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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-23 · 258 added, 271 removed, 577 unchanged (48% of the section changed)

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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, 2023 compared with December 31, 2022 and our results of operations for 2023 compared with 2022 and 2021 and is intended to help you understand the ongoing trends in our business.

We adopted amended accounting guidance for long-duration insurance contracts effective January 1, 2023.

This MD&A has been retrospectively adjusted to conform to the new basis of accounting.

The impact of this amended guidance is immaterial.

Additionally, during the fourth quarter of 2023, our U.S.

Commercial and U.S.

Government operating segments were merged to form the U.S.

Healthcare operating segment within the Cigna Healthcare reportable segment.

For comparisons of our results of operations for 2022 compared with 2021, 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, 2022.

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Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States of America ("GAAP").

See Note 2 to the Consolidated Financial Statements in this Form 10-K for additional information regarding the Company's significant accounting policies.

See Note 2 to the Consolidated Financial Statements in this Form 10-K for additional information regarding the Company's significant accounting policies and additional information regarding the adoption of amended accounting guidance for long-duration insurance contracts effective January 1, 2023.

In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful.

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EXECUTIVE OVERVIEW

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.

The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our") is a global health company with 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.

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

Financial Highlights

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

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

Prior period financial highlights and results of operations have been retrospectively adjusted to conform to this new basis of accounting.

The impact of this amended guidance is immaterial.

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

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

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Adjusted revenues 195,322 180,644 174,069 8 4

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

Net realized investment results from certain equity method investments (57) (126) — 55 N/M

Total revenues $ 195,265 $ 180,518 $ 174,069 8 % 4 %

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Interest expense and other (1,446) (1,228) (1,208) (218) (18) (20) (2)

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

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

Debt extinguishment costs — — (141) — N/M 141 N/M

(Loss) gain on sale of businesses

(1,499) 1,662 — (3,161) N/M 1,662 N/M

Net realized investment (losses) gains

(78) (487) 198 409 84 (685) N/M

Income before income taxes 5,513 8,397 6,790 (2,884) (34) 1,607 24

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2023 2022 2021

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

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

Shareholders' net income $ 5,164 $ 6,704 $ 5,370

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Special items

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

Loss (gain) on sale of businesses 1,499 1,429 (1,662) (1,332) — —

Charge for organizational efficiency plan 252 193 22 17 168 119

(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)

Charges (benefits) associated with litigation matters 201 171 (28) (20) (27) (21)

Integration and transaction-related costs 45 35 135 103 169 71

Deferred tax (benefits), net — (1,071) — — — —

Debt extinguishment costs — — — — 141 110

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

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

Total special items $ 1,997 757 $ (1,533) (1,232) $ 451 279

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Special items

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

Loss (gain) on sale of businesses 5.05 4.81 (5.31) (4.26) — —

Charge for organizational efficiency plan 0.85 0.65 0.07 0.05 0.49 0.35

(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)

Charges (benefits) associated with litigation matters 0.68 0.58 (0.09) (0.06) (0.08) (0.06)

Integration and transaction-related costs 0.15 0.12 0.43 0.33 0.50 0.21

Deferred tax (benefits), net — (3.61) — — — —

Debt extinguishment costs — — — — 0.41 0.32

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

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

Total special items $ 6.73 2.55 $ (4.90) (3.94) $ 1.32 0.82

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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.

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.

2023 versus 2022

The commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2023 with results for the year ended December 31, 2022.

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.

Shareholders' net income decreased 23%, reflecting the estimated loss associated with the sale of our Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses (the "HCSC transaction"), the absence of the gain on the sale of our life, accident and supplemental health benefits business in six countries sold on July 1, 2022 (the "Chubb transaction"), partially offset by foreign deferred tax benefits recorded in the fourth quarter of 2023 as described further under "effective tax rate" below.

Adjusted income from operations increased 2%, primarily driven by higher earnings in our Cigna Healthcare and Evernorth Health Services segments, largely offset by the absence of earnings reported in the first half of 2022 from the businesses divested in the Chubb transaction and increased interest expense and pension costs.

Medical customers increased 10%, reflecting growth in fee-based customers as well as in Individual and Family Plans and Medicare Advantage customers.

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.

Pharmacy revenues increased 7%, reflecting inflation on branded drugs as well as growth in specialty.

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

Premiums increased 11% reflecting insured customer growth and higher premium rates in Cigna Healthcare due to anticipated underlying medical cost trend.

See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.

These favorable effects were partially offset by a decline in premiums due to the Chubb transaction.

Fees and other revenues increased 16%, primarily reflecting client growth from our continued affordability services within Evernorth Health Services.

Net investment income increased 1%, primarily due to growth in average assets, largely offset by the unfavorable impact of the Chubb transaction.

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

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.

Pharmacy and other service costs increased 7%, reflecting inflation on branded drugs as well as growth in specialty.

Medical costs and other benefit expenses increased 13%, primarily reflecting insured customer growth and medical cost trend in Cigna Healthcare, partially offset by the impact of the Chubb transaction.

Selling, general and administrative expenses increased 13%, primarily driven by volume-related expenses in Cigna Healthcare due to business growth, as well as increased investments to support the onboarding of new clients and continued advancement of our digital

capabilities and care solutions in Evernorth Health Services.

Increased expenses were also driven by costs reported in 2023 for an organizational efficiency plan and litigation settlements.

These increases were partially offset by the impact of the Chubb transaction.

Interest expense and other increased 18%, primarily reflecting higher interest rates on our indebtedness and increased pension costs.

See the "Segment Reporting - Corporate" section of this MD&A for further discussion.

(Loss) / gain on sale of businesses.

The loss reported in 2023 primarily reflects asset write-downs and estimated costs related to the HCSC transaction.

In 2022, the reported gain reflects the impact of the Chubb transaction, which closed on July 1, 2022.

Realized investment results were substantially improved, primarily due to lower mark-to-market losses on investments.

See Note 12 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.

The effective tax rate decreased substantially driven by foreign deferred tax benefits.

Also contributing to the decrease were favorable results relative to the Company's foreign operations and the release of uncertain tax positions resulting from favorable audit developments.

These favorable effects were partially offset by the impact of the valuation allowance recorded resulting from the HCSC transaction.

See Note 23 to the Consolidated Financial Statements for additional information.

Recent Events

Economic Conditions

We continue to monitor global economic conditions, including inflation, labor market dynamics and recent geopolitical events.

We continue to proactively address impacts to our pricing with third parties (including vendors, health care providers and drug providers), our investment portfolio and our workforce.

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

Our results of operations or cash flows for the year ended December 31, 2023 were not materially impacted by inflation, labor market dynamics, or recent geopolitical events.

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

Conflict in the Middle East

The Cigna Group serves a limited number of customers and clients in the impacted regions in the Middle East.

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.

Key Transactions and Business Developments

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.

Sale of Medicare Advantage and Related Businesses

In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S.

Healthcare operating segment to Health Care Service Corporation ("HCSC") for $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions.

See Note 6 to the Consolidated Financial Statements for further information.

Organizational Efficiency Plan

During the fourth quarter of 2023, the Company approved a strategic realignment to drive greater operating effectiveness and efficiency.

This plan positions us to be more efficient and focused to deliver differentiated value and services to our clients and customers.

The Company recognized a charge in Selling, general and administrative expenses of $252 million, pre-tax ($193 million, after-tax).

We expect substantially all of the accrued liability to be paid by the end of 2024.

We expect to realize annualized after-tax savings of approximately $280 million.

A significant portion of the savings is expected to be recognized in 2024.

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

CarepathRx Health System Solutions

In July 2023, Evernorth Health, Inc.

acquired a minority interest in CarepathRx Health Systems Solutions ("CHSS").

CHSS 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.

See Note 5 to the Consolidated Financial Statements for further discussion of this investment.

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

VillageMD (majority-owned by Walgreens Boots Alliance, Inc.) provides health care services for individuals and communities across the United States, with primary, multi-specialty and urgent care providers serving patients in traditional clinic settings, in patients' homes and online appointments.

VillageMD and its subsidiaries operate in 26 markets and are responsible for millions of patients.

See Note 12 to the Consolidated Financial Statements for further discussion of this investment.

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.

Effective January 1, 2024, Evernorth Health Services and Centene Corporation ("Centene") have a multi-year agreement 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

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")

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

The Centers for Medicare and Medicaid Services ("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.

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

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 13, 2023, CMS announced Medicare Star Ratings for bonus payments to be received in 2025.

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.

We estimate 67% of our MA customers to be in four star or greater plans for bonus payments to be received in 2024 and 2025 (based upon the current customer mix associated with the announced Star Ratings).

See Part I, Item I, "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").

On March 31, 2023, CMS released the final Calendar Year 2024 Medicare Advantage Program and Part D Payment Policies (the "2024 Final Notice").

On January 31, 2024, CMS released the Calendar Year 2025 Advance Notice for Medicare Advantage and Part D Prescription Drug Programs (the "Advance Notice").

CMS will accept comments on the Advance Notice through March 1, 2024, before publishing the final rate announcement by April 1, 2024.

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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.

With respect to our investment portfolio, we support the liquidity needs of our businesses by managing the duration of assets to be consistent with the duration of liabilities.

We manage the portfolio to both optimize returns in the current economic environment and meet our liquidity needs.

Cash flows were as follows:

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Net cash provided by operating activities $ 11,813 $ 8,656 $ 7,191

Net cash provided by (used in) investing activities:

Net cash (used in) provided by investing activities:

Cash proceeds from sales of businesses, net of cash sold 13 4,835 (61)

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The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2023 compared with the same period in 2022.

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.

For comparisons of liquidity and capital resources for the year ended December 31, 2022 compared with the year ended December 31, 2021, please refer to the previously filed MD&A included in Part II, Item 7 of our 2022 Form 10-K.

Operating activities

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.

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.

Operating cash flows increased for the year ended December 31, 2023 due to higher insurance related liabilities, acceleration of cash proceeds from the accounts receivable factoring facility, lower income tax payments and higher CMS Part D annual settlement.

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.

The Company invested $2.7 billion in VillageMD in 2023.

This, combined with the absence of the net $4.9 billion proceeds received from the Chubb transaction in 2022, resulted in an increase in cash used in investing activities.

Financing activities

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

The Company had lower share repurchases and lower net debt outflows in 2023.

These factors resulted in a decrease in cash used in financing activities in 2023.

Capital Resources

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Our businesses generate significant cash flow from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company.

Dividends from U.S.

Dividends received from U.S.

regulated subsidiaries were $1.2 billion for the year ended December 31, 2023 and $1.9 billion for the year ended December 31, 2022.

This decrease was due in part to lower statutory earnings in 2022 and additional capital held at subsidiaries to support business growth, which is in line with our capital planning.

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

We prioritize our use of capital resources to:

• invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide the capital necessary to maintain or improve the financial strength ratings of subsidiaries and to repay debt and fund pension obligations if necessary;

• invest in capital expenditures, primarily related to technology to support innovative solutions for our clients and customers, provide the capital necessary to maintain or improve the financial strength ratings of subsidiaries and to repay debt and fund pension obligations if necessary;

• pay dividends to shareholders;

• consider acquisitions that are strategically and economically advantageous;

• consider acquisitions and investments that are strategically and economically advantageous;

• return capital to shareholders through share repurchases.

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

The commercial paper program had approximately $1.2 billion outstanding at December 31, 2023.

Revolving Credit Agreements.

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a $4.0 billion five-year revolving credit and letter of credit agreement that expires in April 2028;

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

and a $1.0 billion 364-day revolving credit agreement that expires in April 2024.

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In addition to the sources of liquidity discussed above, the parent company can borrow an additional $2.2 billion from its subsidiaries without further approvals as of December 31, 2023.

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

Long-term debt.

In July 2023, we repaid $2.9 billion of senior notes at maturity.

Capital expenditures .

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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.

We expect to deploy approximately $1.5 billion in capital expenditures in 2024.

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

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.

The Cigna Group declared and paid quarterly cash dividends of $1.23 per share of its common stock during 2023, compared to quarterly cash dividends of $1.12 per share during 2022.

See Note 9 to the Consolidated Financial Statements for further information on our dividend payments.

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The program may be suspended or discontinued at any time.

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.

We repurchased 7.8 million shares for approximately $2.3 billion during the year ended December 31, 2023, compared to 27.4 million shares for approximately $7.6 billion during the year ended December 31, 2022.

In December 2023, the Board increased repurchase authority by an additional $10.0 billion.

We expect to repurchase $5.0 billion of common stock in the first half of 2024.

A portion of this repurchase was executed in February 2024 via an Accelerated Share Repurchase ("ASR") as described below.

In February 2024, as part of our existing share repurchase program, we entered into separate ASR agreements ("2024 ASR agreements") with Deutsche Bank AG and Bank of America, N.A.

(collectively, the "2024 Counterparties") to repurchase $3.2 billion of common stock in aggregate.

We remitted $3.2 billion to the 2024 Counterparties and received an initial delivery of approximately 7.6 million shares of our common stock on February 15, 2024 representing $2.6 billion of the total remitted.

We expect final settlement under the 2024 ASR agreements to occur in the second quarter of 2024.

See Note 9 to the Consolidated Financial Statements for further information on our 2024 ASR agreements.

Including the impact of the 2024 ASR agreements, from January 1, 2024 through February 28, 2024, we repurchased 10.1 million shares for approximately $4.0 billion.

Share repurchase authority was $7.3 billion as of February 28, 2024.

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.

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

See Note 12 to the Consolidated Financial Statements for further discussion of this investment.

In July 2023, Evernorth Health, Inc.

acquired a minority interest in CHSS.

See Note 5 to the Consolidated Financial Statements for further discussion of this investment.

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.

Our pension plans were overfunded by $204 million and $238 million as of December 31, 2023 and December 31, 2022, respectively, and reported in Other assets in our Consolidated Balance Sheets.

In 2023, 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 2024 to be immaterial.

See Note 18 to the Consolidated Financial Statements for additional information.

Other Sources of Funds and Uses of Capital Resources

In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S.

Healthcare operating segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions.

The transaction is expected to close in the first quarter of 2025 and provide approximately $3.7B in transaction proceeds, which consists primarily of cash proceeds.

Following the completion of the sale, we anticipate use of the proceeds in alignment with our capital deployment priorities, with the majority allocated to share repurchases.

Debt Issuance and Debt Tender Offers.

On February 5, 2024, we issued $4.5 billion of new senior notes.

The proceeds from this debt were used to pay the consideration for the cash tender offers as described below.

We intend to use the remaining net proceeds to fund the repayment of our senior notes maturing in March 2024 and for general corporate purposes, which may include repayment of indebtedness and repurchases of shares of our common stock.

Concurrent with the debt issuance, we commenced tender offers to purchase for cash up to $2.25 billion in aggregate principal amount of outstanding notes, which included any and all of the $1.0 billion senior notes due June 2024.

Following the early tender results, we increased the tender offers to up to $2.55 billion aggregate principal amount.

On February 22, 2024, we purchased $1.8 billion principal amount of notes at early settlement of the tender offers.

The tender offers will expire on March 5, 2024.

Risks to Liquidity and Capital Resources

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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See Note 24 to the Consolidated Financial Statements for discussion of various guarantees.

The Company adopted amended accounting guidance for long-duration insurance contracts effective January 1, 2023, which impacted the amounts presented in our Consolidated Balance Sheets.

Within our Consolidated Financial Statements, see Note 2 to the Consolidated Financial Statements for a summary of this accounting change and Note 10 to the Consolidated Financial Statements for a summary of the insurance liabilities in our Consolidated Balance Sheets as well as future expected cash flow information.

With the adoption of amended accounting guidance for long-duration insurance contracts and enhanced disclosure within Note 10 to the Consolidated Financial Statements, we will no longer present additional information regarding insurance liabilities within this section.

On balance sheet :

• Insurance liabilities

◦ 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.

This is because some of the recorded insurance liabilities reflect discounting for interest and the recorded contractholder liabilities exclude future interest crediting, charges and fees.

The timing and amount of actual future cash flows may differ from the projected amount disclosed.

◦ We expect $4.6 billion of insurance liabilities to be paid within the next twelve months beginning January 1, 2023.

◦ See Note 9 to the Consolidated Financial Statements for information regarding insurance liabilities.

• Long-term debt

◦ Total scheduled payments on long-term debt are $44.8 billion, which include scheduled interest payments and maturities of long-term debt.

This excludes any impact from our February 2024 debt issuance and debt tender offers transactions as described above.

◦ We expect $2.8 billion of long-term debt payments (including scheduled interest payments) to be paid within the next twelve months beginning January 1, 2024.

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• 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.

◦ These include approximately $335 million of estimated payments (of which we expect $52 million to be paid in the next twelve months beginning January 1, 2024) for other postretirement and postemployment benefit obligations, reinsurance liabilities, supplemental and deferred compensation plans and interest rate and foreign currency swap contracts.

◦ In connection with our equity method investment in CarepathRx Health Systems Solutions ("CHSS"), we guaranteed CHSS's credit facilities.

See Note 5 to the Consolidated Financial Statements for further information.

◦ See Note 18 to the Consolidated Financial Statements for further information on pension obligations and funded status.

• Operating leases

◦ These include operating lease payments of $494 million.

◦ We expect $114 million of operating lease payments to be due within the next twelve months beginning January 1, 2023.

◦ These include operating lease payments of $497 million (of which we expect $110 million of operating lease payments to be due within the next twelve months beginning January 1, 2024).

◦ See Note 21 to the Consolidated Financial Statements for additional information.

• Uncertain tax positions

◦ 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.

◦ In the event we are unable to sustain all of our $1.4 billion of uncertain tax positions, it could result in future tax payments of approximately $950 million.

We are adequately reserved for such positions.

As a result, there is minimal

direct risk to earnings should we fail to sustain our 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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Purchase obligations exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of goods or services to be purchased.

◦ As of December 31, 2022, purchase obligations consisted of a total of $6.5 billion of estimated payments required under contractual arrangements.

This includes:

▪ $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.

◦ As of December 31, 2023, purchase obligations consisted of a total of $4.3 billion of estimated payments required under contractual arrangements (of which we expect $1.3 billion of purchase obligations to be paid within the next twelve months beginning January 1, 2024).

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.

▪ $2.8 billion of investment commitments (of which we expect $0.7 billion of the committed amounts to be disbursed in 2024).

▪ $1.5 billion of future service commitments (of which we expect $0.6 billion of the committed amounts to be disbursed in 2024), primarily comprised of contracts for certain outsourced business processes and information technology maintenance and support.

◦ See Note 12 of the Consolidated Financial Statements for additional information on investment commitments.

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Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value.

Government reporting unit contracts with CMS to provide managed health care services, including Medicare Advantage and Medicare-approved prescription drug plans.

Estimated future cash flows for this reporting unit's Medicare Advantage business incorporate the current reimbursement structure for 2023 and beyond.

Revenues from the Medicare programs are dependent, in whole or in part, upon annual funding from the federal government through CMS.

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.

During the fourth quarter of 2023, following the change in operating segment discussed in Note 1 to the Consolidated Financial Statements, U.S.

Government's goodwill was merged with U.S Commercial's goodwill.

Certain businesses within the U.S.

Healthcare operating segment were designated as held for sale (see Note 6 to the Consolidated Financial Statements).

Goodwill and other intangibles as of December 31 were as follows (in millions):

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See Note 20 to the Consolidated Financial Statements for additional discussion of our goodwill and other intangible assets.

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 sufficient margins.

We completed our normal annual evaluations for impairment of goodwill and intangible assets during the third quarter of 2023, as well as additional qualitative and quantitative tests as required by GAAP.

The evaluations support that as of December 31, 2023, 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.

If we consistently do not achieve our earnings and cash flow projections or our cost of capital rises significantly, the assumptions and estimates underlying the goodwill and intangible asset impairment evaluations could be adversely affected and result in future impairment charges that would negatively impact our operating results and financial position.

Specific to the U.S.

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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If our positions are upheld upon audit, our net income would increase.

Income taxes - valuation allowance

Deferred income taxes are reflected in the Consolidated Balance Sheets for differences between the financial and income tax reporting bases of the Company's underlying assets and liabilities, and are established based upon enacted tax rates and laws.

Deferred income tax assets are recognized when available evidence indicates that realization is more likely than not and a valuation allowance is established to the extent this standard is not met.

In 2023, the Company recorded a valuation allowance related to various foreign deferred tax assets in the amount of $772 million as well as a valuation allowance of $584 million related to the tax benefit associated with the sale of the Medicare Advantage and related businesses.

It is possible that the realization of deferred tax assets may change due to changes in forecasted future earnings in various foreign jurisdictions or the Company's ability to generate future capital gains.

Valuation allowances that are included in the Consolidated Balance Sheets within deferred tax liabilities, net are as follows (in millions):

· 2023 – $1,498

· 2022 – $208

See Note 23 to the Consolidated Financial Statements for additional discussion around valuation allowances.

The factors that could impact our estimates of valuation allowances include changes in forecasted future earnings in foreign jurisdictions and the Company's future ability to generate capital gains.

Decreases in our valuation allowance would increase net income, while increases in our valuation allowance would decrease net income.

Balance Sheet Caption /

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Unpaid claims and claim expenses – Cigna Healthcare

Unpaid claims and claim expenses include both reported claims and estimates for losses incurred but not yet reported.

Unpaid claims and claim expenses reflects estimates of the ultimate cost of claims that have been incurred but not reported, expected development on reported claims, claims 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.

Unpaid claims and claim expenses in Cigna Healthcare are primarily impacted by assumptions related to completion factors and medical cost trend.

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A 100 basis point increase in the medical cost trend rate would increase this liability by approximately $90 million, resulting in a decrease in net income of approximately $70 million after-tax, and a 50 basis point decrease in completion factors would increase this liability by approximately $180 million, resulting in a decrease in net income of approximately $140 million after-tax.

Balance Sheet Caption /

Nature of Critical Accounting Estimate

Effect if Different Assumptions Used

Valuation of debt security investments

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

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.

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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.

Evernorth Health Services partners with health plans, employers, governmental organizations and health care providers to solve challenges in the areas of pharmacy benefits, home delivery pharmacy, specialty pharmacy, specialty 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.

The key factors that impact Evernorth Health Services' Pharmacy revenues, Fees and other 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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Furthermore, our gross profit differs among network, home delivery and specialty distribution methods and can impact our profitability.

• 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.

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

Inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals.

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

Through these affordability services, we seek to improve the effectiveness of our integrated solutions for the benefit of our clients by continuously innovating, improving affordability and implementing drug purchasing contract initiatives.

Our revenues, cost of revenues and gross profit could increase or decrease as a result of these affordability services.

Pharmaceutical manufacturer inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals.

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.

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

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Total revenues $ 153,499 $ 140,335 $ 131,912 $ 13,164 9 % $ 8,423 6 %

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

Adjusted revenues (1)

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Overall generic fill rate 86.7 % 86.3 % 85.5 % 40 bps 80 bps

(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.

(1) Total revenues and gross profit were equal to adjusted revenues and adjusted gross profit as there were no special items in the periods presented.

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

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

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2023 versus 2022

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.

Adjusted network revenues increased 4%, reflecting inflation on branded drugs and higher claims volume, partially offset by a decrease in claims mix and an increase in the generic fill rate.

Adjusted home delivery and specialty revenues increased 7%, reflecting higher specialty claims volume and inflation on branded drugs, partially offset by lower home delivery claims volume.

Other pharmacy revenues increased 34%, reflecting higher volume from our CuraScript Specialty Distribution business, which distributes pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals.

Adjusted fees and other revenues increased 51%, reflecting client growth in Care Delivery and Management Solutions, including cross-enterprise leverage, primarily driven by our behavioral health and eviCore Healthcare solutions, and client growth from our continued affordability services.

Adjusted gross profit increased 10%, and pre-tax adjusted income from operations increased 5%, reflecting continued affordability improvements and growth in Specialty Pharmacy, partially offset by increased strategic investments to support the onboarding of new clients and continued advancement of our digital capabilities and care solutions.

The adjusted expense ratio increased 20 bps, reflecting increased strategic investments to support the onboarding of new clients and continued advancement of our digital capabilities and care solutions.

Cigna Healthcare Segment

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.

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

During the fourth quarter of 2023, the U.S.

Commercial and U.S.

Government operating segments were merged to form the U.S.

Healthcare operating segment.

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

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

For the Cigna Healthcare segment, prior period results of operations have been retrospectively adjusted to conform to this new basis of accounting.

The impact of this amended guidance is immaterial.

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

Healthcare operating segment to Health Care Service Corporation for $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions.

See Note 6 to the Consolidated Financial Statements for further information.

Results of Operations

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2023 versus 2022

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.

Adjusted revenues increased 14%, primarily reflecting customer growth and higher premium rates due to anticipated underlying medical cost trend.

Pre-tax adjusted income from operations increased 9%, primarily due to a lower medical care ratio and a lower adjusted expense ratio.

The improvement to the medical care ratio and the adjusted expense ratio for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022, was driven by decreases of 160 bps and 190 bps, respectively, for the three months ended December 31, 2023.

The medical care ratio decreased 40 bps, primarily due to a lower U.S.

Healthcare medical care ratio, reflecting improved stop loss results, effective pricing execution and affordability initiatives.

The adjusted expense ratio decreased 20 bps for the twelve months ended December 31, 2023, primarily due to revenue growth outpacing volume-related expenses as well as higher technology spend.

The adjusted expense ratio decreased 190 bps for the three months ended December 31, 2023, primarily due to revenue growth and timing of investments outpacing volume-related expenses.

Medical Customers

A medical customer is defined as a person meeting any one of the following criteria:

• is covered under a medical insurance policy, managed care arrangement or service agreement issued by us;

• is covered under a medical insurance policy, managed care arrangement or administrative services agreement issued by us;

• has access to our provider network for covered services under their medical plan;

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Insured 5,464 4,756 4,757 708 15 % (1) — %

Commercial 2,238 2,166 2,141 72 3 25 1

Government 1,349 1,510 1,387 (161) (11) 123 9

Healthcare 4,280 3,587 3,676 693 19 (89) (2)

International Health (1)

1,184 1,169 1,081 15 1 88 8

Services only 13,248 12,324 12,112 924 7 212 2

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

5 — — 5 N/M — N/M

Administrative services only 14,316 13,248 12,324 1,068 8 924 7

Healthcare 13,890 12,619 11,688 1,271 10 931 8

International Health (1)

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Total 19,780 18,004 17,081 1,776 10 % 923 5 %

(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.

(1) International Health excludes medical customers served by less than 100% owned subsidiaries, as well as certain customers served by our third-party administrator.

International Health customers as of December 31, 2023 reflect the transition of certain run-off business to Other Operations beginning January 1, 2023.

2023 versus 2022

Total medical customers increased 10%, primarily driven by growth in fee-based customers as well as in Individual and Family Plans and Medicare Advantage customers.

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

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$ 5,092 $ 4,176 $ 4,261 $ 916 22 % $ (85) (2) %

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.

2023 versus 2022

Our unpaid claims and claim expenses liability increased 22%, driven by customer growth, primarily within our Individual and Family Plans business.

Other Operations

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.

Other Operations includes corporate owned life insurance ("COLI") and the Company's run-off operations.

See Note 1 to the Consolidated Financial Statements for additional information regarding these operations.

In the prior periods, Other Operations also included the International businesses sold in July 2022 and our interest in a joint venture in Türkiye sold in December 2022.

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

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

For the Other Operations segment, prior period results of operations have been retrospectively adjusted to conform to this new basis of accounting.

The impact of this amended guidance is immaterial.

Prior period results related to long-duration contracts sold in the Chubb transaction and our divested interest in a joint venture in Türkiye were not adjusted (as permitted by ASU 2022-05).

See Note 10 to the Consolidated Financial Statements for additional disclosure of our long-duration insurance contracts and Note 2 to the Consolidated Financial Statements for additional information regarding the adoption of this amended guidance.

Results of Operations

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2023 versus 2022

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.

Adjusted revenues declined reflecting the absence of revenues from the business divested in 2022.

Pre-tax adjusted income from operations decreased primarily due to the absence of earnings from the businesses divested in the Chubb transaction.

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate financing 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 eliminations for products and services sold between segments.

Financial Summary

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2023 versus 2022

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

Pre-tax adjusted loss from operations increased 16% primarily due to an increase in the weighted average interest rate on our indebtedness and increased pension costs due to lower expected asset returns and a higher discount rate.

While our pension expense has increased year-over-year, we continue to expect the required contributions for 2024 to be immaterial.

INVESTMENT ASSETS

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Short-term investments 206 139

Total $ 20,348 $ 17,193

Investments classified as assets of businesses held for sale (1)

Investments per Consolidated Balance Sheets $ 18,910 $ 17,193

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

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

(1) Investments related to the HCSC transaction that were held for sale as of December 31, 2023.

These investments were primarily comprised of debt securities and commercial mortgage loans, and to a lesser extent, other long term investments.

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.

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

Although there has been very limited impact to date on our investment portfolio as a result of 2023 economic and geopolitical events, including banking system stress, we continue to monitor ongoing developments and the

potential impact of 2023 events on the portfolio.

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

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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.

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 unfavorable effect on our financial condition or liquidity.

Debt Securities

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Total $ 9,855 $ 9,872

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.

The carrying value of our debt securities portfolio was flat during the year ended December 31, 2023 reflecting net sales activity offset by a valuation increase due to declining market interest rates .

Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the last several quarters.

More detailed information about debt securities by type of issuer, maturity dates and net unrealized position is included in Note 12 to the Consolidated Financial Statements.

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

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.

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.

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 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.

Elevated global inflation, higher interest rates, continuing supply chain disruptions and potential fallout from the stress in the banking system 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.

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As of December 31, 2023, our $1.5 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.

These loans are carried in our Consolidated Balance Sheets at their unpaid principal balance, net of an 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, 2023.

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For further discussion of the results and changes in key loan metrics, see Note 12 to the Consolidated Financial Statements.

Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at less than 65% of the property's value at origination of the loan.

Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at approximately 65% of the property's value at origination of the loan.

Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations.

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

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.

We assess the credit quality of our commercial mortgage loan portfolio annually, generally in the second 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 2023 confirmed ongoing strong overall credit quality in line with the previous year's results.

See Note 12 to the Consolidated Financial Statements for further information regarding our key credit quality indicators for commercial mortgage loans.

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

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

Although future losses remain possible due to further credit deterioration, we do not expect these losses to have a material unfavorable effect on our financial condition or liquidity.

Other Long-term Investments

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Accounting policies for these investments are discussed in Note 12 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) .

The increase in other long-term investments of $0.5 billion since December 31, 2022 is primarily driven by net additional funding activity.

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

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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 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.

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We account for this joint venture under the equity method of accounting and report our share of the net assets of $0.2 billion in Other assets.

Our 50% share of the investment portfolio

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

Our 50% share of the investment portfolio supporting the joint venture's liabilities is approximately $11.7 billion as of December 31, 2023.

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.

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

We continuously review the joint venture's investment strategy and its execution.

There were no investments with a material unrealized loss as of December 31, 2023.

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Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for financial instruments:

• changes in the fair values of insurance-related assets and liabilities because their primary risks are insurance rather than market risk;

• changes in the fair values of insurance-related assets and liabilities as disclosed in Note 10 to the Consolidated Financial Statements because their primary risks are insurance rather than market risk;

• changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets);

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

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.

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

Following increased investments in equity securities during 2023, primarily as a result of our investment in VillageMD, our exposure to equity price risk has increased.

Our Management of Market Risks

We predominantly rely on three techniques to manage our exposure to market risk:

We predominantly rely on two techniques to manage our exposure to market risk:

• Investment/liability matching.

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Longer-term investments generally support products with longer payout periods such as annuities.

• Use of local currencies for foreign operations .

We generally conduct our international business through foreign operating entities that maintain assets and liabilities in local currencies.

This technique limits exchange rate risk to our net assets.

• Use of derivatives.

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Effect of Market Fluctuations

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:

We determine the sensitivity of market risk for our fixed income financial instruments, including debt securities and commercial mortgage loans, by estimating the present value of future cash flows using duration modeling and applying a 100 basis point increase in interest rates.

The sensitivity of market risk for equity securities is determined by applying a 10% decrease in market prices.

The effect of these 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:

Market scenario for certain non-insurance financial instruments

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

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.

10% decrease in market prices for equity securities $ 0.3 $ 0.1

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 both December 31, 2023 and December 31, 2022.

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 8 to the Consolidated Financial Statements for additional information about the Company's debt.

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