Cigna Group 10-Q

Item 1. FINANCIAL STATEMENTS The Cigna Group Consolidated Statements of Income Unaudited Three Months Ended March 31, (In millions, except per share amounts) 2025 2024 Revenues Pharmacy revenues $ 48,633 $ 42,036 Premiums 12,736 11,603 Fees and other revenues 3,895 3,326 Net investment income 238 290 TOTAL REVENUES 65,502 57,255 Benefits and expenses Pharmacy and other service costs 48,398 41,431 Medical costs and other benefit expenses 10,498 9,440 Selling, general and administrative expenses 4,213 3,705 Amortization of acquired intangible assets 422 423 TOTAL BENEFITS AND EXPENSES 63,531 54,999 Income from operations 1,971 2,256 Interest expense and other ( 362 ) ( 322 ) Gain (loss) on sale of businesses 41 ( 19 ) Net investment losses ( 2 ) ( 1,836 ) Income before income taxes 1,648 79 TOTAL INCOME TAXES 239 291 Net income (loss) 1,409 ( 212 ) Less: Net income attributable to noncontrolling interests 86 65 SHAREHOLDERS' NET INCOME (LOSS) $ 1,323 $ ( 277 ) Shareholders' net income (loss) per share Basic $ 4.88 $ ( 0.97 ) Diluted $ 4.85 $ ( 0.97 ) The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 3 The Cigna Group Consolidated Statements of Comprehensive Income Unaudited Three Months Ended March 31, (In millions) 2025 2024 Net income (loss) $ 1,409 $ ( 212 ) Other comprehensive income (loss), net of tax Net unrealized (depreciation) appreciation on securities and derivatives ( 100 ) 121 Net long-duration insurance and contractholder liabilities measurement adjustments ( 168 ) ( 560 ) Net translation gains (losses) on foreign currencies 13 ( 26 ) Postretirement benefits liability adjustment 6 5 Other comprehensive loss, net of tax ( 249 ) ( 460 ) Total comprehensive income (loss) 1,160 ( 672 ) Less: Net income attributable to noncontrolling interests 86 65 SHAREHOLDERS' COMPREHENSIVE INCOME (LOSS) $ 1,074 $ ( 737 ) The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 4 The Cigna Group Consolidated Balance Sheets Unaudited As of March 31, As of December 31, (In millions) 2025 2024 Assets Cash and cash equivalents $ 8,334 $ 7,550 Investments 727 665 Accounts receivable, net 26,929 24,227 Inventories 5,176 6,692 Other current assets 2,389 2,732 Assets of businesses held for sale — 7,004 Total current assets 43,555 48,870 Long-term investments 15,350 15,128 Reinsurance recoverables 4,375 4,378 Property and equipment 3,681 3,654 Goodwill 44,372 44,370 Other intangible assets 29,045 29,417 Other assets 3,003 2,786 Separate account assets 7,277 7,278 TOTAL ASSETS $ 150,658 $ 155,881 Liabilities Current insurance and contractholder liabilities $ 5,984 $ 5,388 Pharmacy and other service costs payable 28,600 28,465 Accounts payable 9,136 9,294 Accrued expenses and other liabilities 8,032 9,387 Short-term debt 3,993 3,035 Liabilities of businesses held for sale — 2,410 Total current liabilities 55,745 57,979 Non-current insurance and contractholder liabilities 10,309 10,254 Deferred tax liabilities, net 6,879 6,975 Other non-current liabilities 3,579 3,215 Long-term debt 26,455 28,937 Separate account liabilities 7,277 7,278 TOTAL LIABILITIES 110,244 114,638 Contingencies — Note 16 Shareholders' equity Common stock (1) 4 4 Additional paid-in capital 31,443 31,288 Accumulated other comprehensive loss ( 2,590 ) ( 2,341 ) Retained earnings 44,434 43,519 Less: Treasury stock, at cost ( 33,065 ) ( 31,437 ) TOTAL SHAREHOLDERS' EQUITY 40,226 41,033 Noncontrolling interests 188 210 Total equity 40,414 41,243 Total liabilities and equity $ 150,658 $ 155,881 (1) Par value per share, $ 0.01 ; shares issued, 404 million as of March 31, 2025 and 403 million as of December 31, 2024; authorized shares, 600 million. The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 5 The Cigna Group Consolidated Statements of Changes in Total Equity Unaudited Three Months Ended March 31, 2025 (In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders' Equity Noncontrolling Interests Total Equity Redeemable Noncontrolling Interests Balance at December 31, 2024 $ 4 $ 31,288 $ ( 2,341 ) $ 43,519 $ ( 31,437 ) $ 41,033 $ 210 $ 41,243 $ — Effects of issuing stock for employee benefit plans 155 ( 107 ) 48 48 Other comprehensive loss ( 249 ) ( 249 ) ( 249 ) — Net income 1,323 1,323 86 1,409 — Common dividends declared (per share: $ 1.51 ) ( 408 ) ( 408 ) ( 408 ) Repurchase of common stock — ( 1,521 ) ( 1,521 ) ( 1,521 ) Other transactions impacting noncontrolling interests — — ( 108 ) ( 108 ) — Balance at March 31, 2025 $ 4 $ 31,443 $ ( 2,590 ) $ 44,434 $ ( 33,065 ) $ 40,226 $ 188 $ 40,414 $ — Three Months Ended March 31, 2024 (In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders' Equity Noncontrolling Interests Total Equity Redeemable Noncontrolling Interests Balance at December 31, 2023 $ 4 $ 30,669 $ ( 1,864 ) $ 41,652 $ ( 24,238 ) $ 46,223 $ 21 $ 46,244 $ 107 Effect of issuing stock for employee benefit plans 263 ( 114 ) 149 149 Other comprehensive loss ( 460 ) ( 460 ) ( 460 ) — Net (loss) income ( 277 ) ( 277 ) 65 ( 212 ) — Common dividends declared (per share: $ 1.40 ) ( 397 ) ( 397 ) ( 397 ) Repurchase of common stock ( 640 ) ( 3,417 ) ( 4,057 ) ( 4,057 ) Other transactions impacting noncontrolling interests — — 83 83 ( 107 ) Balance at March 31, 2024 $ 4 $ 30,292 $ ( 2,324 ) $ 40,978 $ ( 27,769 ) $ 41,181 $ 169 $ 41,350 $ — The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements. 6 The Cigna Group Consolidated Statements of Cash Flows Unaudited Three Months Ended March 31, (In millions) 2025 2024 Cash Flows from Operating Activities Net income (loss) $ 1,409 $ ( 212 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 674 741 Investment losses, net 2 1,836 Deferred income tax benefit ( 216 ) ( 102 ) (Gain) loss on sale of businesses ( 41 ) 19 Net changes in assets and liabilities, net of non-operating effects: Accounts receivable, net ( 2,205 ) ( 2,687 ) Inventories 1,517 1,015 Reinsurance recoverable and Other assets ( 219 ) 68 Insurance liabilities 1,778 532 Pharmacy and other service costs payable 135 4,637 Accounts payable and Accrued expenses and other liabilities ( 1,174 ) ( 1,068 ) Other, net 260 61 NET CASH PROVIDED BY OPERATING ACTIVITIES 1,920 4,840 Cash Flows from Investing Activities Proceeds from investments sold: Debt securities and equity securities 94 268 Investment maturities and repayments: Debt securities and equity securities 222 179 Commercial mortgage loans 85 4 Other sales, maturities and repayments (primarily short-term and other long-term investments) 331 272 Investments purchased or originated: Debt securities and equity securities ( 952 ) ( 180 ) Commercial mortgage loans ( 34 ) ( 32 ) Other (primarily short-term and other long-term investments) ( 475 ) ( 594 ) Property and equipment purchases, net ( 327 ) ( 300 ) Divestitures, net of cash sold 2,346 — Renewable energy tax credit equity investments ( 92 ) ( 104 ) Other, net ( 1 ) ( 8 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,197 ( 495 ) Cash Flows from Financing Activities Deposits and interest credited to contractholder deposit funds 36 43 Withdrawals and benefit payments from contractholder deposit funds ( 64 ) ( 65 ) Net change in short-term debt ( 891 ) ( 364 ) Repayment of long-term debt ( 700 ) ( 2,210 ) Net proceeds on issuance of long-term debt — 4,462 Repurchase of common stock ( 1,508 ) ( 4,022 ) Issuance of common stock 69 181 Common stock dividend paid ( 412 ) ( 401 ) Other, net ( 211 ) ( 153 ) NET CASH USED IN FINANCING ACTIVITIES ( 3,681 ) ( 2,529 ) Effect of foreign currency rate changes on cash, cash equivalents and restricted cash 9 ( 9 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 555 ) 1,807 Cash, cash equivalents and restricted cash January 1, (1) 8,931 8,337 Cash, cash equivalents and restricted cash, March 31, (1) 8,376 10,144 Cash and cash equivalents reclassified to assets of businesses held for sale — ( 1,660 ) Cash, cash equivalents and restricted cash March 31, per Consolidated Balance Sheets (1) $ 8,376 $ 8,484 Supplemental Disclosure of Cash Information: Income taxes paid, net of refunds $ 140 $ 110 Interest paid $ 379 $ 336 (1) Restricted cash and cash equivalents were reported in other long-term investments. The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements . 7 THE CIGNA GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) TABLE OF CONTENTS Note Number Footnote Page B USINESS AND C APITAL S TRUCTURE 1 Description of Business 9 2 Summary of Significant Accounting Policies 9 3 Accounts Receivable, Net 10 4 Supplier Finance Program 10 5 Divestiture 11 6 Earnings Per Share 11 7 Debt 12 8 Common and Preferred Stock 12 I NSURANCE I NFORMATION 9 Insurance and Contractholder Liabilities 13 10 Reinsurance 16 I NVESTMENTS 11 Investments 17 12 Fair Value Measurements 20 13 Accumulated Other Comprehensive Income (Loss) 23 W ORKFORCE M ANAGEMENT AND C OMPENSATION 14 Strategic Optimization Program 24 C OMPLIANCE , R EGULATION AND C ONTINGENCIES 15 Income Taxes 24 16 Contingencies and Other Matters 24 R ESULTS D ETAILS 17 Segment Information 25 8 Note 1 – Description of Business The Cigna Group ® , together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our"), is a global health company committed to creating a better future for every individual and every community. We relentlessly challenge ourselves to partner and innovate solutions for better health. Powered by our people and our brands, we advance our mission to improve the health and vitality of those we serve. Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental, and related products and services. The majority of these products and services are offered through employers and other entities, such as governmental and nongovernmental organizations, unions and associations. Cigna Healthcare ® also offers health and dental insurance products to individuals in the United States and select international markets. In addition to these operations, The Cigna Group also has certain run-off operations. A full description of our segments follows: The Evernorth Health Services ® reportable segment includes the Pharmacy Benefit Services and the Specialty and Care Services operating segments, which provide independent and coordinated health solutions and capabilities to enable the health care system to work better and help people live richer, healthier lives. Pharmacy Benefit Services drives high-quality, cost-effective pharmacy care through various services, such as drug claim adjudication, retail pharmacy network administration, benefit design consultation, drug utilization review, drug formulary management and access to our home delivery pharmacy. Specialty and Care Services provides specialty drugs for the treatment of complex and rare diseases, specialty distribution of pharmaceuticals and medical supplies, as well as clinical programs to help our clients drive better whole-person health outcomes through care services. The Cigna Healthcare reportable segment includes the U.S. Healthcare and International Health operating segments, which provide comprehensive medical and coordinated solutions to clients and customers. U.S. Healthcare provides medical plans and other benefits and solutions for insured clients, self-insured clients and individual health insurance plans. International Health provides health care solutions in our international markets, as well as health care benefits for globally mobile individuals and employees of multinational organizations. U.S. Healthcare also included the Medicare Advantage and related businesses until the divestiture of such businesses to Health Care Services Corporation ("HCSC") on March 19, 2025 (see Note 5 to the Consolidated Financial Statements for further information). Other Operations comprises the remainder of our business operations, which includes certain continuing (corporate-owned life insurance ("COLI")), run-off and other non-strategic businesses. Our run-off businesses include the (i) variable annuity reinsurance business that was effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska ("Berkshire") in 2013, (ii) settlement annuity business, and (iii) individual life insurance and annuity and retirement benefits businesses, which were sold through reinsurance agreements. Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs, and eliminations for products and services sold between segments. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Certain amounts in the Consolidated Statements of Cash Flows have been reclassified to conform to current year presentation and did not have a significant impact on our Consolidated Financial Statements. Amounts recorded in the Consolidated Financial Statements necessarily reflect management's estimates and assumptions about medical costs, investment, tax and receivable valuations, interest rates, and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment. These interim Consolidated Financial Statements are unaudited but include all adjustments (including normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the periods reported. 9 The interim Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes included in the 2024 Annual Report on Form 10-K ("2024 Form 10-K"). The Company has not included certain footnote disclosures that would substantially duplicate the disclosures contained in its 2024 Form 10-K, unless the information in those disclosures materially changed or is required by GAAP. The preparation of interim Consolidated Financial Statements necessarily relies heavily on estimates. This and other factors, including the seasonal nature of portions of the health care and related benefits business, as well as competitive and other market conditions, call for caution in estimating full-year results based on interim results of operations. Recent Accounting Pronouncements The Company's 2024 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financial statements in the future. There are no updates on significant accounting pronouncements recently adopted or recently issued and not yet adopted that have occurred since the Company filed its 2024 Form 10-K. Note 3 – Accounts Receivable, Net The following amounts were included within Accounts receivable, net: (In millions) March 31, 2025 December 31, 2024 Noninsurance customer receivables $ 13,357 $ 11,879 Pharmaceutical manufacturers receivables 11,393 10,914 Insurance customer receivables 1,488 3,199 Other receivables 691 162 Total $ 26,154 Accounts receivable, net classified as assets of businesses held for sale ( 1,927 ) Total $ 26,929 $ 24,227 These accounts receivable are reported net of our allowances of $ 5.7 billion and $ 5.0 billion as of March 31, 2025 and December 31, 2024, respectively. These allowances include contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain accounts receivable from third-party payors, discounts and claims adjustments issued to customers in the form of client credits, an allowance for current expected credit losses and other non-credit adjustments. The Company's allowance for current expected credit losses was $ 296 million as of March 31, 2025 and $ 84 million as of December 31, 2024. Accounts Receivable Factoring Facility The Company maintains an uncommitted factoring facility (the "Facility") under which certain accounts receivable may be sold on a non-recourse basis to a financial institution. The Facility began in July 2023 with an initial term of two years , followed by automatic one-year renewal terms unless terminated by either party. The Facility's total capacity is $ 1.5 billion. We sold manufacturer accounts receivable under the Facility of $ 1.4 billion and $ 1.9 billion for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, factoring fees paid were not material. As of March 31, 2025 and December 31, 2024, all sold accounts receivable had been collected from pharmaceutical manufacturers. As of March 31, 2025, all collections had been remitted to the financial institution. As of December 31, 2024, there was $ 1.0 billion of collections from pharmaceutical manufacturers that have not been remitted to the financial institution. Such amounts are recorded within Accrued expenses and other liabilities in the Consolidated Balance Sheets. Note 4 – Supplier Finance Program The Company facilitates a voluntary supplier finance program (the "Program") that provides suppliers the opportunity to sell their accounts receivable due from us (i.e., our payment obligations to the suppliers) to a financial institution, on a non-recourse basis, in order to be paid earlier than our payment terms require. As of each of March 31, 2025 and December 31, 2024, $ 1.6 billion of the Company's outstanding payment obligations were confirmed as valid within the Program by the financial institution and are reflected in Accounts payable in the Consolidated Balance Sheets. The amounts confirmed as valid for both periods are predominately associated with one supplier. 10 As of March 31, 2025, we have been informed by the financial institution that $ 563 million of the Company's outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the Program. Note 5 – Divestiture On March 19, 2025, the Company completed the sale of our Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies ® businesses (the "Disposal Group" or the "HCSC transaction"). The purchase price increased from $ 3.3 billion to $ 4.8 billion, subject to post-closing contractual adjustments, reflecting higher statutory surplus for the legal entities when conveyed to HCSC. For the three months ended March 31, 2025, the Company recognized a gain of $ 37 million pre-tax ($ 112 million after-tax) within Gain (loss) on sale of businesses in the Consolidated Statements of Income. The Company received $ 4.2 billion cash proceeds at closing. We expect receipt of the remaining $ 0.6 billion in the fourth quarter of 2025 upon HCSC's collection of amounts due from the Centers for Medicare and Medicaid Services. The Company determined that the Disposal Group met the criteria to be classified as held for sale and aggregated and classified the assets and liabilities as held for sale in our Consolidated Balance Sheets as of December 31, 2024. The assets and liabilities held for sale as of December 31, 2024 were as follows: (In millions) December 31, 2024 Cash and cash equivalents $ 1,339 Investments 1,444 Accounts receivable, net 1,927 Other assets, including Goodwill (1) 2,294 Total assets of businesses held for sale 7,004 Insurance and contractholder liabilities 1,579 All other liabilities 831 Total liabilities of businesses held for sale $ 2,410 (1) Includes Goodwill of $ 94 million as of December 31, 2024. Integration and Transaction-Related Costs In 2025 and 2024, the Company incurred transaction-related costs associated with the HCSC transaction. These costs incurred consisted primarily of certain projects to separate the Company's systems, products and services; fees for legal, advisory and other professional services; and certain employment-related costs. These costs were $ 216 million pre-tax ($ 164 million after-tax) for the three months ended March 31, 2025, compared with $ 37 million pre-tax ($ 29 million after-tax) for the three months ended March 31, 2024. Note 6 – Earnings Per Share Basic and diluted earnings per share were computed as follows: Three Months Ended March 31, 2025 March 31, 2024 (Shares in thousands, dollars in millions, except per share amounts) Basic Effect of Dilution Diluted Basic Effect of Dilution Diluted Shareholders' net income (loss) $ 1,323 $ 1,323 $ ( 277 ) $ ( 277 ) Shares: Weighted average 270,867 270,867 286,465 286,465 Common stock equivalents 2,086 2,086 — — Total shares 270,867 2,086 272,953 286,465 — 286,465 Earnings per share $ 4.88 $ ( 0.03 ) $ 4.85 $ ( 0.97 ) $ — $ ( 0.97 ) For the three months ended March 31, 2025, 2.3 million outstanding employee stock options were excluded in the computation of diluted earnings per share because their effect was anti-dilutive. For the three months ended March 31, 2024, due to the Shareholders' net loss, 8.2 million outstanding employee stock options, unvested restricted stock grants and units, and strategic performance shares were excluded in the computation of diluted earnings per share because their effect was anti-dilutive. 11 The Company held approximately 134.1 million shares of common stock in treasury as of March 31, 2025, 128.7 million shares as of December 31, 2024 and 117.8 million shares as of March 31, 2024. Note 7 – Debt Short-Term and Long-Term Debt. During the three months ended March 31, 2025, the Company redeemed at par its $ 700 million 5.685 % senior notes that were due March 2026. For more information regarding our short-term and long-term debt, see Note 7 of the Company's 2024 Form 10-K. Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including providing liquidity support if necessary under our commercial paper program discussed below. As of March 31, 2025, there were no outstanding balances under these revolving credit agreements. In April 2025, the Company replaced its previous revolving credit agreements and entered into a $ 6.5 billion, five-year revolving credit and letter of credit agreement that will mature in April 2030, with an option to extend the maturity date for additional one-year periods, subject to consent of the banks (the "Credit Agreement"). The Company can borrow up to $ 6.5 billion under the Credit Agreement for general corporate purposes, with up to $ 500 million available for issuance of letters of credit. The Credit Agreement includes an option to increase commitments up to $ 1.5 billion for a maximum total commitment of $ 8.0 billion. The Credit Agreement allows for borrowings at either a base rate, term Secured Overnight Financing Rate ("SOFR") or daily simple SOFR plus, in each case, an applicable margin based on the Company's senior unsecured credit ratings. The Credit Agreement also contains customary covenants and restrictions, including a financial covenant that the Company's leverage ratio, as defined in the Credit Agreement, may not exceed 60 %, subject to certain exceptions upon the consummation of an acquisition. Commercial Paper. Under our commercial paper program, we may issue short-term, unsecured commercial paper notes privately placed on a discounted basis through certain broker-dealers at any time not to exceed an aggregate amount of $ 6.5 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. There was no commercial paper outstanding balance as of March 31, 2025. Debt Covenants. The Company was in compliance with its debt covenants as of March 31, 2025. Interest Expense. Interest expense on long-term and short-term debt was $ 362 million for the three months ended March 31, 2025 and $ 369 million for the three months ended March 31, 2024. Note 8 – Common and Preferred Stock Dividends The following table provides details of the Company's dividend payments: Record Date Payment Date Amount per Share Total Amount Paid (in millions) 2025 March 5, 2025 March 20, 2025 $ 1.51 $ 412 2024 March 6, 2024 March 21, 2024 $ 1.40 $ 401 On April 23, 2025, the Board of Directors declared the second quarter cash dividend of $ 1.51 per share of The Cigna Group common stock to be paid on June 18, 2025 to shareholders of record on June 3, 2025. The Company currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board of Director's determination that the declaration of dividends remains in the best interests of The Cigna Group and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem relevant. 12 Note 9 – Insurance and Contractholder Liabilities A. Account Balances – Insurance and Contractholder Liabilities The Company's insurance and contractholder liabilities were comprised of the following: March 31, 2025 December 31, 2024 March 31, 2024 (In millions) Current Non-current Total Current Non-current Total Total Unpaid claims and claim expenses Cigna Healthcare $ 4,452 $ 56 $ 4,508 $ 4,932 $ 86 $ 5,018 $ 5,863 Other 172 194 366 147 144 291 260 Future policy benefits Cigna Healthcare 38 154 192 91 507 598 607 Other Operations 151 3,157 3,308 157 3,140 3,297 3,460 Contractholder deposit funds Cigna Healthcare — — — 9 115 124 141 Other Operations 348 5,903 6,251 366 5,958 6,324 6,452 Market risk benefits 30 800 830 25 760 785 891 Unearned premiums 793 45 838 753 31 784 836 Total 6,480 10,741 17,221 18,510 Insurance and contractholder liabilities classified as liabilities of businesses held for sale (1) ( 1,092 ) ( 487 ) ( 1,579 ) ( 2,081 ) Total insurance and contractholder liabilities $ 5,984 $ 10,309 $ 16,293 $ 5,388 $ 10,254 $ 15,642 $ 16,429 (1) Amounts classified as liabilities of businesses held for sale include $ 983 million of Unpaid claims, $ 408 million of Future policy benefits, $ 85 million of Unearned premiums and $ 103 million of Contractholder deposit funds as of December 31, 2024 and $ 1,378 million of Unpaid claims, $ 427 million of Future policy benefits, $ 161 million of Unearned premiums and $ 115 million of Contractholder deposit funds as of March 31, 2024. Insurance and contractholder liabilities expected to be paid within one year are classified as current. B. Unpaid Claims and Claim Expenses – Cigna Healthcare This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, expected development on reported claims, claims that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities. The total of incurred but not reported liabilities plus expected development on reported claims and reported claims in process was $ 4.4 billion at March 31, 2025 and $ 5.4 billion at March 31, 2024. The decrease was driven by the HCSC transaction. 13 Activity, net of intercompany transactions, in the unpaid claims liability for the Cigna Healthcare segment was as follows: Three Months Ended March 31, (In millions) 2025 (1) 2024 (1) Beginning balance $ 5,018 $ 5,092 Less: Reinsurance and other amounts recoverable 159 236 Beginning balance, net 4,859 4,856 Incurred costs related to: Current year 10,606 9,452 Prior years ( 222 ) ( 226 ) Total incurred 10,384 9,226 Paid costs related to: Current year 6,078 5,072 Prior years 3,472 3,352 Total paid 9,550 8,424 Less: Divestiture and other 1,323 — Ending balance, net 4,370 5,658 Add: Reinsurance and other amounts recoverable 138 205 Ending balance $ 4,508 $ 5,863 (1) Includes unpaid claims amounts classified as liabilities of businesses held for sale prior to the completion of the HCSC transaction. As of December 31, 2024, March 31, 2024 and December 31, 2023, includes $ 983 million and $ 1,378 million, $ 823 million classified as liabilities of businesses held for sale, respectively. Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certain business for which the Company administers the plan benefits without any right of offset. See Note 10 to the Consolidated Financial Statements for additional information on reinsurance. Variances in incurred costs related to prior years' unpaid claims and claim expenses that resulted from the differences between actual experience and the Company's key assumptions were as follows: Three Months Ended March 31, 2025 2024 (Dollars in millions) $ % (1) $ % (2) Actual completion factors and other $ 96 0.3 % $ 76 0.2 % Medical cost trend 126 0.3 150 0.4 Total favorable variance $ 222 0.6 % $ 226 0.6 % (1) Percentage of current year incurred costs as reported for the year ended December 31, 2024. (2) Percentage of current year incurred costs as reported for the year ended December 31, 2023. Favorable prior year development in both years primarily reflects lower than expected utilization of medical services as compared to our assumptions. C. Future Policy Benefits Cigna Healthcare Future policy benefits for the Cigna Healthcare segment were primarily related to the businesses divested to HCSC on March 19, 2025. Excluding the divestiture, changes in the future policy benefits for the three months ended March 31, 2025 and March 31, 2024 were not material. 14 Other Operations The weighted average interest rates applied and duration for future policy benefits in Other Operations, consisting of annuity and life insurance products, were as follows: As of March 31, 2025 March 31, 2024 Interest accretion rate 5.64 % 5.64 % Current discount rate 5.30 % 5.16 % Weighted average duration 10.8 years 11.3 years Obligations for annuities represent discounted periodic benefits to be paid to an individual or groups of individuals over their remaining lives. Other Operations ' traditional insurance contracts, which are in run-off, have no premium remaining to be collected; therefore, future policy benefit reserves represent the present value of expected future policy benefits, discounted using the current discount rate, and the remaining amortizable deferred profit liability. Future policy benefits for Other Operations includes deferred profit liability of $ 359 million as of March 31, 2025 and $ 379 million as of March 31, 2024. Future policy benefits excluding deferred profit liability were $ 3.0 billion as of March 31, 2025, $ 3.1 billion as of March 31, 2024, $ 2.9 billion as of December 31, 2024, and $ 3.2 billion as of December 31, 2023. Undiscounted expected future policy benefits were $ 4.3 billion as of March 31, 2025 and $ 4.4 billion as of March 31, 2024. As of March 31, 2025 and March 31, 2024, $ 0.9 billion and $ 1.0 billion, respectively, of the future policy benefit reserve was recoverable through treaties with external reinsurers. D. Contractholder Deposit Funds Contractholder deposit fund liabilities within Other Operations were $ 6.3 billion as of both as of March 31, 2025 and December 31, 2024 and $ 6.5 billion as of both March 31, 2024 and December 31, 2023. Approximately 38 % of the balance is reinsured externally. Activity in these liabilities is presented net of reinsurance in the Consolidated Statements of Cash Flows. Changes in contractholder deposit fund liabilities generally relates to withdrawals and benefit payments, partially offset by deposits and interest credited. As of March 31, 2025, the weighted average crediting rate, net amount at risk and cash surrender value for contractholder deposit fund liabilities not effectively exited through reinsurance were 3.20 %, $ 2.8 billion and $ 2.8 billion, respectively. The comparative amounts as of March 31, 2024 were 3.33 %, $ 3.0 billion and $ 2.8 billion, respectively. More than 99 % of the $ 4.0 billion liability as of both March 31, 2025 and March 31, 2024 not reinsured externally is for contracts with guaranteed interest rates of 3 % - 4 %, and approximately $ 1.2 billion as of both March 31, 2025 and March 31, 2024 represented contracts with policies at the guarantee. As of both March 31, 2025 and March 31, 2024, $ 1.2 billion was 50 - 150 basis points ("bps") above the guarantee and the remaining $ 1.6 billion represented contracts above the guarantee that pay the policyholder based on the greater of a guaranteed minimum cash value or the actual cash value. As of both March 31, 2025 and March 31, 2024, more than 90 % of these contracts have actual cash values of at least 110% of the guaranteed cash value. E. Market Risk Benefits Liabilities for market risk benefits ("MRBs") consist of variable annuity reinsurance contracts in Other Operations. These liabilities arise under annuities and riders to annuities written by ceding companies that guarantee the benefit received at death and, for a subset of policies, also provide contractholders the option, within 30 days of a policy anniversary after the appropriate waiting period, to elect minimum income payments. The Company's capital market risk exposure on variable annuity reinsurance contracts arises when the reinsured guaranteed minimum benefit exceeds the contractholder's account value in the related underlying mutual funds at the time the insurance benefit is payable under the respective contract. The Company receives and pays premium periodically based on the terms of the reinsurance agreements. 15 Market risk benefits activity was as follows: Three Months Ended March 31, (In millions) 2025 2024 Balance, beginning of year $ 785 $ 1,003 Balance, beginning of year, before the effect of nonperformance risk (own credit risk) 838 1,085 Changes due to expected run-off ( 4 ) ( 3 ) Changes due to capital markets versus expected 44 ( 113 ) Changes due to policyholder behavior versus expected — ( 14 ) Balance, end of period, before the effect of changes in nonperformance risk (own credit risk) 878 955 Nonperformance risk (own credit risk), end of period ( 48 ) ( 64 ) Balance, end of period $ 830 $ 891 Reinsured market risk benefit, end of period $ 876 $ 951 The following table presents the net amount at risk and the average attained age of contractholders (weighted by exposure) for contracts assumed by the Company. The net amount at risk is the amount the Company would have to pay to contractholders if all deaths or annuitizations occurred as of the earliest possible date in accordance with the insurance contract. The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded, as discussed further in Note 10 to the Consolidated Financial Statements. (Dollars in millions, excludes impact of reinsurance ceded) March 31, 2025 March 31, 2024 Net amount at risk $ 1,412 $ 1,441 Average attained age of contractholders (weighted by exposure) 77.0 years 77.7 years Note 10 – Reinsurance The Company's insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and to permit recovery of a portion of incurred losses. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk. The majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables primarily for expected credit losses. 16 The Company's reinsurance recoverables as of March 31, 2025 are presented at amount due by range of external credit rating and collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value: (In millions) Fair Value of Collateral Contractually Required to Meet or Exceed Carrying Value of Recoverable Collateral Provisions Exist That May Mitigate Risk of Credit Loss (1) No Collateral Total Ongoing operations A- equivalent and higher current ratings (2) $ — $ 6 $ 177 $ 183 BBB- to BBB+ equivalent current credit ratings (2) — — 63 63 Not rated 101 3 3 107 Acquisition, disposition or run-off activities BBB+ equivalent and higher current ratings (2)(3) 304 2,804 208 3,316 Not rated — 6 1 7 Total reinsurance recoverables before market risk benefits $ 405 $ 2,819 $ 452 $ 3,676 Allowance for uncollectible reinsurance ( 31 ) Market risk benefits 876 Total reinsurance recoverables (4) $ 4,521 (1) Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level. (2) Certified by a nationally recognized statistical ratings organization ("NRSRO"). (3) Comprised of six reinsurers of which 75 % is held by two reinsurers, Lincoln National Life Insurance Company and Lincoln Life and Annuity Company of New York. (4) Includes $ 146 million of current reinsurance recoverables that are reported in Other current assets. The Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance transaction in 2013. Variable annuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk benefits as discussed in Note 9 to the Consolidated Financial Statements. Berkshire reinsured 100 % of the Company's future cash flows in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit, with approximately $ 3.0 billion remaining at March 31, 2025. As a result of the reinsurance transaction, amounts payable are offset by a corresponding reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit. As of both March 31, 2025 and 2024, market risk benefits (shown in the table net of nonperformance risk as of March 31, 2025) were predominantly reinsured by Berkshire, which is rated AA+ by an NRSRO. As of March 31, 2025, approximately 90 % of the Berkshire recoverable is secured by assets in a trust. Note 11 – Investments The following table summarizes the Company's investments by category and current or long-term classification: March 31, 2025 December 31, 2024 (In millions) Current Long-Term Total Current Long-Term Total Debt securities $ 454 $ 7,761 $ 8,215 $ 463 $ 8,960 $ 9,423 Equity securities 11 548 559 7 554 561 Commercial mortgage loans 66 1,228 1,294 108 1,243 1,351 Policy loans — 1,128 1,128 — 1,156 1,156 Other long-term investments — 4,685 4,685 — 4,576 4,576 Short-term investments 196 — 196 170 — 170 Total $ 748 $ 16,489 $ 17,237 Investments classified as assets of businesses held for sale (1) ( 83 ) ( 1,361 ) ( 1,444 ) Investments per Consolidated Balance Sheets $ 727 $ 15,350 $ 16,077 $ 665 $ 15,128 $ 15,793 (1) Investments related to the HCSC transaction that were held for sale as of December 31, 2024. These investments were primarily comprised of debt securities. 17 A. Investment Portfolio Debt Securities The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of March 31, 2025: (In millions) Amortized Cost Fair Value Due in one year or less $ 622 $ 555 Due after one year through five years 3,334 3,224 Due after five years through ten years 2,388 2,270 Due after ten years 2,036 1,837 Mortgage and other asset-backed securities 357 329 Total $ 8,737 $ 8,215 Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepay obligations, with or without penalties. Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below: (In millions) Amortized Cost Allowance for Credit Loss Unrealized Appreciation Unrealized Depreciation Fair Value March 31, 2025 Federal government and agency $ 211 $ — $ 16 $ ( 4 ) $ 223 State and local government 24 — 1 — 25 Foreign government 359 — 8 ( 9 ) 358 Corporate 7,786 ( 107 ) 116 ( 515 ) 7,280 Mortgage and other asset-backed 357 — 2 ( 30 ) 329 Total $ 8,737 $ ( 107 ) $ 143 $ ( 558 ) $ 8,215 December 31, 2024 Federal government and agency $ 276 $ — $ 14 $ ( 9 ) $ 281 State and local government 37 — 1 ( 1 ) 37 Foreign government 350 — 5 ( 11 ) 344 Corporate 9,091 ( 111 ) 102 ( 659 ) 8,423 Mortgage and other asset-backed 371 — 1 ( 34 ) 338 Total $ 10,125 $ ( 111 ) $ 123 $ ( 714 ) $ 9,423 Review of Declines in Fair Value. Management reviews debt securities in an unrealized loss position to determine whether a credit loss allowance is needed based on criteria that include severity of decline; financial health and specific prospects of the issuer; and changes in the regulatory, economic or general market environment of the issuer's industry or geographic region. The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded (by investment grade and the length of time these securities have been in an unrealized loss position). Unrealized depreciation on these debt securities is primarily due to declines in fair value resulting from increasing interest rates since these securities were purchased. March 31, 2025 December 31, 2024 (Dollars in millions) Fair Value Amortized Cost Unrealized Depreciation Number of Issues Fair Value Amortized Cost Unrealized Depreciation Number of Issues One year or less Investment grade $ 567 $ 573 $ ( 6 ) 353 $ 1,203 $ 1,227 $ ( 24 ) 545 Below investment grade 220 228 ( 8 ) 802 245 250 ( 5 ) 739 More than one year Investment grade 3,818 4,319 ( 501 ) 1,080 4,687 5,319 ( 632 ) 1,297 Below investment grade 325 368 ( 43 ) 107 416 469 ( 53 ) 123 Total $ 4,930 $ 5,488 $ ( 558 ) 2,342 $ 6,551 $ 7,265 $ ( 714 ) 2,704 18 Equity Securities The following table provides the values of the Company's equity security investments: March 31, 2025 December 31, 2024 (In millions) Cost Carrying Value Cost Carrying Value Equity securities with readily determinable fair values $ 637 $ 38 $ 635 $ 37 Equity securities with no readily determinable fair value 3,217 521 3,215 524 Total $ 3,854 $ 559 $ 3,850 $ 561 Commercial Mortgage Loans Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are generally issued at fixed rates of interest and are secured by high-quality, primarily completed and substantially leased operating properties. The Company regularly evaluates and monitors credit risk from the initial mortgage loan underwriting and throughout the investment holding period. The annual portfolio review performed in the second quarter of 2024 confirmed ongoing strong overall credit quality in line with the previous year's results. For more information on the Company's accounting policies and methodologies regarding these investments, see Note 11 in the Company's 2024 Form 10-K. The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio: (Dollars in millions) March 31, 2025 December 31, 2024 Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio Below 60% $ 503 2.05 $ 547 2.07 60% to 79% 628 1.71 595 1.83 80% to 100% 163 0.88 209 0.51 Total $ 1,294 1.72 69 % $ 1,351 1.70 69 % Other Long-Term Investments Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flow estimates indicate that the carrying value may not be recoverable. Additionally, statutory and other restricted deposits and foreign currency swaps carried at fair value are reported in the table below as Other. The following table provides the carrying value information for these investments: Carrying Value as of (In millions) March 31, 2025 December 31, 2024 Real estate investments $ 1,808 $ 1,763 Securities partnerships 2,660 2,587 Other 217 226 Total $ 4,685 $ 4,576 19 B. Derivative Financial Instruments The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities. The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt. As of March 31, 2025, the notional value of interest rate swap contracts increased to $ 3.0 billion compared to $ 2.7 billion as of December 31, 2024. There were no other material changes to the Company's derivative financial instruments during the three months ended March 31, 2025. Please refer to the Company's 2024 Form 10-K for further discussion of the types of derivative financial instruments and associated accounting policies. The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated Financial Statements as of March 31, 2025 and December 31, 2024. The gross fair values of our derivative financial instruments are presented in Note 12 to the Consolidated Financial Statements. C. Investment Gains and Losses Net investment losses before income taxes were $ 2 million for the three months ended March 31, 2025 versus $ 1,836 million for the three months ended March 31, 2024. This decrease was primarily driven by the impairment of equity securities in 2024. These amounts exclude investment gains and losses attributed to the Company's separate accounts because those gains and losses generally accrue directly to separate account policyholders. Note 12 – Fair Value Measurements For a description of the policies, methods and assumptions that are used to estimate fair value and determine the fair value hierarchy for each class of financial instruments, see Note 12 in the Company's 2024 Form 10-K. A. Financial Assets and Financial Liabilities Carried at Fair Value The following table provides information about the Company's financial assets and liabilities carried at fair value. Further information regarding insurance assets and liabilities carried at fair value is provided in Note 9E to the Consolidated Financial Statements. Separate account assets are also recorded at fair value on the Company's Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generally accrue directly to contractholders. (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 Financial assets at fair value Debt securities Federal government and agency $ 104 $ 165 $ 119 $ 116 $ — $ — $ 223 $ 281 State and local government — — 25 37 — — 25 37 Foreign government — — 358 344 — — 358 344 Corporate — — 6,951 8,049 329 374 7,280 8,423 Mortgage and other asset-backed — — 285 295 44 43 329 338 Total debt securities 104 165 7,738 8,841 373 417 8,215 9,423 Equity securities (1) 1 1 37 36 — — 38 37 Short-term investments — — 196 170 — — 196 170 Derivative assets — — 153 168 — — 153 168 Financial liabilities at fair value Derivative liabilities $ — $ — $ 2 $ 1 $ — $ — $ 2 $ 1 (1) Excludes certain equity securities that have no readily determinable fair value. 20 Level 3 Financial Assets and Financial Liabilities Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement. Unobservable inputs reflect the Company's best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. Additionally, as discussed in Note 9E in the Company's 2024 Form 10-K, the Company classifies variable annuity assets and liabilities in Level 3 of the fair value hierarchy. Quantitative Information about Unobservable Inputs The significant unobservable input used to value our corporate and government debt securities and mortgage and other asset-backed securities is an adjustment for liquidity. This adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security. The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and used in pricing these debt securities. The range and weighted average basis point amounts for liquidity reflect the Company's best estimates of the unobservable adjustments a market participant would make to calculate these fair values. An increase in liquidity spread adjustments would result in a lower fair value measurement, while a decrease would result in a higher fair value measurement. Fair Value as of Unobservable Adjustment Range (Weighted Average by Quantity) as of (Fair value in millions) March 31, 2025 December 31, 2024 Unobservable Input March 31, 2025 March 31, 2025 December 31, 2024 Debt securities Corporate $ 329 $ 373 Liquidity 5 - 1475 ( 300 ) bps 60 - 1520 ( 370 ) bps Mortgage and other asset-backed securities 44 43 Liquidity 105 - 575 ( 290 ) bps 100 - 550 ( 280 ) bps Other debt securities — 1 Total Level 3 debt securities $ 373 $ 417 Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value The following table summarizes the changes in financial assets and financial liabilities classified in Level 3. Gains and losses reported in the table may include net changes in fair value that are attributable to both observable and unobservable inputs. Three Months Ended March 31, (In millions) 2025 2024 Debt securities Beginning balance $ 417 $ 447 Losses included in Shareholders' net income (loss) ( 10 ) ( 21 ) Gains (losses) included in Other comprehensive loss 7 ( 3 ) Purchases, sales and settlements Purchases 2 — Settlements ( 31 ) ( 14 ) Total purchases, sales and settlements ( 29 ) ( 14 ) Transfers into / (out of) Level 3 Transfers into Level 3 18 16 Transfers out of Level 3 ( 30 ) ( 3 ) Total transfers into / (out of) Level 3 ( 12 ) 13 Ending balance $ 373 $ 422 Total losses included in Shareholders' net income (loss) attributable to instruments held at the reporting date $ ( 13 ) $ ( 21 ) Change in unrealized gain or (loss) included in Other comprehensive loss for assets held at the end of the reporting period $ 3 $ ( 4 ) Total gains and losses included in Shareholders' net income (loss) in the tables above are reflected in the Consolidated Statements of Income as Net investment losses and Net investment income. Gains and losses included in Other comprehensive loss, net of tax in the tables above are reflected in Net unrealized (depreciation) appreciation on securities and derivatives in the Consolidated Statements of Comprehensive Income. 21 Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company's best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Market activity typically decreases during periods of economic uncertainty, and this decrease in activity reduces the availability of market observable data. As a result, the level of unobservable judgment that must be applied to the pricing of certain instruments increases and is typically observed through the widening of liquidity spreads. Transfers between Level 2 and Level 3 during 2025 and 2024 primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors. See discussion under Quantitative Information about Unobservable Inputs above for more information. Separate Accounts The investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company's Consolidated Statements of Income and Cash Flows. The separate account activity for the three months ended March 31, 2025 and 2024 was primarily driven by changes in the market values of the underlying separate account investments. Fair values of Separate account assets were as follows: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (In millions) March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 Guaranteed separate accounts (See Note 16) $ 227 $ 231 $ 328 $ 345 $ — $ — $ 555 $ 576 Non-guaranteed separate accounts (1) 275 267 5,559 5,575 255 228 6,089 6,070 Subtotal $ 502 $ 498 $ 5,887 $ 5,920 $ 255 $ 228 6,644 6,646 Non-guaranteed separate accounts priced at net asset value as a practical expedient (1) 633 632 Total $ 7,277 $ 7,278 (1) Non-guaranteed separate accounts include $ 3.8 billion as of each of March 31, 2025 and December 31, 2024 in assets supporting the Company's pension plans, including $ 0.2 billion classified in Level 3 as of each of March 31, 2025 and December 31, 2024, respectively. Non-guaranteed separate accounts are primarily comprised of securities partnerships, real estate and real estate funds. Separate account assets classified in Level 3 primarily support the Company's pension plans and include certain newly issued, privately placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans. Activity, including transfers into and out of Level 3, was not material for the three months ended March 31, 2025 or 2024. B. Assets and Liabilities Measured at Fair Value under Certain Conditions Some financial assets and liabilities are not carried at fair value, such as commercial mortgage loans that are carried at unpaid principal, investment real estate that is carried at depreciated cost and equity securities with no readily determinable fair value when there are no observable market transactions. However, these financial assets and liabilities may be measured using fair value under certain conditions, such as when investments become impaired and are written down to their fair value, or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value. For the three months ended March 31, 2025, impairments recognized requiring the assets and liabilities described above to be measured at fair value were not material. In the first quarter of 2024, we determined our investment in VillageMD was impaired and recorded a $ 1.8 billion loss in Net investment losses in the Company's Consolidated Statements of Income. Observable price changes for equity securities with no readily determinable fair value were not material for the three months ended March 31, 2025 and March 31, 2024. 22 C. Fair Value Disclosures for Financial Instruments Not Carried at Fair Value The following table includes the Company's financial instruments not recorded at fair value but for which fair value disclosure is required. In addition to universal life products and finance leases, financial instruments that are carried in the Company's Consolidated Balance Sheets at amounts that approximate fair value are excluded from the following table. Classification in Fair Value Hierarchy March 31, 2025 December 31, 2024 (In millions) Fair Value Carrying Value Fair Value Carrying Value Commercial mortgage loans Level 3 $ 1,228 $ 1,294 $ 1,256 $ 1,351 Long-term debt, including current maturities, excluding finance leases Level 2 $ 28,149 $ 30,371 $ 28,392 $ 31,008 Note 13 – Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) ("AOCI") includes net unrealized (depreciation) appreciation on securities and derivatives, change in discount rate and instrument-specific credit risk for certain long-duration insurance contractholder liabilities (see Note 9 to the Consolidated Financial Statements), foreign currency translation, and the net postretirement benefits liability adjustment. AOCI includes the Company's share from unconsolidated entities reported on the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders' net income (loss) in the same period that the related pre-tax AOCI reclassifications are recognized. Shareholders' other comprehensive loss, net of tax, for the three months ended March 31, 2025 and March 31, 2024 is primarily attributable to the change in discount rates for certain long-duration liabilities and unrealized changes in the market values of securities and derivatives, including the impacts from unconsolidated entities reported on the equity method. Changes in the components of AOCI were as follows: Three Months Ended March 31, (In millions) 2025 2024 Securities and Derivatives Beginning balance $ 832 $ 171 Unrealized (depreciation) appreciation on securities and derivatives, before reclassification, net of tax benefit (expense) of $ 49 and $( 39 ), respectively ( 134 ) 104 Amounts reclassified to Shareholders' net income (loss), net of tax (benefit) of $( 9 ) and $( 5 ), respectively 34 17 Other comprehensive (loss) income, net of tax ( 100 ) 121 Ending balance $ 732 $ 292 Net long-duration insurance and contractholder liabilities measurement adjustments Beginning balance $ ( 2,038 ) $ ( 971 ) Net current period change in discount rate for certain long-duration liabilities, before reclassification, net of tax benefit of $ 33 and $ 186 , respectively ( 108 ) ( 546 ) Amounts reclassified to Shareholders' net income (loss), net of tax expense of $ 16 and $ — , respectively ( 56 ) — Net current period change in discount rate for certain long-duration liabilities, net of tax benefit of $ 49 and $ 186 , respectively ( 164 ) ( 546 ) Net current period change in instrument-specific credit risk for market risk benefits, net of tax benefit of $ 1 and $ 4 , respectively ( 4 ) ( 14 ) Other comprehensive (loss), net of tax ( 168 ) ( 560 ) Ending balance $ ( 2,206 ) $ ( 1,531 ) Translation of foreign currencies Beginning balance $ ( 198 ) $ ( 149 ) Net translation of foreign currencies, before reclassification, net of tax (expense) of $( 6 ) and $( 2 ), respectively 13 ( 26 ) Ending balance $ ( 185 ) $ ( 175 ) Postretirement benefits liability Beginning balance $ ( 937 ) $ ( 915 ) Amounts reclassified to Shareholders' net income, net of tax (benefit) of $( 2 ) and $( 3 ), respectively 6 5 Ending balance $ ( 931 ) $ ( 910 ) Total Accumulated other comprehensive loss Beginning balance $ ( 2,341 ) $ ( 1,864 ) Shareholders' other comprehensive (loss), net of tax benefit of $ 82 and $ 141 , respectively ( 249 ) ( 460 ) Ending balance $ ( 2,590 ) $ ( 2,324 ) 23 Note 14 – Strategic Optimization Program In 2025, the Company commenced an enterprise-wide initiative to evolve our business and deliver a more efficient and improved experience for our patients, providers and customers. This program is expected to continue through December 2026 and include severance and other employee costs, accelerated asset amortization, and the operating results of certain small non-strategic businesses that we plan to discontinue. As we continue to evaluate additional opportunities to improve the overall efficiency and effectiveness of our operations, we anticipate future charges. During the three months ended March 31, 2025, we reported total costs of $ 215 million, pre-tax ($ 163 million, after-tax) associated with this initiative, including a charge in Selling, general and administrative expenses of $ 198 million, pre-tax ($ 150 million, after-tax) that was primarily associated with employee severance. The remainder reflects the operating results of certain non-strategic businesses. We expect substantially all of the accrued liability to be paid by the end of 2025. The following table summarizes a roll forward of the accrued liability recorded in Accrued expenses and other liabilities during the three months ended March 31, 2025: (In millions) Balance, December 31, 2024 $ — First quarter 2025 charge 171 2025 payments ( 10 ) Balance, March 31, 2025 $ 161 Note 15 – Income Taxes Income Tax Expense The 14.5 % effective tax rate for the three months ended March 31, 2025 was lower than the 368.4 % rate for the three months ended March 31, 2024 primarily due to the absence of a valuation allowance related to the impairment of equity securities in 2024, partially offset by the absence of tax benefits recorded in 2024 related to the release of tax reserves following favorable state audit resolutions and the impact related to the HCSC transaction. As of March 31, 2025, we had approximately $ 856 million in deferred tax assets ("DTAs") associated with the impairment of equity securities as well as unrealized investment losses. A valuation allowance of $ 636 million, of which $ 427 million was established in the three months ended March 31, 2024, drove the higher effective tax rate and was almost entirely related to the impairment of equity securities discussed in Note 11 to the Consolidated Financial Statements. We have determined that a valuation allowance against the remaining DTAs is not currently required based on the Company's loss carryback capacity and ability and intent to hold certain securities until recovery. We continue to monitor and evaluate the need for any additional valuation allowance. Note 16 – Contingencies and Other Matters The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business. A. Financial Guarantees: Retiree and Life Insurance Benefits The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business has the right to redirect the management of the related assets to provide for benefit payments. As of March 31, 2025, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately $ 410 million. An additional liability is established if management believes that the Company will be required to make payments under the guarantees; there were no additional liabilities required for these guarantees, net of reinsurance, as of March 31, 2025. Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy. The Company does not expect that these financial guarantees will have a material effect on the Company's consolidated results of operations, liquidity or financial condition. 24 B. Certain Other Guarantees The Company had indemnification obligations as of March 31, 2025 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, filing of tax returns, compliance with laws or regulations, or identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a stated dollar amount or a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were no recorded liabilities for these indemnification obligations as of March 31, 2025. C. Guaranty Fund Assessments The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws. The Company's exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions. There were no material charges or credits resulting from existing or new guaranty fund assessments for the three months ended March 31, 2025. D. Legal and Regulatory Matters The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator's filing of a complaint under court seal, and other legal matters arising, for the most part, in the ordinary course of managing a global health services business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions. Note 17 – Segment Information See Note 1 to the Consolidated Financial Statements for a description of our segments. A description of our basis for reporting segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy and care services transactions between the Evernorth Health Services and Cigna Healthcare segments. The Chairman and Chief Executive Officer is the chief operating decision maker ("CODM") responsible for making decisions about resources to be allocated to the segment and assessing its performance. The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management, including the CODM, believes these metrics reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability to enable resource allocation decisions. We define pre-tax adjusted income (loss) from operations as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net investment gains/losses, amortization of acquired intangible assets and special items. The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management, including the CODM, believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management, including the CODM, believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management, including the CODM, believes they are not indicative of past or future underlying performance of the business. The Company does not report total assets by segment because this is not a metric used by the CODM to allocate resources or evaluate segment performance. 25 The following table presents the special items charges (benefits) recorded by the Company, as well as the respective financial statement line items impacted: Three Months Ended March 31, 2025 2024 (In millions) Pre-tax After-tax Pre-tax After-tax Integration and transaction-related costs (Selling, general and administrative expenses) $ 216 $ 164 $ 37 $ 29 Strategic optimization program (primarily Selling, general and administrative expenses) 215 163 — — Deferred tax expenses, net (Income taxes, less amount attributable to noncontrolling interests) — 17 — 17 (Gain) loss on sale of businesses ( 41 ) ( 115 ) 19 ( 43 ) Total impact from special items $ 390 $ 229 $ 56 $ 3 Summarized segment financial information was as follows: (In millions) Evernorth Health Services Cigna Healthcare Other Operations Corporate and Eliminations Total Three months ended March 31, 2025 Revenues from external customers $ 52,002 $ 13,168 $ 94 $ — $ 65,264 Intersegment revenues 1,648 1,231 12 ( 2,891 ) Net investment income 31 133 69 5 238 Total revenues 53,681 14,532 175 ( 2,886 ) 65,502 Net investment results from certain equity method investments — ( 50 ) — — ( 50 ) Adjusted revenues $ 53,681 $ 14,482 $ 175 $ ( 2,886 ) $ 65,452 Pharmacy and other service costs 51,121 — Medical costs — 10,385 Selling, general and administrative expenses 1,024 2,812 Other segment items (1) Interest (expense) and other — 2 Less: Income attributable to noncontrolling interests 102 — Pre-tax adjusted income (loss) from operations 1,434 1,287 — ( 411 ) 2,310 Income (loss) before income taxes $ 1,108 $ 1,364 $ ( 20 ) $ ( 804 ) $ 1,648 Pre-tax adjustments to reconcile to adjusted income from operations (Income) attributable to noncontrolling interests ( 102 ) — — — ( 102 ) Net investment (gains) losses (2) ( 4 ) ( 47 ) 3 — ( 48 ) Amortization of acquired intangible assets 415 7 — — 422 Special items Integration and transaction-related costs — — — 216 216 Strategic optimization program 21 — 17 177 215 (Gain) on sale of businesses ( 4 ) ( 37 ) — — ( 41 ) Pre-tax adjusted income (loss) from operations $ 1,434 $ 1,287 $ — $ ( 411 ) $ 2,310 Other segment information Depreciation and amortization $ 584 $ 83 $ 2 $ 5 $ 674 (1) Other segment items represent the difference between segment adjusted revenues less significant segment expenses and pre-tax adjusted income (loss) from operations, and they do not represent significant segment items relative to the CODM's review and oversight. (2) Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income. 26 (In millions) Evernorth Health Services Cigna Healthcare Other Operations Corporate and Eliminations Total Three months ended March 31, 2024 Revenues from external customers $ 44,886 $ 12,012 $ 66 $ 1 $ 56,965 Intersegment revenues 1,281 1,124 25 ( 2,430 ) Net investment income 59 149 75 7 290 Total revenues 46,226 13,285 166 ( 2,422 ) 57,255 Net investment results from certain equity method investments — ( 8 ) — — ( 8 ) Adjusted revenues $ 46,226 $ 13,277 $ 166 $ ( 2,422 ) $ 57,247 Pharmacy and other service costs 43,838 — Medical costs — 9,219 Selling, general and administrative expenses 951 2,720 Other segment items (1) Interest (expense) and other — 2 Less: income attributable to noncontrolling interests 77 — Pre-tax adjusted income (loss) from operations 1,360 1,340 18 ( 409 ) 2,309 (Loss) income before income taxes $ ( 436 ) $ 943 $ 18 $ ( 446 ) $ 79 Pre-tax adjustments to reconcile to adjusted income from operations (Income) attributable to noncontrolling interests ( 77 ) — — — ( 77 ) Net investment losses (2) 1,456 372 — — 1,828 Amortization of acquired intangible assets 417 6 — — 423 Special items Integration and transaction-related costs — — — 37 37 Loss on sale of businesses — 19 — — 19 Pre-tax adjusted income (loss) from operations $ 1,360 $ 1,340 $ 18 $ ( 409 ) $ 2,309 Other segment information Depreciation and amortization $ 606 $ 124 $ 1 $ 10 $ 741 (1) Other segment items represent the difference between segment adjusted revenues less significant segment expenses and pre-tax adjusted income (loss) from operations, and they do not represent significant segment items relative to the CODM's review and oversight. (2) Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income. 27 Revenue from external customers includes Pharmacy revenues, Premiums and Fees and other revenues. The following table presents these revenues by product, premium and service type: Three Months Ended March 31, (In millions) 2025 2024 Products (Pharmacy revenues) (ASC 606) Network revenues $ 28,212 $ 24,166 Home delivery and specialty revenues 18,937 16,458 Other revenues 3,077 2,546 Total Evernorth Health Services 50,226 43,170 Other Operations 13 17 Corporate and eliminations ( 1,606 ) ( 1,151 ) Total Pharmacy revenues 48,633 42,036 Insurance premiums (ASC 944) Cigna Healthcare U.S. Healthcare Employer insured 4,688 4,393 Medicare Advantage 2,363 2,287 Stop loss 1,868 1,668 Individual and Family Plans 859 1,040 Other 1,872 1,258 U.S. Healthcare 11,650 10,646 International Health 978 885 Total Cigna Healthcare 12,628 11,531 Other Operations 81 48 Corporate and eliminations 27 24 Total Premiums 12,736 11,603 Services (Fees) (ASC 606) and Other revenues (1) Evernorth Health Services 3,424 2,997 Cigna Healthcare 1,771 1,605 Other Operations 12 26 Corporate and eliminations ( 1,312 ) ( 1,302 ) Total Fees and other revenues (1) 3,895 3,326 Total revenues from external customers $ 65,264 $ 56,965 (1) Other revenues for the three months ended March 31, 2025 and 2024 were $ 162 million and $ 90 million, respectively. Financial and performance guarantees. Evernorth Health Services may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive compensation if we fail to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period, and the Company defers revenue for any estimated payouts within Accrued expenses and other liabilities (current). These estimates are adjusted and paid following the end of the annual guarantee period. Historically, adjustments to original estimates have not been material. This guarantee liability was $ 1.9 billion as of both March 31, 2025 and December 31, 2024.