax adjustments to reconcile to adjusted income from operations

(Income) attributable to noncontrolling interests

( 96 ) ( 2 ) — — ( 98 )

Net realized investment (gains) losses (1)

( 1 ) 29 ( 6 ) — 22

Amortization of acquired intangible assets 887 27 — — 914

Special items

Integration and transaction-related costs — — — 7 7

Pre-tax adjusted income (loss) from operations $ 2,836 $ 2,287 $ 44 $ ( 837 ) $ 4,330

(In millions) Evernorth Health Services

Cigna Healthcare

Other Operations

Corporate and Eliminations

Six months ended June 30, 2022

Revenues from external customers

$ 66,005 $ 21,082 $ 1,658 $ — $ 88,745

Intersegment revenues 2,418 1,148 — ( 3,566 )

9 unchanged sentences

( 24 ) ( 1 ) ( 7 ) — ( 32 )

Net realized investment losses (gains) (1)

Net realized investment losses (1)

— 384 81 — 465

2 unchanged sentences

Integration and transaction-related costs — — — 88 88

Charge for organizational efficiency plan — — — 22 22

(Benefits) associated with litigation matters — — — ( 28 ) ( 28 )

Pre-tax adjusted income (loss) from operations $ 2,777 $ 2,532 $ 457 $ ( 744 ) $ 5,022

3 unchanged sentences

The following table presents these revenues by product, premium and service type:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In millions) 2023 2022 2023 2022

7 unchanged sentences

Cigna Healthcare

Commercial (1)

Insured 4,091 3,771 8,171 7,491

Stop loss 1,514 1,344 3,017 2,669

Other 365 352 733 712

Government (1)

Medicare Advantage 2,180 2,053 4,416 4,131

Medicare Part D 345 345 760 746

Other (1), (2)

Short-duration (Individual and family plans) 1,293 706 2,501 1,317

Long-duration (2) (Individual Medicare supplement and limited benefit health products)

337 332 671 661

International Health

1 unchanged sentence

Long-duration (2) (Individual private medical insurance)

89 76 175 158

Total Cigna Healthcare 10,945 9,615 21,875 19,141

Divested International businesses — 737 — 1,500

Other 76 74 155 143

Intercompany eliminations 18 — 34 ( 2 )

2 unchanged sentences

Evernorth Health Services

2,838 1,790 5,337 3,414

Cigna Healthcare

1,602 1,478 3,208 2,974

Other Operations

3 unchanged sentences

Total revenues from external customers $ 48,308 $ 45,153 $ 94,548 $ 88,745

(1) Other than supplemental benefits, all of U.S.

(1) Other than the long-duration products referenced in the table, U.S.

Commercial and U.S.

Government are short duration.

Government and International Health recognize premium revenue on long-duration insurance contracts (coverage greater than one year or guaranteed to be renewed at the option of the policyholder beyond one year) related to certain medicare supplement, supplemental health and life products.

All other premium revenue recognized as of March 31, 2023 and March 31, 2022 is primarily related to short-duration insurance contracts.

Government insurance contracts are short-duration.

Government's and International Health's long-duration premium revenues are associated with contracts that provide coverage greater than one year or are guaranteed to be renewed at the option of the policyholder beyond one year.

Evernorth Health Services may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels.

3 unchanged sentences

Historically, adjustments to original estimates have not been material.

This guarantee liability was $ 1.5 billion as of March 31, 2023 and $ 1.3 billion as of December 31, 2022.

This guarantee liability was $ 1.2 billion as of June 30, 2023 and $ 1.3 billion as of December 31, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements