What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 179 added, 150 removed, 443 unchanged (43% of the section changed)

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Investment Assets

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating our financial condition as of March 31, 2024, compared with December 31, 2023 and our results of operations for the three months ended March 31, 2024, compared with the same period last year and is intended to help you understand the ongoing trends in our business.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating our financial condition as of June 30, 2024, compared with December 31, 2023 and our results of operations for the three and six months ended June 30, 2024, compared with the same periods last year and is intended to help you understand the ongoing trends in our business.

We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K").

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Changes in percentages are expressed in basis points ("bps").

In this MD&A, our consolidated measures "adjusted income from operations," earnings per share on that same basis and "adjusted revenues" are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of "shareholders' net income (loss)," "earnings per share" and "total revenues." We also use pre-tax adjusted income (loss) from operations and adjusted revenues to measure the results of our segments.

In this MD&A, our consolidated measures "adjusted income from operations," earnings per share on that same basis and "adjusted revenues" are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of "shareholders' net income," "earnings per share" and "total revenues." We also use pre-tax adjusted income (loss) from operations and adjusted revenues to measure the results of our segments.

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

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

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

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

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Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.

Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders' net income (loss).

See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to shareholders' net income (loss).

See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to shareholders' net income.

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

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Financial highlights by segment

Three Months Ended March 31,

(Dollars in millions, except per share amounts) 2024 2023 Change

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

(Dollars in millions, except per share amounts) 2024 2023 Change 2024 2023 Change

Adjusted revenues by segment

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Adjusted revenues 60,470 48,616 24 117,717 95,095 24

Net realized investment results from certain equity method investments 8 38 (79)

Net realized investment results from certain equity method investments 53 (30) N/M 61 8 N/M

Total revenues $ 60,523 $ 48,586 25 % $ 117,778 $ 95,103 24 %

Shareholders' net (loss) income $ (277) $ 1,267 N/M %

Shareholders' net income

$ 1,548 $ 1,460 6 % $ 1,271 $ 2,727 (53) %

Adjusted income from operations

$ 1,909 $ 1,820 5 % $ 3,784 $ 3,438 10 %

Earnings per share (diluted)

Shareholders' net (loss) income $ (0.97) $ 4.24 N/M %

Shareholders' net income

$ 5.45 $ 4.92 11 % $ 4.43 $ 9.15 (52) %

Adjusted income from operations

$ 6.72 $ 6.13 10 % $ 13.19 $ 11.54 14 %

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

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Cigna Healthcare 1,204 1,172 3 2,544 2,287 11

Other Operations 18 15 20

Other Operations (16) 29 N/M 2 44 (95)

Corporate, net of eliminations (435) (423) 3 (844) (837) 1

Consolidated pre-tax adjusted income from operations

2,372 2,294 3 4,681 4,330 8

Income attributable to noncontrolling interests

Net realized investment (losses) (1)

(1,828) (18) N/M

95 55 73 172 98 76

Net realized investment income (losses) (1)

5 (4) N/M (1,823) (22) N/M

Amortization of acquired intangible assets (420) (455) (8) (843) (914) (8)

Special items (56) (1) N/M

Special items (63) (6) N/M (119) (7) N/M

Income before income taxes

(1) Includes Net realized investment losses as presented in our Consolidated Statements of Income, as well as 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, which are presented within Fees and other revenues in our Consolidated Statements of Income.

$ 1,989 $ 1,884 6 % $ 2,068 $ 3,485 (41) %

(1) Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as 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, which are presented within Fees and other revenues in our Consolidated Statements of Income.

For further analysis and explanation of each segment's results, see the "Segment Reporting" section of this MD&A.

Consolidated Results of Operations (GAAP basis)

Three Months Ended March 31,

(Dollars in millions) 2024 2023 Change

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

(Dollars in millions) 2024 2023 Change 2024 2023 Change

Pharmacy revenues $ 45,101 $ 33,964 33 % $ 87,137 $ 66,108 32 %

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Income from operations

2,412 2,221 9 4,668 4,236 10

Interest expense and other (375) (363) 3 (697) (721) (3)

Loss on sale of businesses

Net realized investment losses

(1,836) (56) N/M

— — N/M (19) — N/M

Net realized investment (losses) gains

(48) 26 N/M (1,884) (30) N/M

Income before income taxes

1,989 1,884 6 2,068 3,485 (41)

Total income taxes 360 374 (4) 651 669 (3)

Net (loss) income (212) 1,306 N/M

1,629 1,510 8 1,417 2,816 (50)

Net income attributable to noncontrolling interests

Shareholders' net (loss) income $ (277) $ 1,267 N/M %

Consolidated effective tax rate 368.4 % 18.4 % N/M bps

81 50 62 146 89 64

Shareholders' net income

$ 1,548 $ 1,460 6 % $ 1,271 $ 2,727 (53) %

Consolidated effective tax rate 18.1 % 19.9 % (180) bps 31.5 % 19.2 % 1,230 bps

Medical customers (in thousands) 19,043 19,506 (2) %

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

Three Months Ended March 31,

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

Shareholders' net (loss) income $ (277) $ 1,267

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

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

2024 2023 2024 2023

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

Shareholders' net income

$ 1,548 $ 1,460 $ 1,271 $ 2,727

Adjustments to reconcile to adjusted income from operations

Net realized investment losses (1)

Net realized investment (gains) losses (1)

$ (5) (20) $ 4 9 $ 1,823 1,807 $ 22 15

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Deferred tax expenses, net (2)

— 17 — — — 34 — —

Total special items $ 63 64 $ 6 5 $ 119 67 $ 7 6

Adjusted income from operations

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

Three Months Ended March 31,

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

Shareholders' net (loss) income (1)

$ 1,909 $ 1,820 $ 3,784 $ 3,438

(2) Represents amortization of a foreign tax attribute.

See Note 23 to the Consolidated Financial Statements in our 2023 Form 10-K for additional details.

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

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

2024 2023 2024 2023

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

Shareholders' net income

$ 5.45 $ 4.92 $ 4.43 $ 9.15

Adjustments to reconcile to adjusted income from operations

Net realized investment losses (2)

Net realized investment (gains) losses (1)

$ (0.02) (0.07) $ 0.01 0.03 $ 6.36 6.30 $ 0.07 0.05

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Deferred tax expenses, net (2)

— 0.06 — — — 0.12 — —

Total special items $ 0.22 0.23 $ 0.02 0.01 $ 0.41 0.23 $ 0.02 0.02

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$ 6.72 $ 6.13 $ 13.19 $ 11.54

(1) For the three months ended March 31, 2024, due to the anti-dilutive effect resulting from the Shareholders' net loss for the period, the impact of potentially dilutive securities has been excluded from the calculation of weighted average shares for the calculation of diluted Shareholders’ net loss per share.

Weighted average common shares outstanding used to calculate diluted Shareholders’ net loss per share for the three months ended March 31, 2024 were 286,465 thousand.

(2) Includes Net realized investment losses as presented in our Consolidated Statements of Income, as well as 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, which are presented within Fees and other revenues in our Consolidated Statements of Income.

(3) For the three months ended March 31, 2024, due to the adjusted income from operations, the number of weighted average shares used to calculate Adjusted income from operations per share reflects the dilution caused by outstanding stock options, unvested restricted stock grants and units and strategic performance shares.

Weighted average common shares outstanding used to calculate Adjusted income from operations per share for the three months ended March 31, 2024 were 289,717 thousand.

Three Months Ended March 31, 2024 versus Three Months Ended March 31, 2023

The commentary presented below, and in the segment discussions that follow, compare results for the three months ended March 31, 2024 with results for the three months ended March 31, 2023.

Shareholders' net loss for the three months ended March 31, 2024 was driven by the impairment of equity securities (see Note 11 to the Consolidated Financial Statements for further discussion), offset by adjusted income from operations.

Adjusted income from operations increased 16%, primarily driven by higher earnings in our Cigna Healthcare and Evernorth Health Services segments.

Medical customers decreased 1%, primarily reflecting a decline in fee-based and Individual and Family Plans customers.

(2) Represents amortization of a foreign tax attribute.

See Note 23 to the Consolidated Financial Statements in our 2023 Form 10-K for additional details.

Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

The commentary presented below, and the segment discussions that follow, compare results for the three and six months ended June 30, 2024 with results for the three and six months ended June 30, 2023.

Unless specified otherwise, commentary applies to both the three and six month periods.

Shareholders' net income increased 6% for the three months ended June 30, 2024, primarily due to higher adjusted income from operations.

For the six months ended June 30, 2024, shareholders' net income decreased 53%, primarily driven by the impairment of equity securities reported in the quarter ended March 31, 2024 (see Note 11 to the Consolidated Financial Statements for further discussion), partially offset by higher adjusted income from operations.

Adjusted income from operations increased 5% and 10% primarily driven by higher earnings in our Evernorth Health Services and Cigna Healthcare segments.

Medical customers decreased 2% primarily reflecting a decline in Individual and Family Plans customers.

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

Pharmacy revenues increased 31%, primarily reflecting the onboarding of Centene Corporation ("Centene") at the beginning of 2024.

Pharmacy revenues increased 33% and 32% reflecting higher claims volume, primarily due to new clients, including Centene Corporation ("Centene") and organic growth.

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

Premiums increased 5% reflecting higher premium rates in Cigna Healthcare due to anticipated underlying medical costs and business mix.

Premiums increased 4% and 5%, reflecting higher premium rates in Cigna Healthcare due to expected increases in underlying medical costs, partially offset by business mix.

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

Fees and other revenues increased 8%, primarily reflecting client growth from our continued affordability services within Evernorth Health Services.

Net investment income increased 5%, primarily due to growth in average assets.

Fees and other revenues increased 10% and 9%, primarily reflecting continued affordability improvements and business growth within Evernorth Health Services.

Net investment income increased 15% and 10%, primarily due to growth in average assets.

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

Pharmacy and other service costs increased 32%, primarily reflecting the onboarding of Centene at the beginning of 2024.

Medical costs and other benefit expenses increased 4%, primarily reflecting medical cost trend in Cigna Healthcare.

Selling, general and administrative expenses increased 5%, primarily driven by planned investments related to the onboarding costs of new clients and continued advancement of our digital capabilities and care solutions in Evernorth Health Services.

Interest expense and other decreased 10%, primarily reflecting lower pension costs.

Realized investment results for the three months ended March 31, 2024 primarily reflects the impairment of equity securities.

Pharmacy and other service costs increased 33% and 32%, reflecting higher claims volume, primarily due to new clients, including Centene, and organic growth.

Medical costs and other benefit expenses increased 5% for both the three and six months ended June 30, 2024 primarily reflecting medical cost trend in Cigna Healthcare, partially offset by business mix.

Selling, general and administrative expenses increased 7% and 6%, primarily driven by strategic investments to support business growth and continued advancement of our digital capabilities and solutions.

Realized investment results decreased for the three months ended June 30, 2024, primarily due to expected credit loss charges on debt securities.

For the six months ended June 30, 2024, realized investment results decreased primarily reflecting the impairment of equity securities reported in the first quarter of 2024.

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

The effective tax rate increased substantially driven by a valuation allowance related to the impairment of equity securities, partially offset by a decrease related to the businesses held for sale and a decrease related to the release of tax reserves following a favorable state audit resolution.

The effective tax rate decreased for the three months ended June 30, 2024, primarily as a result of decreases in state taxes following a favorable state audit resolution.

For the six months ended June 30, 2024, the effective tax rate increased substantially driven by a valuation allowance relative to the impairment of equity securities, partially offset by decreases in state taxes and a decrease relative to the businesses held for sale.

Sale of Medicare Advantage and Related Businesses

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

Medicare Star Quality Ratings ("Star Ratings")

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.

Star Ratings range from one to five stars.

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

We expect 67% of our MA customers to be in four star or greater plans for bonus payments to be received in 2024.

On July 2, 2024, CMS published an update to the original Star Ratings (announced on October 13, 2023) for bonus payments to be received in 2025.

Based upon the updated Star Ratings, we estimate 69% of our MA customers to be in four star or greater plans for bonus payments to be received in 2025.

See Part I, Item I, "Business - Regulation" section of our 2023 Form 10-K for further discussion of Star Ratings.

Medicare Advantage Rates

On April 1, 2024, Centers for Medicare and Medicaid Services ("CMS") released the final Calendar Year 2025 Medicare Advantage Program and Part D Payment Policies (the "2025 Final Notice").

On April 1, 2024, CMS released the final Calendar Year 2025 Medicare Advantage Program and Part D Payment Policies (the "2025 Final Notice").

The Final Notice reflects no change from the January 31, 2024 advance notice.

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Dividends from our insurance, Health Maintenance Organization ("HMO") and certain foreign subsidiaries are subject to regulatory restrictions.

See Note 22 to the Consolidated Financial Statements in our 2023 Form 10-K for additional information regarding these

restrictions.

See Note 22 to the Consolidated Financial Statements in our 2023 Form 10-K for additional information regarding these restrictions.

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.

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

Cash flows for the three months ended March 31 were as follows:

Three Months Ended March 31,

Cash flows for the six months ended June 30 were as follows:

Six Months Ended June 30,

(In millions) 2024 2023

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Financing activities $ (4,838) $ (472)

The following discussion explains variances in the various categories of cash flows for the three months ended March 31, 2024 compared with the same period in 2023.

The following discussion explains variances in the various categories of cash flows for the six months ended June 30, 2024 compared with the same period in 2023.

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 decreased for the three months ended March 31, 2024 due to the absence of an early CMS payment received in March 2023 and the timing of payments for accrued liabilities.

This decrease is partially offset by the favorable net cash flow impacts of onboarding new clients.

Operating cash flows decreased for the six months ended June 30, 2024 due to higher accounts receivable as a result of timing and organic business growth, the absence of an early CMS payment received in June 2023 as well as higher insurance claim payments.

This decrease is partially offset by the favorable net cash flow impacts of new clients.

Investing activities

The decrease in cash used in investing activities during the three months ended March 31, 2024 was due to lower investments in equity securities.

The decrease in cash used in investing activities during the six months ended June 30, 2024 was due to lower purchases of equity securities.

Financing activities

The Company had higher share repurchases including from the ASR Agreements (described below), partially offset by net debt inflows.

These factors resulted in an increase in cash used in financing activities in 2024.

The Company had higher share repurchases including from the recently completed ASR Agreements (described below) as well as an increase in cash used for debt financing activities in 2024.

Capital Resources

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Dividends received from U.S.

regulated subsidiaries were $0.6 billion for the three months ended March 31, 2024 and $0.3 billion for the three months ended March 31, 2023.

regulated subsidiaries were $1.1 billion for the six months ended June 30, 2024 and $0.5 billion for the six months ended June 30,

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

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Commercial Paper Program .

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

amount of $5.0 billion.

In July 2024, our commercial paper program size was increased to $6.5 billion.

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

The commercial paper program had approximately $884 million outstanding at March 31, 2024.

The commercial paper program had approximately $790 million outstanding at June 30, 2024.

Revolving Credit Agreements.

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

As of March 31, 2024, The Cigna Group's revolving credit agreements include:

As of June 30, 2024, The Cigna Group's revolving credit agreements include:

a $5.0 billion five-year revolving credit and letter of credit agreement that expires in April 2029;

and a $1.5 billion 364-day revolving credit agreement that expires in April 2025.

As of March 31, 2024, we had $5.0 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $4.1 billion of remaining capacity under our commercial paper program and $8.8 billion in cash and short-term investments, approximately $1.4 billion of which was held by the parent company or certain non-regulated subsidiaries.

In April 2024, The Cigna Group replaced our existing revolving credit agreements, discussed above, and entered into the following revolving credit agreements:

a $5.0 billion five-year revolving credit and letter of credit agreements that expire in April 2029;

and a $1.5 billion 364-day revolving credit agreement that expires in April 2025.

The increase in the aggregate size of our revolving credit agreements from $5.0 billion to $6.5 billion will provide enhanced liquidity to support the continued growth of our business.

As of June 30, 2024, we had $6.5 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $4.2 billion of remaining capacity under our commercial paper program and $7.0 billion in cash and short-term investments, approximately $1.1 billion of which was held by the parent company or certain non-regulated subsidiaries.

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

Our debt-to-capitalization ratio was 44.3% at March 31, 2024 and 40.1% at December 31, 2023 primarily reflecting timing of debt issuance, in part due to the Accelerated Share Repurchase ("ASR") agreements.

Our debt-to-capitalization ratio was 43.6% at June 30, 2024 and 44.3% at March 31, 2024.

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

Subsidiary Borrowings.

In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.6 billion from its subsidiaries without further approvals as of March 31, 2024.

In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.0 billion from its subsidiaries without further approvals as of June 30, 2024.

Use of Capital Resources

Long-term Debt.

In June 2024, $790 million of senior notes became due and were repaid.

Debt Issuance and Debt Tender Offers.

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Capital Expenditures .

Capital expenditures for property, equipment and computer software were $0.3 billion in the three months ended March 31, 2024 compared to $0.4 billion in the three months ended March 31, 2023.

Capital expenditures for property, equipment and computer software were $0.7 billion in the six months ended June 30, 2024 compared to $0.8 billion in the six months ended June 30, 2023.

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

The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first quarter of 2024, compared to quarterly cash dividends of $1.23 per share during the first quarter of 2023.

The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first six months of 2024, compared to quarterly cash dividends of $1.23 per share during the first six months of 2023.

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

On April 24, 2024, the Board of Directors declared the second quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on June 20, 2024 to shareholders of record on June 4, 2024.

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

On July 24, 2024, the Board of Directors declared the third quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on September 19, 2024 to shareholders of record on September 4, 2024.

The Cigna Group currently intends to pay regular quarterly dividends, with future

declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders.

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

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The program may be suspended or discontinued at any time.

We repurchased 10.1 million shares for approximately $3.4 billion during the three months ended March 31, 2024, compared to 3.2 million shares for approximately $1.0 billion during the three months ended March 31, 2023.

During the three months ended March 31, 2024, $640 million was also paid related to the ASR stock hold-back which will settle in the second quarter of 2024.

See further discussion of ASR below.

We expect to repurchase $5.0 billion of common stock in the first half of 2024, which includes shares repurchased under the ASR.

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

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

We remitted $3.2 billion to the 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 ASR agreements to occur in the second quarter of 2024.

In February 2024, as part of our share repurchase program, we entered into separate Accelerated Share Repurchase ("ASR") agreements to repurchase $3.2 billion of common stock in aggregate.

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

Upon final settlement of the ASR agreements in May 2024, we received approximately 1.7 million additional shares of our common stock for no additional consideration.

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

As anticipated, including the ASR agreements, we repurchased 14.7 million shares for approximately $5.0 billion during the six months ended June 30, 2024, compared to 3.8 million shares for approximately $1.1 billion during the six months ended June 30, 2023.

Other Sources of Funds and Uses of Capital Resources

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See Note 16 to the Consolidated Financial Statements for discussion of various guarantees.

Due to the issuance and repurchase of certain senior notes in the three months ended March 31, 2024, we have updated long-term debt obligations as of March 31, 2024 compared to those previously provided in our 2023 Form 10-K.

Due to the issuance and repurchase of certain senior notes in the three months ended March 31, 2024, we have updated long-term debt obligations as of June 30, 2024 compared to those previously provided in our 2023 Form 10-K.

See Note 7 to the Consolidated Financial Statements for discussion of these debt activities.

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Our most critical accounting estimates, as well as the effect of hypothetical changes in material assumptions used to develop each estimate, are described in our 2023 Form 10-K.

As of March 31, 2024, there were no significant changes to the critical accounting estimates from what was reported in our 2023 Form 10-K.

As of June 30, 2024, there were no significant changes to the critical accounting estimates from what was reported in our 2023 Form 10-K.

SEGMENT REPORTING

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Generally, a higher mix of generic drugs reduces revenues, as generic drugs are typically priced lower than the branded drugs they replace.

However, as ingredient cost paid to pharmacies on generic drugs is incrementally lower than the price charged to our clients, a higher mix of generic drugs generally has a favorable impact on our income from operations.

However, as ingredient cost paid to

pharmacies on generic drugs is incrementally lower than the price charged to our clients, a higher mix of generic drugs generally has a favorable impact on our income from operations.

• 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.

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Specialty and Care Services key factors:

• Customer growth and higher volume in our specialty distribution services where we deliver pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals, primarily to physicians who regularly order costly specialty

pharmaceuticals.

This business provides competitive pricing on pharmaceuticals and medical supplies and leverages our distribution platform to improve our results.

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Three Months Ended

(Dollars in millions) 2024 2023 Change

June 30, Six Months Ended

(Dollars in millions) 2024 2023 Change 2024 2023 Change

Total revenues $ 49,548 $ 38,205 30 % $ 95,774 $ 74,384 29 %

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Pre-tax adjusted income from operations $ 1,619 $ 1,516 7 % $ 2,979 $ 2,836 5 %

Pre-tax adjusted margin 2.9 % 3.6 % (70) bps

Pre-tax adjusted margin 3.3 % 4.0 % (70) bps 3.1 % 3.8 % (70) bps

Adjusted expense ratio (3)

2.1 % 2.3 % (20) bps

2.0 % 2.1 % (10) bps 2.0 % 2.2 % (20) bps

(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.

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Three Months Ended

March 31, Change

June 30, Change Six Months Ended

June 30, Change

(Dollars and adjusted scripts in millions) 2024 2023 2024 2023

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Pharmacy claim volume (1)

533 396 35 % 1,046 777 35 %

(1) Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims.

All other network and specialty prescriptions are counted as one claim.

Three Months Ended March 31, 2024 versus Three Months Ended March 31, 2023

Adjusted revenues increased 28%, reflecting higher claims volume, primarily due to our collaboration with Centene beginning January 1, 2024;

inflation on branded drugs;

and higher volume from Specialty and Care Services, primarily our Curascript Specialty Distribution business.

This increase was partially offset by claims mix.

Gross profit increased 8%, reflecting continued affordability improvements and growth in Specialty and Care Services businesses.

Pre-tax adjusted income from operations increased 3%, reflecting growth in Specialty and Care Services businesses and continued affordability improvements.

This increase was partially offset by planned investments related to the onboarding costs of new clients, including Centene, and continued advancement of our digital capabilities and care solutions.

The adjusted expense ratio decreased 20 bps, reflecting higher revenues, partially offset by planned investments related to the onboarding costs of new clients, including Centene, and continued advancement of our digital capabilities and care solutions.

Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

Adjusted revenues increased 30% and 29%, reflecting higher claims volume driven by Pharmacy Benefit Services and Specialty and Care Services, primarily due to new clients, including Centene, and organic growth.

Gross profit increased 14% and 11%, reflecting continued affordability improvements and growth in Specialty and Care Services businesses.

Pre-tax adjusted income from operations increased 7% and 5%, reflecting growth in Specialty and Care Services businesses and continued affordability improvements.

This increase was partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions.

The adjusted expense ratio decreased 10 bps and 20 bps, reflecting higher adjusted revenues, primarily due to new clients, including Centene, and organic growth, partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions.

Cigna Healthcare Segment

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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 Health Care Service Corporation, subject to applicable regulatory approvals and other customary closing conditions.

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

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

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Three Months Ended

March 31, Change

June 30, Change Six Months Ended

June 30, Change

(Dollars in millions) 2024 2023 2024 2023

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Pre-tax adjusted income from operations $ 1,204 $ 1,172 3 % $ 2,544 $ 2,287 11 %

Pre-tax adjusted margin 10.1 % 8.8 % 130 bps

Medical care ratio 79.9 % 81.3 % (140) bps

Adjusted expense ratio 20.5 % 21.4 % (90) bps

Three Months Ended March 31, 2024 versus Three Months Ended March 31, 2023

Adjusted revenues increased 4%, primarily reflecting higher premium rates due to expected increases in underlying medical costs and business mix.

Pre-tax adjusted income from operations increased 20%, primarily due to a lower medical care ratio and a lower adjusted expense ratio.

The medical care ratio decreased 140 bps, primarily due to a lower U.S.

Healthcare medical care ratio, reflecting effective pricing execution and affordability initiatives, as well as business mix within the Individual and Family Plans business.

The adjusted expense ratio decreased 90 bps, primarily due to revenue growth outpacing volume-related expenses as well as efficiencies from disciplined expense management.

Pre-tax adjusted margin 9.2 % 9.2 % — bps 9.6 % 9.0 % 60 bps

Medical care ratio 82.3 % 81.2 % 110 bps 81.1 % 81.2 % (10) bps

Adjusted expense ratio 20.0 % 20.9 % (90) bps 20.2 % 21.1 % (90) bps

Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

Adjusted revenues increased 3% and 4%, primarily reflecting higher premium rates due to expected increases in underlying medical costs, partially offset by business mix.

Pre-tax adjusted income from operations increased 3% and 11%, primarily due to a lower adjusted expense ratio and higher net investment income.

The improvement for the three months ended June 30, 2024 was partially offset by a higher medical care ratio.

The medical care ratio increased 110 bps for the three months ended June 30, 2024, primarily due to a higher U.S.

Healthcare medical care ratio reflecting business mix and unfavorable revenue adjustments related to prior years, partially offset by effective pricing execution and affordability initiatives.

The adjusted expense ratio decreased 90 bps in both periods, primarily due to revenue growth outpacing volume-related expenses as well as ongoing efficiencies and disciplined expense management.

Medical Customers

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Cigna Healthcare Medical Customers

As of March 31,

As of June 30,

(In thousands) 2024 2023 Change

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

Total medical customers decreased 1%, primarily driven by a decrease in National Accounts, Individual and Family Plans and Middle Market segment customers, partially offset by customer growth within the Select market segment.

Total medical customers decreased 2%, primarily due to a decrease in Individual and Family Plans customers.

See Part I, Item 1 of our 2023 Form 10-K for definitions of Cigna Healthcare's market segments.

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Healthcare operating segment.

Medical Customer information presented as of March 31, 2023 has been restated to conform to the new operating segment presentation.

Medical Customer information presented as of June 30, 2023 has been restated to conform to the new operating segment presentation.

Unpaid Claims and Claim Expenses

March 31, As of

June 30, As of

(In millions) 2024 2023 Change

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$ 5,202 $ 5,092 2 %

Our unpaid claims and claim expenses liability increased 15%, driven by claim submission and payment process disruptions related to a third-party cyber incident and stop loss seasonality, partially offset by a decrease in Individual and Family Plans customers.

Our unpaid claims and claim expenses liability increased 2%, driven by stop loss seasonality, partially offset by a decrease in Individual and Family Plans customers.

Other Operations

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Results of Operations

Financial Summary Three Months Ended

March 31, Change

Financial Summary Three Months Ended June 30, Change Six Months Ended

June 30, Change

(Dollars in millions) 2024 2023 2024 2023

Adjusted revenues $ 227 $ 158 44 % $ 393 $ 315 25 %

Pre-tax adjusted income from operations $ 18 $ 15 20 %

Pre-tax adjusted margin 10.8 % 9.6 % 120 bps

Pre-tax adjusted (loss) income from operations

$ (16) $ 29 N/M % $ 2 $ 44 (95) %

Pre-tax adjusted margin (7.0) % 18.4 % (2,540) bps 0.5 % 14.0 % (1,350) bps

Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

Adjusted revenues for both periods primarily reflect Premiums revenue and Net investment income associated with COLI, our run-off operations and other non-strategic businesses.

Pre-tax adjusted (loss) income from operations decreased for both periods primarily driven by unfavorable margins in our non-strategic businesses.

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 Three Months Ended

March 31, Change

Financial Summary Three Months Ended June 30, Change Six Months Ended

June 30, Change

(In millions) 2024 2023 2024 2023

Pre-tax adjusted loss from operations

Three Months Ended March 31, 2024 versus Three Months Ended March 31, 2023

Pre-tax adjusted loss from operations decreased primarily due to lower pension costs.

$ (435) $ (423) 3 % $ (844) $ (837) 1 %

Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

Pre-tax adjusted loss from operations increased 3% and 1% respectively, primarily due to higher interest rates on our indebtedness partially offset by lower pension costs.

INVESTMENT ASSETS

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

(In millions) March 31,

(In millions) June 30,

2024 December 31,

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Investments per Consolidated Balance Sheets $ 17,012 $ 18,910

(1) Investments related to the HCSC transaction that were held for sale as of March 31, 2024 and December 31, 2023.

(1) Investments related to the HCSC transaction that were held for sale as of June 30, 2024 and 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

Although portfolio impact has been limited to date, we continue to actively monitor geopolitical events and economic conditions and their potential impact on the investment portfolio, including expectations for a longer period of higher inflation and interest rates, the potential for a recession, and ongoing conflict in Europe and the Middle East.

Although portfolio impact has been limited to date, we continue to actively monitor geopolitical events and economic conditions and their potential impact on the investment portfolio, including expectations for inflation and interest rates, the potential for a recession, and ongoing conflict in Europe and the Middle East.

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

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

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

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

Debt Securities

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

(In millions) March 31,

(In millions) June 30,

2024 December 31,

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Total $ 9,350 $ 9,855

The carrying value of our debt securities portfolio decreased during the three months ended March 31, 2024, reflecting net sales activity and a valuation decrease due to rising market interest rates .

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

The carrying value of our debt securities portfolio decreased during the six months ended June 30, 2024, reflecting net sales activity and a valuation decrease due to rising market interest rates .

Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years.

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

As of March 31, 2024, $8.1 billion, or 85%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.4 billion were below investment grade.

As of June 30, 2024, $8.0 billion, or 86%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.3 billion were below investment grade.

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

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Commercial Mortgage Loans

As of March 31, 2024, our $1.6 billion commercial mortgage loan portfolio consisted of approximately 50 fixed-rate loans, diversified by property type, location and borrower.

As of June 30, 2024, 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 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 March 31, 2024.

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 June 30, 2024.

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

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

Our commercial mortgage loan portfolio has no exposure to

regional shopping malls and less than 30% exposure to office properties.

Our commercial mortgage loan portfolio has no exposure to regional shopping malls and less than 25% 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

Other long-term investments of $4.3 billion as of March 31, 2024 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses.

Other long-term investments of $4.4 billion as of June 30, 2024 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses.

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

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We account for this joint venture under the equity method of accounting.

Following the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023, changes in discount rates have resulted in accumulated other comprehensive losses and a corresponding decline in the investment reported in our Consolidated Balance Sheets.

Our 50% share of the investment portfolio supporting the joint venture's liabilities is approximately $12.7 billion as of March 31, 2024.

Our 50% share of the investment portfolio supporting the joint venture's liabilities is approximately $14.1

billion as of June 30, 2024.

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

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

There were no investments with a material unrealized loss as of March 31, 2024.

There were no investments with a material unrealized loss as of June 30, 2024.

Financial Instruments

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We encourage you to read this in conjunction with "Market Risk – Financial Instruments" included in the MD&A section of our 2023 Form 10-K.

As of March 31, 2024, there was an increase in our interest rate risk due to an increase in the fair value of our long-term debt since December 31, 2023.

In the event of a 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $2.0 billion at March 31, 2024 compared to approximately $1.8 billion at December 31, 2023.

As of March 31, 2024, there was a decline in our equity price risk exposure due to the impairment of equity securities.

If the market price for all equity securities declined by 10%, the fair value of the Company's equity securities would decrease by approximately $0.2 billion as of March 31, 2024, compared to approximately $0.3 billion at December 31, 2023.

As of June 30, 2024, there was an increase in our interest rate risk due to an increase in the fair value of our long-term debt since December 31, 2023.

In the event of a 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $1.9 billion at June 30, 2024 compared to approximately $1.8 billion at December 31, 2023.

If the market price for all equity securities declined by 10%, the fair value of the Company's equity securities would decrease by approximately $0.2 billion as of June 30, 2024, compared to approximately $0.3 billion at December 31, 2023.

This decline in our equity price risk exposure is driven by the impairment of equity securities.

See Note 11 to the Consolidated Financial Statements for more information regarding the impairment in equity securities.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis