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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-29 · 164 added, 138 removed, 319 unchanged (49% of the section changed)

As a large global health company operating in a complex industry, we encounter a variety of risks and uncertainties, which could have a material adverse effect on our business, liquidity, results of operations, financial condition or the trading price of our securities.

You should carefully consider each of the risks and uncertainties discussed below, together with other information contained in this Form 10-K, including MD&A.

You should carefully consider each of the risks and uncertainties discussed below, together with other information contained in this Form 10-K, including the MD&A.

These risks and uncertainties are not the only ones we face.

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• differentiate our products, services and solutions from those of our competitors;

• develop and bring to market new and innovative products, solutions or programs that focus on improving patient outcomes and experiences and assist in controlling costs or in response to government regulation;

• develop and create data and analytic solutions to support and improve outcomes for our products, services and solutions, including creating and developing solutions and services through partnerships with other industry participants;

• grow and support our product portfolio, expand our addressable markets and identify and introduce the proper mix, coordination or integration of products that will be accepted by the marketplace;

• develop and bring to market new and innovative products, solutions or programs that focus on improving patient outcomes and experiences, assist in controlling costs, respond to government regulation or respond to challenges within the health care system;

• develop and create responsible data and analytic solutions to support and improve outcomes for our products, services and solutions, including creating and developing solutions and services through partnerships with other industry participants;

• grow and support our product portfolio, expand our addressable markets, and identify and introduce the proper mix, coordination or integration of products that the marketplace will accept;

• evaluate drugs for efficacy, value and price to assist clients in selecting a cost-effective formulary;

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• contract with health care providers, pharmacy providers and pharmaceutical manufacturers on market competitive terms.

For our strategic initiatives to succeed, we must effectively collaborate across our operations, integrate our acquired businesses, actively work to ensure consistency throughout the organization and promote a global mindset along with a focus on individual customers and clients.

If we fail to do so, our business may be unable to grow as planned, or the result of expansion may be unsatisfactory.

We will be unable to rapidly respond to competitive, economic and regulatory changes if we do not make important strategic and operational decisions quickly, define our appetite for risk, implement new governance, managerial and organizational processes smoothly and communicate roles and responsibilities clearly.

If our strategic initiatives fail, our business may be unable to grow as planned and we will be unable to rapidly respond to competitive, economic and regulatory changes if we do not make important strategic and operational decisions quickly;

define our appetite for risk, implement new governance, managerial and organizational processes smoothly;

and communicate roles and responsibilities clearly.

If these initiatives fail or are not executed effectively, our consolidated financial position and results of operations could be negatively affected.

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• technological changes and rapid shifts in the use of technology, such as telehealth and AI;

• the impact or consequences of legislation or regulatory changes;

• the impact or consequences of legislation, executive actions or regulatory changes;

• impacts to distribution channels, including changes to the United States Postal Service or the consolidation of shipping carriers;

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Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.

Our failure to compete effectively, to differentiate our products and services from those of our competitors and maintain or increase market share, including maintaining or increasing enrollments in businesses providing health benefits, could materially adversely affect our results of operations, financial position and cash flows.

Our failure to compete effectively, to differentiate our products and services from those of our competitors, and to maintain or increase market share, including maintaining or increasing enrollments in businesses providing health benefits, could materially adversely affect our results of operations, financial position and cash flows.

We operate in a highly competitive environment and an industry subject to significant market pressures brought about by customer and client needs, legislative and regulatory developments, and other market factors.

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As described in greater detail in the description of our business in Item 1 of this Form 10-K, our key clients in the Evernorth Health Services segment include the DoD, Prime and Centene.

If one or more of our large clients terminates or does not renew a contract for any reason, including as a result of being acquired, or if the provisions of a contract with a large client are modified, renewed or otherwise changed with terms less favorable to us, our results of operations could be adversely affected and we could experience a negative reaction in the investment community resulting in decreases in the trading price of our securities or other adverse effects.

Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive markets to keep or increase our market share, increase customers as planned, differentiate our business offerings by innovating and delivering products and services that provide enhanced value to our customers, provide quality and satisfactory levels of service and retain accounts with favorable medical cost experience or more profitable products versus retaining or increasing our customer base in accounts with unfavorable medical cost experience or less profitable products.

If one or more of our large clients terminates or does not renew a contract for any reason, or if the provisions of a contract with a large client are modified with terms less favorable to us, our results of operations could be adversely affected and we could experience a negative reaction in the investment community.

Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive markets to keep or increase our market share, increase customers, differentiate our business offerings, provide quality and satisfactory levels of service, and retain accounts with favorable medical cost experience or more profitable products.

We must remain competitive to attract new customers, retain existing customers and further integrate additional product and service offerings.

To succeed in this highly competitive marketplace, it is imperative that we maintain a strong reputation.

Increasingly, our customers, clients and investors consider our efforts on a variety of matters that could impact our stakeholders, including our employees and the communities in which we operate, such as our efforts with respect to the environment and diversity, equity and inclusion.

The negative reputational impact of a significant event, including a failure to execute on customer or client contracts or strategic or operational initiatives, failure to comply with applicable laws or regulations, or failure to innovate and deliver products and services that demonstrate greater value to our customers, could affect our ability to grow and retain profitable arrangements, which could have a material adverse effect on our business, results of operations, financial position and cash flows.

Increasingly, our

customers, clients and investors consider our efforts on a variety of matters that could impact our stakeholders, including our employees and the communities in which we operate.

Our reputation may be negatively impacted by a failure to meet customer expectations for consistent, transparent, high-quality and accessible care or by other significant events, including a failure to execute on customer or client contracts or strategic or operational initiatives, failure to comply with applicable laws or regulations, or failure to innovate and deliver cost-effective products and services that demonstrate greater value to our customers.

Any of these outcomes could affect our ability to grow and retain our customer base and other profitable arrangements, which could have a material adverse effect on our business, results of operations, financial position and cash flows.

We face price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers.

While we compete on the basis of many service and quality-related factors, we expect that price will continue to be a significant basis of competition and we may face pressure to contain premium rates.

While we compete on the basis of many service- and quality-related factors, we expect that price will continue to be a significant basis of competition and we may face pressure to contain premium rates or administrative fees.

Our client contracts are subject to negotiation as clients seek to contain their costs, including by reducing benefits offered.

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Clients can easily move between our competitors and us.

Our clients are well informed and typically have knowledgeable consultants that seek competing bids from our competitors before contract renewal.

Our clients are well-informed and typically have knowledgeable consultants who seek competing bids from our competitors before contract renewal.

In addition, as brokers and benefit consultants seek to enhance their revenue streams, they look to take on services that we typically provide.

Each of these events could negatively impact our financial results.

Federal and state regulatory agencies may restrict or prevent entirely our ability to implement changes in premium rates.

Fiscal or other concerns related to the government-sponsored programs in which we participate, such as Medicare Advantage plans and Medicare Part D plans, may cause decreasing reimbursement rates, delays in premium payments, restrictions on implementing changes in premium rates or insufficient increases in reimbursement rates.

Any limitation on our ability to maintain or increase our premium or reimbursement levels, or a significant loss of customers or clients resulting from our need to increase or maintain premium or reimbursement levels, could adversely affect our business, cash flows, financial condition and results of operations.

Federal and state regulatory agencies may restrict or prevent entirely our ability to implement changes in premium rates or collect certain administrative fees.

Fiscal or other concerns related to the government-sponsored programs in which we participate may cause decreasing reimbursement rates, delays in premium payments, restrictions on implementing changes in premium rates or insufficient increases in reimbursement rates.

Any limitation on our ability to maintain or increase our premium or reimbursement levels, or a significant loss of customers or clients resulting from our need to increase or maintain premium, administrative fees or reimbursement levels, could adversely affect our business, cash flows, financial condition and results of operations.

Premiums in the Cigna Healthcare segment are generally set for one-year periods and are priced well in advance of the date on which the contract commences or renews.

Our revenue on Medicare Advantage plans, Individual and Family Plans ("IFP") and Medicare Part D plans is based on rates and bids submitted midyear in the year before the contract year.

Although we base the premiums we charge and our Medicare Advantage, IFP and Medicare Part D rates and bids on our estimate of future health care costs over the contract period, actual costs may exceed what we estimate in setting premiums.

Our revenue on Medicare Advantage plans, IFPs and Medicare Part D plans has been based on rates and bids submitted midyear in the year before the contract year, and in January 2024, the Company entered into the HCSC transaction to sell the Medicare Advantage and Part D plans.

Although we have based the premiums we charge and our Medicare Advantage, IFP and Medicare Part D rates and bids on our estimate of future health care costs over the contract period, actual costs may exceed what we estimate in setting premiums.

Our participation in health insurance exchanges through our IFP offerings involves uncertainties associated with mix and volume of business and could adversely affect our results of operations, financial position and cash flows.

Our health care costs also are affected by external events that we cannot forecast or project and over which we have little or no control, including changes in laws and regulations, as well as pandemics, costly new treatments, new treatment guidelines, provider billing practices, inflation and changes in customers' health care utilization patterns, which may, among other things, impact our ability to appropriately document their health conditions.

Our health care costs are also affected by external events that we cannot forecast or project and over which we have little or no control, including changes in laws and regulations, as well as pandemics, costly new treatments, new treatment guidelines, provider billing practices, inflation and changes in customers' health care utilization patterns, which may, among other things, impact our ability to appropriately document their health conditions.

Our profitability depends, in part, on our ability to accurately predict, price for and effectively manage future health care costs.

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Our inability to maintain positive trends, or failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain clients or sell additional services, which could negatively impact our margins and have a material adverse effect on our business and results of operations.

In addition, legislative reforms related to rebates, reporting, and other activities may adversely affect our competitive position, cash flows, financial condition and results of operations.

In addition, legislative reforms and regulatory or executive actions related to rebates, reporting, owned pharmacies and other activities may adversely affect our competitive position, cash flows, financial condition and results of operations.

The reserves we hold for expected medical claims are based on estimates that involve an extensive degree of judgment and are inherently variable.

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Our estimates of health care costs payable are based on a number of factors, including historical claim experience, but this estimation process requires extensive judgment.

Considerable variability is inherent in such estimates, and the accuracy of the estimates is highly sensitive to changes in medical claims submission and processing patterns or procedures, changes in customer base and product mix, changes in the utilization of prescription drugs, medical or other covered items or services, changes in medical cost trends, changes in our health management practices, changes in regulations and the introduction of new benefits and products.

If we are not able to accurately and promptly anticipate and detect medical cost trends, our ability to take timely corrective actions to limit future costs and reflect our current benefit cost experience in our pricing process may be limited.

Additionally, we must estimate the amount of rebates payable by us under the ACA's and CMS' minimum loss ratio rules and the amounts payable by us to, and receivable by us from, the United States federal government under the ACA's remaining premium stabilization program.

Considerable variability is inherent in such estimates, and the accuracy of the estimates is highly sensitive to changes in medical claims submission and processing patterns or procedures;

changes in customer base and product mix;

changes in the utilization of prescription drugs, medical or other covered items or services;

changes in medical cost trends;

changes in our health management practices;

changes in regulations;

and the introduction of new benefits and products.

If we are not able to accurately and

promptly anticipate and detect medical cost trends, our ability to take timely corrective actions to limit future costs and reflect our current benefit cost experience in our pricing process may be limited.

Additionally, we must estimate the amount of rebates payable by us under the ACA's and CMS' minimum loss ratio rules and the amounts payable by us to, and receivable by us from, the federal government under the ACA's remaining premium stabilization program.

Because establishing reserves is an inherently uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing reserves, which may adversely affect our results of operations, financial position and cash flows.

If we fail to develop and maintain satisfactory relationships with health care payers, physicians, hospitals and other health service providers and with producers and consultants, our business and results of operations may be adversely affected.

We contract with or employ physicians, hospitals and other health service providers and facilities to provide health services to our customers, as well as health care payers (as a service provider to those payers).

If we fail to develop and maintain satisfactory relationships with health care payors, physicians, hospitals and other health service providers and with producers and consultants, our business and results of operations may be adversely affected.

We contract with or employ physicians, hospitals and other health service providers and facilities to provide health services to our customers, as well as health care payors (as a service provider to those payors).

Our results of operations are substantially dependent on our ability to contract for these services at competitive prices.

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Establishing collaborative arrangements with physician groups, specialist groups, independent practice associations, hospitals and health care delivery systems is key to our strategic focus to transition from volume-based fee-for-service arrangements to a value-based health care system.

If such collaborative arrangements do not result in the lower medical costs that we project or if we fail to attract health care providers to such arrangements, or are less successful at implementing such arrangements

than our competitors, our attractiveness to customers may be reduced and our ability to profitably grow our business may be adversely affected.

Our ability to develop and maintain satisfactory relationships with providers may also be negatively impacted by other factors not associated with us, such as changes in Medicare or Medicaid reimbursement levels, increasing pressure on revenue and other pressures on health care providers and increasing consolidation activity among hospitals, physician groups and providers.

Continuing consolidation among physicians, hospitals and other providers, the emergence of accountable care organizations, vertical integration of providers and other entities, changes in the organizational structures chosen by physicians, hospitals and providers, new market entrants, including those not traditionally in the health care industry, and the increased use of virtual care services (including telehealth) may affect the way providers interact with us and may change the competitive landscape in which we operate.

If such collaborative arrangements do not result in the lower medical costs that we project, if we fail to attract health care providers to such arrangements or if we are less successful at implementing such arrangements than our competitors, our attractiveness to customers may be reduced and our ability to profitably grow our business may be adversely affected.

Our ability to develop and maintain satisfactory relationships with providers may also be negatively impacted by other factors not associated with us, such as changes in Medicare or Medicaid reimbursement levels or programmatic changes, increasing pressure on revenue and other pressures on health care providers, and increasing consolidation activity among hospitals, physician groups and providers.

Continuing consolidation among physicians, hospitals and other providers;

the growth of accountable care organizations;

vertical integration of providers and other entities;

changes in the organizational structures chosen by physicians, hospitals and providers;

new market entrants, including those not traditionally in the health care industry;

and the use of new modes of health delivery, including virtual care services, may affect the way providers interact with us and may change the competitive landscape in which we operate.

In some instances, these organizations may compete directly with us, potentially affecting the way we price our products and services or causing us to incur increased costs if we change our operations to be more competitive.

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As a result, the outcome of disputes where we do not have a provider contract may cause us to pay higher medical or other benefit costs than we projected.

Additionally, certain of our products and services are sold in part through non-exclusive producers and consultants for whose services and allegiance we compete.

Additionally, certain of our products and services are sold in part through nonexclusive producers and consultants for whose services and allegiance we compete.

Our sales could be materially adversely affected if we are unable to attract, retain and support such independent producers and consultants or if our sales strategy is not appropriately aligned across distribution channels.

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• access to limited distribution specialty pharmaceuticals by our specialty pharmacies.

Our contracts with pharmaceutical manufacturers are typically non-exclusive and terminable on relatively short notice by either party.

Our contracts with pharmaceutical manufacturers are typically nonexclusive and terminable on relatively short notice by either party.

The consolidation of pharmaceutical manufacturers, the termination or material alteration of our relationships, or our failure to renew contracts on market competitive terms could have a material adverse effect on our business and results of operations.

In addition, arrangements between payors and pharmaceutical manufacturers have been the subject of debate in federal and state legislatures and various other public and governmental forums.

In addition, arrangements between payors and pharmaceutical manufacturers have been the subject of debate in various public and governmental

Adoption of new laws, rules or regulations or changes in, or new interpretations of, existing laws, rules or regulations relating to any of these programs could materially adversely affect our business and results of operations.

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In certain geographic areas of the United States, our networks may be comprised of higher concentrations of one or more large pharmacy chains.

Contracts with retail pharmacies are generally non-exclusive and are terminable on relatively short notice by either party.

Contracts with retail pharmacies are generally nonexclusive and are terminable on relatively short notice by either party.

If one or more of the larger pharmacy chains terminates its relationship with us, or is able to renegotiate terms substantially less favorable to us, our customers' access to retail pharmacies or our business could be materially adversely affected.

The entry of one or more additional large pharmacy chains into the pharmacy benefit management business, the consolidation of existing pharmacy chains, or increased leverage or market share by the largest pharmacy providers could increase the likelihood of negative changes in our relationship with such pharmacies.

Changes in the overall composition of our pharmacy networks, or reduced pharmacy access under our networks, could have a negative impact on our claims volume or our competitiveness in the marketplace, which could cause us to fall short of certain guarantees in our contracts with clients or otherwise impair our business or results of operations.

Changes in the overall composition of our pharmacy networks, including changes due to legislative, regulatory or executive action, or reduced pharmacy access under our networks, could have a negative impact on our claims volume or our competitiveness in the marketplace, which could cause us to fall short of certain guarantees in our contracts with clients or otherwise impair our business or results of operations.

Changes in drug pricing or industry pricing benchmarks could materially impact our financial performance.

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If these benchmarks are no longer published by third parties, we, or our contractual partners, adopt other pricing benchmarks for establishing prices within the industry, legislation or regulation requires the use of other pricing benchmarks, or future changes in drug prices substantially deviate from our expectations, the short- or long-term impacts may have a material adverse effect on our business and results of operations.

Additionally, laws such as the Inflation Reduction Act have granted CMS the ability to negotiate drug prices for certain Part D and Part B drugs, and other federal and state legislative proposals may lead to changes in drug pricing for federal health care programs.

Additionally, laws such as the Inflation Reduction Act have granted CMS the ability to negotiate drug prices for high-cost Part D and Part B drugs, and other federal and state legislative proposals and executive actions can lead to residual effects as drug companies adjust pricing strategies for broader marketplaces, impacting which medications are prioritized.

Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation, availability and data integrity of our information technology and other business systems.

Our business is highly dependent on maintaining effective information systems as well as the integrity and timeliness of the data we use to serve our customers and health care providers and to operate our business.

If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party providers or subcontractors that we or they engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our clients, customers and health care providers and hinder our ability to provide or establish appropriate pricing for products and services, retain and attract clients and customers, establish reserves and report financial results timely and accurately and maintain regulatory compliance, among other things.

If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party providers or subcontractors that we or they engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our clients, customers and health care providers and hinder our ability to provide or establish appropriate pricing for products and services, retain and attract clients and customers, establish reserves and report financial results accurately and in a timely manner and maintain regulatory compliance, among other things.

Our information technology strategy and execution are critical to our continued success.

We must continue to invest in and maintain long-term solutions that will enable us to anticipate customer needs and expectations, enhance the customer experience, act as a differentiator in the market and protect against cybersecurity risks and threats or other events that could disrupt our information technology systems such as man-made or natural disasters (including those as a result of climate change).

Our success is dependent, in large part, on maintaining the effectiveness of existing technology systems and continuing to deliver and enhance technology systems that support our business processes in a cost-efficient and resource-efficient manner.

Increasing regulatory and legislative changes will place additional demands on our infrastructure that could have a direct impact on resources available for other projects tied to our strategic initiatives.

In addition, recent trends toward greater consumer engagement in health care require new and enhanced technologies, including more sophisticated applications for mobile devices.

We must continue to invest in and maintain long-term solutions that will enable us to anticipate customer needs and expectations, enhance the customer experience, act as a differentiator in the market, and protect against cybersecurity risks and threats or other events that could disrupt our information technology systems.

Increasing regulatory and legislative changes will place additional demands on our infrastructure that could have a direct impact on resources available for other strategic initiatives.

In addition, recent trends toward greater consumer engagement in health care require new and enhanced technologies, including applications for mobile devices.

Connectivity among technologies is becoming increasingly important.

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Further, because system development projects are long-term in nature, they may be more costly than expected to complete and may not deliver the expected benefits upon completion.

Our failure to effectively invest in, implement improvements to and properly maintain the uninterrupted operation, availability and data integrity of our systems could adversely affect our results of operations, financial position and cash flow.

As a large global health company, we and our vendors are subject to cyberattacks or other privacy or data security incidents.

If we are unable to prevent or contain the effects of any such attacks, or fail to ensure vendors do the same, we may suffer exposure to substantial liability, reputational harm, loss of revenue or other damages.

Our business depends on our clients' and customers' willingness to entrust us with their health-related and other personal information ("PI"), including Protected Health Information ("PHI") that is subject to privacy, security or data breach notification laws.

Our business depends on our clients' and customers' willingness to entrust us with their health-related and other PII, including PHI, that is subject to privacy, security or data breach notification laws.

Computer networks or systems may be vulnerable to intrusion, computer viruses or malware, programming errors, attacks by third parties or similar disruptive problems.

We have been, and will likely continue to be, the target of computer viruses or other malicious codes, unauthorized access, cyberattacks or other computer-related penetrations.

There have been, and will likely continue to be, large scale cyberattacks within the health service industry.

There have been, and will continue to be, large-scale cyberattacks within the health service industry.

For example, Change Healthcare, a health technology company owned by UnitedHealth Group and a service provider for certain of our pharmacy benefit management services, was the victim of a ransomware attack in February 2024, which resulted in limited disruption of certain of our services and necessitated security validations for certain systems before we reconnected with Change Healthcare to resume such services.

Additionally, hardware, software or applications we develop or procure from third parties may contain defects in design, manufacturer defects or other problems that could unexpectedly compromise information technology.

Human or technological error has and could in the future result in, for example, unauthorized access to, acquisition, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems;

theft of sensitive, regulated, or confidential data including PI and intellectual property;

Human or technological error has and could in the future result in, for example, unauthorized access to and acquisition, disclosure, modification, misuse, loss or destruction of company, customer, or other third-party data or systems;

theft of sensitive, regulated or confidential data, including PII and intellectual property;

the loss of access to critical data or systems through ransomware, destructive attacks or other means;

and business delays, service or system disruptions, or denials of service.

As we increase the amount of PI that we store and share digitally, our exposure to unauthorized uses and disclosures, and data privacy and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss or unauthorized access or acquisition or misappropriation of proprietary or personal information, and the cost of attempting to protect against these risks also increases.

As we increase the amount of PII that we store and share digitally, our exposure to unauthorized uses and disclosures and data privacy and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss, or unauthorized access or acquisition or misappropriation of proprietary or personal information.

The cost of attempting to protect against these risks also increases.

The health care data ecosystem is complex and requires data exchange with vendors, business partners, health care professionals, the government and others.

If disruptions, data disclosures, security incidents or breaches are not detected quickly, their effect could be compounded.

We have dedicated significant resources to implement privacy and security technologies, processes and procedures to

protect PI and provide employee awareness training around phishing, malware and other cyber risks;

however, there are no assurances that such measures will be effective against all types of security incidents or breaches.

Further, we depend on many vendors to support and assist our business, which requires such vendors to generate, store and use PI.

We have dedicated significant resources to implement privacy and security technologies, processes and procedures to protect PII and provide employee awareness training around phishing, malware and other cyber risks;

however, there are no assurances that such measures will be effective against all types of security incidents.

Cybersecurity threats are rapidly evolving, and those threats and the means for obtaining access to our proprietary systems are becoming increasingly sophisticated.

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The costs to eliminate or address security threats and vulnerabilities before or after a cyber-incident could be significant.

Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of existing or potential customers.

In addition, the unauthorized access, acquisition, use, disclosure or dissemination of personal information, proprietary information or confidential information about us, our customers or other third parties could expose our customers' and their private information to the risk of financial or medical identity theft.

Unauthorized access, acquisition, use, disclosure or dissemination of confidential and proprietary information about our business and strategy could also negatively affect the achievement of our strategic initiatives.

Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of customers.

In addition, the unauthorized access to and the acquisition, use, disclosure or dissemination of information about us, our customers or other third parties could expose our customers and their private information to the risk of financial or medical identity theft.

Unauthorized access to and the acquisition, use, disclosure or dissemination of information about our business and strategy could also negatively affect the achievement of our strategic initiatives.

Such events could cause us to breach our contractual obligations and violate applicable laws.

These events would negatively affect our ability to compete, our reputation, customer base and revenues and expose us to mandatory disclosure requirements, government investigations, litigation and other enforcement proceedings, material fines, penalties or remediation costs and compensatory, special, punitive and statutory damages, consent orders and other adverse actions, any of which could adversely affect our business, results of operations, financial condition or liquidity.

These events would negatively affect our ability to compete, our reputation, our customer base and our revenues and expose us to mandatory disclosure requirements, government investigations, litigation, and other enforcement proceedings, material fines, penalties, or remediation costs and compensatory, special, punitive and statutory damages, consent orders, and other adverse actions, any of which could adversely affect our business, results of operations, financial condition or liquidity.

Our use of artificial intelligence and machine learning present regulatory and legal challenges that could negatively affect our business and our reputation.

Our use of artificial intelligence (“AI”), including machine learning (“ML”) technologies, as well as more recent technological advances in AI/ML, pose risks to us and subject us to new and existing laws and regulations.

Our use of AI, including ML technologies, as well as more recent technological advances in AI/ML, poses risks to us and subjects us to new and existing laws and regulations.

While we are committed to responsible use of AI/ML and following applicable laws and regulations, and while we have made progress developing governance as to use of AI/ML by our organization, any failure to use AI/ML responsibly and to adhere to such laws, regulations and governance could have a material unfavorable effect on our business, results of operations and financial condition.

Depending on how existing laws and regulations are interpreted, and as new laws are passed, we may have to make changes to our business practices to comply with such obligations.

These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us retrain our AI/ML, or prevent or limit our use of AI/ML.

Our use of AI/ML technologies could also result in additional compliance costs, regulatory investigations and actions, and consumer or other lawsuits.

Depending on how existing laws and regulations are interpreted, and as new laws go into

effect, we may have to make changes to our business practices to comply with such obligations.

These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties, require us to retrain our AI/ML, require us to comply with outside standards, or prevent or limit our use of AI/ML.

Our use of AI/ML technologies has resulted in and could continue to result in additional compliance costs, regulatory investigations and actions, and lawsuits.

For example, we are currently subject to litigation claiming that we improperly used AI in the claims evaluation process.

If we are unable to use AI/ML, or if regulators restrict our ability to use AI/ML for certain purposes, it could make our business less efficient, result in competitive disadvantages, and subject us to potential unfavorable business impacts.

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companies, favor nationalization or expropriate assets;

• price controls or other pricing issues and exchange controls;

• price controls or other pricing issues and exchange controls, including tariffs;

• restrictions that prevent us from transferring funds out of the countries in which we operate;

foreign currency exchange rates and fluctuations and restrictions on converting currencies

from foreign operations into other currencies;

uncertainty with respect to the adoption of new tax laws and the interpretation of tax positions;

• foreign currency exchange rates and fluctuations and restrictions on converting currencies from foreign operations into other currencies;

• uncertainty with respect to the adoption of new tax laws and the interpretation of tax positions, such as the European Union's ("EU’s") recent adoption of the Pillar Two directive;

• reliance on local employees and interpretations of labor laws in foreign jurisdictions;

• managing our partner relationships in countries outside of the United States;

• providing data protection on a global basis and sufficient levels of technical support in different locations;

• the management of our partner relationships in countries outside of the United States;

• the provision of data protection on a global basis and sufficient levels of technical support in different locations;

• the global trend for companies to enact local data residency requirements;

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• man-made disasters, natural disasters (including those arising as a result of climate change) and pandemics in locations where we operate;

• general economic and political conditions, including conditions that may become unpredictable during a U.S.

presidential election year.

• general economic and political conditions.

These factors may increase in significance as we continue to expand globally, and operating in new foreign markets may require considerable management time before operations generate any significant revenues and earnings.

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and foreign laws prohibiting bribery, corruption and money laundering, in addition to other regulations regarding, among other things, our products, direct-to-consumer communications, customer privacy, data protection and data residency.

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business and significant reputational harm.

Violations of these laws and regulations could result in fines;

criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business;

and significant reputational harm.

Our success depends, in part, on our ability to anticipate these risks and manage these challenges.

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Please see "—Legal and Compliance Risks" below.

Strategic transactions involve risks and we may not realize the expected benefits because of integration or separation difficulties, underperformance relative to our expectations and other challenges.

As part of our strategy, we regularly consider and enter into strategic transactions, including mergers, acquisitions, joint ventures, licensing arrangements, divestitures and other relationships (collectively referred to as "strategic transactions").

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In addition, from time to time, we evaluate alternatives for our businesses that do not meet our strategic, growth or profitability objectives, and we may divest or wind down such businesses.

We may be unable to complete any such divestiture on terms favorable to us, within the expected timeframes, or at all.

For example, in January 2024 we announced the HCSC transaction, which is subject to regulatory approvals and other closing conditions.

We may be unable to satisfy the closing conditions in a timely manner to complete the HCSC transaction, or we may otherwise fail to receive the anticipated benefits from the transaction, even if it is completed.

We may have continued financial exposure to divested businesses following the completion of any such transaction, including increased costs due to potential litigation, contingent liabilities and indemnification of the buyer related to, among other things, lawsuits, regulatory matters or tax liabilities.

We may be unable to complete any such divestiture on terms favorable to us within the expected time frames, or at all.

For example, in January 2024, we entered into the HCSC transaction, which is subject to regulatory approvals and other closing conditions.

We may be unable to satisfy the closing conditions in a timely

manner to complete the HCSC transaction, or we may otherwise fail to receive the anticipated benefits from the transaction, even if it is completed.

We may fail to receive the anticipated benefits from the transaction.

We may have continued financial exposure to divested businesses, including the businesses subject to the HCSC transaction, following the completion of any such transaction, including increased costs due to potential litigation, contingent liabilities and indemnification of the buyer related to, among other things, lawsuits, regulatory matters or tax liabilities.

Our ability to achieve the anticipated benefits of strategic transactions, including synergies, cost savings, innovation and operational efficiencies, is subject to numerous uncertainties and risks, including our ability to successfully combine or separate business operations, resources and systems, including data security systems and internal financial control standards, in an efficient and effective manner.

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A material decrease in shareholders' equity could negatively impact our debt ratings or potentially impact our compliance with existing debt covenants.

See Note 20 to the Consolidated Financial Statements for more information on goodwill and

See Note 18 to the Consolidated Financial Statements for more information on goodwill and intangibles.

In addition, the trading price of our securities may decline if, among other things, we are unable to achieve our estimates of earnings growth and operational cost savings or the transaction costs are greater than expected.

The trading price also may decline if we do not achieve the perceived benefits of a transaction as rapidly or to the extent anticipated by financial or industry analysts.

Additionally, joint ventures and equity investments present risks that are different from acquisitions, including risks related to:

specific operations and finances of the businesses we invest in;

Additionally, joint ventures and equity investments present risks that are different from acquisitions, including risks related to specific operations and finances of the businesses we invest in;

selection of appropriate parties;

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compliance activities (including compliance with applicable CMS requirements);

growing the business in a manner acceptable to all the parties;

maintaining positive relationships among the parties, clients and customers;

initial and ongoing governance of joint ventures and customer and business disruption that may occur upon a joint venture termination.

growing of the business in a manner acceptable to all the parties;

the maintenance of positive relationships among the parties, clients and customers;

and initial and ongoing governance of joint ventures and customer and business disruption that may occur upon a joint venture termination.

For example, in the year ended December 31, 2024, we determined our investment in VillageMD was fully impaired and recorded a $2.7 billion loss in Net investment losses in our Consolidated Statements of Income.

Further, we may finance strategic transactions by issuing common stock for some or all of the purchase price that could dilute the ownership interests of our shareholders or by incurring additional debt that could increase costs and impact our ability to access capital in the future.

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We also rely on the internal controls and financial reporting controls of joint venture entities and other entities in which we invest, and their failure to maintain effectiveness or comply with applicable standards may materially and adversely affect us.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information that could negatively impact the trading price of our securities and our access to capital.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could negatively impact the trading price of our securities and our access to capital.

We are dependent on the success of our relationships with third parties for various services and functions.

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Outsourcing also may require us to change our existing operations, adopt new processes for managing these service providers, or redistribute responsibilities to realize the potential productivity and operational efficiencies.

If there are delays or difficulties in changing business processes or our third-party vendors do not perform as expected, we may not realize, or not realize on a timely basis, the anticipated economic and other benefits of these relationships.

If there are delays or difficulties in changing business processes or our third-party vendors do not perform as expected, we may not realize, or not realize on a timely

basis, the anticipated economic and other benefits of these relationships.

This could result in additional costs or regulatory compliance issues or create other operational or financial problems for us.

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A significant disruption in service within our operations or among our key suppliers or other third parties could materially adversely affect our business and results of operations.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted fashion, necessary business functions, such as claims processing and payment, internet support and customer call centers, data centers and corporate facilities, processing new and renewal business, maintaining appropriate shipment and storage conditions for prescriptions (such as temperature and protection from contamination) and home delivery processing.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted fashion, necessary business functions, such as claims processing and payment, internet support and customer call centers, data centers and corporate facilities, the processing of new and renewal business, the maintenance of appropriate shipment and storage conditions for prescriptions (such as temperature and protection from contamination) and home delivery processing.

In some instances, our ability to provide services or products (including processing and dispensing prescriptions) depends on the availability of services and products provided by suppliers, providers, pharmaceutical manufacturers, vendors or shipping carriers.

A disruption, or threat of disruption, in our supply chain, including as a result of future pandemics or public health emergencies, or inability to access or deliver products that meet requisite quality safety standards and patient needs in a timely and efficient manner could adversely impact our business.

A disruption, or threat of disruption, in our supply chain or inability to access or deliver products that meet requisite quality safety standards and patient needs in a timely and efficient manner could adversely impact our business.

Increasing natural disasters in connection with climate change could also be a direct threat to us and our third-party vendors, service providers or other stakeholders.

Natural disasters, such as wildfires, hurricanes and snow and ice storms, have impacted and may continue to impact our customers and pose a risk to our employees and facilities located in the impacted region.

Responses to such scenarios have and may include, among other things, making temporary policy changes, such as waiving various medical requirements, assisting with replacement medications, transferring prescriptions and expanding our help line.

Natural disasters have impacted and may continue to impact our customers and pose a risk to our employees and facilities located in the impacted region.

Responses to such scenarios have included and may include, among other things, making temporary policy changes, such as waiving various medical requirements, assisting with replacement medications, transferring prescriptions and expanding our help line.

In addition, there is a risk that actions taken to respond to climate change could increase the cost of energy, fuel and other commodities, which would increase our operating costs.

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Our systems interface with and depend on third-party systems, and we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption.

For further information related to risks as a result of information technology disruptions, please refer to "—As a large global health company, we and our vendors are subject to cyberattacks or other privacy or data security incidents.

While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee that such plans and strategies will be effective, which could interrupt the functionality of our information technology systems or those of third parties.

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We also provide in-home care through health care providers that we employ, as well as through third-party contractors.

As such, we may be subject to liability for certain acts, omissions, or injuries caused by our employees or agents, or occurring at one of these practices, pharmacies or clinics.

As such, we may be subject to liability for certain acts, omissions or injuries caused by our employees or agents, or that occur at one of these practices, pharmacies or clinics.

The defense of any actions may require diverting personnel and other resources and incurring significant costs that could have a material adverse effect on our business, results of operations, financial condition, liquidity and reputation.

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Our business is regulated at the federal, state, local and international levels.

The laws and rules governing our business and related interpretations are increasing in number and complexity, are subject to frequent change and can be inconsistent or in conflict with each other.

The laws and rules governing our business and related interpretations are increasing in number and complexity, are subject to frequent change, and can be inconsistent or in conflict with

Noncompliance with applicable regulations by us or our third-party vendors could have material adverse effects on our business, results of operations, financial condition, liquidity and reputation.

We must identify, assess and respond to new trends in the legislative and regulatory environment, as well as comply with the various existing regulations applicable to our business.

There are currently pending, and in the future there will likely be, legislative or regulatory proposals which seek to manage the health services industry, including managing prescription drug costs and health records, as well as regulating drug distribution.

We must identify, assess and respond to new trends in the legislative and regulatory environment, as well as comply with the various existing regulations applicable to our business and respond to policymakers and enforcement agencies accordingly.

There are currently pending, and in the future there will likely be, legislative or regulatory proposals or executive actions which seek to manage or significantly change the health services industry, including managing prescription drug costs and health records as well as regulating drug distribution.

These and other legislative ideas and executive actions could adversely affect our business.

Federal and state governments have enacted, and we expect federal and state governments to continue to enact and seriously consider, many broad-based legislative and regulatory proposals that will or could materially impact various aspects of the health care and related benefits system.

In addition, changes to government policies not specifically targeted to the health services industry, such as a change in tax laws and the corporate tax rate or government spending cuts, could have significant impacts on our business, results of operations, financial condition and liquidity.

In addition, changes to government policies not specifically targeted to the health services industry, such as a change in tax laws and the corporate tax rate, government spending or program cuts or changes, imposition of tariffs across an industry sector such as pharmaceuticals could have significant impacts on our business, results of operations, financial condition and liquidity.

There can be no assurance that our effective tax rate or tax payments will not be adversely affected by legislation resulting from these initiatives both within the United States and other foreign jurisdictions in which we operate.

In addition, tax laws and regulations are extremely complex and subject to varying interpretations.

While we believe that our historical tax positions are consistent with applicable laws, regulations and existing precedent, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.

The trading price of our securities may react to the announcement of such proposals.

As disclosed in Part II, Item 5 of this Form 10-K, we have an active share repurchase program authorized by our board of directors.

Regulators, customers, investors, employees and other stakeholders are increasingly focusing on ESG matters and related disclosures.

These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with such regulations or meeting such expectations.

For example, the European Union's ("EU’s") Corporate Sustainability Reporting Directive (“CSRD”) will require expansive disclosures on various sustainability topics such as climate change, biodiversity, workforce, supply chain, and business ethics by in-scope EU entities and certain non-EU entities with significant cross-border business in EU markets.

In addition, California’s recently-enacted Climate Corporate Data Accountability Act will require annual disclosures of covered companies’ Scope 1, 2 and 3 greenhouse gas emissions.

We are assessing our obligations under CSRD and other enhanced reporting requirements, and expect that compliance could require substantial effort in the future.

Overall, ESG matters and related stakeholder reaction may impact our reputation and have other business impacts which could adversely affect our business.

Existing or future laws, rules, U.S.

Presidential Executive Orders, regulatory interpretations or judgments could force us to change how we conduct our business, affect the products and services we offer and where we offer them, restrict revenue and enrollment growth, increase our costs, including medical, operating, health care technology and administrative costs, and require enhancements to our compliance infrastructure and internal controls environment.

the loss of subsidies related to our IFP offerings and could impact the market for our products.

As disclosed in Part II, Item 5 of this Form 10-K, we have an active share repurchase program authorized by our Board of Directors (the "Board").

Regulators, customers, investors, employees and other stakeholders have focused on environmental, social and governance matters and related disclosures.

These changing rules, regulations and stakeholder expectations have previously resulted in increased general and administrative expenses and increased management time and attention spent complying with such regulations or meeting such expectations.

For example, the EU's Corporate Sustainability Reporting Directive ("CSRD") will require expansive disclosures on various sustainability topics such as climate change, biodiversity, workforce, supply chain and business ethics by in-scope EU entities and certain non-EU entities with significant cross-border business in EU markets.

In addition, California's enacted Climate Corporate Data Accountability Act will require annual disclosures of covered companies' Scope 1, 2 and 3 greenhouse gas emissions.

We are assessing our obligations under CSRD and other enhanced reporting requirements based on policymaker direction and expect that compliance could require substantial efforts in the future.

Overall, sustainability matters and related stakeholder reaction may impact our reputation and have other business impacts which could adversely affect our business.

Existing or future laws, rules, actions by governmental or regulatory authorities, or judgments could force us to change how we conduct our business, affect the products and services we offer and where we offer them, restrict revenue and enrollment growth, increase our costs, including medical, operating, health care technology and administrative costs, and require enhancements to our compliance infrastructure and internal controls environment.

Some proposals or criticisms may be bipartisan or gain momentum, and we expect that governmental and regulatory authorities will continue to seek changes to business practices and the health care industry as a whole.

For example, health care reforms or the invalidation, modification, repeal or replacement of the ACA or portions thereof could result in material changes to the way we conduct our business, as well as the loss of subsidies related to our IFP offerings, and could impact the market for our products.

We are required to obtain and maintain insurance and other regulatory approvals to, among other things, market many of our products, expand into additional geographic or product markets, increase prices for certain regulated products, and consummate some of our acquisitions and dispositions.

Delays in obtaining or failure to obtain or maintain these approvals could reduce our revenue or increase our costs.

Additionally, we must maintain licenses and registrations in the jurisdictions in which we conduct business, and the suspension, material adverse modification or termination of such license and registrations could adversely affect our operations.

Additionally, we must maintain licenses and registrations in the jurisdictions in which we conduct business, and the suspension, material adverse modification or termination of such licenses and registrations could adversely affect our operations.

Such licensure subjects many of our businesses to state regulation of our operations and products, as well as risks associated with doing business in those jurisdictions.

Existing or future laws and rules could also require or lead us to take other actions, such as changing our business practices, and could increase our liability.

Further, failure to effectively implement or adjust our strategic and operational initiatives, such as by reducing operating costs, adjusting premium pricing or benefit design or transforming our business model in response to regulatory changes may have a material adverse effect on our results of operations, financial condition and cash flows.

Further, failure to effectively implement or adjust our strategic and operational initiatives, such as by reducing operating costs, adjusting premium pricing or benefit design, or transforming our business model in response to laws, regulatory changes or executive actions may have a material adverse effect on our results of operations, financial condition and cash flows.

For more information on regulations affecting our business, see "Business – Regulation" in Part I, Item 1 of this Form 10-K.

There are various risks associated with participating in government-sponsored programs, such as Medicare, including dependence upon government funding, compliance with government contracts and increased regulatory oversight and enforcement.

There are various risks associated with participating in government-sponsored programs and providing services to payors who participate in government-sponsored programs, including dependence upon government funding, compliance with government contracts and increased regulatory oversight and enforcement.

Through our U.S.

Healthcare business, we contract with CMS and various state governmental agencies to provide managed health care services including Medicare Advantage plans and Medicare Part D plans.

Additionally, our Evernorth Health Services business provides services to government entities and payors participating in government health care programs and our relationships with these government entities is subject to laws and regulations regarding government contracts.

Healthcare business, we contract with CMS and various state governmental agencies.

Additionally, our Evernorth Health Services business provides services to government entities and payors participating in government health care programs, and our relationships with these government entities are subject to laws and regulations regarding government contracts.

Our revenues from government-funded programs, including our Medicare programs and our government clients, are dependent, in whole or in part, upon annual funding from the federal government or applicable state or local governments.

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Additionally, a portion of each Medicare Advantage plan's reimbursement is tied to the plan's Star Rating, with those plans receiving a rating of four or more stars eligible for quality-based bonus payments.

A plan's Star Rating affects its image in the market and plans that perform well are able to offer enhanced benefits, market more effectively and for longer periods of time than other plans.

A plan's Star Rating affects its image in the market, and plans that perform well are able to offer enhanced benefits and market more effectively and for longer periods of time than other plans.

The Star Rating system is subject to change annually by CMS, which may make it more difficult to achieve four stars or greater.

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Accordingly, our plans may not be eligible for full-level quality bonuses, which could adversely affect the benefits such plans can offer, reduce membership or impact our financial performance.

See the "Executive Overview - Key Transactions and Business Developments" section of MD&A in Part II, Item 7 of this Form 10-K for additional information on our Star Ratings.

Additionally, if we fail to comply with CMS' contractual requirements, including data submission, enrollment and marketing, provider network adequacy, provider directory accuracy, quality measures, claims payment, continuity of care, timely and accurate processing of appeals and grievances, adverse findings under RADV audits, oversight of first tier downstream and related entities and call center performance, we may be subject to administrative actions, including enrollment sanctions or contract termination, fines or other penalties or enforcement actions that could materially impact our profitability.

Additionally, if we fail to comply with CMS' regulatory or contractual requirements, including data submission, enrollment and marketing, provider network adequacy, provider directory accuracy, quality measures, claims payment, continuity of care, timely and accurate processing of appeals and grievances, adverse findings under RADV audits, oversight of first-tier downstream and related entities, and call center performance, we may be subject to administrative actions, including enrollment sanctions or contract termination, fines or other penalties or enforcement actions that could materially impact our profitability.

We face risks related to litigation, regulatory audits and investigations.

We are routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most part, in the ordinary course of business.

These legal matters could include benefit claims, breach of contract actions, tort claims (including claims related to the delivery of health care services, such as medical malpractice by staff at our affiliates' facilities, or by

health care practitioners who are employed by us, have contractual relationships with us, or serve as providers to our managed care networks, including as a result of a failure to adhere to applicable clinical, quality and/or patient safety standards), claims arising from consumer protection laws, false claims act laws, claims disputes under federal or state laws and disputes regarding reinsurance arrangements, employment and employment discrimination-related suits, antitrust claims (including as a result of changes in the enforcement of antitrust laws), employee benefit claims, wage and hour claims, tax, privacy, intellectual property and whistleblower claims, shareholder suits and other securities law claims, real estate disputes, claims related to disclosure of certain business practices and claims arising from customer audits and contract performance, including government contracts.

These legal matters could include civil claims (including tort and breach of contract claims) as well as claims arising from alleged violations of certain laws (such as consumer protection or false claims act laws).

In addition, we have incurred and likely will continue to incur liability for practices and claims related to our health care business, such as marketing misconduct, failure to timely or appropriately pay for or provide health care, provider network structure, poor outcomes for care delivered or arranged, provider disputes including disputes over compensation or contractual provisions, ERISA claims, allegations related to calculations of cost-sharing, and claims related to our administration of self-funded business.

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individual plaintiffs also may bring multiple claims regarding the same subject matter against us and other companies in our industry.

Court decisions and legislative activity may increase our exposure for any of these types of claims.

Court decisions and legislative and regulatory activity may increase our exposure to any of these types of claims.

In some cases, substantial noneconomic or punitive damages may be sought.

We procure insurance coverage to cover some of these potential liabilities, however we also self-insure a significant portion of our litigation risks.

We procure insurance coverage to cover some of these potential liabilities, and we also self-insure a significant portion of our litigation risks.

While we maintain some third-party insurance coverage, including excess liability insurance with third-party insurance carriers, certain liabilities or types of damages, such as punitive damages, may not be covered by insurance, insurers may dispute coverage, or the amount of insurance may be insufficient to cover the entire damages awarded.

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Additionally, it is possible that the resolution of current or future legal matters and claims could result in changes to our industry and business practices, losses material to our results of operations, financial condition, and liquidity or damage to our reputation.

We are frequently the subject of regulatory market conduct and other reviews, audits and investigations by state insurance and health and welfare and pharmacy departments, attorneys general, DOJ, CMS, DOL and the HHS-OIG and comparable authorities in foreign jurisdictions.

We are frequently the subject of regulatory market conduct and other reviews, audits and investigations by state insurance and health and welfare and pharmacy departments, attorneys general, DOJ, FTC, CMS, DOL and the HHS-OIG and comparable authorities in

foreign jurisdictions.

Additionally, we have, in the past, been, and may in the future be, subject to qui tam actions in which the government may or may not intervene.

With respect to our Medicare Advantage and Medicare Part D businesses, CMS and HHS-OIG perform audits to determine a health plan's compliance with federal regulations and contractual obligations, including compliance with proper coding practices and fraud and abuse enforcement practices through audits designed to detect and correct improper payments.

With respect to our Medicare Advantage and Medicare Part D businesses, which are subject to the HCSC transaction, CMS and HHS-OIG perform audits to determine a health plan's compliance with federal regulations and contractual obligations, including compliance with proper coding practices and fraud and abuse enforcement practices through audits designed to detect and correct improper payments.

Certain of our contracts currently have RADV audits by CMS and the HHS-OIG that are awaiting CMS finalization.

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There also continues to be heightened review by federal and state regulators of business and reporting practices within the health services industry, including with respect to claims payment and related escheat practices, and increased scrutiny by other federal and state governmental agencies (such as state attorneys general) empowered to bring criminal actions in circumstances that could have previously given rise only to civil or administrative proceedings.

In addition, various government agencies have conducted investigations and audits into certain pharmacy benefit management practices.

For example, the FTC is conducting an ongoing study of the pharmacy benefit manager industry and the impact of pharmacy benefit managers on the accessibility and affordability of prescription drugs.

In June 2022, the FTC issued an enforcement policy statement indicating the FTC would scrutinize the impact of rebates and fees paid by pharmaceutical manufacturers to pharmacy benefit managers and other intermediaries to determine if laws such as the FTC Act, the Clayton Act, the Robinson-Patman Act and the Sherman Act may have been violated.

In July 2023, the FTC voted to issue a statement cautioning against reliance on prior advocacy letters that advocated against proposals to increase regulatory oversight and transparency of pharmacy benefit managers.

The FTC previously required three group purchasing organizations to provide information and records on business practices and the six largest pharmacy benefit managers to provide information and records on topics including rebate contracts and ancillary agreements, documents related to strategies, conditions and plans for formulary placement, formulary exclusion, formulary tier assignment, and prior authorization regarding rebated drug products, and annual pharmacy reimbursement data for drugs on specialty drug lists and for rebated drug products.

In addition, various government agencies have conducted investigations, inquiries and audits into certain pharmacy benefit management practices, which in certain instances has resulted in litigation or other adverse outcomes.

For example, the FTC recently released staff reports on PBMs and the accessibility and affordability of prescription drugs.

In September 2024, the FTC filed a complaint against Express Scripts and two other PBMs for allegedly engaging in anticompetitive and unfair rebate practices related to insulin drug pricing.

Although we strongly disagree with the claims made by the FTC and intend to respond to them vigorously, there can be no assurance that the outcome of these matters will be resolved to our satisfactions.

Many investigations and audits have resulted in companies being subject to civil penalties, including the payment of money and entry into corporate integrity agreements.

For example, in September 2023, we resolved certain matters related to our Medicare Advantage Business and risk adjustment practices by entering into the Corporate Integrity Agreement (the “CIA”) with the HHS-OIG.

For example, in September 2023, we resolved certain matters related to our Medicare Advantage Business and risk adjustment practices by entering into the CIA with the HHS-OIG.

The CIA imposes various compliance, reporting and governance obligations on us for five years and requires record reviews by an independent review organization.

Our failure to meet these obligations could result in monetary penalties and our exclusion from participation in federal healthcare programs (such as Medicare and Medicaid), which could adversely impact our business, cash flows, financial condition, results of operations and reputation.

Any failure, or alleged failure, to comply with various state and federal health care laws

and regulations, including those related to the CIA or otherwise directed at preventing fraud and abuse in government funded programs, has resulted in and could in the future result in investigations or litigation, such as actions under the federal False Claims Act and similar whistleblower statutes under state laws.

Our failure to meet these obligations could result in monetary penalties and our exclusion from participation in federal health care programs (such as Medicare and Medicaid), which could adversely impact our business, cash flows, financial condition, results of operations and reputation.

Any failure, or alleged failure, to comply with various state and federal health care laws and regulations, including those related to the CIA or otherwise directed at preventing fraud and abuse in government-funded programs, has resulted in and could in the future result in investigations or litigation, such as actions under the federal False Claims Act and similar whistleblower statutes under state laws.

A successful action or claim against us could subject us to damage awards, including treble damages, fines, penalties or other enforcement actions, restrictions on our ability to market or enroll new customers, limits on expansion, restrictions or exclusions from programs or other agreements with federal or state governmental agencies, which could adversely impact our business, cash flows, financial condition, results of operations and reputation.

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However, we will likely continue to experience government scrutiny and audit activity, which has and may in the future result in civil penalties.

Regulatory audits, investigations, litigation or reviews or actions by other government agencies have resulted in and could result in changes to our business practices, retroactive adjustments to certain premiums, significant fines, penalties, civil liabilities, criminal liabilities or other sanctions, including corporate integrity agreements, restrictions on our ability to participate in government programs or exclusion from such programs, market certain products or engage in business-related activities, that could have a material adverse effect on our business, results of operation, financial condition and liquidity.

Regulatory audits, investigations, litigation, or reviews or actions by other government agencies have resulted in and could result in changes to our business practices, retroactive adjustments to certain premiums, significant fines, penalties, civil liabilities, criminal liabilities or other sanctions, including corporate integrity agreements, restrictions on our ability to participate in government programs or exclusion from such programs, and our ability to market certain products or engage in business-related activities, that could have a material adverse effect on our business, results of operation, financial condition and liquidity.

In addition, disclosure of an adverse investigation or audit or the imposition of fines or other sanctions could negatively affect our reputation in certain markets and make it more difficult for us to sell our products and services.

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If we fail to comply with applicable privacy, security and data laws, regulations and standards, our business and reputation could be materially adversely affected.

Most of our activities involve the receipt, use, storage or transmission of a substantial amount of individuals' PI, including PHI.

Most of our activities involve the receipt, use, storage or transmission of a substantial amount of individuals' PII, including PHI.

We also use aggregated and/or anonymized data for research and analysis purposes and, in some cases, provide access to such anonymized data, or analytics created from such data, to pharmaceutical manufacturers and third-party data aggregators and analysts.

We may also use such information to create analytic models designed to predict, and potentially improve, outcomes and patient care.

The collection, dissemination, receipt, maintenance, protection, use, transmission, disclosure, privacy, confidentiality, security, availability, integrity, creation, processing, and disposal of PI are regulated at the federal, state, international and industry levels and requirements are imposed on us by contracts with clients.

The collection, dissemination, receipt, maintenance, protection, use, transmission, disclosure, privacy, confidentiality, security, availability, integrity, creation, processing and disposal of PII are regulated at the federal, state, international and industry levels, and requirements are imposed on us by contracts with clients.

In some cases, such laws, rules, regulations and contractual requirements also apply to our vendors and require us to obtain written assurances of their compliance with such requirements.

We are also subject to various other consumer protection laws that regulate our communications with customers, such as the FTC Act and the Telephone Consumer Protection Act.

Certain of our businesses are also subject to the Payment Card Industry Data Security Standard, which is designed to protect credit card account data as mandated by payment card industry entities.

International laws, rules and regulations governing the use and disclosure of such information, such as the GDPR, can be more stringent than similar laws in the United States, and they vary across jurisdictions.

Certain of our businesses are also subject to the Payment Card Industry Data Security Standard ("PCI DSS"), which is designed to protect credit card account data as mandated by payment card industry entities.

International laws, rules and regulations governing the use and disclosure of such information, such as the GDPR, can be more stringent than similar laws in the United States,

and they vary across jurisdictions.

In addition, more jurisdictions are regulating the transfer of data across borders, and domestic privacy and data protection laws are generally becoming more onerous.

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An audit resulting in findings or allegations of noncompliance or the implementation of an enforcement action could have an adverse effect on our results of operations, financial position, cash flows and reputation.

Noncompliance or findings of noncompliance with applicable laws, regulations or requirements, or the occurrence of any privacy or security breach involving the misappropriation, loss or other unauthorized disclosure of PI, whether by us or by one of our third-party service providers, could materially adversely affect our business and reputation, including our results of operations, financial position and cash flows.

For example, in December 2024, we received a request for a voluntary audit from HHS's Office for Civil Rights ("OCR") to review our compliance with HIPAA security rules.

We are in the process of preparing our initial response to OCR's request.

As participation in this audit is voluntary, the information provided will not result in any HIPAA enforcement action or civil monetary penalty;

however, any serious compliance issues could open up subsequent compliance reviews that could include a range of remedies from OCR.

Noncompliance or findings of noncompliance with applicable laws, regulations or requirements, or the occurrence of any privacy or security breach involving the misappropriation, loss or other unauthorized disclosure of PII, whether by us or by one of our third-party service providers, could materially adversely affect our business and reputation, including our results of operations, financial position and cash flows.

Effective prevention, detection and control systems are critical to maintain regulatory compliance and prevent fraud;

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Significant stock market or interest rate declines could result in unfunded pension obligations resulting in the need for additional plan funding by us and increased pension expenses.

We currently have overfunded obligations in our frozen pension plans.

A significant decline in the value of the plans' equity and fixed income investments or unfavorable changes in applicable laws or regulations could materially increase our expenses and change the timing and amount of required plan funding.

We currently have overfunded obligations in our frozen pension plan.

A significant decline in the value of the plan's equity and fixed income investments or unfavorable changes in applicable laws or regulations could materially increase our expenses and change the timing and amount of required plan funding.

This could reduce the cash available to us, including our subsidiaries.

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Carrying indebtedness:

• requires us to dedicate a portion of our cash flow from operations to debt payments, thereby reducing the availability of cash flow to fund our operations and growth strategy, including investments, acquisitions and capital expenditures, make stock repurchases, pay dividends and for general corporate purposes;

• increases our vulnerability to general adverse economic and industry conditions, which may require us to dedicate an even greater percentage of our cash flow from operations to the payment of principal and interest on our debt and limit our access to capital markets such that additional capital may not be available or may be available only on unfavorable terms;

• requires us to dedicate a portion of our cash flow from operations to debt payments, thereby reducing the availability of cash flow to fund our operations and growth strategy;

• increases our vulnerability to general adverse economic and industry conditions, which may require us to dedicate an even greater percentage of our cash to the payment of principal and interest on our debt and limit our access to capital markets;

• exposes us to increases in interest rates to the extent increased interest expense is not offset by increased income from our investment assets;

• limits our flexibility in planning for, or reacting to, changes in or challenges relating to our business and industry.

The covenants in our debt instruments may have the effect, among other things, of restricting our financial and operating flexibility to respond to significant changes in business and economic conditions.

The covenants in our debt instruments may have the effect of restricting our financial and operating flexibility to respond to significant changes in business and economic conditions, among other things.

We may incur or assume significantly more debt in the future, which may subject us to additional restrictive covenants and increase the risks described above.

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• Higher unemployment rates, employee attrition (including challenges filling open positions in light of a competitive job market) and workforce reductions could result in lower enrollment in our employer-based plans (including an increase in the number of employees who opt out of employer-based plans) or our individual plans.

• Because of unfavorable economic conditions or the ACA, employers may stop offering health care coverage to employees or elect to offer this coverage on a voluntary, employee-funded basis as a means to reduce their operating costs.

• Significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase costs.

• Because of unfavorable economic conditions or legislation and regulation affecting employer-sponsored coverage, employers may stop offering health care coverage to employees or elect to offer this coverage on a voluntary, employee-funded basis as a means to reduce their operating costs.

• If clients are not successful in generating sufficient funds or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us.

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• Other insurers' financial condition may be weakened, increasing the risk that we will receive significant assessments for obligations of insolvent insurers pursuant to guaranty associations, indemnity funds or other similar laws and regulations.

Certain of the foregoing events have occurred and may continue to occur, and the occurrence of these events may, individually or in the aggregate, lead to a decrease in our customer base, revenues or margins or an increase in our operating costs.

The occurrence of these events have led, and may lead, to a decrease in our customer base, revenues or margins or an increase in our operating costs.

In addition, during and following a prolonged unfavorable economic environment, federal and state budgets could be materially adversely affected, resulting in reduced or delayed reimbursements or payments in government programs such as Medicare and Social Security or under contracts with government entities.

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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-K

Item 1A. Risk Factors