What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-15 · 294 added, 391 removed, 1245 unchanged (35% of the section changed)

60 unchanged sentences

Interest expense 660 493 401

Other expense (income), net 137 68 ( 532 )

Income before income taxes and equity in net earnings 3,383 3,568 3,354

Other expense, net 181 137 68

Income before income taxes and equity in net losses 1,721 3,383 3,568

Provision for income taxes 413 836 762

Equity in net (losses) earnings ( 63 ) ( 4 ) 65

Equity in net losses ( 94 ) ( 63 ) ( 4 )

Net income $ 1,214 $ 2,484 $ 2,802

Net loss (income) attributable to noncontrolling interests 5 4 ( 1 )

Net (income) loss attributable to noncontrolling interests ( 7 ) 5 4

Net income attributable to Humana $ 1,207 $ 2,489 $ 2,806

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Net income attributable to Humana $ 1,207 $ 2,489 $ 2,806

Other comprehensive income (loss):

Change in gross unrealized investment gains (losses) 372 ( 1,819 ) ( 356 )

Other comprehensive (loss) income:

Change in gross unrealized investment (losses) gains ( 62 ) 372 ( 1,819 )

Effect of income taxes 15 ( 85 ) 418

Total change in unrealized investment

gains (losses), net of tax 287 ( 1,401 ) ( 275 )

(losses) gains, net of tax ( 47 ) 287 ( 1,401 )

Reclassification adjustment for net realized

losses (gains) included in investment income 25 72 ( 103 )

(gains) losses included in investment income ( 27 ) 25 72

Effect of income taxes 6 ( 7 ) ( 17 )

Total reclassification adjustment, net of tax ( 21 ) 18 55

Other comprehensive income (loss), net of tax 305 ( 1,346 ) ( 355 )

Comprehensive income attributable to equity method

investments — — 6

Other comprehensive (loss) income, net of tax ( 68 ) 305 ( 1,346 )

Comprehensive income attributable to Humana $ 1,139 $ 2,794 $ 1,460

12 unchanged sentences

Net income 2,806 2,806 ( 4 ) 2,802

Distribution to noncontrolling interest holders, net ( 1 ) ( 1 )

Sale of Gentiva Hospice ( 11 ) ( 11 )

Acquisition 52 52

8 unchanged sentences

Net income 2,489 2,489 ( 5 ) 2,484

Distribution to noncontrolling interest holders, net — ( 1 ) ( 1 )

Sale of Gentiva Hospice — ( 11 ) ( 11 )

Distribution from noncontrolling interest holders, net — 7 7

Acquisition — ( 5 ) ( 5 )

Other comprehensive loss ( 1,346 ) ( 1,346 ) ( 1,346 )

Other comprehensive income 305 305 305

Common stock repurchases — — ( 1,586 ) ( 1,586 ) ( 1,586 )

7 unchanged sentences

Distribution from noncontrolling interest holders, net — 7 7

Acquisition — ( 5 ) ( 5 )

Other comprehensive income 305 305 305

Other comprehensive loss ( 68 ) ( 68 ) ( 68 )

Common stock repurchases — — ( 803 ) ( 803 ) ( 803 )

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Restricted stock unit vesting 29 — ( 90 ) 90 — —

Stock option exercises — — 5 4 9 9

Balances, December 31, 2024 198,719 $ 33 $ 3,463 $ 28,317 $ ( 1,067 ) $ ( 14,371 ) $ 16,375 $ 70 $ 16,445

8 unchanged sentences

Gain on sale of Gentiva Hospice — — ( 237 )

Loss on investment securities, net 54 205 130

Gain on Kindred at Home equity method investment — — ( 1,129 )

Equity in net losses (earnings) 63 4 ( 65 )

(Gain) loss on investment securities, net ( 24 ) 54 205

Equity in net losses 94 63 4

Stock-based compensation 207 175 216

2 unchanged sentences

Impairment of property and equipment 237 206 248

Impairment of intangible assets 55 — —

Impairment of indefinite-lived intangible assets 200 55 —

Deferred income taxes ( 192 ) ( 167 ) ( 100 )

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Proceeds from sale of property and equipment 7 210 17

Changes in securities lending collateral receivable ( 418 ) — —

Purchases of investment securities ( 8,185 ) ( 7,552 ) ( 6,049 )

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Proceeds from sales of investment securities 3,376 3,795 2,434

Other ( 50 ) — —

Net cash used in investing activities ( 2,952 ) ( 3,492 ) ( 1,006 )

Cash flows from financing activities

Receipts (withdrawals) from contract deposits, net 828 1,993 ( 306 )

(Payments) receipts from contract deposits, net ( 1,933 ) 828 1,993

Proceeds from issuance of senior notes, net 2,232 2,544 1,982

Repayment of senior notes ( 1,107 ) ( 1,832 ) ( 1,000 )

Proceeds (repayments) from issuance of commercial paper, net 211 ( 376 ) 352

(Repayments) proceeds from issuance of commercial paper, net ( 907 ) 211 ( 376 )

Proceeds from short-term borrowings — 100 —

Repayment of short-term borrowings — ( 100 ) —

Proceeds from term loan — — 2,500

Repayment of term loan — ( 500 ) ( 2,000 )

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Dividends paid ( 431 ) ( 431 ) ( 392 )

Changes in securities lending payable 418 — —

Changes in rebate factor payable 123 — —

Change in book overdraft 50 55 ( 28 )

Other, net ( 108 ) ( 151 ) 9

Net cash (used in) provided by financing activities ( 856 ) ( 1,914 ) 3,015

Net cash used in financing activities ( 2,487 ) ( 856 ) ( 1,914 )

(Decrease) increase in cash and cash equivalents ( 2,473 ) ( 367 ) 1,667

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Noncontrolling interests acquired — 5 ( 53 )

Remeasured existing Kindred at Home equity method investment — — ( 2,360 )

Cash paid for acquired businesses, net of cash acquired $ 89 $ 233 $ 337

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These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates.

Employer Group Commercial Medical Products Business Exit

In February 2023, we announced our planned exit from the Employer Group Commercial Medical Products business, which includes all fully insured, self-funded and Federal Employee Health Benefit medical plans, as well as associated wellness and rewards programs.

No other Humana health plan offerings are materially affected.

Following a strategic review, we determined the Employer Group Commercial Medical Products business was no longer positioned to sustainably meet the needs of commercial members over the long term or support our long-term strategic plans.

We anticipate the exit of this line of business to be finalized in the first half of 2025.

Value Creation Initiatives and Impairment Charges

In order to create capacity to fund growth and investment in our Medicare Advantage business and further expansion of our healthcare services capabilities beginning in 2022, we committed to drive additional value for the enterprise through cost saving, productivity initiatives, and value acceleration from previous investments.

As a result of these initiatives, we recorded charges of $ 436 million and $ 473 million in 2023 and 2022, respectively, within operating costs in the consolidated statements of income.

These charges were recorded at the corporate level and not allocated to the segments.

We expect to incur additional charges through the end of 2024.

The value creation initiative charges primarily relate to $ 237 million and $ 248 million in asset impairments in 2023 and 2022, respectively, as well as $ 199 million and $ 116 million in severance charges in connection with workforce optimization in 2023 and 2022, respectively.

The remainder of the 2022 charges primarily relate to external consulting fees.

During 2023, we also recorded severance charges of $ 70 million within operating costs in our consolidated statement of income as a result of our exit from the Employer Group Commercial Medical Products business and impairment charges of $ 91 million, including $ 55 million relating to indefinite-lived intangibles.

The indefinite-

As a result of these initiatives, we recorded charges of $ 281 million, $ 436 million and $ 473 million in 2024, 2023 and 2022, respectively, primarily within operating costs in the consolidated statements of income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

lived intangibles impairment charges were included within operating costs in our consolidated statement of income with the remaining impairment charges included within investment income.

The value creation initiative charges primarily relate to $ 256 million, $ 237 million and $ 248 million in asset impairments in 2024, 2023 and 2022, respectively, as well as $ 25 million, $ 199 million and $ 116 million in severance charges in connection with workforce optimization in 2024, 2023 and 2022, respectively.

The remainder of the 2022 charges primarily relate to external consulting fees.

In addition, we recorded impairment charges of $ 200 million, relating to indefinite-lived intangible assets, in 2024 and $ 91 million, including $ 55 million relating to indefinite-lived intangible assets, in 2023.

There was no material impairment charge recorded in 2022.

The indefinite-lived intangible asset impairment charges were included within operating costs in our consolidated statements of income with the remaining impairment charges included within investment income.

Further, we recorded severance charges of $ 70 million in 2023 within operating costs in our consolidated statement of income as a result of our exit from the Employer Group Commercial Medical Products business.

The emergence and spread of the novel coronavirus, or COVID-19, beginning in the first quarter of 2020 has impacted our business.

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During 2022, we experienced lower overall utilization of the healthcare system than anticipated, as the reduction in COVID-19 utilization following the increased incidence associated with the Omicron variant outpaced the increase in non-COVID-19 utilization.

The significant disruption in utilization during 2020 also impacted our ability to implement clinical initiatives to manage health care costs and chronic conditions of our members, and appropriately document their risk profiles, and, as such, significantly affected our 2021 revenue under the risk adjustment payment model for Medicare Advantage plans.

Finally, changes in utilization patterns and actions taken in 2021 as a result of the COVID-19 pandemic, including the suspension of certain financial recovery programs for a period of time and shifting the timing of claim payments and provider capitation surplus payments, impacted our claim reserve development and operating cash flows for 2021.

The COVID-19 National Emergency declared in 2020 was terminated on April 10, 2023 and the Public Health Emergency expired on May 11, 2023.

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Investment Securities

Investment securities, which consist of debt and equity securities, are stated at fair value.

Investment securities, which consist of debt securities, are stated at fair value.

Our debt securities have been categorized as available for sale.

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To the extent we have the intent to sell the debt security or it is more likely than not we will be required to sell the debt security before recovery of our amortized cost basis, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Potential expected credit loss impairment is considered using a variety of factors, including the extent to which the fair value has been less than cost;

adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a debt security;

changes in the quality of the debt

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

security's credit enhancement;

changes in the quality of the debt security's credit enhancement;

payment structure of the debt security;

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The expected credit loss cannot exceed the full difference between the amortized cost basis and the fair value.

We participate in a securities lending program to optimize investment income.

We loan certain investment securities for short periods of time in exchange for collateral initially equal to at least 102 % of the fair value of the investment securities on loan.

The fair value of the loaned investment securities is monitored on a daily basis, with additional collateral obtained or refunded as the fair value of the loaned investment securities fluctuates.

The collateral, which may be in the form of cash or U.S.

Government securities, is deposited by the borrower with an independent lending agent.

Any cash collateral, which is reinvested by the lending agent primarily in short-term, highly liquid investments, is recorded as a securities lending collateral asset within other current assets on our consolidated balance sheet at the end of the reporting period.

We record a corresponding liability to reflect our obligation to return the collateral within trade accounts payable and accrued expenses on our consolidated balance sheet at the end of the reporting period.

Collateral received in the form of securities is not recorded in our consolidated balance sheets because, absent default by the borrower, we do not have the right to sell, pledge or otherwise reinvest securities collateral.

Loaned securities continue to be carried as investment securities on the consolidated balance sheet at the end of the reporting period.

Earnings on the invested cash collateral, net of expense, associated with the securities lending payable are recorded as investment income.

Receivables and Revenue Recognition

We generally establish one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30 -day written notice.

We established one-year commercial membership contracts with employer groups, subject to cancellation by the employer group on 30 -day written notice.

Our Medicare contracts with CMS renew annually.

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Premiums revenue is estimated by multiplying the membership covered under the various contracts by the contractual rates.

Premiums revenue is recognized as income in the period members are entitled to receive services and is net of estimated uncollectible amounts, retroactive membership adjustments, and adjustments to recognize rebates under the minimum benefit ratios required under the Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, which we collectively refer to as the Health Care Reform Law.

We estimate policyholder rebates by projecting calendar year minimum benefit ratios for the small group and large group markets, as defined by the Health Care Reform Law using a methodology prescribed by Health and Human Services, or HHS, separately by state and legal entity.

Medicare Advantage and Medicaid products are also subject to minimum benefit ratio requirements.

Estimated calendar year rebates recognized ratably during the year are revised each period to reflect current experience.

Estimated calendar year rebates recognized ratably during the year

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

are revised each period to reflect current experience.

Retroactive membership adjustments result from enrollment changes not yet processed, or not yet reported by an employer group or the government.

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Our CMS payment is subject to risk sharing through the Medicare Part D risk corridor provisions.

In addition, receipts for reinsurance and low-income cost subsidies as well as receipts for certain discounts on brand name prescription drugs in the coverage gap represent payments for prescription drug costs for which we are not at risk.

Receipts for reinsurance and low-income cost subsidies and discounts on certain prescription drugs in the coverage gap represent payments for prescription drug costs for which we are not at risk.

The risk corridor provisions compare costs targeted in our bids to actual prescription drug costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS.

Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the premiums we received.

As risk corridor provisions are considered in our overall annual bid process, we estimate

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and recognize an adjustment to premiums revenue related to these provisions based upon pharmacy claims experience.

As risk corridor provisions are considered in our overall annual bid process, we estimate and recognize an adjustment to premiums revenue related to these provisions based upon pharmacy claims experience.

We record a receivable or payable at the contract level and classify the amount as current or long-term in our consolidated balance sheets based on the timing of expected settlement.

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A reconciliation and related settlement of CMS’s prospective subsidies against actual prescription drug costs we paid is made after the end of the year.

The Health Care Reform Law mandates consumer discounts of 50 % on brand name prescription drugs for Part D plan participants in the coverage gap.

The Health Care Reform Law mandates consumer discounts of 75 % on brand name and generic prescription drugs for Part D plan participants in the coverage gap.

These discounts are funded by CMS and pharmaceutical manufacturers while we administer the application of these funds.

We account for these subsidies and discounts as a deposit in our consolidated balance sheets and as a financing activity under receipts (withdrawals) from contract deposits, net in our consolidated statements of cash flows.

We account for the funding of subsidies and discounts for which we assume no risk as a deposit in our consolidated balance sheets and as a financing activity under receipts (payments) from contract deposits, net in our consolidated statements of cash flows.

2024 2023 2022

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Part D subsidy/discount reimbursements 15,921 18,353 18,498

Net reimbursements (payments) $ 771 $ 1,968 $ ( 261 )

Net (payments) reimbursements $ ( 1,841 ) $ 771 $ 1,968

We do not recognize premiums revenue or benefit expenses for these subsidies or discounts.

2 unchanged sentences

Settlement with CMS for brand name prescription drug discounts is based on a reconciliation made approximately 14 to 18 months after the close of each calendar year.

We continue to revise our estimates with respect to the risk corridor provisions based on subsequent period pharmacy claims data.

We continue to revise our estimates with respect to the risk corridor provisions based on

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

subsequent period pharmacy claims data.

For additional information regarding amounts recorded to our consolidated balance sheets related to the risk corridor settlement and subsidies from CMS with respect to the Medicare Part D program, refer to Note 7 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Form 10-K.

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Services revenues related to product revenues from dispensing prescriptions are recorded when the prescription or product is shipped.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our primary care business recognizes revenues for certain value-based arrangements.

Our primary care recognizes revenues for certain value-based arrangements.

Under these value-based arrangements, we enter into agreements with health plans to stand ready to deliver, integrate, direct and control the administration and management of certain health care services for our patients.

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Administrative services fees are recognized as services are performed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our TRICARE members are served by both in-network and out-of-network providers in accordance with our contracts.

We pay health care costs related to these services to the providers and are subsequently reimbursed by the DoD for such payments.

We account for the payments of the federal government’s claims and the related reimbursements under deposit accounting in our consolidated balance sheets and as a financing activity under receipts (withdrawals) from contract deposits, net in our consolidated statements of cash flows.

We account for the payments of the federal government’s claims and the related reimbursements under deposit accounting in our consolidated balance sheets and as a financing activity under receipts (payments) from contract deposits, net in our consolidated statements of cash flows.

2024 2023 2022

2 unchanged sentences

Health care cost reimbursements 7,385 7,130 7,135

Net reimbursements (payments) $ 57 $ 25 $ ( 45 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Net (payments) reimbursements

$ ( 92 ) $ 57 $ 25

Receivables, including premium receivables, patient services revenue receivables, and ASO fee receivables, are shown net of allowances for estimated uncollectible accounts, retroactive membership adjustments, and contractual allowances.

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The balance of pharmaceutical rebates receivable was $ 1.7 billion and $ 2.3 billion at December 31, 2024 and 2023, respectively.

For additional information regarding amounts associated with Medicare Part D, refer to Note 7 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Form 10-K.

In October 2024, we entered an uncommitted receivables purchase facility, or the Facility, under which certain pharmaceutical rebate receivables may be sold on a non-recourse basis to a financial institution.

Although the sale is made without recourse, we provide collection services related to the transferred assets without compensation.

The Facility's total capacity is $ 1.19 billion with an initial one year term, unless terminated early or extended.

As control of, and risk related to, the receivables are transferred to the financial institution, the transactions under the Facility are accounted for as a true sale.

The derecognition of our receivables transferred to a financial institution reduce our net pharmaceutical rebate receivable balance included in “Other current assets” on our accompanying consolidated balance sheets and generate a loss on discounted receivables included in “Operating costs” on our accompanying consolidated statements of income.

As servicer of the purchased receivables, we establish a payable to the financial institution included in “Trade accounts payable and accrued expenses” on our accompanying consolidated balance sheets for rebates collected from manufacturers not yet remitted to the financial institution.

Cash proceeds from the sale of receivables to the financial institution are classified as an operating activity included in “Changes in other assets” and rebates collected from manufacturers not yet remitted to the financial institution are classified as a financing activity included in “Changes in rebate factor payable” on our accompanying consolidated statement of cash flows.

For the year ended December 31, 2024, we sold $ 639 million of pharmaceutical rebate receivables under the Facility and the loss on discounted receivables were not material.

As of December 31, 2024, we collected $ 168 million from manufacturers, $ 123 million of which have not been remitted to the financial institution.

Policy Acquisition Costs

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Such costs include commissions, costs of policy issuance and underwriting, and other costs we incur to acquire new business or renew existing business.

We expense policy acquisition costs related to our employer-group prepaid health services policies as incurred.

We expensed policy acquisition costs related to our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

employer-group prepaid health services policies as incurred.

These short-duration employer-group prepaid health services policies typically have a 1 -year term and may be canceled upon 30 days notice by the employer group.

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Judgment regarding the level of influence over each equity method investment includes considering key factors such as our ownership interest, representation on the board of directors, organizational structure, participation in policy-making decisions and material intra-entity transactions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition as well as capital contributions to and distributions from these companies.

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A component is considered a reporting unit if the component constitutes a business for which discrete financial information is available that is regularly reviewed by management.

We aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics.

We aggregate the components of an operating segment into one reporting unit if they have similar

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

economic characteristics.

Goodwill is assigned to the reporting units that are expected to benefit from the specific synergies of the business combination.

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The fair value of our reporting units with significant goodwill exceeded carrying amounts.

However, unfavorable changes in key assumptions or combinations of assumptions including a significant increase in the discount rate, decrease in the long-term growth rate or substantial reduction in our underlying cash flow assumptions, including revenue growth rates, medical and operating cost trends, and projected operating income could have a significant negative impact on the estimated fair value of our home solutions and primary care reporting units, which accounted for $ 4.4 billion and $ 1.2 billion of goodwill, respectively.

However, unfavorable changes in key assumptions or combinations of assumptions including a significant increase in the discount rate, decrease in the long-term growth rate or substantial reduction in our underlying cash flow assumptions, including revenue growth rates, operating cost trends, and projected operating income could have a significant negative impact on the estimated fair value of our home solutions reporting unit, which accounted for $ 4.4 billion of goodwill.

Impairment tests completed for 2024, 2023, and 2022 did no t result in an impairment loss.

Intangible assets with indefinite lives relate to Certificate of Needs (CON) and Medicare licenses acquired as part of our acquisition of Kindred at Home, or KAH, and are included within other long-term assets in the consolidated balance sheet at December 31, 2023 and December 31, 2022.

For additional information regarding our acquisition of KAH, refer to Note 3 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Form 10-K.

Intangible assets with indefinite lives relate to Certificate of Needs (CON) and Medicare licenses acquired as part of our acquisition of CenterWell Home Health (formerly Kindred at Home) are included within other long-term assets in the consolidated balance sheet at December 31, 2024 and December 31, 2023.

We are required to annually compare the fair values of other indefinite-lived intangible assets to their carrying amounts.

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Fair values of indefinite-lived intangible assets are determined based on the income approach.

Impairment tests completed for 2023 and 2022 did not result in material impairment losses.

For our CON intangible assets, unfavorable changes in key assumptions or combinations of assumptions, including a significant increase in the discount rate, decrease in the long-term growth rate or substantial reduction in the underlying cash flow assumptions, including revenue growth rates, operating cost trends, and projected operating income could have a significant negative impact on the estimated fair value of our CON intangible assets, which account for $ 910 million of our intangible assets.

Impairment tests completed for 2024 and 2023 resulted in impairment charges of $ 200 million and $ 55 million, respectively.

Impairment test completed for 2022 did not result in a material impairment charge.

These charges reflect the amount by which the carrying value exceeded its estimated fair value.

Impairment tests completed for 2021 did not result in an impairment loss.

The fair values of the assets were measured using Level 3 inputs, such as projected revenues and operating cash flows.

Definite-lived intangible assets primarily relate to acquired customer contracts/relationships and are included with other long-term assets in the consolidated balance sheets.

Definite-lived intangible assets are amortized over the

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useful life generally using the straight-line method.

Definite-lived intangible assets are amortized over the useful life generally using the straight-line method.

We review definite-lived intangible assets for impairment under our long-lived asset policy.

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Benefits expense is recognized in the period in which services are provided and includes an estimate of the cost of services which have been incurred but not yet reported, or IBNR.

Our reserving practice is to consistently recognize the actuarial best point estimate within a level of confidence required by actuarial standards.

Our reserving practice is to consistently

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recognize the actuarial best point estimate within a level of confidence required by actuarial standards.

Actuarial standards of practice generally require a level of confidence such that the liabilities established for IBNR have a greater probability of being adequate versus being insufficient, or such that the liabilities established for IBNR are sufficient to cover obligations under an assumption of moderately adverse conditions.

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Changes in patterns of claim overpayment recoveries can be unpredictable and result in completion factor volatility, as they often impact older dates of service.

The receipt cycle time measures the average length of time between when a medical claim was initially incurred and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

when the claim form was received.

The receipt cycle time measures the average length of time between when a medical claim was initially incurred and when the claim form was received.

Increases in electronic claim submissions from providers decrease the receipt cycle time.

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We reassess the profitability of our contracts for providing insurance coverage to our members when current operating results or forecasts indicate probable future losses.

We establish a premium deficiency reserve in current operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceeds related future premiums under contracts.

We establish a premium deficiency reserve in current

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operations to the extent that the sum of expected future costs, claim adjustment expenses, and maintenance costs exceeds related future premiums under contracts.

For purposes of determining premium deficiencies, contracts are grouped in a manner consistent with our method of acquiring, servicing, and measuring the profitability of such contracts.

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We recognize an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements.

These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or

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liabilities are recovered or settled.

These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled.

We also recognize the future tax benefits such as net operating and capital loss carryforwards as deferred tax assets.

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Distributions to holders of noncontrolling interests are adjusted to the respective noncontrolling interest holders’ balances.

Noncontrolling interests, which relate to the minority ownership held by third party investors in certain of our businesses within our Insurance and CenterWell segments, are reported below net income under the heading “Net income attributable to noncontrolling interests” in the consolidated statements of income and presented as a component of equity in the consolidated balance sheets.

Noncontrolling interests, which relate to the minority ownership held by third-party investors in certain of our businesses within our Insurance and CenterWell segments, are reported below net income under the heading “Net (income) loss attributable to noncontrolling interests” in the consolidated statements of income and presented as a component of equity in the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock-Based Compensation

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The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Level 1 – Quoted prices in active markets for identical assets or liabilities.

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Fair value of privately held investment grade debt securities are estimated using a variety of valuation methodologies, including both market and income approaches, where an observable quoted market does not exist and are generally classified as Level 3.

For privately-held investment grade debt securities, such methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies in similar lines of business with similar credit characteristics, and reviewing the underlying financial performance including estimating discounted cash flows.

For privately-held investment grade debt securities,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

such methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly-traded companies in similar lines of business with similar credit characteristics, and reviewing the underlying financial performance including estimating discounted cash flows.

We obtain at least one price for each security from a third-party pricing service.

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Recently Adopted Accounting Pronouncements

In November 2020, the FASB issued Accounting Standards Update No.

2020-11, Financial Services—Insurance (Topic 944):

Effective Date and Early Application (“ASU 2020-11”).

The amendments in ASU 2020-11 make changes to the effective date and early application of Accounting Standards Update No.

2018-12, Financial Services—Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”), which was issued in November 2018.

The amendments in ASU 2020-11 extended the original effective date by one year, and now the amendments are required for our interim and annual reporting periods beginning after December 15, 2022.

The new guidance relates to accounting for long-duration contracts of insurers which revises key elements of the measurement models and disclosure requirements for long-duration contracts issued by insurers, including the amortization of deferred contract acquisition costs and the measurement of liabilities for future policy benefits using current, rather than locked-in, assumptions.

The new guidance, limited to our Medicare Supplement product which represents less than 1 % of consolidated premiums and services revenue, became effective for us

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

beginning January 1, 2023 and was applied to contracts in force on the basis of their existing carrying value amounts at the beginning of the earliest period presented.

The adoption of the new standard in 2023 did not have a material impact on our consolidated results of operations, financial position or cash flows.

Accounting Pronouncements Effective in Future Periods

In December 2023, the FASB issued Accounting Standards Update No.

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The new guidance requires incremental disclosures related to a public entity’s reportable segments but does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments.

The new guidance requires a public entity to disclose its significant segment expense categories and amounts for each reportable segment.

The new guidance will be effective for us beginning with our annual 2024 year-end financial statements.

We are currently evaluating the impact on our segment information footnote disclosures.

The new guidance became effective for us beginning with our annual 2024 year-end financial statements.

The adoption of ASU 2023-07 in 2024 did not have a material impact on our consolidated financial statements.

Our segment footnote disclosure was updated to reflect adoption of the standard.

Accounting Pronouncements Effective in Future Periods

In December 2023, the FASB issued Accounting Standards Update No.

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We are currently evaluating the impact on our income tax footnote disclosures.

In November 2024, the FASB issued Accounting Standards Update No.

2024-03 — Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The new guidance requires significant additional disclosures disaggregating certain costs and expenses including purchases of inventory, employee compensation, depreciation, and intangible asset amortization.

The new guidance requires prospective application (with retrospective application permitted).

The new guidance will be effective for us beginning with our annual 2027 year-end financial statements, with early adoption permitted.

We are currently evaluating the impact on our results of operations, financial position and cash flows.

There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

ACQUISITIONS AND DIVESTITURES

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In connection with the sale, we recognized a pre-tax gain, net of transaction costs, of $ 237 million which was reported as a gain on sale of Gentiva Hospice in the accompanying consolidated statement of income for the year ended December 31, 2022.

In June 2022, we classified Gentiva Hospice as held-for-sale and aggregated Gentiva Hospice’s assets and liabilities separately on the balance sheet.

The assets, liabilities and noncontrolling interest disposed of on August 11, 2022 were as follows:

(in millions)

Cash and cash equivalents $ 73

Receivables, net of allowances 194

Other current assets 20

Property and equipment, net 44

Goodwill 2,331

Other assets 960

Total assets $ 3,622

Trade accounts payable and accrued expenses $ 245

Other long-term liabilities 285

Total liabilities $ 530

Noncontrolling interest $ 11

Other assets included $ 866 million identifiable intangibles consisting of Medicare licenses and CON.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to the sale of a 60 % interest in Gentiva Hospice on August 11, 2022, as discussed above, Gentiva Hospice revenues and pretax earnings through the date of sale for the year ended December 31, 2022, were $ 958 million and $ 150 million, respectively.

On August 17, 2021, we acquired the remaining 60 % interest in Kindred at Home, or KAH, from TPG Capital and Welsh, Carson, Anderson & Stowe, or WCAS, two private equity funds, for an enterprise value of $ 8.2 billion, which included our equity value of $ 2.4 billion associated with our 40 % minority ownership interest.

The remeasurement to fair value of our previously held 40 % equity method investment with a carrying value of approximately $ 1.3 billion, resulted in a $ 1.1 billion gain recognized in "Other (income) expense, net" in the accompanying consolidated statement of income for the year ended December 31, 2021 .

We paid the approximate $ 5.8 billion transaction price (net of our existing equity stake) through a combination of debt financing, the assumption of existing KAH indebtedness and parent company cash.

During 2023, 2022, and 2021, we acquired other health and wellness related businesses which other than the impacts to goodwill, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows.

The results of operations and financial condition of these businesses have been included in our consolidated statements of income and consolidated balance sheets from the respective acquisition dates.

Prior to the sale, Gentiva Hospice revenues and pretax earnings through the date of sale for the year ended December 31, 2022, were $ 958 million and $ 150 million, respectively.

During 2024, 2023, and 2022, we acquired various health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows.

The results of operations and financial condition of these businesses acquired have been included in our consolidated statements of income and consolidated balance sheets from the respective acquisition dates.

Acquisition-related costs recognized in each of 2024, 2023 and 2022 were not material to our results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

EQUITY METHOD INVESTMENT

Prior to our acquisition of KAH in August 2021, we accounted for our 40 % investment in KAH using the equity method of accounting.

Our share of income or loss was reported as equity in net (losses) earnings in our consolidated statements of income.

EQUITY METHOD INVESTMENTS

We completed the sale of a 60 % interest in Gentiva Hospice on August 11, 2022 and we account for our remaining minority ownership in Gentiva Hospice using the equity method of accounting.

At December 31, 2023 and 2022 we owned 35 % and 40 %, respectively.

This investment was reflected in equity method investments in our December 31, 2023 and 2022 consolidated balance sheets, with our share of income or loss reported as equity in net (losses) earnings in our consolidated statements of income.

At December 31, 2024 and 2023, we owned approximately 35 %.

This investment was reflected in equity method investments in our December 31, 2024 and 2023 consolidated balance sheets, with our share of loss reported as equity in net losses in our consolidated statements of income.

The summarized balance sheets and statements of income at December 31, 2024 and 2023 of Gentiva Hospice were as follows:

Balance sheet December 31, 2023 December 31, 2022

Balance sheets December 31, 2024 December 31, 2023

(in millions)

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Statements of income

For the year ended December 31, 2023 August 11, 2022 through December 31, 2022

For the year ended December 31, 2024 For the year ended December 31, 2023

(in millions)

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Expenses 2,086 1,873

Net income ( 23 ) 2

Other equity method investments

Net loss ( 92 ) ( 23 )

In 2020, our Primary Care Organization entered into a strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS, to accelerate the expansion of our primary care model.

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For additional information on inputs relevant to these put and call options, refer to Note 6 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.

We have several individually immaterial equity method investments, including our strategic partnership with WCAS as described above, included within equity method investments in our consolidated balance sheets as of December 31, 2023 and 2022 with our share of income or loss reported as equity in net (losses) earnings in our consolidated statements of income for the years ended December 31, 2023, 2022 and 2021.

Other equity method investments

We have several other individually immaterial equity method investments included within equity method investments in our consolidated balance sheets as of December 31, 2024 and 2023 with our share of income or loss reported as equity in net losses in our consolidated statements of income for the years ended December 31, 2024, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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Total debt securities $ 20,018 $ 26 $ ( 1,409 ) 18,635

Common stock —

Total investment securities $ 17,008

December 31, 2023

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Total debt securities $ 18,302 $ 34 $ ( 1,328 ) 17,008

Common stock 7

Total investment securities $ 14,261

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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The book value and fair value were $ 379 million and $ 398 million, respectively, at December 31, 2023.

Gross unrealized losses and fair values aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position were as follows at December 31, 2023 and 2022, respectively:

We participate in a securities lending program where we loan certain investment securities for short periods of time in exchange for collateral, consisting of cash or U.S.

Government securities, initially equal to at least 102 % of the fair value of the investment securities on loan.

Collateral with a fair value of $ 418 million was held at December 31, 2024.

At December 31, 2024, collateral from lending our investment securities has been reinvested in short-term, highly liquid assets.

In addition, we participated in non-cash securities lending with a fair value of $ 127 million at December 31, 2024.

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position for which no allowances for credit loss has been recorded were as follows at December 31, 2024 and 2023, respectively:

Less than 12 months 12 months or more Total

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Total debt securities $ 3,621 $ ( 28 ) $ 11,046 $ ( 1,300 ) $ 14,667 $ ( 1,328 )

Approximately 97 % of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by S&P at December 31, 2023.

Most of the debt securities that were below investment-grade were rated B+, the higher end of the below investment-grade rating scale.

Tax-exempt municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education.

Approximately 97 % of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by Standard & Poor's Rating Service, or S&P at December 31, 2024.

Our remaining debt securities below investment grade were primarily rated B+, the higher end of the below investment-grade rating scale.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education.

Our general obligation bonds are diversified across the United States with no individual state exceeding approximately 1 % of our total debt securities.

Our investment policy limits investments in a single issuer and requires diversification among various asset types.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our unrealized loss from all debt securities was generated from approximately 1,560 positions out of a total of approximately 2,060 positions at December 31, 2023.

Our unrealized losses from all debt securities were generated from approximately 1,780 positions out of a total of approximately 2,200 positions at December 31, 2024.

All issuers of debt securities we own that were trading at an unrealized loss at December 31, 2024 remain current on all contractual payments.

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Gross losses on equity securities — — ( 174 )

Net recognized losses on investment securities $ ( 54 ) $ ( 205 ) $ ( 130 )

Net recognized gains (losses) on investment securities $ 24 $ ( 54 ) $ ( 205 )

The gains and losses related to equity securities for the years ended December 31, 2024, 2023 and 2022 was as follows:

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Total debt securities 18,635 — 18,313 322

Common stock — — — —

Securities lending invested collateral 418 418 — —

Total invested assets $ 21,101 $ 2,466 $ 18,313 $ 322

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Total debt securities 17,008 — 16,790 218

Common stock 7 7 — —

Total invested assets $ 21,590 $ 4,582 $ 16,790 $ 218

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Purchases 114 115

Sales ( 3 ) —

Settlements ( 5 ) —

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Interest Rate Swaps

During 2023, we entered into interest-rate swap agreements with major financial institutions to convert our interest-rate exposure on our $ 750 million of 5.875 % senior notes, our $ 750 million of 5.500 % senior notes, our $ 500 million of 3.950 % senior notes and our $ 850 million of 5.950 % from fixed rates to variable rates to align interest costs more closely with floating interest rates received on our cash equivalents and investment securities.

Our swap agreements, which are considered derivative instruments, exchange the fixed interest rate under our 5.875 %, 5.500 %, 3.950 % and 5.950 % senior notes for a variable interest rate based on SOFR.

Interest rate swaps with notional amounts of $ 650 million, maturing September 1, 2032, $ 300 million, maturing March 15, 2033, $ 450 million maturing August 15, 2049 and $ 400 million, maturing March 15, 2034, were outstanding on our 5.875 %, 5.500 %, 3.950 % and 5.950 % senior notes, respectively, at December 31, 2023.

We have entered into interest-rate swap agreements with major financial institutions to convert our interest-rate exposure on some of our senior notes payable from fixed rates to variable rates, based on Secured Overnight Financing Rate (SOFR), to align interest costs more closely with floating interest rates received on our cash equivalents and investment securities.

These swap agreements were qualified and designated as a fair value hedge.

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We utilize market-based financing rates, forward yield curves and discount rates in determining fair value of these swaps at each reporting date, a Level 2 measure within the fair value hierarchy.

The cumulative, aggregate adjustment to the carrying value of the senior notes was a decrease of approximately $ 129 million at December 31, 2024.

The swap liability, included within other long-term liabilities on our consolidated balance sheet, was approximately $ 129 million at December 31, 2024.

The swap asset, included within other long-term assets on our consolidated balance sheet, was approximately $ 68 million at December 31, 2023.

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The gain or loss due to hedge ineffectiveness was not material for the year ended December 31, 2024.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the notional amounts at December 31, 2024 and December 31, 2023, respectively, for our senior notes under the swap agreements:

Notional amount at

Senior Notes Under Swap Agreements December 31, 2024 December 31, 2023

(in millions)

$ 750 million, 5.875 % due March 1, 2033

$ 850 million, 5.950 % due March 15, 2034

$ 500 million, 3.950 % due August 15, 2049

$ 750 million, 5.500 % due March 15, 2053

$ 400 million, 4.625 % due December 1, 2042

$ 750 million, 4.950 % due October 1, 2044

$ 1,250 million, 5.375 % due April, 15, 2031

$ 400 million, 4.800 % due March 15, 2047

$ 1,000 million, 5.750 % due April 15, 2054

Financial Liabilities

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The fair value of our senior note debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.

Carrying value approximates

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

fair value for our term loans and commercial paper borrowings.

The commercial paper borrowings were $ 0.9 billion at December 31, 2023 and the term loan and commercial paper borrowings were $ 1.1 billion at December 31, 2022.

Carrying value approximates fair value for our term loans and commercial paper borrowings.

We had no outstanding commercial paper borrowings at December 31, 2024.

The commercial paper borrowings were $ 0.9 billion at December 31, 2023.

Put and Call Options Measured at Fair Value

Our put and call options associated with our equity method investments are measured at fair value each period using a Monte Carlo simulation.

Effective April 27, 2021, with the signing of the definitive agreement to acquire the remaining 60 % interest of KAH, the respective put and call options were terminated.

As such, the $ 63 million put and $ 440 million call fair values as of the first quarter of 2021 were reduced to zero , resulting in $ 377 million in other expense (income), net in our consolidated statements of income for the year ended December 31, 2021.

The put and call options fair values associated with our Primary Care Organization strategic partnership with WCAS, which are exercisable at a fixed revenue exit multiple and provide a minimum return on WCAS' investment if exercised, are measured at fair value each reporting period using a Monte Carlo simulation.

The put and call options fair values associated with our Primary Care Organization strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS, which are exercisable at a fixed revenue exit multiple and provide a minimum return on WCAS' investment if exercised, are measured at fair value each reporting period using a Monte Carlo simulation.

The put and call options fair values, derived from the Monte Carlo simulation, were $ 883 million and $ 10 million, respectively, at December 31, 2024.

The put and call options fair values, derived from the Monte Carlo simulation, were $ 595 million and $ 18 million, respectively, at December 31, 2023.

The put liability and call asset are included within other long-term liabilities and other long-term assets, respectively, within our consolidated balance sheets.

The significant unobservable inputs utilized in these Level 3 fair value measurements (and selected values) include the enterprise value, annualized volatility and credit spread.

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Long term growth rate 3.0 % 3.0 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assumptions used for annualized volatility, credit spread and weighted average cost of capital reflect the lowest and highest values where they differ significantly across the series of put and call options due to their expected exercise dates.

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Certain assets and liabilities are measured at fair value on a non-recurring basis subject to fair value adjustment only in certain circumstances.

As disclosed in Note 3, “Acquisitions”, we completed our acquisition of KAH during the third quarter of 2021.

The net assets acquired and resulting goodwill and other intangible assets were recorded at fair value primarily using Level 3 inputs.

The net tangible assets including receivables and accrued liabilities were recorded at their carrying value which approximated their fair value due to their short term nature.

The fair value of goodwill and other intangible assets were internally estimated based on the income approach.

The income approach estimates fair value based on the present value of cash flow that the assets could be expected to generate in the future.

We developed internal estimates for expected cash flows in the present value calculation using inputs and significant assumptions that include historical revenues and earnings, long-term growth rate, discount rate, contributory asset charges and future tax rates, among others.

The excess purchase price over the fair value of assets and liabilities acquired is recorded as goodwill.

As disclosed in Note 3, we completed the sale of a 60 % interest in Gentiva Hospice on August 11, 2022.

The carrying value of the assets and liabilities of Gentiva Hospice disposed approximates fair value.

The amount of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

goodwill included in the carrying value is based on the relative fair value of Gentiva Hospice as compared to the total fair value of our home solutions reporting unit included within the CenterWell segment.

The amount of goodwill included in the carrying value is based on the relative fair value of Gentiva Hospice as compared to the total fair value of our home solutions reporting unit included within the CenterWell segment.

Additionally, as disclosed in Note 3, we completed our acquisitions of certain health and wellness related businesses during 2024, 2023, and 2022.

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MEDICARE PART D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with CMS.

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS.

The accompanying consolidated balance sheets include the following amounts associated with Medicare Part D as of December 31, 2024 and 2023.

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Trade accounts payable and accrued expenses ( 83 ) ( 673 ) ( 232 ) ( 1,825 )

Net current (liability) asset ( 8 ) ( 1,311 ) 74 ( 540 )

Net current asset (liability) 107 530 ( 8 ) ( 1,311 )

Other long-term assets 58 — 17 —

Other long-term liabilities ( 39 ) — ( 77 ) —

Net long-term liability ( 60 ) — ( 59 ) —

Total net (liability) asset $ ( 68 ) $ ( 1,311 ) $ 15 $ ( 540 )

Net long-term asset (liability) 19 — ( 60 ) —

Total net asset (liability) $ 126 $ 530 $ ( 68 ) $ ( 1,311 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

PROPERTY AND EQUIPMENT, NET

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Property and equipment, net $ 2,532 $ 3,030

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Depreciation expense was $ 884 million in 2024, $ 831 million in 2023, and $ 749 million in 2022, including amortization expense for capitalized internally developed and purchased software of $ 660 million in 2024, $ 589 million in 2023, and $ 525 million in 2022.

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Acquisitions 191 217 408

Dispositions — ( 2,331 ) ( 2,331 )

Balance at December 31, 2023 2,663 6,887 9,550

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Amortization expense for other intangible assets was approximately $ 60 million in 2024, $ 67 million in 2023, and $ 81 million in 2022.

During 2023 we recorded impairment charges of $ 55 million relating to indefinite-lived intangibles.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We recorded impairment charges of $ 200 million and $ 55 million relating to indefinite-lived intangible assets in 2024 and 2023, respectively.

The following table presents our estimate of amortization expense for each of the five next succeeding fiscal years:

(in millions)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We determine if a contract contains a lease by evaluating the nature and substance of the agreement.

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For the years ended December 31, 2024, 2023 and 2022, sublease rental income was $ 50 million, $ 66 million and $ 52 million, respectively, and is included within operating costs in our consolidated statements of income.

The weighted average remaining lease term is 5.4 years at December 31, 2023 and December 31, 2022.

The weighted average remaining lease term is 5.1 years and 5.4 years at December 31, 2024 and December 31, 2023, respectively.

The weighted average discount rate is 4.6 % and 3.9 % at December 31, 2024 and December 31, 2023, respectively.

For the years ended December 31, 2024, 2023 and 2022, cash paid for amounts included in the measurement of lease liabilities included within our operating cash flows was $ 143 million, $ 166 million and $ 191 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Maturity of Lease Liabilities December 31, 2024

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Present value of lease liabilities $ 522

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, as adjusted for collateralized borrowings, based on the information available at date of adoption or commencement date in determining the present value of lease payments.

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Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As previously discussed, our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims.

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The medical claims reserve development for 2024, 2023, and 2022 primarily reflects the consistent application of trend and completion factors estimated using an assumption of moderately adverse conditions.

The favorable development recognized in 2023 and 2021 primarily resulted from trend factors developing more favorably than originally expected as well as for 2021 completion factors developing faster than expected.

The favorable development recognized in 2022 resulted primarily from completion factors remaining largely unchanged, resulting in lower overall development as compared to 2023 and 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The favorable development recognized in 2024 and 2023 primarily resulted from trend factors developing more favorably than originally expected.

The favorable development recognized in 2022 resulted primarily from trend factors developing more favorably than originally expected with completion factors remaining largely unchanged, resulting in lower overall development as compared to 2024 and 2023.

Incurred and Paid Claims Development

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Total 254,999

All outstanding benefit liabilities before 2021, net of reinsurance N/A

Benefits payable, net of reinsurance $ 10,440

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Total current provision 605 1,000 862

Deferred (benefit) expense ( 164 ) ( 100 ) 15

Deferred benefit ( 192 ) ( 164 ) ( 100 )

Provision for income taxes $ 413 $ 836 $ 762

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Nondeductible executive compensation 31 19 30

Non-taxable KAH gain — — ( 264 )

State lookback review refund claims ( 17 ) — —

Tax effect from sale of Gentiva Hospice — — ( 72 )

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Deferred acquisition costs 39 43

Jobs tax credits — 22

Unearned revenues 6 5

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Total net deferred income tax assets (liabilities) $ 260 $ 48

Amounts recognized in the consolidated balance sheets:

Other long-term assets $ 260 $ 48

All deferred tax assets and liabilities are classified as noncurrent in our consolidated balance sheets as other long-term assets and liabilities at December 31, 2024 and 2023, respectively.

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$ 600 million, 3.850 % due October 1, 2024

$ 1.5 billion, 0.650 % due August 3, 2023

$ 600 million, 4.500 % due April 1, 2025

Total senior notes 577 572

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Senior notes:

$ 600 million, 3.850 % due October 1, 2024

$ 600 million, 4.500 % due April 1, 2025

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$ 500 million, 4.875 % due April 1, 2030

$ 1,250 million, 5.375 % due April, 15, 2031

$ 750 million, 2.150 % due February 3, 2032

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$ 750 million, 5.500 % due March 15, 2053

Total senior notes 10,213 8,534

Delayed draw term loan, due May 28, 2024 — 500

$ 1,000 million, 5.750 % due April, 15, 2054

Total long-term debt $ 11,144 $ 10,213

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In addition, our senior notes contain a change of control provision that may require us to purchase the notes under certain circumstances.

In November 2023, we issued $ 500 million of 5.750 % unsecured senior notes due December 1, 2028 and $ 850 million of our 5.950 % unsecured senior notes due March 15, 2034.

We repaid the remaining $ 559 million aggregate principal amount of our 3.850 % senior notes on their maturity date of October 1, 2024.

In November 2024, we repaid our $ 500 million 5.700 % unsecured senior notes due March 13, 2026.

In March 2024, we issued $ 1.3 billion of 5.375 % unsecured senior notes due April 15, 2031 and $ 1.0 billion of 5.750 % unsecured senior notes due April 15, 2054.

Our net proceeds, reduced for the underwriters' discounts and commissions paid, were $ 2.2 billion.

We used the net proceeds for general corporate purposes, which included the repayment of existing indebtedness, including borrowings under our commercial paper program.

In March 2023, we issued $ 500 million of 5.700 % unsecured senior notes due March 13, 2026 and $ 750 million of 5.500 % unsecured senior notes due March 15, 2053.

Our net proceeds, reduced for the underwriters' discounts and commissions paid, were $ 1.2 billion.

We used the net proceeds to repay outstanding amounts under our $ 500 million Delayed Draw Term Loan.

The remaining net proceeds were used for general corporate purposes, which included the repayment of existing indebtedness, including borrowings under our commercial paper program.

In August 2023, we entered into a Rule 10b5-1 Repurchase Plan to repurchase a portion of our $ 750 million aggregate principal amount of 1.350 % senior notes maturing in February 2027, our $ 600 million aggregate principal amount of 3.950 % senior notes maturing in March 2027, our $ 750 million aggregate principal amount of 3.700 % senior notes maturing in March 2029, and our $ 500 million aggregate principal amount of 3.125 % senior notes maturing in August 2029 during the period beginning on August 7, 2023 and ending on November 15, 2023.

For the year ended December 31, 2023, we repurchased $ 339 million principal amount of these senior notes for approximately $ 310 million cash.

In March 2023, we entered into a Rule 10b5-1 Repurchase Plan to repurchase a portion of our $ 1.5 billion aggregate principal amount of 0.650 % senior notes maturing in August 2023 and our $ 600 million aggregate principal amount of 3.850 % senior notes maturing in October 2024 during the period beginning on March 13, 2023 and ending on July 21, 2023.

For the year ended December 31, 2023, we repurchased $ 361 million principal amount of these senior notes for approximately $ 358 million cash.

We repaid the remaining $ 1.2 billion aggregate principal amount of our 0.650 % senior notes due on their maturity date of August 3, 2023.

During 2023, we entered into interest rate swap agreements to exchange the fixed interest rate under our 5.875 %, 5.500 %, 3.950 % and 5.950 % senior notes for a variable interest rate based on SOFR, as further described in Note 6.

As a result, the carrying value of these senior notes has been adjusted to reflect changes in value caused by an increase or decrease in interest rates.

The cumulative, aggregate adjustment to the carrying value of the 5.875 %, 5.500 %, 3.950 % and 5.950 % senior notes was $ 9 million, $ 13 million, $ 36 million and $ 10 million respectively, at December 31, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The cumulative, aggregate adjustment to the carrying value of the senior notes was a decrease of approximately $ 129 million at December 31, 2024.

Revolving Credit Agreements

In June 2023, we entered into an amended and restated 5-year , $ 2.5 billion unsecured revolving credit agreement (replacing the 5-year , $ 2.5 billion unsecured revolving credit agreement entered in June 2021) and entered into a 364-day $ 1.5 billion unsecured revolving credit agreement (replacing the 364-day $ 1.5 billion unsecured revolving credit agreement entered into in June 2022, which expired in accordance with its terms).

In May 2024, we entered into an amendment to increase commitments under the 5-year revolving credit agreement by $ 0.142 billion resulting in a $ 2.642 billion borrowing capacity.

In May 2024, we entered into a 364-day $ 2.1 billion unsecured revolving credit agreement (replacing the 364-day $ 1.5 billion unsecured revolving credit agreement entered in June 2023, which expired in accordance with its terms).

Under the credit agreements, at our option, we can borrow on either a competitive advance basis or a revolving credit basis.

The revolving credit portion bears interest at Term SOFR or the base rate plus a spread.

The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based Term SOFR, at our option.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based Term SOFR, at our option.

The SOFR spread, currently 114 basis points under the 5-year revolving credit agreement and 116 basis points under the 364-day revolving credit agreement, varies depending on our credit ratings ranging from 92.0 to 130.0 basis points under the 5-year revolving credit agreement and from 94.0 to 135.0 basis points under the 364-day revolving credit agreement.

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This facility fee, currently 11.0 basis points, under the 5-year revolving credit agreement and 9.0 basis points under the 364-day revolving agreement, varies depending on our credit ratings ranging from 8.0 to 20.0 basis points under the 5-year revolving credit agreement and from 6.0 to 15.0 basis points under the 364-day revolving credit agreement.

The terms of the revolving credit agreements include standard provisions related to conditions of borrowing which could limit our ability to borrow additional funds.

In addition, the credit agreements contain customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60 %, as well as customary events of default.

The terms of our revolving credit agreements include standard provisions related to conditions of borrowing which could limit our ability to borrow additional funds.

In addition, our credit agreements contain customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60 %, as well as customary events of default.

We are in compliance with this financial covenant, with actual debt to capitalization of 41.9 % as measured in accordance with the revolving credit agreements as of December 31, 2024.

Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the revolving credit agreements by up to $ 750 million in the aggregate, to a maximum of $ 4.75 billion, across the 5 -year and 364 -day revolving credit agreements.

Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the revolving credit agreements by up to $ 500 million, to a maximum of $ 5.25 billion, across the 5-year and 364-day revolving credit agreements.

At December 31, 2024, we had no borrowings and approximately $ 18 million of letters of credit outstanding under the revolving credit agreements.

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

The maximum principal amount outstanding at any one time during the year ended December 31, 2023 was $ 3.3 billion, with $ 871 million outstanding at December 31, 2023 compared to $ 595 million outstanding at December 31, 2022.

The outstanding commercial paper at December 31, 2023 had a weighted average annual interest rate of 5.68 %.

The maximum principal amount outstanding at any one time during the year ended December 31, 2024 was $ 2.7 billion, with none outstanding at December 31, 2024 compared to $ 871 million outstanding at December 31, 2023.

Other Short-Term Borrowings

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As a member we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements.

We received a short-term cash advance of $ 100 million from FHLB with certain of our marketable securities as

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

collateral and subsequently repaid the outstanding balance in December 2023.

As of December 31, 2023 and December 31, 2022, we had no outstanding short-term FHLB borrowings.

In 2023, we received a short-term cash advance of $ 100 million from FHLB with certain of our marketable securities as collateral and subsequently repaid the outstanding balance in December 2023.

At December 31, 2024 we had no outstanding short-term FHLB borrowings.

EMPLOYEE BENEFIT PLANS

Employee Savings Plan

We have defined contribution retirement savings plans covering eligible employees which include matching contributions based on the amount of our employees’ contributions to the plans.

We have defined contribution retirement savings plans covering eligible associates which include matching contributions based on the amount of our associates’ contributions to the plans.

The cost of these plans amounted to approximately $ 293 million in 2024, $ 278 million in 2023, and $ 286 million in 2022.

The Company’s cash match is invested pursuant to the participant’s contribution direction.

Based on the closing price of our common stock of $ 457.81 on December 31, 2023, approximately 8 % of the retirement and savings plan’s assets were invested in our common stock, or approximately 1.3 million shares, representing approximately 1.1 % of the shares outstanding as of December 31, 2023.

Based on the closing price of our common stock of $ 253.71 on December 31, 2024, approximately 4 % of the retirement and savings plan’s assets were invested in our

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

common stock, or approximately 1.1 million shares, representing approximately 0.9 % of the shares outstanding as of December 31, 2024.

At December 31, 2024, approximately 5.3 million shares of our common stock were reserved for issuance under our defined contribution retirement savings plans.

Stock-Based Compensation

We have plans under which options to purchase our common stock and restricted stock units have been granted to executive officers, directors and key employees.

We have plans under which options to purchase our common stock and restricted stock units have been granted to executive officers, directors and key associates.

Awards generally require both a change in control and termination of employment within 2 years of the date of the change in control to accelerate the vesting, including those granted to retirement-eligible participants.

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Generally, the awards vest upon time-based conditions.

We have also granted awards to certain employees that vest upon a combination of time and performance-based conditions.

We have also granted awards to certain associates that vest upon a combination of time and performance-based conditions.

The stock awards of retirement-eligible participants are generally earned ratably over the service period for each tranche.

Accordingly, upon retirement the earned portion of the current tranche will continue to vest on the originally scheduled vest date and any remaining unearned portion of the award will be forfeited.

Our equity award program includes a retirement provision that generally treats employees with a combination of age and years of services with the Company totaling 65 or greater, with a minimum required age of 55 and a minimum requirement of 5 years of service, as retirement-eligible.

Our equity award program includes a retirement provision that generally treats associates with a combination of age and years of services with the Company totaling 65 or greater, with a minimum required age of 55 and a minimum requirement of 5 years of service, as retirement-eligible.

Upon exercise, stock-based compensation awards are settled with authorized but unissued company stock or treasury stock.

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The actual tax benefit realized in our tax return is based on the intrinsic value, or the excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock vested during the period, subject to limitations on the deductibility of annual compensation in excess of $500,000 per employee as mandated by the Health Care Reform Law.

The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock vesting totaled

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ 30 million in 2023, $ 31 million in 2022, and $ 28 million in 2021.

The actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock vesting totaled $ 21 million in 2024, $ 30 million in 2023, and $ 31 million in 2022.

There was no capitalized stock-based compensation expense during these years.

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Shares may be issued from authorized but unissued company stock or treasury stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restricted Stock

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Exercise provisions vary, but most options vest in whole or in part 1 to 3 years after grant and expire 7 years after grant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The weighted-average fair value of each option granted during 2024, 2023, and 2022 is provided below.

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Treasury bond with a term substantially equal to the option’s expected term.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The volatility used to value employee stock options is based on historical volatility.

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Options exercisable at December 31, 2024 166 $ 393.73

As of December 31, 2023, outstanding stock options, substantially all of which are expected to vest, had an aggregate intrinsic value of $ 13 million, and a weighted-average remaining contractual term of 4.5 years.

As of December 31, 2023, exercisable stock options had an aggregate intrinsic value of $ 10 million, and a weighted-average remaining contractual term of 3.6 years.

As of December 31, 2024, outstanding stock options, substantially all of which are expected to vest, had no intrinsic value, and a weighted-average remaining contractual term of 4.5 years.

As of December 31, 2024, exercisable stock options had no intrinsic value, and a weighted-average remaining contractual term of 3.1 years.

The total intrinsic value of stock options exercised during 2024 was $ 0.1 million, compared with $ 3 million during 2023 and $ 32 million during 2022.

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We expect to recognize this compensation expense over a weighted-average period of approximately 1.8 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

EARNINGS PER COMMON SHARE COMPUTATION

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excluded from computation 814 207 205

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

STOCKHOLDERS’ EQUITY

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Under our share repurchase authorization, shares may have been purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions (including pursuant to accelerated share repurchase agreements with investment banks), subject to certain regulatory restrictions on volume, pricing, and timing.

On December 22, 2020, we entered into separate accelerated stock repurchase agreements, the December 2020 ASR Agreements, with Citibank, N.A., or Citi, and JPMorgan Chase Bank, or JPM, to repurchase $ 1.75 billion of our common stock as part of the $ 3 billion repurchase program authorized by the Board of Directors on July 30,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On December 23, 2020, in accordance with the December 2020 ASR Agreements, we made a payment of $ 1.75 billion ($ 875 million to Citi and $ 875 million to JPM) and received an initial delivery of 3.8 million shares of our common stock ( 1.9 million shares each from Citi and JPM).

We recorded the payments to Citi and JPM as a reduction to stockholders’ equity, consisting of an $ 1.5 billion increase in treasury stock, which reflects the value of the initial 3.8 million shares received upon initial settlement, and a $ 262.5 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi and JPM pending final settlement of the December 2020 ASR Agreements.

Upon final settlement of the December 2020 ASR agreements with Citi and JPM on May 4, 2021 and May 5, 2021, respectively, we received an additional 0.3 million shares and 0.3 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $ 400.07 and $ 401.49 , respectively, bringing the total shares received under the December 2020 ASR agreements to 4.4 million.

In addition, upon settlement we reclassified the $ 262.5 million value of stock initially held back by Citi and JPM from capital in excess of par value to treasury stock.

On February 18, 2021, the Board of Directors replaced the previous share repurchase authorization of up to $ 3 billion (of which approximately $ 1 billion remained unused) with a new authorization for repurchases of up to $ 3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 18, 2024.

On January 11, 2022, we entered into separate accelerated stock repurchase agreements, the January 2022 ASR Agreements, with Mizuho Markets Americas LLC, or Mizuho, and Wells Fargo Bank, or Wells Fargo, to repurchase $ 1 billion of our common stock as part of the $ 3 billion repurchase program authorized by the Board of Directors on February 18, 2021.

On January 12, 2022, in accordance with the January 2022 ASR Agreements, we made a payment of $ 1 billion ($ 500 million to Mizuho and $ 500 million to Wells Fargo) and received an initial delivery of 2.2 million shares of our common stock ( 1.08 million shares each from Mizuho and Wells Fargo).

We recorded the payments to Mizuho and Wells Fargo as a reduction to stockholders’ equity, consisting of an $ 850 million increase in treasury stock, which reflects the value of the initial 2.2 million shares received upon initial settlement, and a $ 150 million decrease in capital in excess of par value, which reflects the value of stock held back by Mizuho and Wells Fargo pending final settlement of the January 2022 ASR Agreements.

Upon final settlement of the January 2022 ASR Agreements with Mizuho and Wells Fargo on March 29, 2022 and March 30, 2022, respectively, we received an additional 0.1 million shares and 0.1 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $ 410.96 and $ 411.66 , respectively, bringing the total shares received under the January 2022 ASR Agreements to 2.4 million.

In addition, upon settlement we reclassified the $ 150 million value of stock initially held back by Mizuho and Wells Fargo from capital in excess of par value to treasury stock.

On November 2, 2022, we entered into separate accelerated stock repurchase agreements, the November 2022 ASR Agreements, with Goldman Sachs & Co.

LLC, or Goldman Sachs, and Mizuho Markets Americas LLC, or Mizuho, to repurchase $ 1 billion of our common stock as part of the $ 3 billion repurchase program authorized by the Board of Directors on February 18, 2021.

In accordance with the November 2022 ASR Agreements, we made a payment of $ 1 billion ($ 500 million to Goldman Sachs on November 3, 2022 and $ 500 million to Mizuho on November 4, 2022) and received an initial delivery of 1.5 million shares of our common stock ( 0.760 million shares each from Goldman Sachs and Mizuho).

We recorded the payments to Goldman Sachs and Mizuho as a reduction to stockholders’ equity, consisting of an $ 850 million increase in treasury stock, which reflects the value of the initial 1.5 million shares received upon initial settlement, and a $ 150 million decrease in capital in excess of par value, which reflects the value of stock held back by Goldman Sachs and Mizuho pending final settlement of the November 2022 ASR Agreements.

Upon final settlement of the November 2022 ASR Agreements with Goldman Sachs and Mizuho on December 15, 2022 and December 16, 2022, respectively, we received an additional 0.177 million shares and 0.177 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $ 534.16 and $ 533.87 , respectively, bringing the total shares received under the November 2022 ASR Agreements to 1.8 million.

In addition, upon settlement we reclassified the $ 150 million value of stock initially held back by Goldman Sachs and Mizuho from capital in excess of par value to treasury stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 15, 2023, the Board of Directors replaced the previous share repurchase authorization of up to $ 3 billion (of which approximately $ 1 billion remained unused) with a new authorization for repurchases of up to $ 3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 15, 2026, which we refer to as the February 2023 repurchase authorization.

During the year ended December 31, 2023, we repurchased 3.1 million common shares in open market transactions for $ 1.5 billion at an average price of $ 482.27 under the current share repurchase authorization.

During the years ended December 31, 2022 and December 31, 2021, we did not repurchase shares in open market transactions.

Effective February 16, 2024, the Board of Directors replaced the February 2023 repurchase authorization (of which approximately $ 824 million remained unused) with a new share repurchase authorization for repurchases of up to $ 3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 15, 2027, which we refer to as the 2024 repurchase authorization.

During the year ended December 31, 2024, we repurchased approximately 0.2 million common shares in open market transactions under the 2024 repurchase authorization for $ 74 million at an average price of $ 339.55 and approximately 1.7 million common shares in open market transactions under the February 2023 repurchase authorization for $ 676 million at an average price of $ 390.30 .

Our remaining repurchase authorization was $ 2.9 billion as of February 19, 2025.

Excluding shares acquired in connection with employee stock plans, share repurchases were as follows during the years ended December 31, 2024, 2023 and 2022:

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February 2023 3,000 1.7 $ 676 3.1 $ 1,500 — $ —

February 2021 3,000 — $ — — $ — 4.3 $ 2,000

Total repurchases 1.9 $ 750 3.1 $ 1,500 4.3 $ 2,000

In connection with employee stock plans, we acquired 0.2 million common shares for $ 46 million in 2024, 0.2 million common shares for $ 73 million in 2023, and 0.2 million common shares for $ 96 million in 2022.

For additional information regarding our stockholders' equity, refer to Note 16 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2022 Form 10-K.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Regulatory Requirements

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Actual dividends that were paid to our parent company were approximately $ 1.5 billion in 2024, $ 1.8 billion in 2023, and $ 1.3 billion in 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

COMMITMENTS, GUARANTEES AND CONTINGENCIES

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Historically, payments made related to these indemnifications have been immaterial.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Government Contracts

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Under the risk-adjustment methodology, all MA plans must collect from providers and submit the necessary diagnosis code information to CMS within prescribed deadlines.

The CMS risk-adjustment model uses the diagnosis data, collected from providers, to calculate the health status-related risk-adjusted premium

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

payment to MA plans, which CMS further adjusts for coding pattern differences between the health plans and the government fee-for-service (FFS) program.

The CMS risk-adjustment model uses the diagnosis data, collected from providers, to calculate the health status-related risk-adjusted premium payment to MA plans, which CMS further adjusts for coding pattern differences between the health plans and the government fee-for-service (FFS) program.

We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our health status-adjusted payment received from CMS under the actuarial risk-adjustment model.

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The Final RADV Rule confirmed CMS’s decision to eliminate the FFS Adjuster.

The Final RADV Rule states CMS’s intention to extrapolate results from CMS and HHS-OIG RADV audits beginning with PY 2018, rather than PY 2011 as proposed.

The Final RADV Rule states CMS’s intention to extrapolate results from CMS and HHS-OIG RADV audits beginning with PY 2018, rather than PY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2011 as proposed.

However, CMS’s Final RADV Rule does not adopt a specific sampling, extrapolation or audit methodology.

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Humana’s actuarially certified bids through PY 2023 preserved Humana’s position that CMS should apply an FFS Adjuster in any RADV audit that CMS intends to extrapolate.

We expect CMS to apply the Final RADV Rule, including the first application of extrapolated audit results to determine audit settlements without a FFS Adjuster, to CMS and HHS-OIG RADV audits conducted for PY 2018 and subsequent years.

CMS confirmed its intent to apply the Final RADV Rule, including the first application of extrapolated audit results to determine audit settlements without the use of a FFS Adjuster, to CMS audits conducted for PY 2018 and subsequent years when it selected certain of Humana's MA contracts for PY 2018 RADV Audits.

The Final RADV Rule, including the lack of a FFS Adjuster, and any related regulatory, industry or company reactions, could have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, as part of our internal compliance efforts, we routinely perform ordinary course reviews of our internal business processes related to, among other things, our risk coding and data submissions in connection with the risk adjustment model.

These reviews may also result in the identification of errors and the submission of corrections to CMS that may, either individually or in the aggregate, be material.

As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On September 1, 2023, Humana Inc.

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It is critical that MA plans are paid accurately and that payment model principles, including the application of a FFS Adjuster, are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.

These reviews may also result in the identification of errors and the submission of corrections to CMS that may, either individually or in the aggregate, be material.

As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

Our state-based Medicaid business accounted for approximately 8 % of our total premiums and services revenue for the year ended December 31, 2024 primarily serving members enrolled in Medicaid, and in certain circumstances members who qualify for both Medicaid and Medicare, under contracts with various states.

Our military services business, which accounted for approximately 1 % of our total premiums and services revenue for the year ended December 31, 2024, primarily consisted of the TRICARE T2017 East Region contract.

The T2017 East Region contract comprises 32 states and approximately 6.0 million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018.

The T2017 East Region contract, which was originally set to expire on December 31, 2022, was subsequently extended by the DoD and is currently scheduled to expire on December 31, 2024, unless further extended.

In December 2022, we were awarded the next generation of TRICARE Managed Care Support Contracts, or T-5, for the updated TRICARE East Region by the Defense Health Agency of the DoD.The T-5 East Region contract comprises 24 states, and Washington D.C., and covers approximately 4.6 million beneficiaries.

The transition period for the T-5 contract began in January 2024 and will overlap the final year of the T2017 contract.

We delivered services under the T2017 East Region contract from commencement on January 1, 2018 through expiration on December 31, 2024.

The T2017 East Region contract comprised 32 states and approximately 6 million TRICARE beneficiaries.

In December 2022, we were awarded the next generation of TRICARE Managed Care Support Contracts, or T-5, for the updated TRICARE East Region by the Defense Health Agency of the DoD.

The T-5 East Region contract commenced on January 1, 2025 and comprises 24 states, and Washington D.C., and approximately 4.6 million beneficiaries.

The transition period for the T-5 contract began in January 2024 and overlapped the final year of the T2017 contract.

The length of the contract is one transition year followed by eight annual option periods, which, if all options are exercised, would result in a total contract length of nine years .

The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, or increases in member benefits or member eligibility criteria without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Legal Proceedings and Certain Regulatory Matters

As previously disclosed, the Civil Division of the United States Department of Justice provided us with an information request in December 2014, concerning our Medicare Part C risk adjustment practices.

The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts.

We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors.

We cooperated with the Department of Justice, and we have not heard from the Department of Justice on this matter since 2020.

As previously disclosed, on January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel.

From time to time, the Civil Division of the United States Department of Justice has provided us with information requests, concerning our Medicare Part C risk adjustment practices.

These requests relate to our oversight and submission of risk adjustment data generated by providers, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by our Medicare Advantage Organizations.

We continue to cooperate with the Department of Justice on these requests.

On January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel.

Steven Scott v.

, currently pending in United States District Court, Western District of Kentucky, Louisville Division.

The complaint alleges certain civil violations by us in connection with the actuarial equivalence of the plan benefits under Humana’s Basic PDP plan, a prescription drug plan offered by us under Medicare Part D.

The action seeks damages and penalties on behalf of the United States under the False Claims Act.

The court ordered the qui tam action unsealed on September 13, 2017, so that the relator could proceed, following notice from the U.S.

Government that it was not intervening at that time.

On March 31, 2022, the Court denied the parties' Motions for Summary Judgement.

We take seriously our obligations to comply with applicable CMS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

requirements and actuarial standards of practice, and continue to vigorously defend against these allegations.

During 2023, we have accrued certain anticipated expenses in connection with this matter.

Humana Inc in United States District Court, Western District of Kentucky, Louisville division.

As previously disclosed, during 2023, we accrued certain anticipated expenses in connection with this matter.

On August 15, 2024, Humana settled the claims in this suit, and paid the United States $ 90 million.

On September 1, 2023, Humana Inc.

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See “Government Contracts” in this Note 17 for additional information regarding this matter.

In June 2024, a putative stockholder class action was filed against Humana Inc.

and certain of our current and former executive officers under the federal securities laws in the United States District Court for the District of Delaware.

The case, now captioned In re Humana Inc.

Securities Litigation, alleges that between July 2022 and October 2024, Humana made false or misleading statements in its periodic SEC filings and statements to the financial markets about our financial performance and the medical costs and Star Ratings in our Medicare Advantage business.

The action seeks, among other things, unspecified compensatory damages and attorneys' fees.

Between July and November 2024, parallel stockholder derivative actions captioned Silva v.

Broussard, Spikes v.

Broussard, and Noble v.

Broussard, respectively, were filed in the United States District Court for the Western District of Kentucky alleging that the same claimed acts and omissions underlying the federal securities law case also constitute a breach of fiduciary duty by certain of our current and former directors and executive officers.

The actions seek, among other things, reforms to the Company's corporate governance and internal procedures, unspecified damages and attorneys' fees.

We will vigorously defend against the allegations in all cases.

On October 18, 2024, Humana Inc., along with co-plaintiff Americans for Beneficiary Choice, filed suit against the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, Xavier Becerra in his official capacity as Secretary, and Chiquita Brooks-LaSure, in her official capacity as Administrator, in the United States District Court, Northern District of Texas, Fort Worth Division, seeking a determination that they violated the Administrative Procedure Act in administering the Medicare Advantage and Part D Star Ratings program.

We seek to set aside and vacate Humana’s 2025 Star Ratings and remand the matter to CMS for recalculation and to declare that CMS’s policy refusing to disclose all relevant data and information is arbitrary, capricious, and unlawful.

There is no assurance that we will prevail in the lawsuit.

For additional information on this matter, refer to Part I, Item 1A, "Risk Factors" of this Form 10-K.

Other Lawsuits and Regulatory Matters

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These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies.

These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, sales practices, and provision of care by our healthcare services businesses, among others.

These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider and vendor contracting and oversight, risk adjustment, competitive practices, commission payments, marketing payments, privacy issues, utilization management practices, pharmacy benefits, access to care, sales practices, and provision of care by our healthcare services businesses, among others.

Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices.

We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits.

Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices.

Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, personal injury, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices.

Under state guaranty assessment laws, including those related to state cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.

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No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including:

(i) the damages sought in the proceedings are unsubstantiated or

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

indeterminate;

(i) the damages sought in the proceedings are unsubstantiated or indeterminate;

(ii) discovery is not complete;

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SEGMENT INFORMATION

During December 2022, we realigned our businesses into two distinct segments:

Insurance and CenterWell.

The Insurance segment includes the businesses that were previously included in the Retail and Group and Specialty segments, as well as the Pharmacy Benefit Manager, or PBM, business which was previously included in the Healthcare Services segment.

The CenterWell segment (formerly Healthcare Services) represents our payor-agnostic healthcare services offerings, including pharmacy solutions, primary care, and home solutions.

In addition to the new segment classifications being utilized to assess performance and allocate resources, we believe this simpler structure will create greater collaboration across the Insurance and CenterWell businesses and will accelerate work that is underway to centralize and integrate operations within the organization.

2021 segment financial information was recast to conform to the 2022 presentation.

Our two reportable segments, Insurance and CenterWell, are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below.

These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

Our Chief Executive Officer, the Chief Operating Decision Maker, utilizes these segment groupings and results of each segment, measured by income (loss) from operations, to assess performance and allocate resources primarily during our annual budget process and periodic forecast updates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Insurance segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts, as well as our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, dual eligible demonstration, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts.

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In addition, our Insurance segment includes our Military services business, primarily our T-2017 East Region contract, as well as the operations of our PBM business.

The CenterWell segment includes our pharmacy solutions, primary care, and home solutions operations.

The segment also includes our strategic partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers, as well as our minority ownership interest in Gentiva Hospice operations.

No other Humana health plan offerings are materially affected.

We anticipate the exit of this line of business to be finalized in the first half of 2025.

The CenterWell segment includes our pharmacy, primary care, and home solutions operations.

Services offered by this segment are designed to enhance the overall healthcare experience.

These services may lead to lower utilization associated with improved member health and/or lower drug costs.

Our CenterWell intersegment revenues primarily relate to the operations of CenterWell Pharmacy (our mail-order pharmacy business), CenterWell Specialty Pharmacy, and retail pharmacies jointly located within CenterWell Senior Primary Care clinics.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, our CenterWell intersegment revenues includes revenues earned by certain owned providers (CenterWell Senior Primary Care) derived from certain value-based arrangements with our health plans.

Under these value-based arrangements, our owned providers enter into agreements with our health plans to stand ready to deliver, integrate, direct and control the administration and management of certain health care services for our members.

In exchange, the owned provider receives a premium that is typically paid on a per-member per-month basis.

These value-based arrangements represent a single performance obligation where revenues are recognized in the period in which we are obligated to provide integrated health care services to our members.

Fee-for-service revenue is recognized at agreed upon rates, net of contractual allowances, as the performance obligation is completed on the date of service.

Our CenterWell intersegment revenues includes the operations of CenterWell Pharmacy (our mail-order pharmacy business), CenterWell Specialty Pharmacy, and retail pharmacies jointly located within CenterWell Senior Primary Care clinics.

In addition, our CenterWell intersegment revenues include revenues earned by certain owned providers and our home solutions business, including fee-for-service and certain value-based arrangements with our health plans.

We present our consolidated results of operations from the perspective of the health plans.

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Other than those described previously, the accounting policies of each segment are the same and are described in Note 2.

Transactions between reportable segments primarily consist of sales of services rendered by our CenterWell segment, primarily pharmacy solutions, primary care, and home solutions, to our Insurance segment customers.

Intersegment sales and expenses are recorded at fair value and eliminated in consolidation.

Transactions between reportable segments primarily consist of sales of products and services rendered by our CenterWell segment, primarily pharmacy, primary care, and home solutions, to our Insurance segment customers.

Intersegment sales and expenses are recorded primarily at fair value and eliminated in consolidation.

Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers.

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External revenues

Individual Medicare Advantage $ 78,837 $ — $ — $ 78,837

Group Medicare Advantage 6,869 — — 6,869

Medicare stand-alone PDP 2,189 — — 2,189

Total Medicare 87,895 — — 87,895

Commercial fully-insured 3,527 — — 3,527

Specialty benefits 1,007 — — 1,007

Medicare Supplement 735 — — 735

State-based contracts and other 8,108 — — 8,108

Total premiums 101,272 — — 101,272

Premiums revenue $ 112,104 $ — $ — $ 112,104

Services revenue 966 3,465 — 4,431

Home solutions — 1,342 — 1,342

Primary care — 842 — 842

Commercial ASO 237 — — 237

Military services and other 763 — — 763

Pharmacy solutions — 849 — 849

Total services revenue 1,000 3,033 — 4,033

Total external revenues 113,070 3,465 — 116,535

Intersegment revenues 4 16,471 ( 16,475 ) —

Services 31 4,921 ( 4,952 ) —

Products — 10,451 ( 10,451 ) —

Intersegment revenues 31 15,372 ( 15,403 ) —

Investment income 690 — 536 1,226

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Income (loss) from operations $ 1,289 $ 1,329 $ ( 56 ) $ 2,562

Interest expense — 3 490 493

Other expense, net — — 137 137

Income (loss) before income taxes and equity in net losses 2,654 1,401 ( 672 ) 3,383

Equity in net losses ( 6 ) ( 57 ) — ( 63 )

Segment earnings (loss) $ 2,648 $ 1,344 $ ( 672 ) $ 3,320

Net loss (income) attributable to noncontrolling interests 6 ( 1 ) — 5

Segment earnings (loss) attributable to Humana $ 2,654 $ 1,343 $ ( 672 ) $ 3,325

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Insurance CenterWell Eliminations/

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External revenues

Individual Medicare Advantage $ 65,591 $ — $ — $ 65,591

Group Medicare Advantage 7,297 — — 7,297

Medicare stand-alone PDP 2,269 — — 2,269

Total Medicare 75,157 — — 75,157

Commercial fully-insured 4,389 — — 4,389

Specialty benefits 1,047 — — 1,047

Medicare Supplement 743 — — 743

State-based contracts and other 6,376 — — 6,376

Total premiums 87,712 — — 87,712

Premiums revenue $ 101,272 $ — $ — $ 101,272

Services revenue 1,000 3,033 — 4,033

Home solutions — 2,333 — 2,333

Primary care — 568 — 568

Commercial ASO 300 — — 300

Military services and other 550 — — 550

Pharmacy solutions — 1,025 — 1,025

Total services revenue 850 3,926 — 4,776

Total external revenues 102,272 3,033 — 105,305

Intersegment revenues 31 15,372 ( 15,403 ) —

Services 56 3,532 ( 3,588 ) —

Products — 9,841 ( 9,841 ) —

Intersegment revenues 56 13,373 ( 13,429 ) —

Investment income 551 — 518 1,069

6 unchanged sentences

Income (loss) from operations $ 2,654 $ 1,404 $ ( 45 ) $ 4,013

Gain on sale of Gentiva Hospice — ( 237 ) — ( 237 )

Interest expense — — 401 401

Other expense, net — — 68 68

Income (loss) before income taxes and equity in net earnings (losses) 3,022 1,528 ( 982 ) 3,568

Equity in net earnings (losses) 18 ( 22 ) — ( 4 )

Segment earnings (loss) $ 3,040 $ 1,506 $ ( 982 ) $ 3,564

Net loss (income) attributable to noncontrolling interests 5 ( 1 ) — 4

Segment earnings (loss) attributable to Humana $ 3,045 $ 1,505 $ ( 982 ) $ 3,568

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Insurance CenterWell Eliminations/

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External revenues

Individual Medicare Advantage $ 58,654 $ — $ — $ 58,654

Group Medicare Advantage 6,955 — — 6,955

Medicare stand-alone PDP 2,371 — — 2,371

Total Medicare 67,980 — — 67,980

Commercial fully-insured 4,950 — — 4,950

Specialty benefits 1,052 — — 1,052

Medicare Supplement 731 — — 731

State-based contracts and other 5,109 — — 5,109

Total premiums 79,822 — — 79,822

Premiums revenue $ 87,712 $ — $ — $ 87,712

Services revenue 850 3,926 — 4,776

Home solutions — 1,166 — 1,166

Primary care — 413 — 413

Commercial ASO 306 — — 306

Military services and other 547 — — 547

Pharmacy solutions — 623 — 623

Total services revenue 853 2,202 — 3,055

Total external revenues 88,562 3,926 — 92,488

Intersegment revenues 56 13,373 ( 13,429 ) —

Services 41 2,828 ( 2,869 ) —

Products — 9,024 ( 9,024 ) —

Intersegment revenues 41 11,852 ( 11,893 ) —

Investment income (loss) 214 4 ( 31 ) 187

Investment income 223 8 151 382

Total revenues 88,841 17,307 ( 13,278 ) 92,870

5 unchanged sentences

Income (loss) from operations $ 3,022 $ 1,291 $ ( 513 ) $ 3,800

Interest expense — — 326 326

Other income, net — — ( 532 ) ( 532 )

Income before income taxes and equity in net earnings 2,412 938 4 3,354

Equity in net earnings — 65 — 65

Segment earnings $ 2,412 $ 1,003 $ 4 $ 3,419

Net income attributable to noncontrolling interest — ( 1 ) — ( 1 )

Segment earnings attributable to Humana $ 2,412 $ 1,002 $ 4 $ 3,418

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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Protective Life Insurance Company, with $ 154 million in reinsurance recoverables, is well-known and well-established with a AM Best rating of A+ at December 31, 2024.

The remaining reinsurance recoverables of $ 15 million are divided between 8 other reinsurers, with $ 0.4 million subject to funds withheld accounts or other financial guarantees supporting the repayment of these amounts.

The remaining reinsurance recoverables of $ 13 million are divided between 7 other reinsurers, with none subject to funds withheld accounts or other financial guarantees supporting the repayment of these amounts.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Humana Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flow for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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As described by management, for the periods prior to the most recent two months, a completion factor method uses historical paid claims patterns to estimate the percentage of claims incurred during a given period that have historically been adjudicated as of the reporting period.

For periods prior to the most recent two months, a completion factor method uses historical paid claims patterns to estimate the percentage of claims incurred during a given period that have historically been adjudicated as of the reporting period.

Changes in claim inventory levels and known changes in claim payment processes are taken into account in these estimates.

For the most recent two months, the incurred claims are estimated primarily from a trend analysis based upon per member per month claims trends developed from historical experience in the preceding months, adjusted for known changes in estimates of hospital admissions, recent hospital and drug utilization data, provider contracting changes, changes in benefit levels, changes in member cost sharing, changes in medical management processes, product mix and workday seasonality.

The principal considerations for our determination that performing procedures relating to the valuation of IBNR is a critical audit matter are the significant judgment by management when developing the estimate of IBNR, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the actuarial methodologies and significant assumptions related to completion factors, per member per month claims trends, and the potential for moderately adverse conditions.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

The principal considerations for our determination that performing procedures relating to the valuation of IBNR is a critical audit matter are (i) the significant judgment by management when developing the estimate of IBNR;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the actuarial methodologies and management’s significant assumptions related to completion factors, per member per month claims trends, and the potential for moderately adverse conditions;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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Developing the independent estimate involved developing independent completion factors and per member per month claims trends assumptions using management’s data, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of management’s assumptions.

Goodwill Impairment Assessments – Home Solutions and Primary Care Reporting Units

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $9.6 billion as of December 31, 2023, and the goodwill associated with the Home Solutions and Primary Care Reporting Units was $4.4 billion and $1.2 billion, respectively.

Management conducts an impairment test in the fourth quarter of each year and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired.

Management relies on an evaluation of future discounted cash flows analysis to determine fair value and uses discount rates that correspond to a market-based weighted-average cost of capital, and terminal growth rates that correspond to long-term growth prospects, consistent with the long-term inflation rate.

Key assumptions in management’s cash flow projections, including revenue growth rates, medical and operating cost trends, and projected operating income, are supported with management’s long-range business plan and annual planning process.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Home Solutions and Primary Care reporting units is a critical audit matter are the significant judgment by management when determining the fair value of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue and terminal growth rates, projected operating income, and the discount rates.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Impairment Assessments – Home Solutions Reporting Unit Goodwill and Certificates of Need Intangible Assets

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s goodwill balance was $9.6 billion as of December 31, 2024, of which $4.4 billion relates to the Home Solutions reporting unit.

The Company’s other intangible assets balance was $1.4 billion as of December 31, 2024, of which $0.9 billion relates to the Certificates of Need intangible assets.

Impairment tests are performed, at a minimum, in the fourth quarter of each year and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired.

Management uses future discounted cash flows analyses to determine fair value.

Key assumptions in management’s future discounted cash flow analyses include revenue growth rates, long-term growth rates, operating cost trends, projected operating income, and discount rates.

The annual impairment assessment of the Certificates of Need intangible assets resulted in an impairment charge of $0.2 billion in the year ended December 31, 2024.

The principal considerations for our determination that performing procedures relating to the impairment assessments of the Home Solutions reporting unit goodwill and the Certificates of Need intangible assets is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Home Solutions reporting unit goodwill and the Certificates of Need intangible assets;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, long-term growth rates, projected operating income, including operating cost trends, and discount rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the significant assumptions used in the valuation of the Home Solutions and Primary Care reporting units.

These procedures also included, among others, testing management's process for determining the fair value estimate of the reporting units;

evaluating the appropriateness of the discounted cash flows analysis;

testing the completeness and accuracy of underlying data used in the analysis;

and evaluating the reasonableness of the significant assumptions used by management related to the revenue and terminal growth rates, projected operating income, and the discount rates.

Evaluating management’s assumptions related to revenue and terminal growth rates and projected operating income involved considering the past performance of the reporting units and whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flows analysis and the reasonableness of the significant assumptions related to the terminal growth rates and the discount rates.

These procedures included testing the effectiveness of controls relating to management’s impairment assessments, including controls over the significant assumptions used in the valuation of the Home Solutions reporting unit goodwill and the Certificates of Need intangible assets.

These procedures also included, among others, (i) testing management's processes for developing the fair value estimates of the Home Solutions reporting unit goodwill and the Certificates of Need intangible assets;

(ii) evaluating the appropriateness of the discounted cash flows analyses;

(iii) testing the completeness and accuracy of underlying data used in the analyses;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, long-term growth rates, projected operating income, including operating cost trends, and discount rates.

Evaluating management’s assumptions related to revenue growth rates, long-term growth rates and projected operating income, including operating cost trends involved evaluating whether the assumptions used by management were reasonable considering the past performance of the Home Solutions reporting unit and the Certificates of Need intangible assets and whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flows analyses and the reasonableness of the significant assumptions related to the long-term growth rates and discount rates.

/s/ PricewaterhouseCoopers LLP

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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 8. Financial Statements and Supplementary Data