Connecting for a
Healthier Future
T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
O U R M I S S I O N
To improve the health and
vitality of those we serve
D A V I D M . C O R D A N I
C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R , T H E C I G N A G R O U P
Connecting for a
Healthier Future
Good health drives good results. This is an unmistakable conclusion
from our collective experiences over the past few years. With good
health, individuals are happier and more fulfilled, companies and
organizations thrive, and our communities are stronger. Without it,
challenges and uncertainties can feel insurmountable.
Recognizing the foundational role of good health in our society
at every level, we are doubling down to do even more. In 2022,
we launched the Evernorth Vitality Index1 to better understand
the factors influencing an individual’s ability to not just survive
but to thrive. We evolved our mission — clarifying that the reason
we exist is to improve the health and vitality of those we serve.
And we set a bold goal to increase the health of the lives we touch.
2 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Our vision for the health care system is built on the vitality of
every individual and every community, and this means delivering
on the promise of:
• Personalized, digital-first health care access and experiences at scale;
• Advanced care models for conditions, diseases and episodes
with superior value; and
• Seamlessly connected pharmacy, medical and behavioral
health services.
This is what we are working toward by harnessing the capabilities
within our company and convening others through relationships
with our partners. It is also what drives and fuels the passion of our
more than 70,000 co-workers around the world. We all recognize
the inevitable day each of us, or a loved one, will need to turn to the
health care system with our own health challenge. Given the level
of talent, capabilities and expertise we possess as a company, we view
it as both our responsibility and our privilege to ensure the health
care system responds by keeping good health and, therefore, vitality
in reach for everyone. We will continue to support the health and
vitality of customers, patients, clients and communities in ways
that drive all of us forward in connecting for a healthier future.
Our results and progress
To fulfill these commitments, we have continued to strengthen
and evolve our capabilities, and we also have refreshed our brands
to reflect the unique value we bring with our broad portfolio.
The Cigna Group is the new name of our corporation, and we bring
our mission and vision to life through our two growth platforms,
Evernorth Health Services and Cigna Healthcare. Guided by our
durable strategic growth framework, we leverage our platforms as we
work each and every day to fulfill our promises to our key stakeholders.
In 2022, both Evernorth Health Services and Cigna Healthcare
delivered strong value for the benefit of our customers, patients,
clients and partners, and, as a result, we achieved strong financial
results for our investors. Our company:
• Grew total revenues to $180.5 billion.2
• Achieved shareholders’ net income of $6.7 billion, or $21.30 per share,
and adjusted income from operations of $7.3 billion.2,3
• Returned $9 billion to shareholders via a combination of share
repurchases and dividends.2
3 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
EVERNORTH HEALTH SERVICES
Evernorth Health Services performed well in 2022 with its Pharmacy
Benefits Services, Specialty Pharmacy and Evernorth Care
businesses providing market-leading innovation and affordability.
Throughout 2022, Evernorth Health Services continued to drive
a digital-first approach to care with MDLIVE serving as the engine
for virtual care. Last year alone, total MDLIVE patient visits grew
by approximately 20 percent,4 including substantial growth in
the virtual primary care program we introduced. Today, MDLIVE
offers virtual primary, urgent, behavioral and dermatological care,
which is expanding access, enhancing experiences and improving
affordability for customers.
Evernorth Health Services’ pharmacy solutions are also increasing
the value of each dollar spent on medication and driving to the
lowest net cost while ensuring quality outcomes. The highest therapy
completion rates in the market are a key part of this success.
This applies to specialty and gene therapy costs, which comprise
as much as half of total drug spending5 even though specialty
drugs are used by less than 2 percent of the population. Biosimilars
offer growing opportunities to lower costs for patients, clients and
partners, and our leading specialty pharmacy capabilities give
us a differentiated position to create value. Today, approximately
7 percent of our specialty drug spend has a biosimilar or generic
equivalent on the market, and this will likely increase to more than
25 percent by 2026.4 Over time, we believe this will translate to a
$100 billion market opportunity.6 And we expect to manage almost
$30 billion of this market opportunity, driving significant savings for
patients and clients as more biosimilar equivalents come to market.4
As a result of the value Evernorth Health Services is generating
for the benefit of those we serve, we continue to be a partner of
choice across health care and have established significant new
relationships with Kaiser Permanente7 and Centene.8
Pharmacy Benefits
Home Delivery Pharmacy
Specialty Pharmacy
Distribution
Care Delivery and Management Solutions
4 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
CIGNA HEALTHCARE
Cigna Healthcare, our benefits portfolio, includes our U.S. Commercial,
U.S. Government and International Health businesses. Together, these
businesses are delivering products and services that meet the needs
of employers of all sizes as well as individuals.
In U.S. Commercial, we drove strong growth, demonstrating how
much clients appreciate our in-depth expertise and consultative
approach, as well as the continued progress we are making with
affordability. We are committed to being a differentiated partner
of choice in helping individuals and their companies thrive in
a time when employees increasingly are looking to their employers
for health and well-being needs.
Our U.S. Government business provides an important growth
opportunity for our company, and, in 2022, we continued to
support individuals with plans for their personal health and
well-being needs, for their lifestyle, and that fit within their budget.
We continued our progress in strengthening our offerings as well
as our work doubling the size of our Medicare Advantage provider
network over the past two years.4,9 In our Individual and Family Plans
business in 2022, we maintained our long-standing and continued
commitment to participating in the ACA exchange marketplace,
expanding our footprint and capabilities that provide positive
experiences for those we serve.
Our International Health business contributed strong revenue and
earnings in 2022. In addition, we completed the divestiture of our life,
accident and supplemental benefits businesses across seven markets.
We will continue to sharpen our focus on meeting the health and well-
being needs in attractive growth markets and for the globally mobile.
Throughout the year, our Cigna Healthcare segment continued
to find more ways of delivering value in the wake of COVID-19 as
individuals and employers looked not only for medical benefits —
they were looking for ways to increase their overall vitality.
U.S. Commercial
U.S. Government
International Health
5 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
CROSS-COMPANY COLLABORATION
Evernorth Health Services and Cigna Healthcare have delivered
impactful results on their own. And, when they work together,
they accelerate innovation and create new solutions for our clients
and customers by leveraging our entire suite of capabilities,
including our longitudinal portfolio of data.
Our Cigna Pathwell program is a prime example. Cigna Pathwell
Specialty connects patients with convenient, quality and affordable
options for drug infusions through Cigna Healthcare’s provider
network. The newest Cigna Pathwell program, Cigna Pathwell Bone
& Joint, connects patients to Cigna Healthcare’s provider network,
as well as its personalized benefit designs, physical therapy options
(both virtually and in person), behavioral health services and peer
support. Through Evernorth Health Services’ analytics, our team can
predict potential surgeries up to a year in advance and offer holistic
care while also decreasing unnecessary surgeries that can drive up
costs. When surgery is necessary, the members’ benefits will cover
the procedure at low-to-no cost from admission to discharge.10
Another example of the power of our cross-company collaboration
is a new multi-year strategic relationship with VillageMD.11 Through
VillageMD, we are transforming how care is accessed, delivered
and coordinated for better health outcomes and affordability.
Operating more than 250 primary care practices across 22 markets,
VillageMD is one of the largest independent primary care groups
in the United States. VillageMD physicians and patients partner
closely with Cigna Healthcare and also benefit from Evernorth
Health Services, including real-time data and clinical insights at
the point of diagnosis, enhanced virtual care options through
MDLIVE, and dedicated pathways to specialty care and condition
management capabilities.
6 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
When Evernorth Health Services
and Cigna Healthcare work together,
they accelerate innovation
and create new solutions
for our clients and customers.
7 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
7 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Making an impact
Our commitment to improve the health and vitality of those we
serve guides how we operate our businesses, as well as how we
engage and support our communities. We are honored by the
recognition our efforts have earned, including being listed on
the Dow Jones Sustainability Indices for a sixth consecutive year12
and ranking No. 1 within health care among America’s Most
JUST companies by JUST Capital and CNBC.13
In 2022, we continued to make strides across the four pillars
of our environmental, social and governance framework:
Healthy Environment, Healthy Society, Healthy Workforce
and Healthy Company.
HEALTHY ENVIRONMENT
We see an inextricable link between the health of our environment
and people’s health. This has spurred our commitment to do more.
In 2022, we signed the RE100 global corporate renewable energy
initiative and pledged to transition to 100 percent renewable
electricity by 2030. In addition, we see an opportunity to measure
the positive impact on the environment with a number of ways
we are advancing our business. Telemedicine can help to reduce
the carbon footprint of health care by reducing emissions
because patients do not need to travel for care. Our continued
investment in virtual care is one important way we will support
a healthy environment.
8 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
HEALTHY SOCIETY
Recognizing that some communities face greater challenges than
others in supporting the health of their citizens, we maintain our long-
standing focus on reducing disparities, addressing social determinants
of health and creating a more sustainable health care system.
We continue to advance our Building Equity and Equality Program,
a five-year commitment to accelerate our health equity and DE&I
efforts, and are particularly encouraged by innovative opportunities
to address racial disparities in pre-term births. By working with
health care providers and convening services that include free
home delivery of prenatal vitamins, transportation for medical
appointments, nutrition and emotional support, we aim to
reduce disparities in pregnancy-related complications among
African American women in Baltimore, Houston and Memphis,
where we have launched our pre-term birth program.
We partner with providers to think beyond the clinical setting to best
support the holistic care of their patients. We reward value-based
providers to screen for social needs and make appropriate referrals
for support and to identify health disparities impacting their patient
population and develop an action plan to close gaps. We are also
working to embed health equity into our culture, systems, policies
and practices. Starting in 2021, we reviewed all our existing and
new medical coverage policies through a health equity lens and,
as a result, made changes to our policies that put us on the forefront
of driving advancements in equitable access to care.
The commitment to our leadership role in making a positive impact
in our communities is core to our business and embraced by our
co-workers. Dr. Luis Torres is a shining example, among so many others
across our company, of co-workers personally dedicated to making a
difference. Dr. Torres worked to drive policy change addressing health
equity for racial and social justice when representing The Cigna Group
during the CEO Action for Racial Equity fellowship in 2022.14
HEALTHY WORKFORCE
Within our company, we support transparency as we advance an
inclusive culture honoring the unique talents and perspectives of
our co-workers. Last year, we published our full-year 2021 Diversity
Scorecard Report, reinforcing our commitment and progress in
creating an environment where members of our team are able to
bring their best selves to work, leaving us better able to serve the
diverse needs of our customers, clients and communities.15
9 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Our Diversity, Equity & Inclusion (DE&I) Council continued to
provide valuable leadership in guiding our DE&I strategy, helping
us strengthen our approaches within our company and in our
communities. Caring deeply about our customers, patients and
co-workers is a value ingrained in our culture, and we are proud of
the many ways our team brings this to life, including through our
Community Ambassador Fellowship Program. Each year, we select
up to 15 employees who receive paid leave and additional support to
work with a nonprofit partner in addressing health and well-being
needs. Our 2022 class of ambassador fellows worked on projects such
as humanitarian and psychological support for refugees, help for
adult survivors of childhood abuse, education around addiction,
and the creation of equitable opportunities for high school students.
We are encouraged by the impact we are seeing with our
wide-ranging approach and are pleased to be recognized among
DiversityInc’s Top 50 Companies for Diversity for a fifth year in a row.16
We also understand the added challenges that many of our
employees have faced over the past few years, and we have
worked to increase the support we provide them. We initially
offered emergency time off in 2021, and as the Omicron variant
of COVID-19 spread rapidly at the beginning of 2022, we extended
that benefit for our employees. In addition to increased flexibility,
we also expanded our caregiver leave program to include care for
grandparents and grandchildren in addition to children, spouses
and parents with a serious health condition.
HEALTHY COMPANY
We have a deep and long-held commitment to strong governance
as well as ethical and resilient business practices. The strength of
our Board of Directors contributes meaningfully to upholding these
commitments. Approximately 70 percent of our directors have served
on our Board for fewer than six years, which demonstrates how we
continue to bring new and relevant perspectives and skill sets into our
company. Throughout 2022, our Board composition exceeded the
S&P benchmarks on median age, tenure, gender and ethnic diversity.
Our company is purposeful about whom we work with as we seek
suppliers that share our values and are committed to operating in a
responsible manner. We continue to make progress in creating and
supporting a diverse supplier base, and we are honored by the National
Minority Supplier Development Council as being among the Forefront
50 corporations showing leadership in creating greater economic
access and equity for systematically excluded entrepreneurs of color.17
1 0 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Building for the future
2022 was a strong year of performance, growth and positive
impact for our company. With Evernorth Health Services
and Cigna Healthcare, we demonstrated that we are serving
the needs of our customers, clients and partners, and we
expect to deliver another year of customer and earnings
growth in 2023.2
We are making a defining difference in health care, and
we are committed to building on our momentum by taking
on new challenges where we are positioned to lead.
It is a profound privilege to lead more than 70,000 colleagues
around the world who demonstrate personal dedication
to our refreshed mission to improve the health and vitality
of those we serve. I’m inspired by the way they guide patients
to the care they need, work with employers in supporting
their people and always seek more ways we can help.
Each and every day, we are bringing to life our vision
of a better future, built on the vitality of every individual
and every community.
DAVID M. CORDANI
Chairman and Chief Executive Officer
The Cigna Group
1 1 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
2 0 2 2 A T A G L A N C E
Innovating
New
Partnerships
• Created a new strategic collaboration
with Centene to make prescription
medications more accessible and
affordable for 20 million Centene health
plan members beginning in 2024.8
• Entered into a new strategic partnership
with VillageMD to accelerate value-based
care services across the country.11
• Announced five-year collaboration
with Kaiser aimed at delivering
increased convenience, affordability
and expanded access to high-quality
care for its members.7
1 2 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Delivering
Value
• Transforming the care experience
for patients with complex conditions
with the launch of Cigna Pathwell,
a new, industry-leading suite of
cost-saving products.10
• Accredo, our specialty pharmacy,
was awarded URAC’s Rare Disease
Pharmacy Center of Excellence
designation.18
• Named a 2023 Best Medicare
Advantage Plan company in
Alabama and Tennessee by
U.S. News & World Report.19
• Driving affordability for patients
and employers through the adoption
of biosimilars.20
1 3 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
1 3 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Expanding
Coverage
• Expanded virtual primary care offerings
through MDLIVE for patients with chronic
conditions via personalized care plans
and remote monitoring capabilities.21
• Doubled the size of Medicare Advantage
provider network over the past two years,
including significantly increasing the
number of available specialists.4,9
• Expanded ACA offerings in three new
states — Texas, Indiana and South Carolina
— and 50 new counties.22
1 4 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Investing
in Our Future
• Repurchased $3.5 billion of common
stock through accelerated stock
repurchase agreements.23
• Completed ~$5.4 billion sale of life,
accident and supplemental benefits
businesses in six international markets
to Chubb.24
• $450 million capital investment in
Cigna Ventures, the strategic venture
fund of The Cigna Group, to drive
continuous health care transformation,
innovation and growth.25
1 5 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
1 5 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
We are transforming the
ecosystem of health.
Advancing better health for all.
Our approach is rooted in our drive to make the health care system
well-functioning, sustainable and equitable. The approach
is structured around four interconnected pillars that underscore
our mission to improve the health and vitality of those we serve.
The following are some 2022 highlights within each pillar.
1 6 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Healthy Society
• Our businesses further aligned our products and services with
value-based care models, leveraging integrated benefits, managing
drug costs through innovation, expanding digital offerings and
applying a health equity focus to coverage policy development.26
• The Cigna Group and the Cigna Foundation supported nearly
$54 million in combined charitable giving,27 including more
than $16.5 million toward the following focus areas: health and
well-being; education and workforce development; community
and social issues; military, veterans and first responders; disaster
relief; global and trending causes; employee programs; and the
Foundation’s signature programs: Building Equity and Equality
Program, Cigna Scholars, and Healthier Kids For Our Future®.27
• Employees dedicated their time and talent to various
causes, equating to more than $2.8 million in volunteer-
engagement value.27, 28
• The Cigna Foundation, in partnership with The New York Life
Foundation and E4E Relief, received a Gold Halo award from
Engage for Good. The award recognizes the Brave of Heart Fund,
which supports frontline health care workers, as the 2022 best
COVID-19 Initiative.29
1 7 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Healthy Workforce
• Expanded our caregiver leave program, which allows up to
four weeks of paid leave to enable employees to care for a
family member with a serious health condition, to include
care for grandparents and grandchildren in addition to children,
spouses and parents. This program will be expanded to eight
weeks in 2023.26
• Honored by Business Group on Health as Best Employer
for Health and Well-being.30
• Published our full-year 2021 Diversity Scorecard Report,
which reflected a goal-oriented approach for progress
in three key areas: colleagues, clinical and communities.15
• Ranked #24 on DiversityInc’s Top 50 Companies For Diversity,
a nine-place jump forward from 2021.16
• Awarded “2022 Best Places to Work for LGBTQ+ Equality”
by the Human Rights Campaign Foundation.31
1 8 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Healthy Environment
• Continued to work toward achieving our operational
sustainability targets, including reducing our Scope 1 and 2
greenhouse gas emissions, striving for carbon neutrality,
sourcing renewable electricity, and reducing water consumption
and waste generation.26
• Launched digital ID cards, and encouraged customers to go
paperless where feasible by providing them with the option to
receive paperless statements, submit claims online, use direct
deposit and view plan information through myCigna.com and
the myCigna® app.32
1 9 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Healthy Company
• Evolved our ESG governance, developed a new ESG framework
and maintained ESG leadership:
• Member of Dow Jones Sustainability Index for both the
World and North America for the sixth consecutive year.12
• Named one of America’s Most JUST Companies
for the third year by JUST Capital and CNBC, including
#1 in the Health Care Providers industry and #16 overall
in the JUST 100.13
• Top 1% in EcoVadis, improving to a Platinum Medal
sustainability rating over Gold in 2021.33
• Upgraded to AA in MSCI ESG Ratings, representing
industry leadership.34
• Made significant progress toward our goal to achieve $1 billion
in annual diverse supplier spend by 2025, resulting in being
recognized with the Forefront 50 honor by the National Minority
Supplier Development Council, which acknowledges companies
that are leading the way to create greater economic access and
equity for systematically excluded entrepreneurs of color.17
2 0 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
$180.5 billion
adjusted revenues,
representing
growth of 4%2,3
$7.3 billion
adjusted income
from operations2,3
$23.27
adjusted earnings
per share2,3
$8.7 billion
cash flow from
operations2
27.4 million
shares repurchased
for $7.6 billion in 20222
Paid a quarterly
dividend of
$1.12
per share in 2022,
increased by 10%
for 20232
2.2 million
relationships with
health care providers,
clinics and facilities4
300,000+
mental and behavioral
health care providers4
189 million+
customer relationships2
70,000+
employees committed
to changing people’s lives
for the better
~30
countries and
jurisdictions
The information provided is as
of December 31, 2022, except
where otherwise noted.
All information subject to change.
2 1 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
2 1 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Corporate Board
of Directors
Board of Directors
DAVID M. CORDANI
Chairman and Chief Executive Officer,
The Cigna Group
WILLIAM J. DELANEY
Former Chief Executive Officer,
Sysco Corporation, a food marketing
and distribution company
ERIC J. FOSS
Former Chair, President
and Chief Executive Officer,
Aramark, a provider of food services,
facilities management and uniform services
RETIRED MAJ. GEN. ELDER GRANGER, M.D.
President and Chief Executive Officer,
THE 5Ps LLC, a health care, education
and leadership consulting firm
NEESHA HATHI
Head of Wealth and Advice Solutions,
The Charles Schwab Corporation,
a financial services company
GEORGE KURIAN
Chief Executive Officer,
NetApp, Inc., a cloud-led, data-centric
software company
KATHLEEN M. MAZZARELLA
Chair, President and Chief Executive Officer,
Graybar Electric Company, Inc., a North
American distributor of electrical,
communications and data networking
products and provider of related supply
chain management and logistics services
MARK B. MCCLELLAN, M.D., PH.D.
Director,
Duke-Robert J. Margolis, M.D.,
Center for Health Policy
KIMBERLY A. ROSS
Former Chief Financial Officer,
Baker Hughes Company, an energy
technology company
ERIC C. WISEMAN
Lead Independent Director, The Cigna Group
Former Executive Chair, President
and Chief Executive Officer,
VF Corporation, an apparel and
footwear company
DONNA F. ZARCONE
Former President and Chief Executive Officer,
The Economic Club of Chicago, a civic
and business leadership organization
EXECUTIVE COMMITTEE
David M. Cordani, Chair
Eric J. Foss
Elder Granger
Kathleen M. Mazzarella
Kimberly A. Ross
Eric C. Wiseman
Donna F. Zarcone
AUDIT COMMITTEE
Kimberly A. Ross, Chair
William J. DeLaney
Neesha Hathi
Donna F. Zarcone
COMPLIANCE COMMITTEE
Elder Granger, Chair
George Kurian
Mark B. McClellan
2 2 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
Executive Officers
DAVID M. CORDANI
Chairman and Chief Executive Officer,
The Cigna Group
CHARLES G. BERG
President, U.S. Government Business
and Senior Advisor, Cigna Healthcare
EVERETT NEVILLE
Executive Vice President, Solutions and
Corporate Development, The Cigna Group
ERIC P. PALMER
President and Chief Executive Officer,
Evernorth Health Services
DAVID J. BRAILER, M.D., PH.D.
Executive Vice President, Chief Health Officer,
The Cigna Group
CYNTHIA RYAN
Executive Vice President, Chief Human
Resources Officer, The Cigna Group
NOELLE K. EDER
Executive Vice President and Global Chief
Information Officer, The Cigna Group
JASON D. SADLER
President, International Health,
Cigna Healthcare
BRIAN C. EVANKO
Executive Vice President and Chief Financial
Officer, The Cigna Group
PAUL A. SANFORD
Executive Vice President, Operations,
The Cigna Group
NICOLE S. JONES
Executive Vice President and General Counsel,
The Cigna Group
MICHAEL W. TRIPLETT
President, U.S. Commercial, Cigna Healthcare
Other Officers
KARI KNIGHT STEVENS
Senior Vice President, Chief Counsel and
Corporate Secretary, The Cigna Group
MARY T. AGOGLIA HOELTZEL
Senior Vice President, Tax and
Chief Accounting Officer, The Cigna Group
TIMOTHY D. BUCKLEY
Senior Vice President and Treasurer,
The Cigna Group
CORPORATE GOVERNANCE
COMMITTEE
Donna F. Zarcone, Chair
William J. DeLaney
Elder Granger
Mark B. McClellan
FINANCE COMMITTEE
Eric J. Foss, Chair
Neesha Hathi
Kathleen M. Mazzarella
Kimberly A. Ross
PEOPLE RESOURCES
COMMITTEE
Kathleen M. Mazzarella, Chair
Eric J. Foss
George Kurian
2 3 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
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2023 ANNUAL MEETING
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Website: www.computershare.com/investor
The Annual Meeting of
Shareholders will be held virtually
on Wednesday, April 26, 2023,
at 9:30 a.m. ET. Information
regarding how to attend will be
included in the proxy materials
for the Annual Meeting. Proxies
and proxy statements have been
made available to shareholders
of record as of the close of
business on Tuesday, March 7,
2023. As of December 31, 2022,
the number of shareholders of
record was 28,205.
FINANCIAL INFORMATION
The Cigna Group’s Form 10-K,
Form 10-Qs, quarterly earnings
releases and other SEC filings
are available online
at TheCignaGroup.com.
OFFICES
900 Cottage Grove Road
Bloomfield, CT 06002
860.226.6000
One Express Way
St. Louis, MO 63121
314.996.0900
Two Liberty Place
1601 Chestnut Street
Philadelphia, PA 19192-1550
215.761.1000
STOCK LISTING
The Cigna Group’s common stock
is listed on the New York Stock
Exchange. The ticker symbol is CI.
THE CIGNA GROUP ONLINE
To access online information
about The Cigna Group, our
products and our services,
visit TheCignaGroup.com.
2 4 • T H E C I G N A G R O U P 2 0 2 2 A N N U A L R E P O R T
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 001-38769
The Cigna Group
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
900 Cottage Grove Road, Bloomfield, Connecticut
(Address of principal executive offices)
82-4991898
(I.R.S. Employer Identification No.)
06002
(Zip Code)
(860) 226-6000
Registrant's telephone number, including area code
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Par Value $0.01
CI
New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging
growth company" in Rule 12b-2 of the Exchange Act.
☒
☐
☒
☐
Yes
☒
☐
No
☐
☒
Large accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☐
Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
☐
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2022 was approximately $82.8 billion.
☐
☒
☐
☐
☒
As of January 31, 2023, 297,059,973 shares of the registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference information from the registrant's definitive proxy statement related to the 2023 annual meeting of
shareholders.
TABLE OF CONTENTS
FREQUENTLY REQUESTED 10-K INFORMATION
Risk Factors
Executive Overview
Key Transactions and Business Developments
Liquidity and Capital Resources
Critical Accounting Estimates
Segment Information
Revenues by Product Type
Cautionary Statement
PART I
Item 1.
Business ...............................................................................................................................
Overview ......................................................................................................................
Evernorth Health Services ...........................................................................................
Cigna Healthcare ..........................................................................................................
Other Operations ..........................................................................................................
Investment Management ..............................................................................................
Strategic Investments ...................................................................................................
Digital, Data and Technology ......................................................................................
Human Capital Management .......................................................................................
Environmental, Social and Governance .......................................................................
Miscellaneous ...............................................................................................................
Regulation ....................................................................................................................
Risk Factors .........................................................................................................................
Item 1A.
Unresolved Staff Comments ...............................................................................................
Item 1B.
Properties .............................................................................................................................
Item 2.
Legal Proceedings ...............................................................................................................
Item 3.
Item 4.
Mine Safety Disclosures ......................................................................................................
Information about our Executive Officers .....................................................................................................
Page
33
53
56
58
63
134
137
Page
1
1
3
11
17
18
18
19
20
21
21
21
33
48
48
48
48
49
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ................................................................................................
[Reserved] ...............................................................................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations ..
Quantitative and Qualitative Disclosures about Market Risk .................................................
Financial Statements and Supplementary Data .......................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .
Controls and Procedures ..........................................................................................................
Other Information ....................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ....................................
Directors, Executive Officers and Corporate Governance ......................................................
A. Directors of the Registrant ...............................................................................................
B. Executive Officers of the Registrant ................................................................................
C. Code of Ethics and Other Corporate Governance Disclosures ........................................
D. Delinquent Section 16(a) Reports ....................................................................................
Executive Compensation .........................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ................................................................................................................
Certain Relationships and Related Transactions, and Director Independence ........................
Principal Accountant Fees and Services ..................................................................................
50
51
52
75
76
138
138
138
138
139
139
140
140
140
PART IV
Item 15.
Exhibits and Financial Statement Schedules ...........................................................................
Form 10-K Summary ...............................................................................................................
Item 16.
Signatures ...........................................................................................................................................................
Index to Financial Statement Schedules ............................................................................................................
Exhibits
141
149
150
FS-1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on The Cigna Group's current expectations and projections about future
trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others,
statements concerning future financial or operating performance, including our ability to improve the health and vitality of those we
serve; future growth, business strategy and strategic or operational initiatives; economic, regulatory or competitive environments,
particularly with respect to the pace and extent of change in these areas and the impact of developing inflationary and interest rate
pressures; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming
years; strategic transactions; the impact of the Inflation Reduction Act (as defined below); expectations related to our CMS (as defined
below) Star Ratings and Medicare Advantage Capitation Rates; and other statements regarding The Cigna Group's future beliefs,
expectations, plans, intentions, liquidity, cash flows, financial condition or performance. You may identify forward-looking statements
by the use of words such as "believe," "expect," "project," "plan," "intend," "anticipate," "estimate," "predict," "potential," "may,"
"should," "will" or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.
Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ
materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to:
our ability to achieve our strategic and operational initiatives; our ability to adapt to changes in an evolving and rapidly changing
industry; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or
increase market share; price competition, inflation and other pressures that could compress our margins or result in premiums that are
insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to
expected medical claims; our ability to develop and maintain satisfactory relationships with physicians, hospitals, other health service
providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical
manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy
networks; changes in drug pricing or industry pricing benchmarks; our ability to invest in and properly maintain our information
technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data
security incident; the scale, scope and duration of the COVID-19 pandemic and its potential impact on our business, operating results,
cash flows or financial condition; political, legal, operational, regulatory, economic and other risks that could affect our multinational
operations, including currency exchange rates; risks related to strategic transactions and realization of the expected benefits of such
transactions, as well as integration or separation difficulties or underperformance relative to expectations; dependence on success of
relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; potential
liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities;
the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in
existing laws or regulations; uncertainties surrounding participation in government-sponsored programs such as Medicare; the
outcome of litigation, regulatory audits and investigations; compliance with applicable privacy, security and data laws, regulations and
standards; potential failure of our prevention, detection and control systems; unfavorable economic and market conditions, including
the risk of a recession or other economic downturn and resulting impact on employment metrics, stock market or changes in interest
rates and risks related to a downgrade in financial strength ratings of our insurance subsidiaries; the impact of our significant
indebtedness and the potential for further indebtedness in the future; unfavorable industry, economic or political conditions; credit risk
related to our reinsurers; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors and Part II, Item 7
– Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K and as described from
time to time in our future reports filed with the Securities and Exchange Commission (the "SEC").
You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees
of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. The
Cigna Group undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise, except as may be required by law.
Item 1. BUSINESS
OVERVIEW
PART I
The Cigna Group, together with its subsidiaries, is a global health company. On February 13, 2023, we changed our corporate name
from Cigna Corporation to The Cigna Group. We will not distinguish between our prior and current corporate name and will refer to
our current corporate name throughout this Annual Report on Form 10-K. As such, unless expressly indicated or the context requires
otherwise, the terms "Company," "we," "us," and "our" in this document refer to The Cigna Group, a Delaware corporation, and,
where appropriate, its subsidiaries. On February 13, 2023, we also changed the name of our Evernorth segment to Evernorth Health
Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout
this Annual Report on Form 10-K. Our common stock continues to be listed with, and trades on, the New York Stock Exchange under
the ticker symbol "CI".
Our Purpose and Mission
The Cigna Group is a global health company committed to a better future built on the vitality of
every individual and every community. Our employees are trailblazers, relentlessly partnering and
innovating solutions for better health. This captures who we are today – and who we aspire to be in
the future. We are undergoing a revolution in health.
Our Pathways to Growth
In order to turn the differentiated value we deliver to our customers, patients, clients, communities
and investors into attractive, sustained growth, we will continue to cultivate our portfolio of
businesses so that it can continue to deliver the foundational and accelerated growth and cross-
enterprise leverage we expect today and in the future.
• Foundational: Mature, scaled businesses contributing steady, predictable growth.
• Accelerated: High-growth businesses in very attractive markets.
• Cross-Enterprise Leverage: Working together to create even greater value.
How We Win
• Deep clinical expertise across pharmacy, medical and behavioral.
• Robust data and insights supporting care with greater precision and personalization.
• Focus on developing innovative solutions addressing needs of customers, patients and
clients.
• Partnering with others to accelerate innovation and achieve greater impact.
• Consultative approach driven by an experienced and talented team.
The last couple of years have reoriented every person, every organization and every community toward a deeper relationship with
health. We believe that achieving both health and vitality for those we serve must fuel the actions of our over 70,000 colleagues
around the world, each and every day. We have two growth platforms: Evernorth Health Services and Cigna Healthcare. Evernorth
Health Services is our pharmacy, care and benefits solution that is highly attractive to our clients and partners because of the depth of
its capabilities and expertise. Evernorth Health Services also enables us to deepen existing relationships across our entire book of
business. Cigna Healthcare is the health benefits provider of The Cigna Group, serving customers and clients for our U.S.
Commercial, U.S. Government and International Health operating segments, and it allows us to harness our partnership relationship
with physicians to deliver affordable and coordinated health care to employers and individuals.
Together, Evernorth Health Services and Cigna Healthcare provide a strong and diverse foundation that allows us to capitalize on
growth opportunities by leading with our strengths – medical and pharmacy solutions – and then expanding those relationships by
addressing additional client needs and innovating and delivering new services and solutions. To transform the differentiated value we
deliver to our customers, patients, clients, communities and investors into attractive, sustained growth, we continue to cultivate our
portfolio of businesses with the goal of consistently delivering the foundational growth, accelerated growth and opportunity for
cross-enterprise leverage we expect today and in the future. When considering our broad portfolio of businesses, we have strong
foundational businesses that will continue to grow. These businesses often serve as the key entry point for clients with either a
1
pharmacy relationship, a medical relationship or both. We also have a variety of accelerated growth businesses, both scaled and
emerging, which build upon our foundational relationships or provide exposure to adjacent high-growth areas. Our cross-enterprise
leverage provides us with an opportunity to unlock even more value as the combined power of the franchise is unleashed.
The Cigna Group's employees are champions for the people we serve and over the past decade, our focus has shifted to helping
individuals and families thrive by offering solutions to prevent and better manage health challenges. When sickness or disability do
occur, we support our customers by offering broad choices to help them best access high quality, affordable, whole person care. We
see three primary ways to help individuals maintain, improve or recover their physical or mental health: 1) behavioral and lifestyle
changes – with health coaches helping individuals set and meet health goals; 2) affordable, effective medication options – with access
to our leading pharmacy services improving health and driving affordability; and 3) targeted medical and surgical interventions – with
a clear and proven strategy around partnerships and value-based care quality programs, powered by data and analytics and aligned
incentives. We maximize use of evidence-based care, while delivering best-in-class service for our customers with acute and chronic
conditions through enhanced real-time insights across an expanded platform with industry-leading solutions to support care decisions.
Our portfolio of offerings solves diverse challenges across the health care system. We offer a differentiated set of pharmacy, medical,
behavioral, dental and supplemental products and services, primarily through two growth platforms: Evernorth Health Services and
Cigna Healthcare. Our capabilities include: 1) a broad portfolio of solutions and services, some of which can be offered on a stand-
alone basis; 2) integrated behavioral, medical and pharmacy management solutions; 3) leading specialty pharmacy, clinical and care
management expertise; and 4) advanced analytics that help us engage more meaningfully with individuals, the plan sponsors we serve
and our provider partners.
We differentiate ourselves in the market through a number of capabilities. We improve whole-person health, in body and mind by
treating physical and behavioral health together to improve outcomes and by providing early behavioral and lifestyle interventions. We
make it easier to access quality care by improving navigation at every step in a patient's health journey and by meeting customers
wherever they are - virtually, digitally and in home. We connect care for the most pressing conditions by closing gaps between
hospitals, primary care providers, specialists and other health care providers. We also develop personalized treatment paths across
every dimension of care. We continue to build upon our network of value-based provider arrangements for better customer
experiences, better overall health outcomes and greater affordability, with a significant number of our eligible customers aligned to our
Accountable Care programs nationally. We make medicine more affordable by reducing costs from start to finish, including those
related to drug access, delivery and treatment and by identifying appropriate medication alternatives. We partner and innovate to
enable us to deliver differentiated value and broaden our reach in new geographies or through the introduction of new solutions and
offerings.
Our key to success revolves around how deeply we care about our customers, patients and co-workers. We intend to create a better
future together by innovating and adapting, acting with speed and purpose, partnering, collaborating and keeping our promises.
Information about Segments
We present the financial results of our businesses in the following segments (see "Executive Overview" section of the Management
Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") located in Part II, Item 7 of this Form 10-K for
a Financial Summary):
Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those
from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and
Care Delivery and Management Solutions, which are provided to health plans, employers, government organizations and health care
providers. Within Evernorth Health Services, Pharmacy Benefits and Home Delivery Pharmacy are foundational growth businesses
and Specialty Pharmacy, Distribution, and Care Delivery and Management Solutions are accelerated growth businesses.
Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health operating segments, which provide
comprehensive medical and coordinated solutions to clients and customers. Within Cigna Healthcare, U.S. Commercial and
International Health are our foundational growth businesses and U.S. Government is our accelerated growth business.
2
Other Operations comprises the remainder of our business operations, which includes certain ongoing businesses and exiting
businesses. Our ongoing businesses include our continuing business, corporate-owned life insurance ("COLI"), and our run-off
businesses. Our run-off businesses include (i) guaranteed minimum death benefit ("GMDB") and guaranteed minimum income benefit
("GMIB") business, (ii) settlement annuity business and (iii) individual life insurance and annuity and retirement benefits businesses.
Our exiting businesses include our interest in a joint venture in Türkiye, which was sold to our partner in December 2022, the
international life, accident and supplemental benefits businesses sold on July 1, 2022 and the Group Disability and Life business sold
on December 31, 2020.
On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong
Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc. ("Chubb") for approximately $5.4
billion in cash (the "Chubb transaction") (see Note 4 to the Consolidated Financial Statements included in Part II, Item 8 of this Form
10-K).
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt
less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated
with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and
intersegment eliminations for products and services sold between segments.
Other Information
The financial information included in this Form 10-K for the fiscal year ended December 31, 2022 is in conformity with accounting
principles generally accepted in the United States of America ("GAAP") unless otherwise indicated. In the segment discussions that
follow, we use the terms "adjusted revenues" and "pre-tax adjusted income (loss) from operations" to describe segment results. See
Note 24 to the Consolidated Financial Statements of this Form 10-K for definitions of those terms. Industry rankings and percentages
set forth herein are for the year ended December 31, 2022, unless otherwise indicated. In addition, statements set forth in this
document concerning our rank or position in an industry or particular line of business have been developed internally based on
publicly available information unless otherwise noted.
Cigna Holding Company (formerly Cigna Corporation) was incorporated in Delaware in 1981. Halfmoon Parent, Inc. was
incorporated in Delaware in March 2018. Halfmoon Parent, Inc. was renamed Cigna Corporation and Cigna Holding Company
became its subsidiary concurrent with the consummation of the combination with Express Scripts on December 20, 2018. Cigna
Corporation was renamed The Cigna Group in February 2023.
You can access our website at http://www.thecignagroup.com to learn more about our company. We make annual, quarterly and
current reports and proxy statements and amendments to those reports available, free of charge through our website as soon as
reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission
("SEC"). We also use our website as a means of disclosing material information and for complying with our disclosure obligations
under the SEC's Regulation FD (Fair Disclosure). Important information, including news releases, analyst presentations and financial
information regarding The Cigna Group is routinely posted on our website. Accordingly, investors should monitor the Investor
Relations portion of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
The information contained on, or that may be accessed through, our website is neither incorporated by reference into nor a part of this
report. See also "Code of Ethics and Other Corporate Governance Disclosures" in Part III, Item 10 of this Form 10-K for additional
information regarding the availability of our Codes of Ethics on our website.
Intellectual Property Rights
We hold a variety of trademarks and service marks used throughout our businesses. We also use patents to protect our proprietary
technological advances and to differentiate ourselves in the market. The Cigna Group companies hold over 320 United States patents.
We are not substantially dependent on any single patent or group of related patents. We are not aware of any facts that could
materially impact the continuing use of any of our intellectual property.
EVERNORTH HEALTH SERVICES
Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those
from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and
Care Delivery and Management Solutions, which are provided to health plans, employers, government organizations and health care
providers. These offerings are also integrated into our Cigna Healthcare solutions to span the total health care delivery system, further
3
reducing the total cost of care for our clients and customers. In 2022, Evernorth Health Services reported adjusted revenues of $140.3
billion and pre-tax adjusted income from operations of $6.1 billion.
On February 13, 2023, we changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between
our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.
HOW WE WIN
Evernorth Health Services accelerates delivery of comprehensive, connected solutions to create value and meet the diverse needs
of health plans, employers, health care providers and government organizations by:
•
•
•
Partnering in unconventional ways to solve complex problems across a fragmented health care ecosystem, fueled by data
and expertise that drives purposeful innovation
Creating flexible solutions tailored to client needs, using Evernorth Health Services' combined strengths and capabilities, as
well as strategic partnerships, to deliver: better, more efficient care for patients; better experiences for clients, providers and
customers; and enhanced choices for clients and customers through our open architecture model
Evaluating medicines, digital therapeutics and other health solutions for efficacy, adherence, value and price to assist
clients in selecting a cost-effective formulary
• Offering home delivery, virtual and in-person care, and specialty customer-centric solutions that meet the needs of our
clients and customers in ways that unlock greater value and better health services while providing better and specialized
clinical care
Delivering more affordable solutions that provide more discounts and drive risk-sharing and value-based care
Promoting the use of generics and lowest-cost, clinically effective brands of medications
•
•
4
The following chart depicts a high-level summary of our principal products and services in this segment with definitions on
subsequent pages.
Principal
Products &
Services
Brands/
Subsidiaries
Key Relationships
Primary Competitors
Pharmacy
Benefits
Driving
Foundational
Growth
Express Scripts PBM, myMatrixx®, Care
Continuum, Express Scripts MedRx
ManagementSM, Embarc Benefit Protection®,
FamilyPathSM, Advanced Utilization
Management, Enhanced Fraud, Waste &
Abuse, Ascent Health Services, Econdisc,
SaveOnSP, Inside Rx®, Evernorth Wholesale
MarketplaceSM, Value-Based Programs
(Express Scripts SafeGuardRx®, Express
Scripts Patient Assurance®), National Preferred
Formulary, Advanced Opioid Management®,
ScreenRx®
Clients, Customers,
Health Care Providers,
Consultants, Health
Plans, Commercial and
Government Payors,
Self-paying Customers,
Pharmacy Providers
Health Plans, Independent
Pharmacy Benefit Managers
("PBMs"), Managed Care PBMs,
Third-Party Benefit
Administrators, Group Purchasing
Organizations, Clinical Solutions
and Health Care Data Analytics
Companies
Home Delivery
Pharmacy
Express Scripts Pharmacy®
Clients, Customers,
Health Care Providers
Independent PBMs, Managed Care
PBMs, Retail Pharmacies
Specialty
Pharmacy
Accredo®, Freedom Fertility Pharmacy®,
Therapeutic Resource Center®
Clients, Customers,
Health Care Providers,
Specialty Drug
Distributors
Specialty Pharmacies
Distribution
CuraScript SD®
Clinics, Hospitals
Specialty Drug Distributors
Care Delivery
and
Management
Solutions
Evernorth Care Group, Evernorth Care
Services, Evernorth Care Solutions, Evernorth
Direct Health, Evernorth Home-Based Care,
eviCore Healthcare®, MDLIVE®, Evernorth
Behavioral Health, inMyndSM, Health Connect
360®, RationalMed®, Evernorth Digital Health
FormularySM, Evernorth Labs, Trend Central®,
HealthPredictSM, MediCUBE®, ScriptVision®
Clients, Customers,
Health Care Providers
Managed Care Organizations,
Care Delivery and Care
Management Solutions Providers,
Third-Party Benefit
Administrators, Health Care Data
Analytics Companies
Driving
Accelerated
Growth
Principal Products & Services
•
Pharmacy Benefits. Express Scripts Pharmacy dispenses approximately 1.6 billion adjusted prescriptions(1) annually to
members of pharmacy plans managed by our Express Scripts PBM. We drive high-quality, cost-effective care through
prescription drug utilization and cost management services. We support our clients' plan design selections to deliver balanced
affordability, choice, simplicity and convenience. We focus our solutions to align with our clients' service, care and cost
management needs. As a result, we believe we deliver better care, healthier outcomes, higher customer satisfaction and a
more affordable prescription drug benefit. We dispense drug claims via Express Scripts Pharmacy, Accredo and our retail
networks by integrating retail network pharmacy administration, benefit design consultation, drug utilization review, drug
formulary management and pharmacy fulfillment services. We administer payments to retail networks and bill benefits costs
to our clients through our end-to-end adjudication services.
◦
Drug Utilization Review Program. When pharmacies submit claims for prescription drugs to us, we review them
electronically in real time for health and safety. We then alert the dispensing pharmacy of any detected issues. Clients
may also choose to enroll in programs that result in communications about potential therapy concerns being sent to
prescribers after the initial claim submission.
Benefits Design Consultation. We consult with our clients on how best to structure and leverage the pharmacy benefit to
meet plan objectives for affordable access to the prescription medications customers need to stay healthy and to ensure
the safe and effective use of those medications.
myMatrixx. myMatrixx is a unique PBM with an exclusive focus on workers' compensation. We combine high-touch
customer service with clinical expertise and state-of-the-art business intelligence systems to deliver simplified solutions
and positive outcomes. myMatrixx leverages Express Scripts' robust pharmacy network and provides a smooth and
personalized experience for clients and injured workers.
◦
◦
(1) Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted
as one script.
5
◦
◦
◦
◦
◦ Medical Drug Management. We offer a comprehensive range of services and guaranteed savings for managing medically
billed specialty drugs. Our solutions apply utilization management, site of care management and claims prepayment
review to effectively reduce wasteful spend, while providing services tailored to customers ensuring safety and healthier
outcomes. We also offer Express Scripts MedRx Management, a suite of solutions and consultative services for medical
rebates contracting, medically-billed drug preferencing and value-based contracting.
Embarc Benefit Protection. Embarc shields clients and members from the high costs of life-saving gene therapies, so that
customers who need treatment can get it. Additionally, the program provides access to quality, cost-effective in-network
providers and support from a dedicated gene therapy case management team.
FamilyPath. FamilyPath is raising the bar for fertility health by providing more comprehensive and more flexible
coverage and proactive care for growing families, including expanded medical and pharmacy benefit management;
access to vetted provider and lab networks; and dedicated Fertility Advisors to proactively support and guide customers.
Retail Network Pharmacy Administration. We contract with retail pharmacies to provide prescription drugs to customers
of the pharmacy benefit plans we manage. We negotiate with pharmacies throughout the United States to discount drug
prices provided to customers and manage national and regional networks responsive to client preferences related to cost
containment, convenience of access for customers and network performance. We also manage networks of pharmacies
customized for or under direct contract with specific clients and have contracted with pharmacy provider networks to
comply with the Center for Medicare and Medicaid Services ("CMS") access requirements for the federal Medicare Part
D prescription drug program ("Medicare Part D"). All retail pharmacies in our network communicate with us online and
in real-time to process prescription drug claims.
Drug Formulary Management. Formularies are lists of drugs with designations that may be used to determine drug
coverage, customer out-of-pocket costs and communicate plan preferences in competitive drug categories. Our formulary
management services support clients in establishing formularies that assist customers and physicians in choosing
clinically-appropriate, cost-effective drugs and prioritize access, safety and affordability. We administer specific
formularies on behalf of our clients, including standard formularies developed and offered by Express Scripts and custom
formularies in which we play a more limited role. Most of our clients select standard formularies, governed by our
National Pharmacy & Therapeutics Committee, which is comprised of a panel of independent physicians and
pharmacists in active clinical practice representing a variety of specialties and practice settings, typically with major
academic affiliations. In making formulary recommendations, this committee considers only the drug's safety and
efficacy and not the cost of the drug, including any negotiated manufacturer discount or rebate arrangement. This process
is designed to ensure the clinical recommendation is not affected by our financial arrangements. We fully comply with
this committee's clinical recommendations regarding drugs that must be included or excluded from the formulary based
on their assessment of safety and efficacy.
Advanced Utilization Management. These programs include prior authorization, drug quantity management and step
therapy designed to decrease client spend on pharmacy.
Enhanced Fraud, Waste & Abuse. We help plan sponsors identify potential problem customers and prescribers with
unusual or excessive utilization patterns. The program is designed to help identify outliers and situations of abnormal use
or prescribing patterns by analyzing types of prescriptions, refill patterns and pharmacy utilization.
Administration of Group Purchasing Organizations. We operate various group purchasing organizations that negotiate
pricing for the purchase of pharmaceuticals and formulary rebates with pharmaceutical manufacturers on behalf of their
participants. They also provide various administrative services to their participants including management and reporting.
Copay Solutions. Our first-to-market innovative copay solutions help customers afford their medications, protect plan
design preferences and achieve lower trend. Our partnership with SaveOnSP on the first non-essential health benefits
copay assistance solution has driven significant savings by targeting high-cost, high-volume drugs. SaveOnSP
recommends plan design and coverage changes for certain drugs, enabling maximum savings and reducing plan and
client costs. As manufacturer programs and regulations change, this aggressive solution adapts, delivering lower
specialty plan cost and enhanced customer support.
Inside Rx. Inside Rx is a prescription medication savings program that offers eligible self-paying customers discounts on
many brand and generic medications. This program is not insurance but offers savings at more than 60,000 participating
retail pharmacies (including all major chains) in the United States and Puerto Rico. The program also offers discounts on
prescription medications through private label solutions. Inside Rx earns a small fee from our supply chain partners
every time a customer fills a prescription via the program. This lets us provide access to our savings card at no cost to the
customer.
Evernorth Wholesale Marketplace. Evernorth Wholesale Marketplace offers a suite of flexible, private label solutions
including but not limited to Wholesale Marketplace Drug Formulary Management services, Retail Network Programs,
Value-Based Solutions, Medical Rebate Programs and Utilization Management Policies. These offerings are captured
under either our drug formulary administrative service arrangements or our formulary processing arrangements. As the
needs of the market evolve, we will continue to partner with clients and develop additional offerings that align with their
goals and objectives.
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6
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Value-Based Programs.
▪
Express Scripts SafeGuardRx. We offer a solution platform aimed at therapy classes that pose budgetary threats and
clinical challenges to customers. Our solutions are designed to keep our clients ahead of the drug cost curve while
providing customers the personalized care and access they need. These solutions are offered throughout our
pharmacy benefit management services and include, but are not limited to care for: cardiovascular, diabetes,
hepatitis, HIV, inflammatory conditions, neurological, multiple sclerosis, oncology, pulmonary, rare conditions and
weight management. Innovative programs, such as Express Scripts SafeGuardRx, combine utilization management,
formulary management, specialized care from our Therapeutic Resource Centers and financial savings, to help us to
change the market in key categories. These services optimize the safe and appropriate dispensing of therapeutic
agents, minimize waste and improve clinical and financial outcomes.
Express Scripts Patient Assurance Program. This program addresses affordability challenges for customers
managing their diabetes and cardiovascular conditions by providing a lower, fixed, out-of-pocket cost directly to the
customer. Express Scripts negotiates additional discounts to reduce customer cost share without increasing plan cost,
and applies those discounts at the point of service. By making the cost of medication affordable and predictable, the
Express Scripts Patient Assurance Program improves medication adherence, driving better customer outcomes and
lower downstream medical costs for the plan.
▪
•
•
•
Home Delivery Pharmacy. Evernorth Health Services offers free standard shipping of medications nationwide, usually in a
90-day supply, directly to the customer's home and allows for automatic refills on eligible medications and unrestricted
telephone access to over 4,000 customer care advocates and specially trained pharmacists to answer customer questions. Our
differentiated practice of pharmacy, coupled with our advanced automated dispensing technology, results in safer and more
accurate pharmacy operations when compared to retail pharmacies, convenient access to maintenance medications and better
management of our clients' drug costs through operating efficiencies and generic substitutions. Our research shows that
Express Scripts Pharmacy achieves a higher level of therapeutic interventions, better adherence, more cost savings and a
consistently higher Net Promoter Score (marketplace "NPS") compared to retail pharmacies. The Home Delivery Pharmacy
operations consist of ten home delivery pharmacies and four high-volume automated dispensing pharmacies located
throughout the United States. Our high-volume automated dispensing pharmacies are located in Arizona, Indiana, Missouri
and New Jersey.
Specialty Pharmacy. Specialty medications are primarily characterized as high-cost medications for the treatment of complex
and rare diseases. These medications broadly include those with frequent dosing adjustments, intensive clinical monitoring,
the need for customer training, specialized product administration requirements or medications limited to certain specialty
pharmacy networks by manufacturers. The front-end of our pharmacy is organized into Therapeutic Resource Centers, where
pharmacists focus their practice of pharmacy by condition, which offers customers a more personalized experience while
providing enhanced clinical care. Through a combination of assets and capabilities, we work to provide an enhanced level of
predictable care and therapy management for customers taking specialty medications, leading to increased visibility and
improved outcomes for payors and custom programs for biopharmaceutical manufacturers. The launch of biosimilars to
blockbuster specialty therapies provides competition and an opportunity to drive down costs for both customers and clients.
We work closely with clients to efficiently support each benefit design to improve affordability. Accredo is focused on
dispensing injectable, infused, oral and inhaled drugs that require a higher level of clinical service and support than traditional
pharmacies typically offer. Accredo supports successful outcomes for customers and reduces waste for clients through
specialty trained clinicians, a nationwide footprint and a network of in-home nursing services, reimbursement and customer
assistance programs and biopharmaceutical services. Drug manufacturers may select Accredo for exclusive dispensing of
highly specialized therapies. Freedom Fertility Pharmacy is dedicated exclusively to supporting customers undergoing
fertility treatment. Accredo and Freedom Fertility Pharmacy serve customers within a pharmacy benefit plan administered by
Express Scripts PBM, as well as customers in plans administered by other PBMs and health plans. Our Specialty Pharmacy
operations consist of 33 specialty pharmacies.
Distribution. CuraScript SD is a specialty distributor of pharmaceuticals and medical supplies (including injectable and
infusible pharmaceuticals and medications to treat specialty and rare or orphan diseases) directly to health care providers,
clinics and hospitals in the United States for office or clinic administration. Through this business, we provide distribution
services primarily to office and clinic-based physicians who treat customers with chronic diseases and regularly order costly
specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies, operates
three distribution centers and ships most products overnight within the United States; it also provides distribution capabilities
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to Puerto Rico and Guam. It is a contracted supplier with most major group purchasing organizations and leverages our
distribution platform to operate as a third-party logistics provider for several pharmaceutical companies.
•
Care Delivery and Management Solutions. We offer clinical programs to help our clients drive better whole-person health
outcomes through our Care Delivery (virtual care, in-home care, physical primary care) and Care Management (behavioral
health services and health coaching capabilities) offerings.
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eviCore. eviCore healthcare is a medical benefits management organization that is a leading provider of solutions that
ensure customers receive optimal treatment at the right site of care by leveraging our team of medical professionals,
evidence-based guidelines and innovative technologies to deliver affordable care. eviCore provides integrated solutions
for key clinical diagnostic areas such as advanced imaging, cardiology and gastroenterology, as well as longitudinal
areas such as musculoskeletal, oncology and post-acute care. eviCore contracts with health plans to promote the
appropriate use of health care services by the customers they serve. In certain instances, this occurs through capitated
risk arrangements, when we assume the financial obligation for the cost of health care services provided to eligible
customers covered by eviCore healthcare management programs.
◦ MDLIVE. MDLIVE virtual care services provide flexibility for the customer to access a network of virtual care providers
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for preventative and routine primary care and wellness, urgent care, dermatology care, behavioral health care needs and
chronic condition management beginning with hypertension.
Behavioral health. Our behavioral health solutions simplify the complicated treatment landscape by assisting members to
the right level of care at the right time, in the right place - from start to finish. Our predictive analytics models
proactively identify customers who need support so that we can engage them early and provide the appropriate care,
leveraging our extensive provider network including in-person providers, virtual providers and digital tools.
inMynd. Our Evernorth inMynd Behavioral Health and inMyndRx solutions provide access to expert guidance and
support for anxiety, depression, insomnia, ADHD, narcolepsy, Alzheimer's and select mood stabilizing medications.
These solutions include providing access to individualized support and educational resources, condition-specific care
through our Neuroscience Therapeutic Resource Centers and digital Cognitive Behavioral Therapy program when
applicable.
Health Connect 360. This program is a transformational, outcomes-based, clinical management model that bridges
pharmacy, medical, lab and biometric data to develop insights and deliver personalized health care clinical support.
Clinical outcomes and quality metrics are tailored to meet client needs.
RationalMed. RationalMed improves customer health and safety by integrating medical, pharmacy and laboratory claims
data to initiate changes and correct errors in care, lowering both medical and prescription drug costs.
Evernorth Digital Health Formulary. Through the Evernorth Digital Health Formulary, we evaluate, procure, implement
and manage digital health solutions on behalf of clients, alleviating administrative burden and ensuring clinical
effectiveness, data security, user-friendly experiences and financial value.
Cigna Pathwell Specialty. Cigna Pathwell Specialty is designed to address one of our clients' top health care cost drivers
- specialty drugs - enabling clients to reinvest in their employees, making health care more affordable. This new solution
controls specialty spending across the medical and pharmacy benefits by integrating pharmacy network and care
coordination for customers who need our support the most.
Evernorth Intelligence Solutions. By bringing together world-class talent, multi-disciplinary expertise and advanced data
and analytics, we unlock actionable insights to help drive greater affordability, simplicity, predictability and growth. We
work together with our clients and partners to create dynamic solutions, services and platforms that guide better
decisions and improved performance (see "Business - Digital, Data and Technology" section of this Form 10-K for
further information).
•
Evernorth Labs. We accelerate innovation through increased collaboration with clients, customers and partners to
develop solutions for launch in their businesses. With our Labs, which are state-of-the-art research facilities and
shared spaces for collaboration, ideation and innovation, we gather with our clients and industry leaders to solve the
toughest challenges in the health care system, including: better managing the most complex and expensive disease
states, such as oncology; improving care access and delivery, such as worksite, home and virtual care; and planning
for emerging trends, such as artificial intelligence, and industry disruptors, such as COVID-19.
Data, advanced analytics and platforms. We use advanced predictive modeling to shape solutions that help decrease
health care fragmentation, drive optimized care coordination, reduce key cost drivers and improve health outcomes.
In-depth trend analysis helps us to identify and effectively address challenges like opioid abuse, COVID-19 and
other emerging health crises. We use market surveillance and forecasting to pinpoint and proactively address cost
drivers. Our platform strategy as a service gives clients the tools to build successful businesses in a flexible,
customizable way: Trend Central provides access to key performance indicators to help plan sponsors reduce costs
and work towards healthier outcomes; HealthPredict produces high customer-level risk scores, to show the highest
value opportunities for proactive intervention; MediCUBE gives our academic detailing pharmacists the analytical
power to identify ways to save plans from significant unnecessary spend and improve quality metrics; and
ScriptVision provides a suite of real-time, data-driven capabilities that empower physicians to make the best
•
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prescribing choices, including ePrescribing (including controlled substances), real-time prescription benefit
information, electronic prior authorizations, clinical care messages such as drug interactions and high-risk
medication alerts and data on customer adherence rates.
Customers
We provide products and services in the Evernorth Health Services segment to clients and customers, as described below. Also
described below are our significant clients.
•
•
Clients. We provide services to managed care organizations, health insurers, third-party administrators, employers, union-
sponsored benefit plans, workers' compensation plans, government health programs, providers, clinics, hospitals and others.
We provide services to a majority of customers in our Cigna Healthcare segment.
Customers. Prescription drugs are dispensed to patients connected to the service offerings we provide to clients. Prescription
drugs are dispensed primarily through networks of retail pharmacies under non-exclusive contracts with us and via home
delivery from Express Scripts Pharmacy and specialty drug fulfillment pharmacies.
The Department of Defense ("DoD") TRICARE® Pharmacy Program is the military health care program serving active-duty service
customers, National Guard and Reserve customers and retirees, as well as their dependents. Under this contract, we provide online
claims adjudication, home delivery services, specialty pharmacy clinical services, claims processing and contact center support and
other services critical to managing pharmacy trend. In 2021, the DoD awarded Express Scripts a seven-year pharmacy program
contract beginning January 1, 2023. Under the new contract, Express Scripts will provide enhanced specialty care and expanded care
coordination capabilities, while continuing to support current pharmacy operations, through 2029. Revenues from this contract are
significant to the segment.
In 2019, Express Scripts and Prime Therapeutics LLC ("Prime") entered into an agreement effective on April 1, 2020 to deliver
improved choice and affordability for Prime's clients and their customers by enhancing retail pharmacy networks and pharmaceutical
manufacturer value. In 2022, Prime and Express Scripts agreed to extend this relationship through 2025. In 2021, the relationship with
Prime was expanded to include the option for Prime's plans to access the Accredo specialty pharmacy and Express Scripts home
delivery in-network pharmacies. Revenues from these contracts are significant to the segment.
In October 2022, Evernorth Health Services and Centene Corporation ("Centene") announced a multi-year agreement effective
January 2024 to manage pharmacy benefit services and make prescription medications more accessible and affordable for Centene's
approximately 20 million customers. In addition to greater savings on prescription drugs, Centene customers will also have access to
Express Scripts' extensive national network of retail pharmacies.
Competition
The health care industry has undergone periods of substantial consolidation and may continue to consolidate in the future. Many of the
largest managed care organizations now also own health services businesses that compete with Evernorth Health Services in the
verticals in which we participate. We believe the primary competitive factors in the industry include the ability to: negotiate with retail
pharmacies to ensure our retail pharmacy networks meet the needs of our clients and customers; provide home delivery and specialty
pharmacy services; negotiate discounts and rebates on prescription drugs with drug manufacturers; navigate the complexities of
government-reimbursed business including Medicare, Medicaid and the public exchanges; manage cost and quality of specialty drugs;
and use the information we obtain about drug utilization patterns and consumer behavior to reduce costs for our clients and customers
and assess the level of service we provide.
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• Managed Care PBMs. CVS Caremark (owned by CVS Health Corporation ("CVS")), Humana Inc. ("Humana"), IngenioRx
(owned by Elevance Health Inc. ("Elevance")), OptumRx (owned by UnitedHealth Group Inc. ("UnitedHealth")) and Prime
Therapeutics (owned by a collection of Blue Cross / Blue Shield Plans) compete with us on a variety of products and in
various regions throughout the United States.
Independent PBMs. MedImpact, Navitus Health Solutions, Elixir (owned by Rite Aid Corporation) and many other regional
PBMs compete with us on a variety of products across the United States.
Pharmacies. CVS, Walgreens Boots Alliance, Inc., WalMart, Inc., Rite Aid, Kroger and other independent pharmacies
compete with us for the delivery of prescription drug needs to our customers. In addition, many PBMs own and operate home
delivery and specialty pharmacies including CVS, OptumRx, Walgreens, Humana and Elixir. New entrants continue to
emerge, including Amazon Pharmacy, Capsule and Hims.
Third-Party Benefits Administrators. Third parties that specialize in claim adjudication and benefit administration, such as
SS&C Health, are direct competitors. With the emergence of alternative benefit models through private exchanges, the
competitive landscape also includes brokers, health plans and consultants. Some of these competitors may deploy greater
financial, marketing and technological resources than we do and new market entrants, including strategic alliances aimed at
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9
modifying the current health care delivery models or entering the prescription drug sector from another sector of the health
care industry, may increase competition as barriers to entry are relatively low. For example, GoodRx is an entrant focused on
serving the uninsured and underinsured in the cash pay pharmacy administration space.
Care Delivery and Management Solutions. OptumHealth, NaviHealth and Landmark (UnitedHealth); Beacon, Aspire and
CareMore (owned by Elevance); CVS's HealthHubs and MinuteClinics; CenterWell Home Health (Humana); Community
and Bayless (Centene); VillageMD, Teladoc, Doctor on Demand, MeMD, WalmartHealth and AmazonCare are among the
companies that compete with us in this market.
Clinical Solutions and Health Care Data Analytics Companies. Optum (owned by UnitedHealth), Elevance, Magellan Health
and Apixio (owned by Centene Corporation), HealthHelp, Cotiviti and Inovalon are among the companies that compete with
us in this market.
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Operations
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Sales and Account Management. Our sales and account management teams market and sell pharmacy benefit management
solutions and are supported by client service representatives, clinical pharmacy managers and benefit analysis consultants.
These teams work with clients to develop innovative strategies that put medicine within reach of customers while helping
health benefit providers improve access to and affordability of prescription drugs.
Supply Chain. Our supply chain contracting and strategy teams negotiate and manage pharmacy retail network contracts,
pharmaceutical and wholesaler purchasing contracts and manufacturer rebate contracts. As our clients continue to experience
increased cost trends, our supply chain teams develop innovative solutions such as our Express Scripts SafeGuardRx platform
and preferred pharmacy networks to combat these cost increases. In addition, our Formulary Consulting team, consisting of
pharmacists and financial analysts, provides services to our clients to support formulary decisions, benefit design consultation
and utilization management programs.
Clinical Support. Our staff of highly trained health care professionals provides clinical support for our pharmacy, medical
and behavioral customers. Our services include access to:
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Support for the individual and their caregivers from crisis care in their most vulnerable moments to stabilization and
returning back to work and life for all involved
Comprehensive behavioral health offerings including network access, utilization management and coordination of care to
treat conditions ranging from depression and anxiety to substance use, autism and eating disorders
Condition-specific specialized customer care through our Therapeutic Resource Center facilities staffed with specialist
pharmacists, nurses and other clinicians
Clinical development and operational support for our pharmacy benefit management services by our clinical solutions
staff of pharmacists and physicians who conduct a wide range of activities including: identifying emerging medication-
related safety issues and alerting physicians, clients and customers (as appropriate); providing drug information services;
managing formulary; identifying and closing gaps in care; and developing utilization management, safety (drug
utilization review) and other clinical interventions
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Suppliers
We maintain an inventory of brand-name and generic pharmaceuticals in our home delivery and specialty pharmacies. Our specialty
pharmacies also carry biopharmaceutical products to meet the needs of our customers, including pharmaceuticals for the treatment of
rare or chronic diseases; if a drug is not in our inventory, we can generally obtain it from a supplier within a reasonable amount of
time.
We purchase pharmaceuticals either directly from manufacturers or through authorized wholesalers. Evernorth Health Services uses
one wholesaler more than others in the industry, but holds contracts with other wholesalers if needs for an alternate source arise.
Generic pharmaceuticals are generally purchased directly from manufacturers.
Key Transactions and Business Developments
See the "Executive Overview - Key Transactions and Business Developments" section of our MD&A located in Part II, Item 7 of this
Form 10-K for discussion of key developments impacting this segment.
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CIGNA HEALTHCARE
Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health operating segments, which provide
comprehensive medical and coordinated solutions to clients and customers. Within Cigna Healthcare, U.S. Commercial and
International Health are our foundational growth businesses and U.S. Government is our accelerated growth business. In 2022, Cigna
Healthcare reported adjusted revenues of $45.0 billion and pre-tax adjusted income from operations of $4.1 billion.
HOW WE WIN
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Clinical programs to support the highest-quality health outcomes and customer experiences
Partnership with high-performing providers, emphasizing value over volume of services
Differentiated approach to understanding clients and responding to evolving workforce needs to improve employee
productivity and drive more consistent performance
Innovative coordinated benefit solutions that deliver value for our customers, clients and partners
Technology and data analytics powering actionable insights and promoting solutions to improve health and vitality with
greater precision and personalization
Talented, experienced and caring people who work as consultative partners in aligning client and customer needs to our
solutions and putting those we serve at the center of all we do
By offering a mix of services and medical insurance products to employers, groups and individuals along with specialty products, we
improve the quality of care, lower costs and help customers achieve better health outcomes. Many of these products are available on a
standalone basis, but we believe they create additional value and savings when integrated with a Cigna Healthcare-administered health
plan.
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The following chart depicts a high-level summary of our principal products and services in this segment, with definitions on
subsequent pages.
Principal Products &
Services
Major
Brand(s)
Geography
Funding
Solution(s)(1)
Market
Segment(s)
Primary
Distribution
Channel(s)
Primary Competitors
U.S. Commercial Medical
Managed Care
Preferred Provider
Organization
("PPO")
Cigna
Healthcare
Consumer-Driven
National Insurers, Local
Healthplans, Third-Party
Administrators ("TPAs")
Nationwide
GC, ER, ASO
U.S.
Commercial
Brokers, Private
Exchanges, Direct
National Insurers, Local
Healthplans, TPAs
U.S. Government Medical
National Insurers, Local
Healthplans
Individual and
Family Plans
Medicare
Advantage
Cigna
Healthcare
Cigna
Healthcare
16 states (2)
29 states (3) &
District of
Columbia
GC
GC
Public Exchanges,
Brokers, Direct
Direct, Brokers
National Insurers,
Local Healthplans,
Provider-led Plans
National Insurers,
Local Healthplans,
Provider-led Plans
U.S.
Government
Medicare Stand –
Alone Prescription
Drug Plans
Cigna
Healthcare,
Express Scripts
Medicare
Supplement
Stop-Loss
Cost Containment
Cigna
Healthcare
Cigna
Healthcare
Cigna
Healthcare
Consumer Health
Engagement
Cigna
Healthcare
Pharmacy
Management
Behavioral Health
Cigna
Healthcare
Cigna
Healthcare
Dental
Cigna Dental
Care®
Nationwide
GC, ASO
Direct, Brokers
National Insurers
48 states (4) &
District of
Columbia
GC
Specialty Products and Services
Brokers, Direct,
Private Exchanges
National Insurers
GC
GC, ER, ASO
GC, ER, ASO
Nationwide
GC, ER, ASO
GC, ER, ASO
GC, ER, ASO
U.S.
Commercial
U.S.
Commercial
U.S.
Commercial,
U.S.
Government
U.S.
Commercial,
U.S.
Government
U.S.
Commercial,
U.S.
Government
U.S.
Commercial,
U.S.
Government
National Insurers,
Specialty Companies
National Insurers,
Specialty Companies
National Insurers,
Specialty Companies
Brokers, Direct
Independent PBMs,
Managed Care PBMs
National Insurers,
Specialty Companies
Dental Insurers, National
Insurers
(1) Our three funding solutions include administrative services only ("ASO"), insured - guaranteed cost ("GC") and insured - experience-rated ("ER") arrangements.
(2) AZ, CO, FL, GA, IL, KS, MO, MS, NC, PA, TN, UT & VA. Effective January 1, 2023, also includes IN, SC & TX.
(3) AL, AR, AZ, CO, CT, DE, FL, GA, IL, KS, MD, MO, MS, NC, NJ, NM, OH, OK, OR, PA, SC, TN, TX, UT, VA, VT & WA. Effective January 1, 2023, also includes KY
& NY.
(4) All states except MA & NY.
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Principal Products &
Services
Major
Brand(s)
Geography
Funding
Solution(s)
Market
Segment(s)
Primary
Distribution
Channel(s)
Primary Competitors
International Health Products and Services
Global Health Care
Local Health Care
Cigna Global
Health Benefits,
Cigna Global
Individual
Health
Cigna
Healthcare,
ManipalCigna,
CignaCMB
Worldwide
(except as limited
by applicable law)
China, Middle
East, Singapore,
Hong Kong,
Spain, United
Kingdom, India
Principal Products & Services
U.S. Commercial Medical
GC, ER, ASO
International
Health
Brokers, Direct
Global insurers
Global insurers and local
non-U.S. insurers
• Managed Care Plans are offered through our insurance companies, Health Maintenance Organizations ("HMOs") and TPA
companies. HMO, LocalPlus®, Network and Open Access Plus plans use meaningful cost-sharing incentives to encourage
the use of "in-network" versus "out-of-network" health care providers. The national provider network for Managed Care
Plans is smaller than the national network used with the PPO plan product line.
PPO Plans feature a network with broader provider access than the Managed Care Plans.
Consumer-Driven Products are typically paired with a high-deductible medical plan and offer customers a tax-advantaged
way to pay for eligible health care expenses. These products, consisting of health savings accounts, health reimbursement
accounts and flexible spending accounts, encourage customers to play an active role in managing their health and health care
costs.
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U.S. Government Medical
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Individual and Family Plans are Patient Protection and Affordable Care Act ("ACA") compliant exclusive provider
organization ("EPO") or HMO plans marketed to individuals under age 65 who do not have access to health care coverage
through an employer or government program such as Medicare or Medicaid. Customers receive comprehensive health care
benefits and have access to a local network of health care providers who have been selected with cost and quality in mind.
• Medicare Advantage Plans allow Medicare-eligible customers to receive health care benefits, including prescription drugs,
through a managed care health plan such as our coordinated care plans. Our Medicare Advantage Plans include HMO and
PPO plans marketed to individuals and qualified employer groups. A significant portion of our Medicare Advantage
customers receive medical care from our value-based models that focus on developing highly engaged physician networks,
aligning payment incentives to improve health outcomes and using timely and transparent data sharing.
• Medicare Stand-Alone Prescription Drug ("Part D") Products provide a number of prescription drug plan options, as well as
service and information support to Medicare-eligible individuals or individuals through a qualified employer group. Our
stand-alone plans offer the coverage of Medicare combined with the flexibility to select a product that provides enhanced
benefits and a formulary that aligns with the individual's needs. Eligible customers benefit from broad network access and
enhanced service intended to promote adherence, wellness and affordability.
• Medicare Supplement Plans provide Medicare-eligible customers with federally standardized Medigap-style plans.
Customers may select among the various plans with specific plan options to meet their unique needs and may visit, without
the need for a referral, any health care provider or facility that accepts Medicare throughout the United States.
Specialty Products and Services
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Stop-Loss insurance coverage is offered to self-insured clients whose group health plans are administered by Cigna
Healthcare. Stop-loss insurance provides reimbursement for claims in excess of a predetermined amount for individuals, the
entire group, or both.
Cost Containment Programs are designed to contain the cost of covered health care services and supplies. These programs
reduce out-of-network utilization and costs, protect customers from balance billing and educate customers regarding the
availability of lower cost in-network services. In addition, under these programs we negotiate discounts with out-of-network
providers, review provider bills and recover overpayments. We charge fees for providing or arranging for these services.
These programs may be administered by third-party vendors that have contracted with Cigna Healthcare.
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Consumer Health Engagement services are offered to customers covered under plans administered by Cigna Healthcare or by
third-party administrators. These services consist of an array of health management, disease management and wellness
services. Our Medical Management programs include case, specialty and utilization management and a 24/7 Health
Information line which ensures around the clock access to a medical professional. Our Health Advocacy program services
include early intervention in the treatment of chronic conditions and an array of health and wellness coaching. We administer
incentives programs designed to encourage customers to engage in health improvement activities.
Pharmacy Management services and benefits can be combined with our medical offerings. The comprehensive suite of
pharmacy management services are available to clients and customers through our integration with Evernorth Health
Services' capabilities.
Behavioral Health services consist of a broad national network of behavioral health providers which includes one of the
largest virtual networks in the United States, behavioral health specialty case and utilization management, a crisis
intervention line accessible anytime, employee assistance programs and work/life programs. We integrate our programs and
services with medical and pharmacy programs to facilitate customized, holistic care as well as to provide resources that
increase resiliency and address non-medical factors that affect overall well-being.
Dental solutions include dental HMO plans, dental PPO plans, exclusive dental provider organization plans, traditional dental
indemnity plans and a dental discount program. Employers and other groups can purchase our products on either an insured
or self-insured basis as standalone products or in conjunction with medical products. Additionally, individual customers can
purchase insured dental PPO plans as standalone products or in conjunction with individual medical policies.
International Health
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Global Health Care products and services include insurance and administrative services for medical, dental, pharmacy, vision
and life, accidental death and dismemberment and disability risks. We are a leading provider of products and services that
meet the needs of multinational employers, intergovernmental and nongovernmental organizations and globally mobile
individuals with a focus on keeping employees healthy and productive. The employer benefits products and services are
offered through guaranteed cost, experience-rated and administrative services only funding solutions, while individuals
purchase guaranteed cost coverage.
Local Health Care products and services include medical, dental, pharmacy and vision as well as life coverage. The
customers of local health care businesses are employers and individuals located in specific countries where the products and
services are purchased. These employer services can similarly be funded through a range of options; individuals purchase on
a guaranteed cost basis.
Revenues: Premiums and Fees
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ASO. Plan sponsors (i.e., employers, unions and other groups) self-fund all claims, but may purchase stop-loss insurance to
limit exposure. We collect fees from plan sponsors for providing access to our participating provider network and for other
services and programs including: claims administration; behavioral health services; disease management; utilization
management; cost containment; dental and pharmacy benefit management. Approximately 85% of our U.S. Commercial
medical customers are in ASO arrangements.
Insured.
GC and ER. In most states, individual and group insurance premium rates must be approved by the applicable state regulatory
agency (typically a department of insurance). State or federal laws may restrict or limit the use of rating methods. Premium
rates are established at the beginning of a policy period and, depending on group size, may be based in whole or in part on
prior experience of the policyholder or on a pool of similar policyholders. With the exception of ER policies, we generally
cannot subsequently adjust premiums to reflect actual claim experience until the next policy period; the policyholder does not
participate, or share in, actual claim experience; and we keep any experience surplus or margin if costs are less than the
premium charged (subject to minimum medical loss ratio rebate requirements discussed below). For all insured arrangements,
we bear the risk for actual costs in excess of the premium charged. Approximately 15% of our U.S. Commercial medical
customers are in insured arrangements.
For Medicare Advantage plans, we receive fixed monthly payments from CMS for each plan customer based on customer
demographic data and actual customer health risk factors compared to the broader Medicare population. Premiums may be
received from customers when our plan premium exceeds the revenue received from CMS. We also may earn additional
revenue from CMS related to quality performance measures (known as "Star Ratings").
The ACA subjects individual and small group policy rate increases above an identified threshold to review by the United
States Department of Health and Human Services ("HHS"). Our U.S. Commercial and U.S. Government medical plans are
subject to minimum medical loss ratio ("MLR") requirements. The MLR represents the percentage of premiums used to pay
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claims and expenses for activities that improve the quality of care. If we do not satisfy the prescribed MLR, statutes require
premium refunds to policyholders or to CMS.
See the "Business - Regulation" section of this Form 10-K for additional information about premiums, MLR requirements, Star
Ratings and risk adjustment programs of the ACA.
Market Segments
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U.S. Commercial comprises the following market segments:
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◦ Middle Market. Employers generally with 500 to 2,999 eligible employees, solutions for third party payers, Taft-Hartley
National. Employers with 3,000 or more eligible employees, primarily through ASO funding solutions.
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plans, as well as other groups, through ASO and insured funding solutions.
Select. Employers generally with 51 to 499 eligible employees, primarily through ASO with stop-loss insurance coverage
and insured funding solutions.
Small Group. Employers generally with 2 to 50 eligible employees. We offer guaranteed cost insured funding solutions
in select geographies with our Cigna + Oscar product.
U.S. Government comprises the following market segments:
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Individual. Includes individuals under age 65 who do not have access to health care coverage through an employer or
government program such as Medicare or Medicaid. We offer guaranteed cost, medical ACA-compliant and dental plans
in this market segment.
◦ Medicare. Includes individuals who are Medicare-eligible customers, as well as employer group sponsored post-65
retirees. We receive Medicare Advantage revenue from CMS based on customer demographic data and health risk
factors. Revenues from CMS are significant to the market segment.
International Health comprises market segments offering international plans to multinational employers and globally mobile
individuals, and domestic plans to employers and individuals in specific countries outside of the U.S. Employer plans in the
International Health segment may be ASO or fully insured plans.
Customers
We provide clients and customers with access to a mix of medical and specialty products and services.
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Clients. Our clients include employers, third-party administrators, union-sponsored benefit plans, government health
programs and other groups which span our operating segments.
Customers. Our customers include individuals who access our offerings through an employer-sponsored plan, government-
sponsored plan, or other insured group.
Primary Distribution Channels
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Brokers. Sales representatives distribute our products and services to a broad group of insurance brokers and consultants.
Direct. Cigna Healthcare sales representatives distribute our products and services directly to employers, unions and other
groups or individuals. Various products may also be sold directly to insurance companies, HMOs and third-party
administrators. Direct distribution may take the form of in-person contact, telephone or group selling venues, or online direct
to consumer enrollment platforms.
Private Exchanges. We partner with select companies that have created private exchanges where individuals and
organizations can acquire health insurance. We evaluate private exchange participation opportunities as they emerge in the
market and target our participation to those models that best align with our mission and value proposition.
Public Exchanges. Cigna Healthcare offers individual ACA-compliant policies through public health insurance exchanges in
select geographies.
Competition
The primary competitive factors affecting our business are quality of care and cost effectiveness of service and provider networks;
effectiveness of medical care management; products that meet the needs of employers and their employees; total cost management;
technology and effectiveness of marketing and sales. Financial strength, as indicated by ratings issued by nationally recognized rating
agencies, is also a competitive factor. Our health advocacy capabilities, holistic approach to consumer engagement, breadth of product
offerings, clinical care and health management capabilities along with an array of product funding solutions are competitive
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advantages. We believe our focus on improving the health and vitality of those we serve will allow us to further differentiate
ourselves.
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National Insurers. UnitedHealth, Aetna Inc. (owned by CVS), Elevance, Humana and Blue Cross Blue Shield plans compete
with us in a variety of products and regions.
Local Healthplans. Blue Cross Blue Shield plans, local affiliates of major insurance companies and hospitals and regional
stand-alone managed care and specialty companies compete with us in the states in which we offer managed care products.
TPAs. Third-party administrators compete with us for ASO business.
Provider-led Plans. Include health systems and hospitals who integrate health plan offerings with care delivery. Additionally,
plan sponsors may contract directly with providers.
Dental Insurers. Various companies offering primarily dental insurance compete with us on these products.
Specialty Companies. Specialty insurance or service companies that offer niche products and services compete with us.
International Companies. Global insurers and local non-U.S. insurers compete with us through product and service offerings.
Partnering to Advance our Growth Strategy
Cigna Healthcare's strategy engages customers in their health, collaborates with providers to help them improve their performance and
connects customers and providers through aligned health goals, incentives and actionable information to help enable informed
decisions and drive better outcomes. Continuing to expand the breadth and depth of Evernorth Health Services care services,
pharmacy services and benefits management will further reduce the total cost of care for our clients and customers. Fueled by
advanced insights and predictive analytics, Cigna Healthcare continues to develop innovative solutions that span the health care
delivery system and can be applied to a multitude of providers.
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Accountable Care Program. We have approximately 239 collaborative care arrangements with primary care groups built on
the patient-centered medical home and accountable care organization ("ACO") models. Program flexibility allowed
adjustments in response to the COVID-19 pandemic designed to maintain appropriate focus on high-risk individuals and
populations with chronic conditions impacted by Social Determinants of Health. As we emerge from the pandemic, we are
leveraging new models to increase provider adoption of upside and downside risk sharing to drive better health outcomes and
lower the total cost of care.
Hospital Quality Program. We have contracts with approximately 152 hospital systems, involving over 592 hospitals, with
reimbursements tied to quality metrics.
Site of Care Redirection. We encourage the use of clinically appropriate settings to reduce the cost of care. This results in
significant cost savings compared to receiving the same care in a hospital setting, while ensuring high quality care and
service.
Specialist Programs. We have approximately 266 arrangements with specialist groups in value-based reimbursement
arrangements across six different disciplines. Arrangements include incentives for enhanced care coordination and episodes
of care reimbursements for meeting cost and quality goals. We have expanded these programs to include prospective bundled
payment arrangements beginning with orthopedics.
Independent Practice Associations. We have value-based physician engagement models in our Medicare Advantage plans
that allow physician groups to share financial outcomes with us. This clinical model also includes outreach to new and at-risk
patients to ensure they are accessing their primary care physician.
Participating Provider Network. We provide our customers with an extensive network of participating health care providers,
hospitals and other facilities, pharmacies and providers of health care services and supplies. In addition, we have strategic
alliances with several regional managed care organizations to gain access to their provider networks and discounts.
Virtual Care. We encourage access for customers through MDLIVE telehealth services as a way to support the patient/
provider relationship. MDLIVE telehealth services provide flexibility for the customer to access a network of telehealth
providers for services including preventative and routine primary care and wellness, urgent care, dermatology care,
behavioral health care needs and chronic condition management beginning with hypertension.
Key Transactions and Business Developments
See the "Executive Overview - Key Transactions and Business Developments" section of our MD&A located in Part II, Item 7 of this
Form 10-K for discussion of key developments impacting this segment.
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OTHER OPERATIONS
Other Operations comprises the remainder of our business operations, which includes certain ongoing businesses and exiting
businesses. Our ongoing businesses include our continuing business, COLI, as described below, as well as our run-off businesses. Our
run-off businesses include (i) GMDB and GMIB business that were effectively exited through reinsurance with Berkshire Hathaway
Life Insurance Company of Nebraska ("Berkshire") in 2013, (ii) settlement annuity business, and (iii) individual life insurance and
annuity and retirement benefits businesses comprised of deferred gains from the sales of these businesses. Our exiting businesses
include our interest in a joint venture in Türkiye, which was sold to our partner in December 2022, the international life, accident and
supplemental benefits businesses sold on July 1, 2022, and the Group Disability and Life business sold on December 31, 2020.
In 2022, Other Operations reported adjusted revenues of $2.3 billion and pre-tax adjusted income from operations of $500 million.
Other Operations was previously named Group Disability and Other.
Ongoing Businesses
Continuing Business
Corporate-Owned Life Insurance
The principal products of the COLI business are permanent insurance contracts sold to corporations to provide coverage on the lives of
certain employees for financing employer-paid future benefit obligations. Permanent life insurance provides coverage that, when
adequately funded, does not expire after a term of years. The contracts are primarily non-participating universal life policies. Fees for
universal life insurance products consist primarily of mortality and administrative charges assessed against the policyholder's fund
balance. Interest credited and mortality charges for universal life and mortality charges on variable universal life may be adjusted
prospectively to reflect expected interest and mortality experience. To reduce our exposure to large individual losses, we purchase
reinsurance from unaffiliated reinsurers.
Run-off Businesses
Settlement Annuity Business
Our settlement annuity business is a closed, run-off block of single premium annuity contracts. These contracts are primarily liability
settlements with approximately 15% of the liabilities associated with guaranteed payments not contingent on survivorship. Non-
guaranteed payments are contingent on the survival of one or more parties involved in the settlement.
Reinsurance
Our reinsurance operations are an inactive business in run-off.
In February 2013, we effectively exited the GMDB and GMIB business by reinsuring 100% of our future exposures, net of
retrocessional arrangements in place at that time, up to a specified limit. For additional information regarding this reinsurance
transaction and the arrangements that secure our reinsurance recoverables, see Note 10 to the Consolidated Financial Statements.
Individual Life Insurance and Annuity and Retirement Benefits Businesses
This business includes deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004
sale of the retirement benefits business. For more information regarding the arrangements that secure our reinsurance recoverables for
the retirement benefits business, see Note 10 to the Consolidated Financial Statements.
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Exiting Businesses
Our Interest in a Joint Venture in Türkiye
In December 2022, we divested our ownership interest in Cigna Sağlık Hayat ve Emeklilik, our joint venture in Türkiye, to our long-
time partner QNB Finansbank.
International Life Accident and Supplemental Benefits
We offered life, accident and supplemental benefits insurance products and services in Hong Kong, Indonesia, New Zealand, South
Korea, Taiwan and Thailand until the completion of the sale of these businesses on July 1, 2022 to Chubb as described in the
"Overview" section of this Form 10-K. South Korea represented our single largest geographic market for these businesses.
Group Disability and Life
Our Group Disability and Life operating segment included our commercial long-term and short-term disability products and our term
life group insurance products, until completion of the sale in 2020. We also offered personal accident insurance and will continue to
offer voluntary products and services that were not part of the sale. Beginning in 2021, voluntary products and services are reported in
the Cigna Healthcare segment.
INVESTMENT MANAGEMENT
Our investment operations provide investment management and related services for our various businesses, including the insurance-
related invested assets in our General Account ("General Account Invested Assets"). We acquire or originate, directly or through
intermediaries, a broad range of investments, including private placement and public securities, commercial mortgage loans, real
estate, mezzanine, private equity partnerships and short-term investments. Invested assets also include policy loans that are fully
collateralized by insurance policy cash values. We also enter into derivative financial instruments, primarily to minimize the risk of
changes in foreign currency exchange rates on our investments and to manage the interest rate exposures of our long-term debt.
Invested assets are managed primarily by our subsidiaries and, to a lesser extent, external managers with whom our subsidiaries
contract. Net investment income is included as a component of adjusted income from operations for each of our segments and
Corporate. Realized investment gains (losses) are reported by segment but excluded from adjusted income from operations. For
additional information about invested assets, see the "Investment Assets" section of the MD&A and Notes 11 and 12 to the
Consolidated Financial Statements.
We manage our investment portfolios to reflect the underlying characteristics of related insurance and contractholder liabilities and
capital requirements, as well as regulatory and tax considerations pertaining to those liabilities and state investment laws. Insurance
and contractholder liabilities range from short duration health care products to longer-term obligations associated with life insurance
products and the run-off settlement annuity business. Assets supporting these liabilities are managed in segregated investment
portfolios to facilitate matching of asset durations and cash flows to those of corresponding liabilities. Investment results are affected
by the amount and timing of cash available for investment, economic and market conditions and asset allocation decisions. We
routinely monitor and evaluate the status of our investments, obtaining and analyzing relevant investment-specific information and
assessing current economic conditions, trends in capital markets and other factors such as industry sector, geographic and property-
specific information.
Separate Accounts
Our subsidiaries or external advisors manage invested assets of separate accounts on behalf of contractholders, including The Cigna
Group Pension Plan, variable universal life products sold through our corporate-owned life insurance business and other life insurance
products. These assets are legally segregated from our other businesses and are not included in General Account Invested Assets.
Income, gains and losses generally accrue directly to the contractholders.
STRATEGIC INVESTMENTS
Cigna Ventures. In addition to the portfolio investments in our general and separate accounts discussed in the Investment
Management section above that support our insurance operations, we make targeted investments within the health care industry,
specifically. In 2022, The Cigna Group committed an additional $450 million to Cigna Ventures, our strategic corporate venture fund,
resulting in an aggregate commitment of $700 million to this strategic initiative. Cigna Ventures invests in promising startups and
growth-stage companies who, like us, are unlocking new growth possibilities in health care. Specifically, we invest in companies
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making groundbreaking progress in three strategic areas: insights and analytics, digital health and experience, and care delivery and
enablement. As of December 31, 2022, Cigna Ventures has seven venture capital partners and 22 existing direct investments. Through
these deep partnerships we collaborate, innovate and develop new solutions that address critical challenges of health and vitality
impacting the people we serve.
VillageMD. As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to
$2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is an independent
primary care group committed to offering high-quality, accessible primary care options for communities across the country through
Village Medical. VillageMD partners with physicians to provide the tools, technology, operations, staffing support and industry
relationships to deliver high-quality clinical care and better patient outcomes, while reducing the total cost of care. VillageMD and
Village Medical operate in 22 markets and are responsible for more than 1.6 million patients.
DIGITAL, DATA AND TECHNOLOGY
The Cigna Group's investments in digital, data and technology are focused on cultivating robust digital-first capabilities to better
engage with customers and stakeholders. We deliver value for our clients, customers and other stakeholders by creating better health
outcomes, improving customer experience and lowering total cost of care.
Innovation. Customer-centric, digital-first innovation remains at the forefront of our priorities. The advancement of our internal
capabilities and strategic partnerships continues to produce new and more effective ways to engage with our customers to help close
gaps in care, optimize treatment and improve outcomes. During 2022, technology continued to deliver value for current business while
simultaneously focusing on reducing complexity and cost within our technology ecosystem. In the future, with a simplified technology
ecosystem, we expect an increase in optionality, customer engagement, loyalty and speed to market. (See Evernorth Intelligence
Solutions section of the "Business - Evernorth Health Services" discussion of this Form 10-K for additional information on our
intelligent solutions and capabilities).
In 2022, The Cigna Group continued to invest in our technology capabilities to produce new and more effective ways to operate, as
well as meet customers where they are. We intend to lead with digital engagement by creating connections between points of care and
guiding customers through the best mechanism to the optimal location and provider. Our modernized data and technology ecosystem
will empower us to integrate our assets, gather insights and engage with prospects and customers in new ways. For the year ended
December 31, 2022, our capital expenditures for property, equipment and computer software were $1.3 billion.
Data and Analytics. Our rich, integrated data allows us to provide differentiated outcomes. We conduct timely, rigorous and objective
research and analysis that informs evidence-based medical and pharmacy benefit management and evaluates the clinical, economic
and individual impact of enhanced benefit designs and programs. The combination of our predictive analytics, as well as our machine
and deep learning capabilities create actionable intelligence that informs decision-making of our health care professionals. Our data-
driven approach to behavioral health provides personalized and customized care across the entire continuum for the populations we
serve. These solutions predict emerging health needs, close gaps in care and drive cost savings - all while empowering whole-person
and whole-family health.
During 2022, we continued to leverage both internal and external data to identify and address health disparities and better understand
the long-term medical and behavioral complications facing our customers. The data-informed approach allows for delivery of
solutions with a digital-first entry point that meet our customers where they are to offer physical and behavioral health support.
Digital. Our digital health focus has shown value across the enterprise by creating engaging experiences that give customers the right
information at the right time. We continue to bring new technology-enabled products and services to the market, expanding on a
platform that connects to a given benefit structure in a single personalized environment. This allows for further capitalization on our
unique data. Cybersecurity protections continue to be a top priority across The Cigna Group's digital offerings.
Technology Operations. Our technology team, powered by over 8,500 employees and several thousand external resources working
with our partners, supports the various information systems essential to our operations, including the health benefit claims processing
systems and specialty and home delivery pharmacy systems. Uninterrupted point-of-sale electronic retail pharmacy claims processing
is a significant operational requirement for our business. We believe we have substantial capacity for growth in our United States
pharmacy claims processing facilities. Our pharmacy technology platform allows us to safely, rapidly and accurately adjudicate over
one billion adjusted prescriptions annually. Our technology helps retail pharmacies focus on patient care and our real-time safety
checks help avoid medication errors. The Cigna Group companies hold over 320 United States patents. We use these patents to protect
our proprietary technological advances and to differentiate ourselves in the market.
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HUMAN CAPITAL MANAGEMENT
The Cigna Group's mission is to improve the health and vitality of those we serve. A global healthy and diverse workforce is essential
to achieving our mission and our business growth strategies. We are continually investing in our global workforce to support our
employees' health and well-being, further drive diversity and inclusion, provide fair and market-competitive pay and foster employee
growth and development. As of the end of 2022, we had approximately 71,300 employees, with 94% of our employees based in the
United States. Approximately 97% of our employees are full-time.
Health, Well-Being and Other Benefits
Tending to our employees' health and vitality is a critical business imperative for our company and one of the most important
investments in our enterprise that we make each year. We believe that when we support our employees' health and well-being, they
have fewer absences and are more productive and engaged in driving our mission and business strategy forward, thereby creating
shareholder value. In 2022, The Cigna Group invested approximately 18% of total payroll in health, well-being and other benefits,
including life and disability programs, 401(k) contributions and retirement-related benefits for our employees in the United States.
In addition to traditional medical and pharmacy benefits, we provide both physical and mental health support to employees, including:
nutrition and fitness programs, employee assistance program (EAP) benefits that are free to all employees and to all members of their
household, and digital tools that provide access to education and therapy to help individuals build greater resilience and cope with
stress, anxiety and depression.
Diversity, Equity & Inclusion
At The Cigna Group, we take an expansive view of diversity including race, ethnicity, nationality, gender, veteran status, disability,
sexual orientation and gender identity. As of the end of 2022, based on employee self-reporting, 71% of our employees were women,
and 39% of our employees in the United States were ethnic minorities (which includes Black / African American, Asian, Hispanic or
Latinx, Pacific Islander and American Indian / Alaskan employees).
We are committed to attracting and recruiting key diverse talent into various leadership development programs and other entry level
positions across the business. This success is rooted in strategic relationships with diverse student groups at our partner colleges and
universities, as well as our commitment to multiple national, regional and local organizations, which provide us focused recruiting
opportunities with women, the LGBTQ+ community, military veterans and underrepresented minority groups.
Our compensation practices, rooted in our pay-for-performance philosophy, promote equity in pay through measures such as
benchmarking compensation by role, eliminating inquiries regarding applicants' compensation history from the hiring process and
monitoring for potential disparities. Our most recent pay equity analysis among our U.S. employees, conducted in 2023, illustrated
that female employees of The Cigna Group earn more than 99 cents for every dollar earned by similarly-situated male employees, and
employees from underrepresented groups (which includes Black/African American, Hispanic or Latinx, Pacific Islander and American
Indian/Alaskan employees) earn more than 99 cents for every dollar earned by similarly-situated white employees. This year, for the
first time, we also analyzed gender pay on a global basis and found that across the entire Company female employees at The Cigna
Group earn more than 99 cents for every dollar earned by similarly-situated male employees.
Talent Acquisition, Development and Retention
Our talent acquisition and rewards strategies are designed to attract and retain skilled employees who are engaged in our mission. Our
compensation program is rooted in market competitive base salaries and incentives that reward contributions that advance the
Company's strategy and mission. Shifts in labor dynamics that started in the midst of the COVID-19 pandemic have continued to
impact our employee population. As we have adapted to new ways of working post-pandemic, where possible, employees work with
their leaders to determine whether they work onsite, work at home, or leverage a hybrid option. The level of worker attrition continues
to be above our pre-pandemic levels as well: in 2022, the voluntary turnover rate was 16% for all employees. In previous 10-K filings,
we reported the voluntary turnover rate only for exempt employees in the United States.
Our online learning platform and career development tools and events offer a broad range of training, education and development
resources to all employees. In 2022, based on internal data, U.S. employees on average engaged in 34 hours of learning through these
resources. Enterprise leadership development programs were provided to executive, high-potential and new manager audiences to
develop and expand leadership capability across the enterprise. The Cigna Group also offers an education reimbursement program for
both full and part-time employees who meet the continuing education criteria. We believe these strategies and programs contribute to
employee engagement and retention.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE
The Cigna Group's environmental, social and governance ("ESG") framework is structured around four pillars that underscore our
mission to improve the health and vitality of those we serve. We drive action through this framework to deliver on our ESG vision: to
transform the ecosystem of health into one that is well-functioning, sustainable, accessible and equitable - advancing better health for
all. Our commitment to this vision guides us in our multidimensional value-creation strategy as we strive to meet the needs of our
many stakeholders. The four pillars of our ESG framework are:
Healthy Environment
We believe that responsible environmental stewardship can improve health and well-being and also makes sound business sense. We
strive to identify new efficiencies and make strategic investments to drive progress on our operational sustainability targets. We aim to
reduce our environmental impacts and our operating costs, but our commitments are not material to our results of operations, financial
condition or liquidity.
Healthy Society
We work to advance better health for all. Building a well-functioning, sustainable, accessible and equitable health care system
involves understanding and addressing social determinants of health, advancing health equity and improving medical quality and
access while prioritizing affordability, lowering health risks, promoting preventive health interventions and coordinating all aspects of
care. We drive progress in each of these areas by aligning our products and services with value-based care models, leveraging
integrated benefits, managing drug costs through innovation, expanding digital offerings, and reviewing coverage policies for health
equity. We also help to eliminate barriers to care and address other factors that contribute to health disparities.
Healthy Workforce
We believe that employers play a vital role in the health care system, and we strive to be a model for others by prioritizing the health
and well-being of employees within our own company. We are advancing our diversity, equity and inclusion commitments, including
by setting aspirational goals to increase gender equality in our leadership pipeline. We are continuing to evolve our employee
programs to meet the dynamic working environment and supporting our employees in their career growth as they support the growth
of our business. See further discussion of this pillar within Part I, Item 1 "Human Capital Management" section above.
Healthy Company
We strive to promote positive societal impact, ethical behavior and responsible and resilient business practices across our
multidimensional enterprise. This includes adhering to strong board governance practices, protecting the sensitive data of our clients
and customers by ensuring cybersecurity incident response preparedness, as well as supporting a responsible supply chain and
committing to increasing our annual diverse supplier spend.
MISCELLANEOUS
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Revenues from U.S. Federal Government agencies, under a number of contracts, represented 14% of our consolidated
revenues in 2022 and 2021 and 15% in 2020.
The Company does not rely on business from one or a few brokers or agents.
REGULATION
The laws and regulations governing our business continue to increase each year and are subject to frequent change. We are regulated
by federal, state and international legislative bodies and agencies, which generally have discretion to issue regulations and interpret
and enforce laws and rules. These regulations can vary significantly from jurisdiction to jurisdiction, and the interpretation of existing
laws and rules also may change periodically. Domestic and international governments continue to enact and consider various
legislative and regulatory proposals, which could materially impact the health care system. We expect continued legislative and
regulatory debate of issues related to our businesses. As has become increasingly common with public policy reforms in the health
services industry, executive, judicial or legislative intervention could alter, slow or eliminate the impact of any proposal following the
related regulation's promulgation.
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Many aspects of our business are directly regulated by federal and state laws and administrative agencies, such as HHS, CMS, the
Internal Revenue Service ("IRS"), the U.S. Departments of Labor ("DOL") and Treasury, the Office of Personnel Management
("OPM"), the Federal Trade Commission ("FTC"), the SEC, the Office of the National Coordinator for Health Information
Technology ("ONC"), state departments of insurance and state boards of pharmacy. Our business practices may also be shaped by
enforcement actions of federal agencies, such as the Department of Justice ("DOJ"), state agencies, as well as judicial decisions.
In addition, aspects of our business are subject to indirect regulation. The self-funded benefit plans sponsored by our U.S. employer
clients are regulated under federal law. These self-funded clients expect us to ensure that our administration of their plans complies
with the regulatory requirements applicable to them.
Our business operations and the books and records of our regulated businesses are routinely subject to examination and audit at regular
intervals by state insurance and HMO regulatory agencies, state boards of pharmacy, CMS, DOL, IRS, OPM and comparable
international regulators to assess compliance with applicable laws and regulations. Our operations are also subject to non-routine
examinations, audits and investigations by various state and federal regulatory agencies, generally as the result of a complaint. In
addition, we may be implicated in investigations of our clients whose group benefit plans we administer on their behalf. As a result,
we routinely receive subpoenas and other demands or requests for information from various state insurance and HMO regulatory
agencies, state attorneys general, the HHS Office of Inspector General ("HHS-OIG"), the DOJ, the DOL and other state, federal and
international authorities. We may also be called upon by members of the U.S. Congress to provide information, including testifying
before Congressional committees and subcommittees, regarding certain of our business practices. If The Cigna Group is determined to
have failed to comply with applicable laws or regulations, these examinations, audits, investigations, reviews, subpoenas and demands
may:
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result in fines, penalties, injunctions, consent orders or loss of licensure;
suspend or exclude us from participation in government programs or limit our ability to sell or market our products;
require changes in business practices;
damage relationships with the agencies that regulate us and affect our ability to secure regulatory approvals necessary for the
operation of our business; or
damage our brand and reputation.
Our international subsidiaries are subject to regulations in international jurisdictions, including in certain cases many regulations
similar to the federal and state regulations described below, which are complex and where foreign insurers may face more rigorous
regulations than their domestic competitors and may also be affected by geopolitical developments or tensions.
The laws and regulations governing our business, as well as the related interpretations, are subject to frequent change and can be
inconsistent or in conflict with each other. Changes in our business environment are likely to continue as elected and appointed
officials at the national and state levels continue to propose and enact significant modifications to existing laws and regulations. Even
where we believe that we are in compliance with the various laws and regulations, any enforcement actions by federal, state or
international government officials alleging non-compliance with these rules and regulations could subject us to penalties or
restructuring or reorganization of our business. For a discussion of the risks related to our compliance with these laws and regulations
see the Risk Factors section located in Part I, Item 1A of this Form 10-K. Management continues to be actively engaged with
regulators and policymakers with respect to legislation and rulemaking.
COVID-19-related Regulatory Actions
In response to COVID-19 and its variants, U.S. federal and state governments have increasingly enacted new legislative and
regulatory requirements, as well as provided flexibility to industry participants within existing legal requirements. These regulatory
actions primarily provide for:
• mandating or requesting waiver of customer cost-sharing and other related costs such as COVID-19 testing or treatment, as
well as establishing provider reimbursement and vaccine immunizations coverage requirements;
extending claims filing deadlines for providers, customers and facilities;
•
• mandating or encouraging waiver of customer cost-share related to telemedicine services, as well as requiring certain
reimbursement levels for telemedicine providers to encourage its utilization;
increasing the Medicare fee-for-service reimbursement for certain items and services;
enacting coverage and reimbursement requirements at in-network levels for certain services received from out-of-network
providers;
clarification regarding permissible sharing of information and coordination among health care providers; and
•
•
•
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•
requiring vaccinations for certain employee populations.
These actions are in effect for various durations, but generally track the different states of emergency that have been declared at the
state and federal levels. Of particular significance is the Public Health Emergency ("PHE") declared by the Secretary of HHS on
January 31, 2020, which has since been extended and sets the effective period for certain of the requirements established through
federal COVID-19 legislation, such as covering testing without cost sharing. On January 30, 2023, the Biden administration
announced that it plans to end the PHE and Federal National Emergency on May 11, 2023. With the PHE coming to an end, states will
be required to resume Medicaid redeterminations for the first time since the PHE began. These redeterminations will take place on a
staggered basis, but it is anticipated that the remediations will find many beneficiaries are no longer eligible for Medicaid. As a result,
it is expected that beneficiaries determined to be ineligible for Medicaid may seek alternate coverage in the individual marketplace.
Patient Protection and the Affordable Care Act
The Patient Protection and Affordable Care Act ("ACA") mandated broad changes to the U.S. health care system that affect insured
and self-insured health benefit plans and pharmacy benefit managers. Our business model is impacted by the ACA, including our
relationships with current and future producers and health care providers, products, service providers and technologies. The provisions
of the ACA imposed, among other things, certain assessments on health insurers, created health insurance exchanges for individuals
and small group employers to purchase insurance coverage and implemented minimum MLRs for our Medicare and commercial
businesses. Certain states have adopted MLR requirements applicable to our commercial businesses that are more stringent than those
established by the ACA. Other provisions of the ACA in effect include reduced Medicare Advantage payment rates, the requirement
to cover preventive services with no enrollee cost-sharing, banning the use of lifetime and annual limits on the dollar amount of
essential health benefits, increasing restrictions on rescinding coverage, extending coverage of dependents up to age 26, restrictions on
differential pricing, enforcement mechanisms and rules related to health care fraud and abuse enforcement activities and certain
pharmacy benefit transparency requirements. The employer mandate requires employers with 50 or more full-time employees to offer
affordable health insurance that provides minimum value (each as defined under the ACA) to full-time employees and their
dependents, including children up to age 26, or be subject to penalties based on employer size. The ACA also changed certain tax laws
to effectively limit tax deductions for certain employee compensation paid by health insurers. In December 2019, the federal
government repealed the non-deductible health insurance industry fee effective for 2021, as well as the enacted but never implemented
40% excise tax on certain employer-sponsored coverage (known as the "Cadillac Tax") and the medical device tax. In 2021, in
response to the COVID-19 pandemic, the federal government temporarily expanded eligibility for ACA subsidies to higher-income
people who did not otherwise qualify, increased ACA subsidies for lower-income people who already qualify for 2021 and 2022,
provided subsidies for individuals who receive unemployment benefits in 2021 and prevented taxpayers who misestimated their
income in 2020 from having to repay excess premium tax credits. The Inflation Reduction Act, which was signed into law in August
2022, extended the expanded and increased premium tax credits for individuals enrolled in ACA qualified health plans, through
December 31, 2025.
Medicare and Medicaid Regulations
Through our subsidiaries, we offer individual and group Medicare Advantage, Medicare Prescription Drug ("Part D") and Medicare
Supplement products. We also provide Medicare Part D-related products and services to other Medicare Part D sponsors, Medicare
Advantage Prescription Drug Plans and employers and clients offering Medicare Part D benefits to Medicare Part D eligible
beneficiaries, including those dually eligible for Medicare and Medicaid benefits ("dual-eligible"). As part of our Medicare Advantage
and Medicare Part D business, we contract with CMS to provide services to Medicare beneficiaries. We offer dual-eligible products
and participate in state Medicaid programs directly or indirectly through our clients who are Medicaid managed care contractors. We
also perform certain Medicaid subrogation services and certain delegated services for clients, including utilization management, which
are regulated by federal and state laws. Our dual-eligible products are regulated by CMS and state Medicaid agencies audit our
performance to determine compliance with contracts and regulations. Our ability to obtain payment (and the determination of the
amount of such payments), market to, enroll and retain customers and expand into new service areas is subject to compliance with
CMS' numerous and complex regulations and requirements that are frequently modified and subject to administrative discretion,
review and enforcement.
CMS evaluates Medicare Advantage plans and Part D plans under its "Star Rating" system. The Star Rating system considers various
measures adopted by CMS, including, for example, quality of care, preventive services, chronic illness management, coverage
determinations and appeals and customer satisfaction. A plan's Star Rating affects its image in the market and plans that perform very
well are able to offer enhanced benefits and market more effectively and for longer periods of time than other plans. Medicare
Advantage plans' quality-bonus payments are determined by the Star Rating, with plans receiving a rating of four or more stars eligible
for such payments. The Star Rating system is subject to change annually by CMS, which may make it more difficult to achieve and
maintain four stars or greater. For example, beginning with Star Ratings for payment year 2024, CMS will place more emphasis on
patient experience survey-based measures which could reduce Star Ratings predictability year over year. Additionally, as a result of
the COVID-19 pandemic's impact on 2020 care patterns and utilization, CMS finalized rules applying relief to Medicare Advantage
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and Part D Plan Star Ratings for payment year 2023 by utilizing the higher of the payment year 2023 or 2022 measure level Star
Ratings. The 2023 Star Ratings will only include adjustments as a result of the COVID-19 pandemic's impact for three Healthcare
Effectiveness Data and Information Set measures, and we expect this change will result in a decrease in our Star Ratings for payment
year 2024.
CMS provides risk-adjusted premium payments for Medicare Advantage plans based on our customer demographics and medical
diagnoses, which may change from period to period based on the underlying health of our customers. Under this model, rates paid to
Medicare Advantage plans are based on actuarially determined bids, which include a process whereby our prospective payments are
based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That
baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology,
Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital
outpatient and physician providers to CMS within prescribed deadlines. We generally rely on providers to appropriately document
their claims and other submissions with appropriate diagnoses from which we extract hierarchical condition codes to submit to CMS
as the basis for our payments received under the actuarial risk-adjustment model. The CMS risk-adjustment model uses the diagnosis
data to calculate the risk-adjusted premium payment to the plans. These adjustments are generally settled semi-annually with CMS.
The final adjustment is generally settled with CMS in the year following the contract year. CMS may conduct audits to validate risk-
adjustment data submitted by health plans.
On January 30, 2023, CMS issued the Final Rule titled "Medicare and Medicaid Programs; Policy and Technical Changes to the
Medicare Advantage, Medicare Prescription Drug Benefit, Program for All-inclusive Care for the Elderly (PACE), Medicaid Fee-For-
Service, and Medicaid Managed Care Programs for Years 2020 and 2021", effective April 3, 2023. The Final Rule addresses CMS's
audit methodology and related policies for the Risk Adjustment Data Validation ("RADV"). Although CMS did not specify their
sampling or extrapolation methodology the rule did codify that CMS will use a statistically valid method for sampling and
extrapolation of error rates and the decision not to apply a fee for service adjuster when determining RADV audit findings. CMS will
not apply extrapolation to RADV audits until the 2018 payment year with payment recoveries for those RADV audits expected in
2025. Audits for payment years prior to 2018 are not subject to extrapolation. RADV audits for our contract years 2011 through 2015
are currently in process. The Company is not currently subject to RADV audits for the 2018 and subsequent payment years.
Coverage of prescription drugs under Medicare Part D is also regulated by CMS and our contracts with CMS contain provisions for
risk sharing and certain payments for prescription drug costs for which we are not at risk. These provisions affect our ultimate
payments from CMS. For example, premiums from CMS are subject to risk corridor payments that compare costs targeted in our
annual bids with actual prescription 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 payments we received.
We expect CMS, HHS-OIG, DOJ and other federal agencies to continue to closely scrutinize each component of the Medicare
Advantage program and modify the terms and requirements of the program through rulemaking or enforcement activities. The
Company continues to believe that further regulation or changes to existing regulations could result in disruption in the marketplace
including the potential for some combination of degraded plan benefits and higher monthly premiums. Noncompliance with these laws
and regulations may result in significant consequences, including fines and penalties, enrollment sanctions, exclusion from the
Medicare and Medicaid programs, limitations on expansion and criminal penalties.
False Claims Act and Anti-Kickback Laws
Our products and services are also subject to the federal False Claims Act (the "False Claims Act"), state false claims acts and federal
and state anti-kickback laws. Additionally, the federal government has made investigating and prosecuting health care fraud, waste
and abuse a priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including kickbacks in return for
customer referrals, billing for unnecessary medical services, upcoding and improper marketing. The regulations and contractual
requirements in this area are complex, frequently modified and subject to administrative discretion and judicial interpretation.
False Claims Act and Related Criminal Provisions. The False Claims Act imposes civil penalties on any person who knowingly, as
defined by the statute, makes, conspires to make, or causes to be made false claims, records, or statements, or fails to return known
overpayments, in connection with reimbursement by federal government programs such as Medicare and Medicaid. Private
individuals may bring qui tam or "whistleblower" suits under the False Claims Act, which authorizes the payment of a portion of any
recovery to the individual bringing suit. The ACA amended the federal anti-kickback laws to state any claim submitted to a federal or
state health care program that violates the anti-kickback laws is also a false claim under the False Claims Act. The False Claims Act
generally provides for the imposition of civil penalties and for treble damages, creating the possibility of substantial financial
liabilities. Criminal statutes similar to the False Claims Act provide that if a corporation is convicted of presenting a claim or making a
statement it knows to be false, fictitious or fraudulent to any federal agency, the corporation may be fined. Conviction under these
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statutes may also result in exclusion from participation in federal and state health care programs. Many states have also enacted laws
similar to the False Claims Act, some of which may include criminal penalties, substantial fines and treble damages.
Anti-Kickback and Referral Laws. Subject to certain exceptions and "safe harbors," the federal anti-kickback statute generally
prohibits, among other things, knowingly and willfully paying, receiving or offering any payment or other remuneration to induce a
person to purchase, lease, order or arrange for items (including prescription drugs) or services reimbursable in whole or in part under
Medicare, Medicaid or another federal health care program. Many states have similar laws, some of which are not limited to items or
services paid for with government funds. Sanctions for violating these federal and state anti-kickback laws may include criminal and
civil fines and exclusion from participation in federal and state health care programs.
Anti-kickback laws have been cited as a partial basis, along with state consumer protection laws described below, for investigations
and multi-state settlements relating to financial incentives provided by drug manufacturers to pharmacies or payors in connection with
"product conversion" or promotion programs. Other anti-kickback and referral laws may also be applicable including criminal and
civil laws restricting illegal kickbacks and conflicts of interest in connection with plans governed by the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the federal "Stark Law," and various state anti-kickback restrictions.
In November 2020, HHS and HHS-OIG released a final rule that eliminates an anti-kickback regulatory safe harbor protection for
price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors or pharmacy benefit managers
under the Medicare Part D program. The final rule creates two new safe harbors: (i) for price reductions by manufacturers to plan
sponsors under Medicare Part D and Medicaid managed care organizations that are reflected at the time of dispense and (ii) for fixed-
fee service arrangements between manufacturers and pharmacy benefit managers. The effective date of the final rule has been
postponed to 2032.
Federal Civil Monetary Penalties Law. The federal civil monetary penalty statute provides for civil monetary penalties against any
person who gives something of value to a Medicare or Medicaid program beneficiary that the person knows or should know is likely
to influence the beneficiary's selection of a particular provider for Medicare or Medicaid items or services. Under this law, our wholly-
owned home delivery pharmacies, specialty pharmacies and home health providers are restricted from offering certain items of value
to influence a Medicare or Medicaid patient's use of services. The ACA also includes several civil monetary provisions, such as
penalties for the failure to report and return a known overpayment and failure to grant timely access to the HHS-OIG under certain
circumstances.
Federal and State Oversight of Government-Sponsored Health Care Programs
Participation in government-sponsored health care programs subjects us to a variety of federal and state laws and regulations and risks
associated with audits conducted under these programs. These audits may occur years after the provision of services. Risks include
potential fines and penalties, restrictions on our ability to participate or expand our presence in certain programs and restrictions on
marketing our plans. For example, with respect to our Medicare Advantage business, CMS and the HHS-OIG perform audits to
determine a health plan's compliance with federal regulations and contractual obligations, including program audits and RADV audits,
which focus on compliance with proper coding practices. Certain of our contracts are currently subject to audits by CMS and the HHS-
OIG, including RADV audits. CMS has announced that its goal is to subject all Medicare Advantage contracts to either a
comprehensive or a targeted RADV audit for each contract year. The DOJ is also currently conducting industry-wide investigations of
the risk adjustment data submission practices and business processes of The Cigna Group and a number of other Medicare Advantage
organizations. See Note 23 to the Consolidated Financial Statements for more information.
For our Medicare Part D business, compliance with certain contractual provisions and regulatory requirements is subject to review by
Recovery Audit Contractor audits in which third-party contractors conduct post-payment reviews on a contingency fee basis to detect
and correct improper payments.
Government Procurement Regulations
We have a contract with the U.S. DoD, which subjects us to applicable Federal Acquisition Regulations ("FAR") and the DoD FAR
Supplement, which govern federal government contracts. Further, there are other federal and state laws applicable to our DoD
arrangement and our arrangements with other clients that may be subject to government procurement regulations. In addition, certain
of our clients participate as contracting carriers in the Federal Employees Health Benefits Program administered by the OPM, which
includes various pharmacy benefit management standards.
Employee Retirement Income Security Act
Our domestic subsidiaries sell most of their products and services to sponsors of employee benefit plans that are governed by ERISA.
ERISA is a complex set of federal laws and regulations enforced by the IRS and the DOL, as well as the courts. ERISA regulates
certain aspects of the relationship between us, the employers that maintain employee welfare benefit plans subject to ERISA and the
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participants in such plans. Certain of our domestic subsidiaries are also subject to requirements imposed by ERISA affecting claim
payment and appeals procedures for individual health insurance and insured and self-insured group health plans and for the insured
plans we administer. Certain of our domestic subsidiaries also may contractually agree to comply with these requirements on behalf of
the self-insured plans they administer. We believe the conduct of our pharmacy benefit management business is not generally subject
to the fiduciary obligations of ERISA. However, there can be no assurances that the DOL may not assert that pharmacy benefit
managers are fiduciaries. From time to time, states have considered, and in limited cases, enacted legislation to declare a pharmacy
benefit manager or health benefit manager a fiduciary with respect to its clients.
Plans subject to ERISA may also be subject to state laws and the legal question of whether and to what extent ERISA preempts a state
law is likely to continue to be a subject for interpretation by the courts for years to come.
Privacy, Security and Data Standards Regulations
Numerous federal, state and foreign laws and regulations govern the creation, collection, dissemination, receipt, maintenance,
protection, use, transmission, disclosure, privacy, confidentiality, security, availability, integrity, processing, and disposal (collectively
"Processing") of protected health information ("PHI") and other personally identifiable information ("PII"). Many of our activities
involve Processing of PHI and PII. In addition, we use aggregated and de-identified data for our own research and analysis purposes
and, in some cases, provide access to such de-identified data, or analytics created from such data, to third parties. We may also use
such information to create analytic models designed to predict, and potentially improve, outcomes and patient care. We are also
subject to the Payment Card Industry Data Security Standard, a set of requirements designed to help ensure that entities that Process
credit card information maintain a secure environment.
On the federal level we are subject to a number of sector specific regulation. The federal Health Insurance Portability and
Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, the 21st Century Cures Act,
Public Law 116-321, and the regulations that implement these laws (collectively "HIPAA") impose requirements on covered entities
and business associates that address the privacy and security of PHI. In the conduct of our business we may be either a covered entity
or business associate, and we may also be held liable under HIPAA for violations by our vendors that are business associates. HIPAA
imposes contracting requirements, requires breach notifications, and establishes rules that standardize the format and content of certain
electronic transactions, including eligibility and claims. Violations of HIPAA may result in enforcement actions, civil and criminal
penalties and settlement, resolution, and monitoring agreements. Further, state attorneys general may bring civil actions seeking either
injunctions or damages in response to violations of HIPAA that threaten the privacy of state residents and may negotiate settlements
for related cases on behalf of their respective residents. There can be no assurance that we will not be the subject of an investigation,
audit or compliance review regarding our compliance with HIPAA. While HIPAA does not create a private right of action, its
standards have been used as a basis for the duty of care in state civil suits, such as those for negligence or recklessness in the handling,
misuse or breach of PHI. HIPAA does not preempt more stringent state health privacy laws and regulations, which may protect the
health information of certain individuals, such as minors, and certain types of sensitive health information, such as transgender care,
HIV/AIDS status, reproductive health information, genetic information, and mental and behavioral health.
The federal government has also enacted final regulations on interoperability and information blocking to support the seamless and
secure access, exchange and use of electronic health information by and between patients, enrollees and entities such as payors and
health care providers. These regulations apply to a variety of entities , including health plans, and generally require significant
enhancements to information technology and data governance practices. The regulations impact how industry participants, including
us, comply with disclosure requirements and share information with individuals and other health care organizations.
The federal Gramm-Leach-Bliley Act ("GLBA") and its implementing regulations generally place restrictions on the disclosure of
nonpublic information to nonaffiliated third parties, and requires financial institutions, including insurers, to provide customers with
notice regarding how their nonpublic personal information is used, including an opportunity to "opt out" of certain disclosures. State
departments of insurance and certain federal agencies adopted implementing regulations as required by federal law. In 2023,
significant changes to GLBA's "Safeguards Rule" will go into effect, substantially raising the GLBA standards for security.
Additionally, under Section 5 of the Federal Trade Commission Act ("FTC Act"), the FTC has jurisdiction over certain privacy and
security practices deemed unfair and deceptive acts and practices in or affecting commerce. The FTC has charged companies with
violating this act based on failures to appropriately and transparently safeguard personal information, respect consumers' privacy
rights, based on disclosures of health and personal information to third parties, the failure to limit third-party use of health information,
the failure to implement policies and procedures to prevent the improper or unauthorized disclosure of health information, and the
failure to provide notice and obtain consent before the use and disclosure of health information for advertising. In addition to the FTC
Act, the FTC also enforces other federal laws relating to consumers' privacy and security. The FTC has also been active with respect
to companies' use of big data and artificial intelligence ("AI"), specifically ensuring fair and equitable use of these tools, and the FTC
has named AI as an area of enforcement focus. State legislatures and regulators are similarly interested in the use of AI, particularly as
it is used in modeling, and a handful of states have either passed legislation or issued regulatory guidance concerning AI. Additionally,
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the National Association of Insurance Commissioners ("NAIC"), an organization of state insurance regulators, recently established the
Innovation, Cybersecurity and Technology Committee to provide a forum for regulators to learn, monitor and confer on emerging
technology issues, including, among others, cybersecurity and AI. State Departments of Insurance ("DOI") and other state government
agencies and legislatures are increasingly aware and active in providing guidance in the AI space.
The SEC has proposed additional cybersecurity disclosure obligations on reporting companies, with final rulemaking expected in
2023.
The Cybersecurity Information Sharing Act of 2015 ("CISA") encouraged organizations to share cyber threat indicators with the
federal government and, among other things, directed HHS to develop a set of voluntary cybersecurity best practices for organizations
in the health care industry. States have also begun to issue regulations specifically related to cybersecurity, which may differ or
conflict from state to state. In October 2017, the NAIC adopted the Insurance Data Security Model Law that creates rules for insurers
and other covered entities addressing data security, investigation and notification of breaches. This includes maintaining an
information security program based on ongoing risk assessment, overseeing third-party service providers, investigating data breaches
and notifying regulators of a cybersecurity event. As the model law is intended to serve as model legislation only, states will need to
enact legislation for the model law to become mandatory and enforceable. To date, twenty-one states have enacted some form of the
model law.
Over the past several years, the federal government has increasingly focused on the cybersecurity requirements applicable to
government contractors, including enhanced guidance and regulation. These include compliance with the Privacy Act of 1974, the
Defense Federal Acquisition Regulation Supplement ("DFARS") cybersecurity requirements, the Cybersecurity Maturity Model
Certification ("CMMC") (going into effect over the next four years and based on NIST standards), the Federal Information Security
Modernization Act ("FISMA"), and the White House's 2021 Executive Order on Improving the Nation's Cybersecurity.
Some local authorities are increasing focused on protecting individuals from identity theft and a number of states have adopted
comprehensive data security laws and regulations requiring, among other things, certain minimum data security standards and security
breach notifications that may apply to us in certain circumstances, as well as certain limitations on access to and use of PII. These laws
and regulations include state general data breach laws, which exist in all fifty states and protect PII generally, as well as DOI
cybersecurity laws, applicable to various DOI licensees, such as insurers, PBMs and TPAs. Many states also have their own sector-
specific laws regarding the Processing of PII which may apply to us as well. In the past few years, five states have adopted their own
comprehensive consumer privacy statutes and many more states are considering doing so. Generally, the statutes exempt data and/or
entities regulated by GLBA and/or HIPAA but are, in varying respects, applicable to other data we collect, such as PII provided by
website visitors, and in California, employees and business partners. Additionally, we anticipate federal and state legislators and
regulators will continue to enact legislation related to privacy and cybersecurity, including with respect to ransomware incidents.
In addition, international laws, rules and regulations governing the use and disclosure of PII can be more stringent than those in the
United States, and they vary from jurisdiction to jurisdiction. The European Union's General Data Protection Regulation ("GDPR"),
which became effective May 2018, enhanced or created obligations regarding the handling of PII relating to European residents (such
as regarding notices, data protection impact assessments and individual rights) and provides for greater penalties for noncompliance
than the previous European Directive or laws. In addition, many countries outside of Europe where we conduct business have
implemented or may implement data protection laws and regulations, some of which include requirements modeled after those in the
GDPR. Some non-U.S. jurisdictions are also instituting data residency regulations requiring that data be maintained within the
respective jurisdiction or otherwise restricting transfer of personal data across borders unless specified regulatory requirements are
met.
See Part I. Item 1A, "Risk Factors" for a discussion of the risks related to compliance with privacy and security regulations.
Consumer Protection Laws
We engage in direct-to-consumer activities and are increasingly offering mobile and web-based solutions to our customers. We are
therefore subject to federal and state regulations applicable to electronic communications and other consumer protection laws and
regulations, such as the Telephone Consumer Protection Act and the CAN-SPAM Act. With the ever increasing reliance and demand
by consumers on using their mobile devices for convenient communications, we face increased risk under these laws. The FTC is also
increasingly exercising its enforcement authority in the areas of consumer privacy and data security, with a focus on web-based,
mobile data and "big data." Federal consumer protection laws may also apply in some instances to privacy and security practices
related to personally identifiable information.
State and federal policymakers have taken actions intended to increase transparency and predictability of health care costs for
consumers. For example, the Transparency in Coverage rule issued in October 2020 by the HHS, the DOL and the Department of the
Treasury now requires most group health plans and health insurance issuers in the individual and group markets to publicly disclose
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price and cost-sharing information for all items and services to participants and enrollees. Health plans and health insurers must
publicly disclose (i) in-network provider negotiated rates, and (ii) historical out-of-network allowed amounts and billed charges. The
rule also required public disclosure of in-network negotiated rates and historical net prices for all covered prescription drugs, but the
departments announced in August 2021 guidance that they will indefinitely defer enforcement of the rule's requirement that plans and
issuers publish machine-readable files relating to prescription drug pricing pending further rulemaking. Beginning in 2023, we will be
required to make available to members personalized cost-sharing information for 500 covered health care items and services. In 2024,
this cost-sharing information requirement will expand to all items and services, including prescription drugs. Insurers offering group
or individual health insurance coverage may receive credit in their MLR calculations for certain savings they share with enrollees that
result from the enrollees shopping for, and receiving care from, lower-cost, higher-value providers.
Congress also passed the Consolidated Appropriations Act, 2021 ("CAA"), which included a number of transparency requirements on
plans and issuers that are duplicative or overlap with the Transparency in Coverage rule issued by the departments. The indefinite
enforcement deferral of the prescription drug pricing file under the Transparency in Coverage rule is, in part, due to the subsequent
enactment of the CAA, which requires plans to report information regarding prescription drug spending to federal regulators beginning
in 2022. The CAA also included the No Surprises Act, which prohibits health care providers, in certain situations, from balance billing
the patient and requires that they work directly with insurers to agree on out-of-network reimbursement, including utilizing an
independent dispute resolution ("IDR") process outlined in the act. Many states already have addressed balance billing, or surprise
medical bills. These laws and regulations vary in their approach, resulting in different impacts on the health care system as a whole. In
2021, HHS, DOL and the Department of the Treasury, announced interim final rules ("IFR") intended to implement provisions of the
No Surprises Act, certain provisions of which were vacated by a Federal district court in February and July 2022. The departments
then issued a final rule on August 26, 2022, finalizing disclosure requirements relating to information that group health plans and
health insurance issuers offering group or individual health insurance coverage must share about the Qualifying Payment Amount
("QPA"), which the departments have stated is generally based on the median contracted rate for a qualified IDR item or service, and
requirements related to the consideration of information when a certified IDR entity makes a payment determination under the federal
IDR process. The final rule was also challenged, and the final result is difficult to predict.
Additionally, most states have consumer protection laws that have been the basis for investigations and multi-state settlements relating
to financial incentives provided by drug manufacturers to retail pharmacies in connection with product conversion programs. Such
statutes have also been cited as the basis for claims or investigations by state attorneys general relative to privacy and data security.
Office of Foreign Assets Control Sanctions and Anti-Money Laundering
We are also subject to regulation by the Office of Foreign Assets Control of the U.S. Department of the Treasury, which administers
and enforces economic and trade sanctions against targeted foreign countries and regimes based on U.S. foreign policy and national
security goals. Certain of our products are subject to the Department of the Treasury anti-money laundering regulations under the
Bank Secrecy Act. In addition, we are subject to similar regulations in non-U.S. jurisdictions in which we operate.
Corporate Practice of Medicine and Other Laws
Many states in which our subsidiaries operate limit the practice of medicine to licensed individuals or professional organizations
comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of
physicians. Statutes and regulations relating to the practice of medicine, fee-splitting between physicians and referral sources and
similar issues vary widely from state to state. Under management agreements between certain of our subsidiaries and physician-owned
professional groups, these groups retain sole responsibility for all medical decisions, as well as for hiring and managing physicians and
other licensed health care providers, developing operating policies and procedures, implementing professional standards and controls
and maintaining malpractice insurance. We believe that our health services operations comply with applicable state statutes regarding
corporate practice of medicine, fee-splitting and similar issues. However, any enforcement actions by governmental officials alleging
noncompliance with these statutes could subject us to penalties or restructuring or reorganization of our business.
Utilization Management Laws
State legislatures have begun to propose and enact laws exempting certain providers from pre-authorization requirements of insurers.
These exemptions reduce the ability for insurers and medical management entities from reviewing services for medical necessity if the
provider meets the law's established thresholds for approval rates in the preceding six months. The inability to apply pre-authorization
requirements could lead to increased costs to plan issuers by way of the provision of unnecessary services. States are also
standardizing the process for, and restricting the use of, utilization management rules and shortening the time frames within which
prescription drug prior authorization determinations must be made. Even where states do not regulate pharmacy benefit or utilization
management companies directly, these laws will apply to many of our clients, including managed care organizations and health
insurers.
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Laws and Legislation Affecting Pharmacy Benefit Plan Design, Administration and Pharmacy Network Access
Some states have enacted laws that prohibit managed care plan sponsors from implementing certain restrictive benefit plan design
features, and many states have laws or have introduced legislation to regulate various aspects of managed care plans, including
provisions relating to the pharmacy benefit. For example, some states, under so-called "freedom of choice" legislation, provide that
customers of the plan may not be required to use network providers, but must instead be provided with benefits even if they choose to
use non-network providers. Some states have also enacted legislation that can negatively impact the use of cost-saving network
configurations for plan sponsors, such as limiting the implementation of pharmacy benefit designs and reimbursement structures that
leverage affiliate pharmacies to reduce costs. Other states have enacted legislation purporting to prohibit health plans from offering
customers financial incentives for use of home delivery pharmacies. Medicare and some states have issued guidance and regulations
that limit our ability to fill or refill prescriptions electronically submitted by a physician to our home delivery pharmacy without first
obtaining consent from the patient. Such restrictions generate additional costs and limit our ability to maximize efficiencies, which
could otherwise be gained through the electronic prescription and automatic refill processes. Legislation has been introduced in some
states to prohibit or restrict therapeutic intervention, or to require coverage of all Food and Drug Administration approved drugs. Other
states mandate coverage of certain benefits or conditions, and require health plan coverage of specific drugs if deemed medically
necessary by the prescribing physician.
Additionally, Medicare Part D and a majority of states now have laws, regulations or some form of legislation affecting our ability, or
our clients' ability, to limit access to a pharmacy provider network or remove a provider from a network. Such laws, regulations or
legislation may require us or our clients to admit any retail pharmacy or provider willing to meet the plan's terms and conditions for
network participation ("any willing provider") or may direct that a provider may not be removed from a network except in compliance
with certain procedures ("due process").
Certain states have laws prohibiting certain pharmacy benefit management clients from imposing additional copayments, deductibles,
limitations on benefits, or other conditions on covered individuals utilizing a retail pharmacy when the same conditions are not
otherwise imposed on covered individuals utilizing home delivery pharmacies. However, the laws require the retail pharmacy to agree
to the same reimbursement amounts and terms and conditions as are imposed on the home delivery pharmacies. An increase in the
number of prescriptions filled at retail pharmacies may have a negative impact on the number of prescriptions filled through home
delivery.
Pharmacy Benefit Manager and Drug Pricing Regulation
Our pharmacy benefit management services are subject to numerous laws and regulations. These laws and regulations govern, and
proposed legislation and regulations may govern, critical practices, including: disclosure, receipt and retention of rebates and other
payments received from pharmaceutical manufacturers; certain pharmacy contracting practices including disclosure of cost
information to customers; the receipt and retention of transmission fees from contracted pharmacies; performance-based price
concessions; pharmacy price concessions to drug prices at the point of sale; audits of contracted pharmacies; use of, administration of,
or changes to drug formularies, the use and disclosure of maximum allowable cost ("MAC") pricing, or clinical programs; "most
favored nation" pricing, which provides that a pharmacy participating in a specific government program must give the program the
best price the pharmacy makes available to any third-party plan; disclosure of data to third parties; drug utilization management
practices; the level of duty a pharmacy benefit manager owes its clients or customers; configuration of pharmacy networks; the
operations of our subsidiary pharmacies; referrals to affiliated pharmacies; disclosure of negotiated provider reimbursement rates;
disclosure of negotiated drug rebates, calculation of certain customer cost-share for prescription drug claims; pricing that includes
differential or spread (i.e., a difference between the drug price charged to the plan sponsor by a pharmacy benefit manager and the
price paid by the manager to the dispensing provider); disclosure of fees associated with administrative service agreements and patient
care programs that are attributable to customers' drug utilization; utilization management; and registration or licensing of pharmacy
benefit managers.
We expect federal and state governments to continue to prioritize means of addressing out-of-pocket costs for consumers, particularly
related to prescription drug costs. Recently enacted legislation, and other policy proposals and regulations vary broadly in their
approaches to achieve that goal. For example, proposed legislation includes, among other things, the Pharmacy Benefit Manager
Transparency Act; the Pharmacy Benefit Manager Accountability Study Act; a repeal of the 2020 Medicare drug rebate, as described
above under the heading "False Claims Act and Anti-Kickback Laws—Anti-Kickback and Referral Laws;" and limits on manufacturer
price increases for prescription drugs. Additionally, proposals at the federal and state levels consider increased regulation of pharmacy
benefit managers and health plans as a means to limit consumer out-of-pocket costs, including: proposing to limit the use of various
pharmacy benefit management tools; mandating the treatment of fees, discounts or financing mechanisms that otherwise are set in
private contractual terms; increasing supply chain transparency; expanding regulatory requirements or definitions of fiduciaries; or
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mandating plan benefit designs that cap consumer out-of-pocket expense. The NAIC has also proposed laws intended to protect
consumer drug benefits and has examined regulatory approaches to pharmacy benefit manager business practices.
Some states have enacted statutes regulating the use of MAC pricing. These statutes, referred to as "MAC Transparency Laws,"
generally require pharmacy benefit managers to disclose specific information related to MAC pricing to pharmacies and provide
certain appeal rights for pharmacies. MAC Transparency Laws also restrict the application of MAC and may require operational
changes to maintain compliance with the law. Some states have also enacted laws regulating pharmacy pricing and protecting the
profitability of pharmacies for dispensing certain MAC-priced drugs. Some states have enacted laws requiring that the customer cost-
share for a prescription drug claim not exceed certain price points, such as the pharmacy's usual and customary charge or its contracted
reimbursement for the drug. In a recent Supreme Court decision, the Court found that certain MAC Transparency Laws may be
applied by states to ERISA plans in addition to health plans regulated by the applicable state. Following this decision, state legislatures
and regulators have sought to extend their oversight authority of self-funded ERISA plans to pharmacy benefit management functions
and pharmacy benefit plan designs beyond MAC pricing.
The federal Medicaid Drug Rebate Program requires participating drug manufacturers to provide rebates on all drugs reimbursed
through state Medicaid programs, including through Medicaid managed care organizations. Manufacturers of brand-name products
must provide a rebate equivalent to the greater of (a) 23.1% of the average manufacturer price ("AMP") paid by retail community
pharmacies or by wholesalers for certain drugs distributed to retail community pharmacies, or (b) the difference between AMP and the
"best price" available to essentially any customer other than the Medicaid program and certain other government programs, with
certain exceptions. We negotiate rebates with drug manufacturers and, in certain circumstances, sell services to drug manufacturers.
Investigations are being and have been conducted by certain government entities which call into question whether a drug's "best price"
was properly calculated and reported with respect to rebates paid by the manufacturers to the Medicaid programs. We are not
responsible for such calculations, reports or payments.
In February 2022, the FTC began soliciting public comment on pharmacy benefit manager practices and their impact on patients,
physicians, employers, independent and chain pharmacies, and other businesses in pharmaceutical distribution. In June 2022, the FTC
announced an inquiry into pharmacy benefit managers and stated the FTC was seeking information concerning the competitive impact
of the contracting and business practices of pharmacy benefit managers. The FTC required the six largest pharmacy benefit managers
to provide information and records on topics including rebate contracts and ancillary agreements, documents related to strategies,
conditions and plans for formulary placement, formulary exclusion, formulary tier assignment, and prior authorization regarding
rebated drug products, and annual pharmacy reimbursement data for drugs on specialty drug lists and for rebated drug products. In
July 2022, the FTC issued an enforcement policy statement indicating the FTC would scrutinize the impact of rebates and fees paid by
pharmaceutical manufacturers to pharmacy benefit managers and other intermediaries to determine if laws such as the FTC Act, the
Clayton Act, the Robinson-Patman Act and the Sherman Act may have been violated.
Pharmacy Regulation
Our home delivery and specialty pharmacies also subject us to extensive federal, state and local regulation. The practice of pharmacy
is generally regulated at the state level by state boards of pharmacy, though our pharmacies are subject to laws described above under
the headings "Privacy, Security and Data Standards Regulations" and "Consumer Protection Laws." We are licensed to do business as
a pharmacy in the states in which our pharmacies are located and the health care professionals that we employ are also licensed by,
and subject to, the laws and regulations of state boards of pharmacy and other governmental authorities. Most of the states into which
we deliver pharmaceuticals have laws that require out-of-state home delivery pharmacies to register with, or be licensed by, the board
of pharmacy or a similar regulatory body in the state. These states generally permit the pharmacy to follow the laws of the state where
the pharmacy is located, although some states require compliance with certain laws in that state as it impacts or relates to drugs
distributed or dispensed into that state.
Our various pharmacy facilities also provide services under certain Medicare and state Medicaid programs. Participation in these
programs requires our pharmacies to comply with the applicable Medicare and Medicaid provider rules and regulations, and exposes
the pharmacies to various changes the federal and state governments may impose regarding reimbursement methodologies, the
submission of claims and amounts to be paid to participating providers under these programs. In addition, several of our pharmacy
facilities are participating providers under Medicare Part D and are required to adhere to certain requirements applicable to Medicare
Part D. Additionally, we are subject to CMS rules regarding the administration of our Medicare plans and pricing between our plans
and related parties, including our pharmacy business.
Other statutes and regulations affect our home delivery and specialty pharmacy operations, including the federal and state anti-
kickback laws, federal and state false claims acts and the federal civil monetary penalty law described above. Federal and state statutes
and regulations govern the labeling, packaging, repackaging, compounding, storing, holding, disposal, distribution, advertising,
misbranding, adulteration, transfer, handling and security of prescription drugs and the dispensing of prescription, over-the-counter,
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hazardous and controlled substances and certain of our pharmacies must register with the U.S. Drug Enforcement Administration, the
U.S. Food and Drug Administration and individual state controlled substance authorities. The FTC requires mail order sellers of goods
generally to engage in truthful advertising, to stock a reasonable supply of the product to be sold, to fill mail orders within thirty days
and to provide clients with refunds when appropriate. The United States Postal Service also has significant statutory authority to
restrict the delivery of drugs and medicines through the mail. Violations of pharmacy laws and regulations may result in warning
letters, civil and criminal penalties, seizures, suspension, termination or revocation of licenses and registrations, restrictions on
facilities or operations, and other enforcement actions.
Financial Reporting, Internal Control and Corporate Governance
Regulators closely monitor the financial condition of licensed insurance companies and HMOs. States regulate the form and content of
statutory financial statements, the type and concentration of permitted investments and corporate governance over financial reporting.
Our insurance and HMO subsidiaries are required to file periodic financial reports and schedules with regulators in most of the
jurisdictions in which they do business as well as annual financial statements audited by independent registered public accounting
firms. Certain insurance and HMO subsidiaries are required to file an annual report of internal control over financial reporting with
most jurisdictions in which they do business. Insurance and HMO subsidiaries' operations and financial statements are subject to
examination by such agencies. Many states have expanded regulations relating to corporate governance and internal control activities
of insurance and HMO subsidiaries as a result of model regulations adopted by the NAIC with elements similar to corporate
governance and risk oversight disclosure requirements under federal securities laws.
Guaranty Associations, Indemnity Funds, Risk Pools and Administrative Funds
Most states and certain non-U.S. jurisdictions require insurance companies to support guaranty associations or indemnity funds that
are established to pay claims on behalf of insolvent insurance companies. Some states have similar laws relating to HMOs and other
payors, such as consumer operated and oriented plans (co-ops) established under the ACA. In the United States, these associations
levy assessments on member insurers licensed in a particular state to pay such claims. Certain states require HMOs to participate in
guaranty funds, special risk pools and administrative funds. For additional information about guaranty funds and other assessments,
see Note 23 to the Consolidated Financial Statements.
Certain states continue to require health insurers and HMOs to participate in assigned risk plans, joint underwriting authorities, pools
or other residual market mechanisms to cover risks not acceptable under normal underwriting standards, although some states have
eliminated these requirements as a result of the ACA.
Solvency and Capital Requirements
Many states have adopted some form of the NAIC model solvency-related laws and risk-based capital ("RBC") rules for life and
health insurance companies and HMOs. The RBC rules recommend a minimum level of capital depending on the types and quality of
investments held, the types of business written and the types of liabilities incurred. If the ratio of the insurer's adjusted surplus to its
RBC falls below statutorily required minimums, the insurer could be subject to regulatory actions ranging from increased scrutiny to
conservatorship.
In addition, various non-U.S. jurisdictions prescribe minimum surplus requirements that are based upon solvency, liquidity and
reserve coverage measures. Our HMOs and life and health insurance subsidiaries, as well as non-U.S. insurance subsidiaries, are
compliant with applicable RBC and non-U.S. surplus rules.
The Risk Management and Own Risk and Solvency Assessment Model Act ("ORSA"), adopted by the NAIC, provides requirements
and principles for maintaining a group solvency assessment and a risk management framework and reflects a broader approach to U.S.
insurance regulation. ORSA includes a requirement to file an annual ORSA Summary Report in the lead state of domicile. To date, an
overwhelming majority of the states have adopted the same or similar versions of ORSA. We file our ORSA report annually as
required.
Holding Company Laws
Our domestic insurance companies and certain of our HMOs are subject to state laws regulating subsidiaries of insurance holding
companies. Under such laws, certain dividends, distributions and other transactions between an insurance company or an HMO
subsidiary and its affiliates may require notification to, or approval by, one or more state insurance commissioners. In addition, the
holding company acts of states in which our subsidiaries are domiciled restrict the ability of any person to obtain control of an
insurance company or HMO subsidiary without prior regulatory approval. State holding company laws and regulations also subject
our insurance companies and certain HMO subsidiaries to additional regulatory scrutiny related to their oversight of affiliates
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performing regulated services on behalf of the insurance company or HMO and require the Company to file an annual Enterprise Risk
Report, which summarizes material risks that could pose enterprise risk to the insurance company subsidiaries.
Marketing, Advertising and Products
In most states, our insurance companies and HMO subsidiaries are required to certify compliance with applicable advertising
regulations on an annual basis. Our insurance companies and HMO subsidiaries are also required by most states to file and secure
regulatory approval of products prior to the marketing, advertising and sale of such products.
Licensing and Registration Requirements
Our insurance companies and HMO subsidiaries must be licensed by the jurisdictions in which they conduct business. Additionally,
certain subsidiaries contract to provide claim administration, utilization management and other related services for the administration
of self-insured benefit plans. These subsidiaries may be subject to state third-party administration and other licensing requirements and
regulation, as well as third-party accreditation requirements.
We have received full accreditation for Utilization Review Accreditation Commission Pharmacy Benefit Management version 2.2
Standards, which includes quality standards for drug utilization management, and select subsidiaries have received full accreditation
for Utilization Review Accreditation Commission for Health Utilization Management version 7.2, which includes quality standards for
medical utilization management.
Certain states have adopted pharmacy benefit management registration, licensure or disclosure laws. In addition to registration laws,
some states have adopted legislation mandating disclosure of various aspects of our financial practices, including those concerning
pharmaceutical company revenue, as well as prescribing processes for prescription switching programs and client and provider audit
terms.
Our international subsidiaries are often required to be licensed when entering new markets or starting new operations in certain
jurisdictions. The licensure requirements for these subsidiaries vary by country and are subject to change.
International Regulations
Our operations outside of the United States expose us to laws of multiple jurisdictions and the rules and regulations of various
governing bodies and regulators, including those related to the provision of insurance, financial and other disclosures, the provision of
health care-related services, corporate governance, privacy, data protection, data mining, data transfer, intellectual property, labor and
employment, consumer protection, direct-to-consumer communications activities, tax, anti-corruption and anti-money laundering.
Foreign laws and rules may include requirements that are different from, or more stringent than, similar requirements in the United
States.
Our operations in countries outside of the United States:
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are subject to local regulations of the jurisdictions where we operate;
in some cases, are subject to regulations in the jurisdictions where customers reside; and
in all cases, are subject to the Foreign Corrupt Practices Act ("FCPA").
Anti-money laundering requirements in countries where we do business also may impose obligations to collect certain information
about each customer at time of sale or to risk rank each customer to determine possible future money laundering risk.
The FCPA prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official or
employee to obtain or retain business or otherwise secure a business advantage. Outside of the United States, we may interact with
government officials in several different capacities: as regulators of our insurance business; as clients or partners who are state-owned
or partially state-owned; as health care providers who are employed by the government; as hospitals that are state-owned; and as
officials issuing permits in connection with real estate transactions. Violations of the FCPA and other anti-corruption laws may result
in severe criminal and civil sanctions as well as other penalties, and the SEC and DOJ have increased their enforcement activities with
respect to FCPA. The UK Bribery Act of 2010 applies to all companies with a nexus to the United Kingdom. Under this act, any
voluntary disclosures of FCPA violations may be shared with United Kingdom authorities, thus potentially exposing companies to
liability and potential penalties in multiple jurisdictions. Other countries in which we do business also have anti-corruption laws to
which we are subject.
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Item 1A. RISK FACTORS
As a large global health company operating in a complex industry, we encounter a variety of risks and uncertainties, which could
have a material adverse effect on our business, liquidity, results of operations, financial condition or the trading price of our
securities. You should carefully consider each of the risks and uncertainties discussed below, together with other information
contained in this Form 10-K, including MD&A. These risks and uncertainties are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect us. The following risk
factors have been organized by category for ease of use; however many of the risks may have impacts in more than one category.
These categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a
limitation on the potential impact of the matters discussed. Risk factors are not necessarily listed in order of importance.
Strategic and Operational Risks
Future performance of our business will depend on our ability to execute our strategic and operational initiatives effectively.
The future performance of our business will depend in large part on our ability to effectively implement and execute our strategic and
operational initiatives. Successfully executing on these initiatives depends on a number of factors, including our ability to:
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differentiate our products, services and solutions from those of our competitors;
develop and bring to market new and innovative products, solutions or programs that focus on improving patient outcomes
and experiences and assist in controlling costs or in response to government regulation;
develop and create data and analytic solutions to support and improve outcomes for our products, services and solutions,
including creating and developing solutions and services through partnerships with other industry participants;
grow and support our product portfolio, expand our addressable markets and identify and introduce the proper mix,
coordination or integration of products that will be accepted by the marketplace;
evaluate drugs for efficacy, value and price to assist clients in selecting a cost-effective formulary;
offer cost-effective home delivery pharmacy and specialty services;
access or continue accessing key drugs and successfully penetrate key treatment categories in our specialty pharmacy
business;
attract and retain sufficient numbers of qualified employees, particularly in an increasingly competitive job market;
attract, develop and maintain collaborative relationships with a sufficient number of qualified partners;
attract new and maintain existing customer and client relationships;
leverage purchase volume to deliver discounts to health benefit providers;
transition health care providers from volume-based fee-for-service arrangements to a value-based system;
improve medical cost competitiveness in our targeted markets;
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• manage our medical, pharmacy, administrative and other operating costs effectively; and
•
contract with health care providers, pharmacy providers and pharmaceutical manufacturers on market competitive terms.
For our strategic initiatives to succeed, we must effectively collaborate across our operations, integrate our acquired businesses,
actively work to ensure consistency throughout the organization and promote a global mindset along with a focus on individual
customers and clients. If we fail to do so, our business may be unable to grow as planned, or the result of expansion may be
unsatisfactory. We will be unable to rapidly respond to competitive, economic and regulatory changes if we do not make important
strategic and operational decisions quickly, define our appetite for risk, implement new governance, managerial and organizational
processes smoothly and communicate roles and responsibilities clearly. If these initiatives fail or are not executed effectively, our
consolidated financial position and results of operations could be negatively affected.
We operate in a highly competitive, evolving and rapidly changing industry and our failure to adapt could negatively impact our
business.
The health service industry continues to be dynamic and rapidly evolving. Any significant shifts in the structure of the industry could
alter industry dynamics and adversely affect our ability to attract or retain clients and customers. Industry shifts could result (and have
resulted) from, among other things:
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•
a large intra- or inter-industry merger or industry consolidation;
strategic alliances;
new or alternative business models or new government options or offerings;
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continuing consolidation among physicians, hospitals and other health care providers, as well as changes in the organizational
structures chosen by physicians, hospitals and health care providers;
new market entrants, including those not traditionally in the health service industry;
the ability of larger employers and clients to contract directly with providers;
technological changes and rapid shifts in the use of technology, such as telehealth;
the impact or consequences of legislation or regulatory changes;
changes in the United States Postal Service or the consolidation of shipping carriers;
increased drug acquisition cost or unexpected changes to drug pricing trend;
changes in the generic drug market or the failure of new generic drugs to come to market; or
changes in utilization of health care, prescription drugs or other covered services and items, including under risk-based
contracts in the health benefit management market and for those businesses that utilize risk adjustment methodology.
Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and
adversely affect our business and results of operations.
Our failure to compete effectively, to differentiate our products and services from those of our competitors and maintain or
increase market share, including maintaining or increasing enrollments in businesses providing health benefits, could materially
adversely affect our results of operations, financial position and cash flows.
We operate in a highly competitive environment and an industry subject to significant market pressures brought about by customer
and client needs, legislative and regulatory developments and other market factors. In particular markets, our competitors may have
greater, better or more established capabilities, resources, market share, reputation or business relationships, or lower profit margin or
financial return expectations. Our clients are well informed and organized and can easily move between our competitors and us. Our
Express Scripts client contracts generally have three-year terms and may be subject to periodic renegotiation of pricing terms based on
market factors. As described in greater detail in the description of our business in Item 1 of this Form 10-K, one of our key clients in
the Evernorth Health Services segment is the United States Department of Defense. If one or more of our large clients terminates or
does not renew a contract for any reason, including as a result of being acquired, or if the provisions of a contract with a large client
are modified, renewed or otherwise changed with terms less favorable to us, our results of operations could be adversely affected and
we could experience a negative reaction in the investment community resulting in decreases in the trading price of our securities or
other adverse effects.
Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive
markets to keep or increase our market share, increase customers as planned, differentiate our business offerings by innovating and
delivering products and services that provide enhanced value to our customers, provide quality and satisfactory levels of service and
retain accounts with favorable medical cost experience or more profitable products versus retaining or increasing our customer base in
accounts with unfavorable medical cost experience or less profitable products.
We must remain competitive to attract new customers, retain existing customers and further integrate additional product and service
offerings. To succeed in this highly competitive marketplace, it is imperative that we maintain a strong reputation. Increasingly, our
customers, clients and investors consider our efforts on a variety of matters that could impact our stakeholders, including our
employees and the communities in which we operate, such as our efforts with respect to the environment and diversity, equity and
inclusion. The negative reputational impact of a significant event, including a failure to execute on customer or client contracts or
strategic or operational initiatives, failure to comply with applicable laws or regulations, or failure to innovate and deliver products
and services that demonstrate greater value to our customers, could affect our ability to grow and retain profitable arrangements,
which could have a material adverse effect on our business, results of operations, financial position and cash flows.
We face price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover
the cost of services delivered to our customers.
While we compete on the basis of many service and quality-related factors, we expect that price will continue to be a significant basis
of competition and we may face pressure to contain premium rates. Our client contracts are subject to negotiation as clients seek to
contain their costs, including by reducing benefits offered. Increasingly, our clients seek to negotiate performance guarantees that
require us to pay penalties if the guaranteed performance standard is not met. Clients can easily move between our competitors and us.
Our clients are well informed and typically have knowledgeable consultants that seek competing bids from our competitors before
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contract renewal. In addition, as brokers and benefit consultants seek to enhance their revenue streams, they look to take on services
that we typically provide. Each of these events could negatively impact our financial results.
Federal and state regulatory agencies may restrict or prevent entirely our ability to implement changes in premium rates. Fiscal or
other concerns related to the government-sponsored programs in which we participate, such as Medicare Advantage plans and
Medicare Part D plans, may cause decreasing reimbursement rates, delays in premium payments, restrictions on implementing
changes in premium rates or insufficient increases in reimbursement rates. Any limitation on our ability to maintain or increase our
premium or reimbursement levels, or a significant loss of customers or clients resulting from our need to increase or maintain
premium or reimbursement levels, could adversely affect our business, cash flows, financial condition and results of operations.
Premiums in the Cigna Healthcare segment are generally set for one-year periods and are priced well in advance of the date on which
the contract commences or renews. Our revenue on Medicare Advantage plans, Individual and Family Plans ("IFP") and Medicare
Part D plans is based on rates and bids submitted midyear in the year before the contract year. Although we base the premiums we
charge and our Medicare Advantage, IFP and Medicare Part D rates and bids on our estimate of future health care costs over the
contract period, actual costs may exceed what we estimate in setting premiums. Our participation in health insurance exchanges
through our IFP offerings involves uncertainties associated with mix and volume of business and could adversely affect our results of
operations, financial position and cash flows. Our health care costs also are affected by external events that we cannot forecast or
project and over which we have little or no control, including changes in laws and regulations, as well as pandemics, costly new
treatments, new treatment guidelines, provider billing practices, inflation and changes in customers' health care utilization patterns,
which may, among other things, impact our ability to appropriately document their health conditions. Our profitability depends, in
part, on our ability to accurately predict, price for and effectively manage future health care costs. Relatively small differences
between predicted and actual medical costs or utilization rates as a percentage of revenue can result in significant changes in our
financial results.
Strong competition within the pharmacy benefit business has also generated greater demand for lower product and service pricing,
increased revenue sharing and enhanced product and service offerings. These competitive factors have historically applied pressure on
our operating margins and caused many companies, including us, to reduce the prices charged for products and services while sharing
with clients a greater portion of the formulary fees and related rebates received from pharmaceutical manufacturers. Our inability to
maintain positive trends, or failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our
ability to attract or retain clients or sell additional services, which could negatively impact our margins and have a material adverse
effect on our business and results of operations. In addition, legislative reforms related to rebates, reporting, and other activities may
adversely affect our competitive position, cash flows, financial condition and results of operations.
The reserves we hold for expected medical claims are based on estimates that involve an extensive degree of judgment and are
inherently variable. If actual claims exceed our estimates, our operating results could be materially adversely affected, and our
ability to take timely corrective actions to contain future costs may be limited.
We maintain and record medical claims reserves in our Consolidated Balance Sheets for estimated future payments. Our estimates of
health care costs payable are based on a number of factors, including historical claim experience, but this estimation process requires
extensive judgment. Considerable variability is inherent in such estimates, and the accuracy of the estimates is highly sensitive to
changes in medical claims submission and processing patterns or procedures, changes in customer base and product mix, changes in
the utilization of prescription drugs, medical or other covered items or services, changes in medical cost trends, changes in our health
management practices, changes in regulations and the introduction of new benefits and products. If we are not able to accurately and
promptly anticipate and detect medical cost trends, our ability to take timely corrective actions to limit future costs and reflect our
current benefit cost experience in our pricing process may be limited. Additionally, we must estimate the amount of rebates payable by
us under the ACA's and CMS' minimum loss ratio rules and the amounts payable by us to, and receivable by us from, the United
States federal government under the ACA's remaining premium stabilization program. Because establishing reserves is an inherently
uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing reserves
which may adversely affect our results of operations, financial position and cash flows.
If we fail to develop and maintain satisfactory relationships with health care payers, physicians, hospitals and other health service
providers and with producers and consultants, our business and results of operations may be adversely affected.
We contract with or employ physicians, hospitals and other health service providers and facilities to provide health services to our
customers, as well as health care payers (as a service provider to those payers). Our results of operations are substantially dependent
on our ability to contract for these services at competitive prices. In any particular market, physicians, hospitals and health service
providers may enter into exclusive arrangements with competitors or simply refuse to contract with us, demand higher payments or
take other actions that could result in higher medical costs or less desirable products or services for our customers. In some markets,
certain providers, particularly hospitals, physician/hospital organizations and multispecialty physician groups, may have significant or
controlling market positions that could result in a diminished bargaining position for us. If providers refuse to contract with us, use
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their market position to negotiate more favorable contracts or place us at a competitive disadvantage, our ability to market products or
to be profitable in those areas could be materially adversely affected. Additionally, certain regulations may impact our ability to obtain
competitive prices. Establishing collaborative arrangements with physician groups, specialist groups, independent practice
associations, hospitals and health care delivery systems is key to our strategic focus to transition from volume-based fee-for-service
arrangements to a value-based health care system. If such collaborative arrangements do not result in the lower medical costs that we
project or if we fail to attract health care providers to such arrangements, or are less successful at implementing such arrangements
than our competitors, our attractiveness to customers may be reduced and our ability to profitably grow our business may be adversely
affected.
Our ability to develop and maintain satisfactory relationships with providers may also be negatively impacted by other factors not
associated with us, such as changes in Medicare or Medicaid reimbursement levels, increasing pressure on revenue and other pressures
on health care providers and increasing consolidation activity among hospitals, physician groups and providers. Continuing
consolidation among physicians, hospitals and other providers, the emergence of accountable care organizations, vertical integration of
providers and other entities, changes in the organizational structures chosen by physicians, hospitals and providers, new market
entrants, including those not traditionally in the health care industry, and the increased use of virtual care services (including
telehealth) may affect the way providers interact with us and may change the competitive landscape in which we operate. In some
instances, these organizations may compete directly with us, potentially affecting the way we price our products and services or
causing us to incur increased costs if we change our operations to be more competitive.
Out-of-network providers are not limited by any agreement with us in the amounts they bill. While benefit plans place limits on the
amount of charges that will be considered for reimbursement and regulations seek to prescribe payment levels, establish
methodologies and dispute resolution processes, providers are increasingly sophisticated and aggressive. As a result, the outcome of
disputes where we do not have a provider contract may cause us to pay higher medical or other benefit costs than we projected.
Additionally, certain of our products and services are sold in part through nonexclusive producers and consultants for whose services
and allegiance we compete. Our sales could be materially adversely affected if we are unable to attract, retain and support such
independent producers and consultants or if our sales strategy is not appropriately aligned across distribution channels.
If we lose our relationship with one or more key pharmaceutical manufacturers, or if the payments made or discounts provided by
pharmaceutical manufacturers decline, our business and results of operations could be adversely affected.
We maintain relationships with numerous pharmaceutical manufacturers, which provide us with, among other things:
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discounts for drugs we purchase to be dispensed from our home delivery and specialty pharmacies;
discounts, in the form of rebates, for drug utilization;
fees for administering rebate programs, including invoicing, allocating and collecting rebates;
fees for services provided to pharmaceutical manufacturers by our specialty pharmacies; and
access to limited distribution specialty pharmaceuticals by our specialty pharmacies.
Our contracts with pharmaceutical manufacturers are typically nonexclusive and terminable on relatively short notice by either party.
The consolidation of pharmaceutical manufacturers, the termination or material alteration of our relationships, or our failure to renew
contracts on market competitive terms could have a material adverse effect on our business and results of operations. In addition,
arrangements between payors and pharmaceutical manufacturers have been the subject of debate in federal and state legislatures and
various other public and governmental forums. Adoption of new laws, rules or regulations or changes in, or new interpretations of,
existing laws, rules or regulations, relating to any of these programs could materially adversely affect our business and results of
operations.
If significant changes occur within the pharmacy provider marketplace, or if other issues arise with respect to our pharmacy
networks, including the loss of or adverse change in our relationship with one or more key pharmacy providers, our business and
financial results could be adversely affected.
More than 67,000 pharmacies participated in one or more of our networks as of December 31, 2022. The ten largest retail pharmacy
chains represent approximately 60% of the total number of stores in our largest network. In certain geographic areas of the United
States, our networks may be comprised of higher concentrations of one or more large pharmacy chains. Contracts with retail
pharmacies are generally nonexclusive and are terminable on relatively short notice by either party. If one or more of the larger
pharmacy chains terminates its relationship with us, or is able to renegotiate terms substantially less favorable to us, our customers'
access to retail pharmacies or our business could be materially adversely affected. The entry of one or more additional large pharmacy
chains into the pharmacy benefit management business, the consolidation of existing pharmacy chains or increased leverage or market
share by the largest pharmacy providers could increase the likelihood of negative changes in our relationship with such pharmacies.
Changes in the overall composition of our pharmacy networks, or reduced pharmacy access under our networks, could have a negative
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impact on our claims volume or our competitiveness in the marketplace, which could cause us to fall short of certain guarantees in our
contracts with clients or otherwise impair our business or results of operations.
Changes in drug pricing or industry pricing benchmarks could materially impact our financial performance.
Contracts in the prescription drug industry, including our contracts with retail pharmacy networks and our pharmacy and specialty
pharmacy clients, generally use pricing metrics published by third parties as benchmarks to establish pricing for prescription drugs. If
these benchmarks are no longer published by third parties, we, or our contractual partners, adopt other pricing benchmarks for
establishing prices within the industry, legislation or regulation requires the use of other pricing benchmarks, or future changes in drug
prices substantially deviate from our expectations, the short- or long-term impacts may have a material adverse effect on our business
and results of operations.
Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted
operation, availability and data integrity of our information technology and other business systems.
Our business is highly dependent on maintaining effective information systems as well as the integrity and timeliness of the data we
use to serve our customers and health care providers and to operate our business. If our data were found to be inaccurate or unreliable
due to fraud or other error, or if we, or any of the third-party providers we engage, were to fail to maintain information systems and
data integrity effectively, we could experience operational disruptions that may impact our clients, customers and health care providers
and hinder our ability to provide or establish appropriate pricing for products and services, retain and attract clients and customers,
establish reserves and report financial results timely and accurately and maintain regulatory compliance, among other things.
Our information technology strategy and execution are critical to our continued success. We must continue to invest in and maintain
long-term solutions that will enable us to anticipate customer needs and expectations, enhance the customer experience, act as a
differentiator in the market and protect against cybersecurity risks and threats or other events that could disrupt our information
technology systems such as man-made or natural disasters (including those as a result of climate change). Our success is dependent, in
large part, on maintaining the effectiveness of existing technology systems and continuing to deliver and enhance technology systems
that support our business processes in a cost-efficient and resource-efficient manner. Increasing regulatory and legislative changes will
place additional demands on our infrastructure that could have a direct impact on resources available for other projects tied to our
strategic initiatives. In addition, recent trends toward greater consumer engagement in health care require new and enhanced
technologies, including more sophisticated applications for mobile devices. Connectivity among technologies is becoming
increasingly important. We must also develop new systems to meet current market standards and keep pace with continuing changes in
information processing technology, evolving industry and regulatory standards and customer needs. Failure to do so may present
compliance challenges and impede our ability to deliver services in a competitive manner. Further, because system development
projects are long-term in nature, they may be more costly than expected to complete and may not deliver the expected benefits upon
completion. Our failure to effectively invest in, implement improvements to and properly maintain the uninterrupted operation,
availability and data integrity of our systems could adversely affect our results of operations, financial position and cash flow.
As a large global health company, we and our vendors are subject to cyberattacks or other privacy or data security incidents. If we
are unable to prevent or contain the effects of any such attacks, or fail to ensure vendors do the same, we may suffer exposure to
substantial liability, reputational harm, loss of revenue or other damages.
Our business depends on our clients' and customers' willingness to entrust us with their health-related and other sensitive personal
information, including information that is subject to privacy, security or data breach notification laws. Computer systems may be
vulnerable to physical break-ins, computer viruses or malware, programming errors, attacks by third parties or similar disruptive
problems. We have been, and will likely continue to be, the target of computer viruses or other malicious codes, unauthorized access,
cyberattacks or other computer-related penetrations. There have been, and will likely continue to be, large scale cyberattacks within
the health service industry. Additionally, hardware, software or applications we develop or procure from third parties may contain
defects in design, manufacturer defects or other problems that could unexpectedly compromise information technology. Human or
technological error has and could in the future result in, for example, unauthorized access to, acquisition, disclosure, modification,
misuse, loss, or destruction of company, customer, or other third-party data or systems; theft of sensitive, regulated, or confidential
data including personal information and intellectual property; the loss of access to critical data or systems through ransomware,
destructive attacks or other means; and business delays, service or system disruptions or denials of service.
As we increase the amount of personal information that we store and share digitally, our exposure to unauthorized disclosures, data
privacy and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss or unauthorized access or
acquisition or misappropriation of proprietary or personal information, and the cost of attempting to protect against these risks also
increases. The health care data ecosystem is complex and requires data exchange with vendors, business partners, the government and
others. If disruptions, disclosures, security incidents or breaches are not detected quickly, their effect could be compounded. We have
dedicated significant resources to implement security technologies, processes and procedures to protect consumer identity and provide
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employee awareness training around phishing, malware and other cyber risks; however, there are no assurances that such measures
will be effective against all types of security incidents or breaches. Further, we depend on many vendors to support and assist our
business, which requires such vendors to generate, store and use sensitive personal information.
Cybersecurity threats are rapidly evolving and those threats and the means for obtaining access to our proprietary systems are
becoming increasingly sophisticated. Cyberattacks can originate from a wide variety of sources including terrorists, nation states,
internal actors, or third parties, such as external service providers, and the techniques used change frequently or are often not
recognized until after they have been launched. For example, there has been an increase in new financial fraud schemes akin to
ransomware attacks on large companies whereby a cybercriminal installs a type of malicious software, or malware, that prevents a
user or enterprise from accessing computer files, systems or networks and demands payment of a ransom for their return. Those parties
may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order
to gain access to our data or that of our customers. In addition, while we have certain standards for all vendors that provide us services,
our vendors, and in turn, their own service providers, may become subject to the same types of security breaches. Finally, our offices
may be vulnerable to security incidents or security attacks, acts of vandalism or theft, misplaced or lost data, human error or similar
events that could negatively affect our systems and our customers' and clients' data.
The costs to eliminate or address security threats and vulnerabilities before or after a cyber-incident could be significant. Our
remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of existing or
potential customers.
In addition, the unauthorized access, acquisition, use, disclosure or dissemination of sensitive personal information, proprietary
information or confidential information about us, our customers or other third parties could expose our customers' and their private
information to the risk of financial or medical identity theft. Unauthorized access, acquisition, use, disclosure or dissemination of
confidential and proprietary information about our business and strategy could also negatively affect the achievement of our strategic
initiatives. Such events could cause us to breach our contractual obligations and violate applicable laws. These events would
negatively affect our ability to compete, our reputation, customer base and revenues and expose us to mandatory disclosure
requirements, government investigations, litigation and other enforcement proceedings, material fines, penalties or remediation costs
and compensatory, special, punitive and statutory damages, consent orders and other adverse actions, any of which could adversely
affect our business, results of operations, financial condition or liquidity.
The scale, scope and duration of the ongoing COVID-19 pandemic continues to be unknown and the overall impact on our
business, operating results, cash flows or financial condition has been and may continue to be material.
The COVID-19 pandemic has adversely affected, and is continuing to affect, global economies, financial markets and the overall
environment for our business, and the extent to which it may impact our future results of operations and overall financial performance
remains uncertain. While vaccination rates continue to rise, the COVID-19 pandemic, including vaccination efficacy, the
implementation of and reaction to vaccination and testing mandates and the occurrence of new variants, could continue to effect such
economies and financial markets as well as the health and availability of our workforce. As a result, we may experience new
disruptions to our business operations and our business could be adversely affected further, directly or indirectly, by the ongoing
pandemic.
The COVID-19 pandemic has in some instances, and may continue to, heighten the potential adverse effects on our business,
operating results, cash flows or financial condition as described below or in other risk factors within this section of the Form 10-K
including, but not limited to, the likelihood of and impact from:
•
•
•
•
unfavorable economic conditions on our clients and customers (both employers and individuals), health care and pharmacy
providers, pharmaceutical manufacturers and third-party vendors, as well as federal and state entities and programs;
changes in medical claims submission and processing patterns or procedures; changes in customer base and product mix;
changes in utilization of prescription drugs, medical or other covered items or services, including increased behavioral health
services utilization; changes in medical cost trends; changes in our health management practices; and the introduction of new
benefits and products causing actual claims to exceed our estimates;
changes in health care utilization patterns, provider billing practices and other external events that we cannot forecast or
project and over which we have little or no control impacting our ability to accurately predict, price for and manage health
care costs and ultimately our profitability, including impacts from care deferral on, among other things, risk adjustment
revenue and acuity of future care;
increased costs or reductions in revenue, including costs for COVID-19-related care, testing and treatment; vaccine and other
coverage mandates; inflation; and support for employees, clients, customers and providers;
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•
•
•
•
•
•
compliance with substantial government regulation, including privacy and security requirements associated with providing
telehealth and remote care options and new laws or regulations or changes in existing laws or regulations, such as vaccine,
testing and coverage mandates and premium deferrals, which laws or regulations may vary significantly by jurisdiction;
cyberattacks or other privacy or data security incidents, including as a result of the transition to a hybrid work environment
by substantially all of our workforce and the workforces of third parties with whom we contract;
significant shifts in the structure of the industry which could alter dynamics and, if we fail to adapt, negatively impact our
business;
risks inherent in foreign operations, including political, legal, operational, regulatory, economic and other risks;
economic and market conditions affecting the value of our financial instruments and the value of particular assets and
liabilities; and
fluctuations in equity market prices, interest rates and credit spreads limiting our ability to raise or deploy capital and
affecting our overall liquidity.
We believe COVID-19 and its variants' adverse impact on our business, operating results, cash flows or financial condition will be
driven primarily by the severity and duration of the pandemic, including the impact of the breadth and timing of implementation and
the efficacy and costs of vaccination programs, the pandemic's continued impact on our employees, clients, customers, suppliers and
partners, as well as the U.S. and global economies and the continued actions taken by governmental authorities and other third parties
in response to the pandemic. Those primary drivers are largely beyond our knowledge and control, and may be more adverse than our
current expectations. Given these uncertainties, we cannot estimate the full impact COVID-19 will have on our business, operating
results, cash flows or financial condition, but the adverse impact could be material.
As a global company, we face political, legal, operational, regulatory, economic and other risks that present challenges and could
negatively affect our multinational operations or our long-term growth.
As a global company, our business is increasingly exposed to risks inherent in foreign operations. These risks can vary substantially
by market, and include political, legal, operational, regulatory, economic and other risks, including government intervention that we
do not face in our U.S. operations. The global nature of our business and operations may present challenges including, but not limited
to, those arising from:
•
•
•
geopolitical business conditions and demands;
regulation that may discriminate against U.S. companies, favor nationalization or expropriate assets;
price controls or other pricing issues and exchange controls; restrictions that prevent us from transferring funds out of the
countries in which we operate; foreign currency exchange rates and fluctuations and restrictions on converting currencies
from foreign operations into other currencies; uncertainty with respect to the interpretation of tax positions;
reliance on local employees and interpretations of labor laws in foreign jurisdictions;
•
• managing our partner relationships in countries outside of the United States;
•
•
•
providing data protection on a global basis and sufficient levels of technical support in different locations;
the global trend for companies to enact local data residency requirements;
acts of civil unrest, war and terrorism, as well as other political and economic conflicts such as through imposition of
economic or political sanctions;
• man-made disasters, natural disasters (including those arising as a result of climate change) and pandemics, such as the
COVID-19 pandemic, in locations where we operate; and
general economic and political conditions.
•
These factors may increase in significance as we continue to expand globally and operating in new foreign markets may require
considerable management time before operations generate any significant revenues and earnings. Any one of these challenges could
negatively affect our operations or long-term growth.
International operations also require us to devote significant resources to implement controls and systems in new markets to comply
with, and to ensure that our vendors and partners comply with, U.S. and foreign laws prohibiting bribery, corruption and money
laundering, in addition to other regulations regarding, among other things, our products, direct-to-consumer communications,
customer privacy, data protection and data residency. Violations of these laws and regulations could result in fines, criminal sanctions
against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business and significant reputational
harm. Our success depends, in part, on our ability to anticipate these risks and manage these challenges. Our failure to comply with
laws and regulations governing our conduct outside of the United States or to establish constructive relations with non-U.S. regulators
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could have a material adverse effect on our business, results of operations, financial condition, liquidity and long-term growth.
Strategic transactions involve risks and we may not realize the expected benefits because of integration difficulties,
underperformance relative to our expectations and other challenges.
As part of our strategy, we regularly consider and enter into strategic transactions, including mergers, acquisitions, joint ventures,
licensing arrangements, divestitures and other relationships (collectively referred to as "strategic transactions"). There is significant
competition for attractive targets and opportunities and we may be unable to identify and successfully complete strategic transactions
in the future. In addition, from time to time, we evaluate alternatives for our businesses that do not meet our strategic, growth or
profitability objectives, and we may divest or wind down such businesses. We may be unable to complete any such divestiture on
terms favorable to us, within the expected timeframes, or at all. We may have continued financial exposure to divested businesses
following the completion of any such transaction, including increased costs due to potential litigation, contingent liabilities and
indemnification of the buyer related to, among other things, lawsuits, regulatory matters or tax liabilities.
Our ability to achieve the anticipated benefits of strategic transactions, including synergies, cost savings, innovation and operational
efficiencies, is subject to numerous uncertainties and risks, including our ability to successfully combine or separate business
operations, resources and systems, including data security systems and internal financial control standards, in an efficient and effective
manner. Integration and separation activities may result in additional and unforeseen expenses, and the anticipated benefits may not be
fully realized or may take longer to realize than expected. These activities are complex, costly and time-consuming and may divert
management's attention from ongoing business concerns. Delays or issues encountered in these activities could have a material
adverse effect on the revenues, expenses, operating results and financial condition of the Company. Additionally, the benefits of
strategic transactions and the related timing could be impacted by various factors, including political instability, natural disasters,
fluctuations in currency exchange rates, delays in obtaining regulatory approval and changes in regulations.
Strategic transactions could result in increased costs, including facilities and systems consolidation or separation costs and costs to
retain key employees, decreases in expected revenues, earnings or cash flows and goodwill or other intangible asset impairment
charges. As of December 31, 2022, our goodwill and other intangible assets had a carrying value of approximately $78 billion,
representing 54% of our total consolidated assets. The value of our goodwill may be materially and adversely impacted if the
businesses we acquire do not perform in a manner consistent with our assumptions. Future evaluations requiring an impairment to
goodwill and other intangible assets could materially affect our results of operations and shareholders' equity in the period in which
the impairment occurs. A material decrease in shareholders' equity could negatively impact our debt ratings or potentially impact our
compliance with existing debt covenants. See Note 19 to the Consolidated Financial Statements for more information on goodwill and
intangibles. In addition, the trading price of our securities may decline if, among other things, we are unable to achieve our estimates
of earnings growth and operational cost savings, or the transaction costs are greater than expected. The trading price also may decline
if we do not achieve the perceived benefits of a transaction as rapidly or to the extent anticipated by financial or industry analysts.
Additionally, joint ventures and equity investments present risks that are different from acquisitions, including risks related to: specific
operations and finances of the businesses we invest in; selection of appropriate parties; differing objectives of the various parties;
competition between and among parties; compliance activities (including compliance with applicable CMS requirements); growing the
business in a manner acceptable to all the parties; maintaining positive relationships among the parties, clients and customers; initial
and ongoing governance of joint ventures and customer and business disruption that may occur upon a joint venture termination.
Further, we may finance strategic transactions by issuing common stock for some or all of the purchase price that could dilute the
ownership interests of our shareholders, or by incurring additional debt that could increase costs and impact our ability to access
capital in the future.
In addition, effective internal controls are necessary to provide reliable and accurate financial reports and to mitigate the risk of fraud.
The integration of businesses is likely to cause increasing complexity in our systems and internal controls and make them more
difficult to manage. Any difficulties in assimilating businesses into our control system could cause us to fail to meet our financial
reporting obligations. We also rely on the internal controls and financial reporting controls of joint venture entities and other entities in
which we invest and their failure to maintain effectiveness or comply with applicable standards may materially and adversely affect
us. Ineffective internal controls could also cause investors to lose confidence in our reported financial information that could
negatively impact the trading price of our securities and our access to capital.
We are dependent on the success of our relationships with third parties for various services and functions.
To improve operating costs, productivity and efficiencies, we contract with third parties for the provision of specific services. Our
operations may be adversely affected if a third party fails to satisfy its obligations, if the arrangement is terminated in whole or in part
or if there is a contractual dispute between us and the third party. Even though contracts are intended to provide certain protections, we
have limited control over the actions of third parties. For example, noncompliance with any privacy or security laws and regulations,
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any security breach involving one of our third-party vendors or a dispute between us and a third-party vendor related to our
arrangement could have a material adverse effect on our business, results of operations, financial condition, liquidity and reputation.
Outsourcing also may require us to change our existing operations, adopt new processes for managing these service providers or
redistribute responsibilities to realize the potential productivity and operational efficiencies. If there are delays or difficulties in
changing business processes or our third-party vendors do not perform as expected, we may not realize, or not realize on a timely
basis, the anticipated economic and other benefits of these relationships. This could result in additional costs or regulatory compliance
issues or create other operational or financial problems for us. Terminating or transitioning, in whole or in part, arrangements with key
vendors could result in additional costs or penalties, risks of operational delays or potential errors and control issues during the
termination or transition phase. We may not be able to find an alternative vendor in a timely manner or on acceptable terms. If there is
an interruption in business or loss of access to data resulting from a security breach, termination or transition in services, we may not
be able to meet the demands of our customers and, in turn, our business and results of operations could be adversely impacted.
A significant disruption in service within our operations or among our key suppliers or other third parties could materially
adversely affect our business and results of operations.
Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted fashion, necessary business functions,
such as claims processing and payment, internet support and customer call centers, data centers and corporate facilities, processing
new and renewal business, maintaining appropriate shipment and storage conditions for prescriptions (such as temperature and
protection from contamination) and home delivery processing. In some instances, our ability to provide services or products (including
processing and dispensing prescriptions) depends on the availability of services and products provided by suppliers, providers,
pharmaceutical manufacturers, vendors or shipping carriers. A disruption, or threat of disruption, in our supply chain, including as a
result of the COVID-19 pandemic, or inability to access or deliver products that meet requisite quality safety standards and patient
needs in a timely and efficient manner could adversely impact our business.
Increasing natural disasters in connection with climate change could also be a direct threat to us and our third-party vendors, service
providers or other stakeholders. Natural disasters, such as wildfires, hurricanes and snow and ice storms, have impacted and may
continue to impact our customers and pose a risk to our employees and facilities located in the impacted region. Responses to such
scenarios have and may include, among other things, making temporary policy changes, such as waiving various medical
requirements, assisting with replacement medications, transferring prescriptions and expanding our help line. In addition, there is a
risk that actions taken to respond to climate change could increase the cost of energy, fuel and other commodities, which would
increase our operating costs.
We are also subject to risk as a result of information technology disruptions. Any failure or disruption of our performance of, or our
ability to perform, key business functions, including through unavailability or cyberattack of our information technology systems or
those of third parties (including cloud service providers), could cause slower response times, decreased levels of service satisfaction
and harm to our reputation. Our systems interface with and depend on third-party systems and we could experience service denials if
demand for such service exceeds capacity or a third-party system fails or experiences an interruption.
While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee
that such plans and strategies will be effective, which could interrupt the functionality of our information technology systems or those
of third parties. Our failure to implement adequate business continuity and disaster recovery strategies could significantly reduce our
ability to provide products and services to our customers and clients, which could have material adverse effects on our business and
results of operations.
In managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities, we may be subject to
additional liability that could result in significant time and expense.
In addition to contracting with physicians and other health care providers for services, we employ physicians, pharmacists, nurses and
other health care providers at our home delivery and specialty pharmacies, onsite low acuity and primary care practices and infusion
clinics that we manage and operate for our customers, as well as certain clinics for our employees. We also provide in-home care
through health care providers that we employ, as well as, through third-party contractors. As such, we may be subject to liability for
certain acts, omissions, or injuries caused by our employees or agents, or occurring at one of these practices, pharmacies or clinics.
The defense of any actions may require diverting personnel and other resources and incurring significant costs that could have a
material adverse effect on our business, results of operations, financial condition, liquidity and reputation.
Legal and Compliance Risks
Our business is subject to substantial government regulation, as well as new laws or regulations or changes in existing laws or
regulations that could have a material adverse effect on our business, results of operations, financial condition and liquidity.
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Our business is regulated at the federal, state, local and international levels. The laws and rules governing our business and related
interpretations are increasing in number and complexity, are subject to frequent change and can be inconsistent or in conflict with each
other. Noncompliance with applicable regulations by us or our third-party vendors could have material adverse effects on our business,
results of operations, financial condition, liquidity and reputation.
We must identify, assess and respond to new trends in the legislative and regulatory environment, as well as comply with the various
existing regulations applicable to our business. There are currently pending, and in the future there will likely be, legislative or
regulatory proposals which seek to manage the health services industry, including managing prescription drug costs and health
records, as well as regulating drug distribution. Federal and state governments have enacted and we expect federal and state
governments to continue to enact and seriously consider many broad-based legislative and regulatory proposals that will or could
materially impact various aspects of the health care and related benefits system. In addition, changes to government policies not
specifically targeted to the health services industry, such as a change in tax laws and the corporate tax rate or government spending
cuts, could have significant impacts on our business, results of operations, financial condition and liquidity. The trading price of our
securities may react to the announcement of such proposals. As disclosed in Part II, Item 5 of this Form 10-K, we have an active share
repurchase program authorized by our board of directors.
Existing or future laws, rules, regulatory interpretations or judgments could force us to change how we conduct our business, affect the
products and services we offer and where we offer them, restrict revenue and enrollment growth, increase our costs, including
medical, operating, health care technology and administrative costs, and require enhancements to our compliance infrastructure and
internal controls environment. For example, health care reforms or the invalidation, modification, repeal or replacement of the ACA or
portions thereof could result in material changes to the way we conduct our business, as well as the loss of subsidies related to our IFP
offerings and could impact the market for our products. We are required to obtain and maintain insurance and other regulatory
approvals to, among other things, market many of our products, expand into additional geographic or product markets, increase prices
for certain regulated products and consummate some of our acquisitions and dispositions. Delays in obtaining or failure to obtain or
maintain these approvals could reduce our revenue or increase our costs. Additionally, we must maintain licenses and registrations in
the jurisdictions in which we conduct business, and the suspension, material adverse modification or termination of such license and
registrations could adversely affect our operations. Such licensure subjects many of our businesses to state regulation of our operations
and products, as well as risks associated with doing business in those jurisdictions. Existing or future laws and rules could also require
or lead us to take other actions such as changing our business practices, and could increase our liability. Further, failure to effectively
implement or adjust our strategic and operational initiatives, such as by reducing operating costs, adjusting premium pricing or benefit
design or transforming our business model in response to regulatory changes may have a material adverse effect on our results of
operations, financial condition and cash flows.
For more information on regulations affecting our business, see "Business – Regulation" in Part I, Item 1 of this Form 10-K.
There are various risks associated with participating in government-sponsored programs, such as Medicare, including dependence
upon government funding, compliance with government contracts and increased regulatory oversight and enforcement.
Through our U.S. Government business, we contract with CMS and various state governmental agencies to provide managed health
care services including Medicare Advantage plans and Medicare Part D plans. Additionally, our Evernorth Health Services business
provides services to government entities and payors participating in government health care programs and our relationships with these
government entities is subject to laws and regulations regarding government contracts.
Our revenues from government-funded programs, including our Medicare programs and our government clients, are dependent, in
whole or in part, upon annual funding from the federal government or applicable state or local governments. Funding for these
programs is dependent on many factors outside our control, including general economic conditions, continuing government efforts to
contain health care costs, budgetary constraints at the federal or applicable state or local level and general political issues and
priorities. These entities generally have the right to not renew or to cancel their contracts with us on short notice without cause or if
funds are not available. Unanticipated changes in funding, such as the application of sequestration by the federal or state governments,
retroactive rate adjustments, a delay by Congress in raising the federal debt ceiling, or the failure to provide for continued
appropriations or regular ongoing scheduled payments to us, could substantially reduce our revenues or profitability or impact our
liquidity.
The Medicare program has been the subject of regulatory reform initiatives. The premium rates paid to Medicare Advantage plans and
Medicare Part D plans are established by contract, although the rates differ depending on a combination of factors, some of which are
outside our control. For example, the base premium rate paid differs depending upon a combination of various factors such as defined
upper payment limits, a member's health status, age, gender, county or region, benefit mix, member eligibility category and risk
scores. Additionally, a portion of each Medicare Advantage plan's reimbursement is tied to the plan's Star Rating, with those plans
receiving a rating of four or more stars eligible for quality-based bonus payments. A plan's Star Rating affects its image in the market
and plans that perform well are able to offer enhanced benefits, market more effectively and for longer periods of time than other
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plans. The Star Rating system is subject to change annually by CMS, which may make it more difficult to achieve four stars or greater.
Our Medicare Advantage plans' and Medicare Part D plans' operating results, premium revenue and benefit offerings are likely to
continue to be significantly determined by their Star Ratings. There can be no assurances that we will be successful in maintaining or
improving our Star Ratings in future years. In addition, audits of our performance for past or future periods may result in downgrades
to our Star Ratings. If we do not maintain or improve our Star Ratings or if the quality-based bonus payments are reduced or
eliminated, we may experience a negative impact on our revenue and the marketability of our plans may be adversely affected.
Accordingly, our plans may not be eligible for full level quality bonuses, which could adversely affect the benefits such plans can
offer, reduce membership or impact our financial performance. See the "Executive Overview - Key Transactions and Business
Developments" section of MD&A in Part II, Item 7 of this Form 10-K for additional information on our Star Ratings.
Additionally, if we fail to comply with CMS' contractual requirements, including data submission, enrollment and marketing, provider
network adequacy, provider directory accuracy, quality measures, claims payment, continuity of care, timely and accurate processing
of appeals and grievances, adverse findings under RADV audits, oversight of first tier downstream and related entities and call center
performance, we may be subject to administrative actions, including enrollment sanctions or contract termination, fines or other
penalties or enforcement actions that could materially impact our profitability.
Any failure, or alleged failure, to comply with various state and federal health care laws and regulations, including those directed at
preventing fraud and abuse in government funded programs, has resulted in and could in the future result in investigations or
litigation, such as actions under the federal False Claims Act and similar whistleblower statutes under state laws. A successful action
or claim against us could subject us to damage awards, including treble damages, fines, penalties or other enforcement actions,
restrictions on our ability to market or enroll new customers, limits on expansion, restrictions or exclusions from programs or other
agreements with federal or state governmental agencies, which could adversely impact our business, cash flows, financial condition,
results of operations and reputation.
We face risks related to litigation, regulatory audits and investigations.
We are routinely involved in numerous claims, lawsuits, regulatory audits, investigations and other legal matters arising, for the most
part, in the ordinary course of business. These legal matters could include benefit claims, breach of contract actions, tort claims
(including claims related to the delivery of health care services, such as medical malpractice by staff at our affiliates' facilities, or by
health care practitioners who are employed by us, have contractual relationships with us, or serve as providers to our managed care
networks, including as a result of a failure to adhere to applicable clinical, quality and/or patient safety standards), claims arising from
consumer protection laws, false claims act laws, claims disputes under federal or state laws and disputes regarding reinsurance
arrangements, employment and employment discrimination-related suits, antitrust claims (including as a result of changes in the
enforcement of antitrust laws), employee benefit claims, wage and hour claims, tax, privacy, intellectual property and whistleblower
claims, shareholder suits and other securities law claims, real estate disputes, claims related to disclosure of certain business practices
and claims arising from customer audits and contract performance, including government contracts. In addition, we have incurred and
likely will continue to incur liability for practices and claims related to our health care business, such as marketing misconduct, failure
to timely or appropriately pay for or provide health care, provider network structure, poor outcomes for care delivered or arranged,
provider disputes including disputes over compensation or contractual provisions, ERISA claims, allegations related to calculations of
cost sharing and claims related to our administration of self-funded business. We are also routinely involved in legal matters arising
from our health services business, including without limitation claims related to the dispensing of pharmaceutical products by our
home delivery and specialty pharmacies, pharmacy benefit management services, such as formulary management services, health
benefit management services and provider services. Our pharmacy services operations are subject to the clinical quality, patient safety
and other risks inherent in the dispensing, packaging and distribution of drugs, including claims related to purported dispensing and
other operational errors. There are currently, and may be in the future, attempts to bring class action lawsuits against the Company and
other companies in our industry; individual plaintiffs also may bring multiple claims regarding the same subject matter against us and
other companies in our industry.
Court decisions and legislative activity may increase our exposure for any of these types of claims. In some cases, substantial
noneconomic or punitive damages may be sought. We procure insurance coverage to cover some of these potential liabilities, however
we also self-insure a significant portion of our litigation risks. While we maintain some third-party insurance coverage, including
excess liability insurance with third-party insurance carriers, certain liabilities or types of damages, such as punitive damages, may not
be covered by insurance, insurers may dispute coverage or the amount of insurance may be insufficient to cover the entire damages
awarded. Resolving disputes is often expensive and disruptive, regardless of the outcome. Additionally, it is possible that the
resolution of current or future legal matters and claims could result in changes to our industry and business practices, losses material to
our results of operations, financial condition and liquidity or damage to our reputation.
We are frequently the subject of regulatory market conduct and other reviews, audits and investigations by state insurance and health
and welfare and pharmacy departments, attorneys general, DOJ, CMS, DOL and the HHS-OIG and comparable authorities in foreign
jurisdictions. Additionally, we are, and may in the future be, subject to qui tam actions in which the government may or may not
43
intervene. With respect to our Medicare Advantage and Medicare Part D businesses, CMS and HHS-OIG perform audits to determine
a health plan's compliance with federal regulations and contractual obligations, including compliance with proper coding practices and
fraud and abuse enforcement practices through audits designed to detect and correct improper payments. Certain of our contracts are
currently subject to RADV audits by CMS and the HHS-OIG. These audits could result in significant adjustments in payments made
to our health plans, which could adversely affect our results of operations. There also continues to be heightened review by federal and
state regulators of business and reporting practices within the health services industry, including with respect to claims payment and
related escheat practices, and increased scrutiny by other federal and state governmental agencies (such as state attorneys general)
empowered to bring criminal actions in circumstances that could have previously given rise only to civil or administrative
proceedings.
In addition, various government agencies have conducted investigations and audits into certain pharmacy benefit management
practices. Many of these investigations and audits have resulted in other companies being subject to civil penalties, including the
payment of money and entry into corporate integrity agreements. We cannot predict what effect, if any, such government
investigations and audits may ultimately have on us or on the industry in general. However, we will likely continue to experience
government scrutiny and audit activity, which has and may in the future result in civil penalties.
Regulatory audits, investigations, litigation or reviews or actions by other government agencies could result in changes to our business
practices, retroactive adjustments to certain premiums, significant fines, penalties, civil liabilities, criminal liabilities or other
sanctions, including corporate integrity agreements, restrictions on our ability to participate in government programs or exclusion from
such programs, market certain products or engage in business-related activities, that could have a material adverse effect on our
business, results of operation, financial condition and liquidity. In addition, disclosure of an adverse investigation or audit or the
imposition of fines or other sanctions could negatively affect our reputation in certain markets and make it more difficult for us to sell
our products and services.
A description of material pending legal actions and other legal and regulatory matters is included in Note 23 to the Consolidated
Financial Statements included in this Form 10-K. The outcome of litigation and other legal or regulatory matters is always uncertain.
If we fail to comply with applicable privacy, security and data laws, regulations and standards, our business and reputation could
be materially adversely affected.
Most of our activities involve the receipt, use, storage or transmission of a substantial amount of individuals' PHI and personally
identifiable information. We also use aggregated and anonymized data for research and analysis purposes, and in some cases, provide
access to such de-identified data, or analytics created from such data, to pharmaceutical manufacturers and third-party data
aggregators and analysts. We may also use such information to create analytic models designed to predict, and potentially improve,
outcomes and patient care. The collection, dissemination, receipt, maintenance, protection, use, transmission, disclosure, privacy,
confidentiality, security, availability, integrity, creation, processing, and disposal of sensitive personal information are regulated at the
federal, state, international and industry levels and requirements are imposed on us by contracts with clients. In some cases, such laws,
rules, regulations and contractual requirements also apply to our vendors and require us to obtain written assurances of their
compliance with such requirements. We are also subject to various other consumer protection laws that regulate our communications
with customers. Certain of our businesses are also subject to the Payment Card Industry Data Security Standard, which is designed to
protect credit card account data as mandated by payment card industry entities. International laws, rules and regulations governing the
use and disclosure of such information, such as the GDPR, can be more stringent than similar laws in the United States, and they vary
across jurisdictions. In addition, more jurisdictions are regulating the transfer of data across borders and domestic privacy and data
protection laws are generally becoming more onerous.
These laws, rules and contractual requirements are subject to change and the regulatory environment surrounding data security and
privacy is increasingly demanding. Compliance with existing or new privacy, security and data laws, regulations and requirements
may result in increased operating costs, and may constrain or require us to alter our business model or operations. For more
information on privacy regulations to which we are subject, see "Business – Regulation" in Part I, Item 1 of this Form 10-K.
HIPAA requires covered entities and business associates to comply with the HIPAA privacy, security and breach rules. While we
endeavor to provide appropriate protections through our contracts with our third-party service providers and in certain cases assess
their security controls, we have limited oversight or control over their actions and practices. Several of our businesses act as business
associates to their covered entity customers and, as a result, collect, receive, use, disclose, transmit and maintain sensitive personal
information in order to provide services to these customers. HHS administers an audit program to assess HIPAA compliance efforts by
covered entities and business associates. In addition, HHS continues to exercise its enforcement authority to bring enforcement actions
resulting from complaints, compliance reviews, audits and investigations brought on by notification to HHS of a breach. An audit
resulting in findings or allegations of noncompliance or the implementation of an enforcement action could have an adverse effect on
our results of operations, financial position, cash flows and reputation.
44
Noncompliance or findings of noncompliance with applicable laws, regulations or requirements, or the occurrence of any privacy or
security breach involving the misappropriation, loss or other unauthorized disclosure of protected personal information, whether by us
or by one of our third-party service providers, could materially adversely affect our business and reputation, including our results of
operations, financial position and cash flows.
Effective prevention, detection and control systems are critical to maintain regulatory compliance and prevent fraud and failure of
these systems could adversely affect us.
Federal and state governments have made investigating and prosecuting health care and other insurance fraud and abuse a priority.
Fraud and abuse prohibitions encompass a wide range of activities including kickbacks for referral of customers, billing for
unnecessary medical services, improper marketing and violations of patient privacy rights. Some of our businesses are also subject to
federal and state laws and regulations that may impact our relationships with health care providers and customers, including laws on
self-referrals, beneficiary inducements, false claims, fee-splitting, telemedicine, corporate practice of medicine, dispensing, packaging,
fulfillment, and distribution of controlled substances, other pharmaceutical products and medical devices, medical malpractice,
consumer protection, product liability, narrow networks, provider tiering programs, provider contracts, overpayments, reimbursement
of out-of-network claims, and licensure. The regulations and contractual requirements applicable to us are complex and subject to
change and may affect our ability to market or provide our products or services. In addition, ongoing vigorous law enforcement, a
highly technical regulatory scheme and the Dodd-Frank Act and related regulations enhance regulators' enforcement powers and
whistleblower incentives and protections. Our compliance efforts in this area will continue to require significant resources. Failure of
our prevention, detection or control systems related to regulatory compliance or the failure of employees to comply with our internal
policies, including data systems security or unethical conduct by managers and employees, could adversely affect our reputation and
also expose us to litigation and other proceedings, fines and penalties.
In addition, provider or customer fraud that is not prevented or detected could impact our medical costs or those of our self-insured
clients. Further, during an economic downturn, we may experience increased fraudulent claims volume that may lead to additional
costs due to an increase in disputed claims and litigation.
Economic Risks
Economic and market conditions affect the value of our financial instruments and the value of particular assets and liabilities,
investment income and interest expense.
As an insurer, we have substantial investment assets that support insurance and contractholder deposit liabilities and surplus
requirements in our regulated companies. The market values of our investments vary depending on economic and market conditions
with no offsetting change in the value of a portion of our liabilities. A substantial portion of our investment assets are in fixed interest-
yielding debt securities of varying maturities and commercial mortgage loans. The value of these investment assets can fluctuate
significantly with changes in market conditions. A rise in interest rates would likely reduce the value of our investment portfolio,
increase interest expense on our indebtedness and increase investment income as investment assets mature and are replaced. In
addition, an economic contraction could result in delay in payment of principal or interest by issuers, or defaults by issuers, reducing
our investment income and requiring us to write down the value of our investments.
Significant stock market or interest rate declines could result in unfunded pension obligations resulting in the need for additional
plan funding by us and increased pension expenses.
We currently have overfunded obligations in our frozen pension plans. A significant decline in the value of the plans' equity and fixed
income investments or unfavorable changes in applicable laws or regulations could materially increase our expenses and change the
timing and amount of required plan funding. This could reduce the cash available to us, including our subsidiaries. We are also
exposed to interest rate and equity risk associated with our pension obligations. Sustained declines in interest rates could have an
adverse impact on the funded status of our pension plans and our reinvestment yield on new investments. See Note 17 to the
Consolidated Financial Statements for more information on our obligations under the pension plans.
A downgrade in the financial strength ratings of our insurance subsidiaries could adversely affect new sales and retention of
current business, and a downgrade in our debt ratings would increase the cost of borrowed funds and could negatively affect our
ability to access capital.
Financial strength, claims paying ability and debt ratings by recognized rating organizations are each important factors in establishing
the competitive position of insurance and health benefits companies. Ratings information by nationally recognized ratings agencies is
broadly disseminated and generally used throughout the industry. We believe that the claims paying ability and financial strength
ratings of our principal insurance subsidiaries are important factors in marketing our products to certain customers. Our debt ratings
impact both the cost and availability of future borrowings and, accordingly, our cost of capital. Each of the rating agencies reviews
45
ratings periodically and there can be no assurance that current ratings will be maintained in the future. A downgrade of any of these
ratings in the future could make it more difficult to either market our products successfully or raise capital to support business growth.
We maintain significant indebtedness in the ordinary course of business and may incur further indebtedness in the future. Our
indebtedness could adversely affect our financial condition, our ability to react to changes in the economy or our industry and
could divert our cash flow from operations for debt service costs, leaving us with less cash flow from operations available to fund
growth, stock repurchases, dividends and other corporate purposes.
The total indebtedness of The Cigna Group was approximately $31.1 billion as of December 31, 2022. Carrying indebtedness:
•
•
•
•
requires us to dedicate a portion of our cash flow from operations to debt payments, thereby reducing the availability of cash
flow to fund our operations and growth strategy, including investments, acquisitions and capital expenditures, make stock
repurchases, pay dividends and for general corporate purposes;
increases our vulnerability to general adverse economic and industry conditions, which may require us to dedicate an even
greater percentage of our cash flow from operations to the payment of principal and interest on our debt and limit our access
to capital markets such that additional capital may not be available or may be available only on unfavorable terms;
exposes us to increases in interest rates to the extent increased interest expense is not offset by increased income from our
investment assets; and
limits our flexibility in planning for, or reacting to, changes in or challenges relating to our business and industry.
The covenants in our debt instruments may have the effect, among other things, of restricting our financial and operating flexibility to
respond to significant changes in business and economic conditions. We may incur or assume significantly more debt in the future
which may subject us to additional restrictive covenants and increase the risks described above. If our cash flow and capital resources
are insufficient to service our debt obligations, we may be forced to seek additional dividends from our subsidiaries, sell assets, seek
additional equity or debt capital or restructure our debt.
Unfavorable developments in economic conditions may adversely affect our business, results of operations and financial condition.
Many factors, including geopolitical issues, future economic downturns, man-made disasters, natural disasters (including those as a
result of climate change) and pandemics, availability and cost of credit and other capital and consumer spending can negatively impact
the U.S. and global economies. Our results of operations could be materially adversely affected by the impact of unfavorable
economic conditions on our clients and customers (both employers and individuals), health care providers, pharmacy manufacturers,
pharmacy providers and third-party vendors. For example:
•
Employers may take action to reduce their operating costs by modifying, delaying or canceling plans to purchase our
products or making changes in the mix of products purchased that are unfavorable to us.
• Higher unemployment rates, employee attrition (including challenges filling open positions in light of an increasingly
competitive job market) and workforce reductions could result in lower enrollment in our employer-based plans (including an
increase in the number of employees who opt out of employer-based plans) or our individual plans.
Because of unfavorable economic conditions or the ACA, employers may stop offering health care coverage to employees or
elect to offer this coverage on a voluntary, employee-funded basis as a means to reduce their operating costs.
If clients are not successful in generating sufficient funds or are precluded from securing financing, they may not be able to
pay, or may delay payment of, accounts receivable that are owed to us.
•
•
• Our clients or potential clients may force us to compete more vigorously on factors such as price and service to retain or
obtain their business.
• Our clients may be acquired, consolidated, or otherwise fail to successfully maintain or grow their business or workforce,
which could reduce the number of customers we serve or otherwise result in lower than anticipated utilization of our services.
• A prolonged unfavorable economic environment could adversely impact the financial position of hospitals and other health
care providers, potentially increasing our medical costs.
• Our third-party vendors could significantly and quickly increase their prices or reduce their output to reduce their operating
costs. Our business depends on our ability to perform necessary business functions in an efficient and uninterrupted fashion.
• Other insurers' financial condition may be weakened, increasing the risk that we will receive significant assessments for
obligations of insolvent insurers pursuant to guaranty associations, indemnity funds or other similar laws and regulations.
Certain of the foregoing events have occurred and may continue to occur, and the occurrence of these events may, individually or in
the aggregate, lead to a decrease in our customer base, revenues or margins or an increase in our operating costs.
46
In addition, during and following a prolonged unfavorable economic environment, federal and state budgets could be materially
adversely affected, resulting in reduced or delayed reimbursements or payments in government programs such as Medicare and Social
Security or under contracts with government entities. These budgetary pressures also could cause the government to impose new or a
higher level of taxes or assessments on us, such as premium taxes on insurance companies and HMOs and surcharges or fees on select
fee-for-service and capitated medical claims. Although we could attempt to mitigate or cover our exposure from such increased costs
through, among other things, increases in premiums, there can be no assurance that we will be able to mitigate or cover all of such
costs, which may have a material adverse effect on our business, results of operations, financial condition and liquidity.
We are subject to the credit risk of our reinsurers.
We enter into reinsurance arrangements with other insurance companies, primarily in connection with acquisition or divestiture
transactions when the underwriting company is not being acquired or sold. Under all reinsurance arrangements, reinsurers assume
insured losses, subject to certain limitations or exceptions that may include a loss limit. These arrangements also subject us to various
obligations, representations and warranties with the reinsurers. Reinsurance does not relieve us of liability as the originating insurer.
We remain liable to the underlying policyholders if a reinsurer defaults on obligations under the reinsurance arrangement. Although
we regularly evaluate the financial condition of reinsurers to minimize exposure to significant losses from reinsurer insolvencies,
reinsurers may become financially unsound. If a reinsurer fails to meet its obligations under the reinsurance contract or if the liabilities
exceed any applicable loss limit, we will be forced to cover the claims on the reinsured policies.
The collectability of amounts due from reinsurers is subject to uncertainty arising from a number of factors, including whether the
insured losses meet the qualifying conditions of the reinsurance contract, whether reinsurers or their affiliates have the financial
capacity and willingness to make payments under the terms of the reinsurance contract and the magnitude and type of collateral
supporting our reinsurance recoverable, such as holding sufficient qualifying assets in trusts or letters of credit issued. Although a
portion of our reinsurance exposures are secured, the inability to collect a material recovery from a reinsurer could have a material
adverse effect on our results of operations, financial condition and liquidity.
47
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
At the end of 2022, our global real estate portfolio consisted of approximately 9.8 million square feet of owned and leased properties
to support the operations of our reporting segments. Our domestic portfolio had approximately 8.9 million square feet in 42 states, the
District of Columbia and the U.S. Virgin Islands. Our international properties contain approximately 906 thousand square feet located
throughout the following countries: Australia, Bahrain, Belgium, Canada, Cayman Islands, China, France, Germany, Hong Kong,
India, Kenya, Kuwait, Lebanon, Malaysia, Oman, Singapore, Spain, Switzerland, United Arab Emirates and the United Kingdom.
Our principal domestic office locations include the Wilde Building located at 900 Cottage Grove Road in Bloomfield, Connecticut
(our corporate headquarters), Two Liberty Place located at 1601 Chestnut Street in Philadelphia, Pennsylvania and Evernorth Health
Services' corporate offices located at and around One Express Way in St. Louis, Missouri. The Wilde Building measures
approximately 893,000 square feet and is owned. The St. Louis campus measures approximately 986,000 square feet of leased space
and Two Liberty Place measures approximately 237,000 square feet of leased space.
The pharmacy operations consist of 10 home delivery pharmacies, 33 specialty pharmacies and four high-volume automated
dispensing pharmacies located throughout the United States. Our high-volume automated dispensing pharmacies are located in
Arizona, Indiana, Missouri and New Jersey.
We believe our properties are adequate and suitable for our business as presently conducted. The foregoing does not include
information on investment properties.
Item 3. LEGAL PROCEEDINGS
The information contained under "Litigation Matters" and "Regulatory Matters" in Note 23 to the Consolidated Financial Statements
of this Form 10-K is incorporated herein by reference.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
48
Information about our Executive Officers
The principal occupations and employment histories of our executive officers (as of February 23, 2023) are listed below.
CHARLES G. BERG, 65, Senior Advisor of The Cigna Group beginning January 2023; President, U.S. Government Business of
Cigna Healthcare from January 2022 until January 2023; Executive Chairman of DaVita Medical Group from November 2016 until
December 2017; and Non-Executive Chairman of WellCare Health Plans, Inc. from January 2011 until May 2013.
DAVID BRAILER, 63, Executive Vice President and Chief Health Officer of The Cigna Group beginning September 2022; and
Founder and Chairman of Health Evolution beginning in 2011.
DAVID M. CORDANI, 57, Chairman of the Board of The Cigna Group beginning January 2022; Chief Executive Officer beginning
December 2009; Director since October 2009; President beginning June 2008; and Chief Operating Officer from June 2008 until
December 2009.
NOELLE K. EDER, 53, Executive Vice President, Global Chief Information Officer of The Cigna Group beginning September 2020;
Executive Vice President, Chief Information and Digital Officer at Hilton Worldwide Holdings from March 2018 until August 2020;
Executive Vice President, Chief Card Customer Experience Officer at Capital One Financial Corporation from November 2016 until
2018; and Executive Vice President, Customer Experience and Operations at Capital One Financial Corporation from September 2014
until November 2016.
BRIAN C. EVANKO, 46, Executive Vice President and Chief Financial Officer of The Cigna Group beginning January 2021;
President, Government Business from November 2017 to January 2021; and President, U.S. Individual Business from August 2013 to
November 2017.
NICOLE S. JONES, 52, Executive Vice President and General Counsel of The Cigna Group beginning June 2011; Senior Vice
President and General Counsel of Lincoln Financial Group from May 2010 until June 2011; Vice President and Deputy General
Counsel of The Cigna Group from April 2008 until May 2010; and Corporate Secretary from September 2006 until April 2010.
EVERETT NEVILLE, 58, Executive Vice President, Solutions and Corporate Development of The Cigna Group beginning September
2022; Executive Vice President, Strategy, Corporate Development & Solutions from October 2021 to September 2022; Executive Vice
President, Strategy and Business Development from January 2021 to October 2021; Senior Vice President, Value Creation and
Solutions from January 2020 until January 2021; Chief Value Officer from December 2018 until January 2020; Executive Vice
President, Strategy, Supply Chain & Specialty, Express Scripts from January 2018 until December 2018; Senior Vice President,
Strategy, Supply Chain & Specialty from November 2016 until January 2018; and Senior Vice President, Supply Chain from March
2015 until November 2016.
ERIC P. PALMER, 46, President and Chief Executive Officer of Evernorth Health Services beginning January 2022; President and
Chief Operating Officer from January 2021 until December 2021; Executive Vice President and Chief Financial Officer of The Cigna
Group from June 2017 to January 2021; Deputy Chief Financial Officer from February 2017 until June 2017; Senior Vice President,
Chief Business Financial Officer from November 2015 to February 2017; and Vice President, Business Financial Officer, Health Care
from April 2012 to November 2015.
CYNTHIA RYAN, 49, Executive Vice President, Chief Human Resources Officer of The Cigna Group beginning August 2021;
Senior Vice President, Human Resources from December 2018 to August 2021; Vice President, Human Resources from January 2017
to December 2018; and Vice President, Talent Management from May 2014 to January 2017.
JASON D. SADLER, 54, President, International Health of Cigna Healthcare beginning June 2014; and President, Global Individual
Health, Life and Accident from July 2010 until June 2014.
PAUL SANFORD, 55, Executive Vice President, Operations of The Cigna Group beginning September 2021; Senior Vice President,
Operations and Solutions Delivery from January 2021 to September 2021; Senior Vice President, Solutions Delivery from February
2017 to December 2020; and Vice President, Operating Effectiveness from September 2008 to February 2017.
MICHAEL W. TRIPLETT, 61, President, U.S. Commercial of Cigna Healthcare beginning February 2017; and Regional Segment
Lead from June 2009 to February 2017.
49
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
As of December 31, 2022, the number of shareholders of record was 28,205. The Cigna Group's common stock is listed with, and
trades on, the New York Stock Exchange under the symbol "CI".
In 2022, The Cigna Group declared and paid quarterly cash dividends of $1.12 per share of The Cigna Group common stock. The
Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors
and the Board's determination that the declaration of dividends remains in the best interests of The Cigna Group and its shareholders.
The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial
position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board
may deem relevant.
In 2021, The Cigna Group paid quarterly cash dividends of $1.00 per share of The Cigna Group common stock. In 2020, The Cigna
Group paid a yearly cash dividend of $0.04 per share.
See Note 8 to the Consolidated Financial Statements for further information on dividend payments.
For information on securities authorized for issuance under our existing equity compensation plans, see Item 12 under the heading
"Security Ownership of Certain Beneficial Owners and Management and Rebated Stockholder Matters."
Issuer Purchases of Equity Securities
The following table provides information about The Cigna Group's share repurchase activity for the quarter ended December 31, 2022:
Period
October 1-31, 2022
November 1-30, 2022
December 1-31, 2022
Total
Total # of shares
purchased (1)
Average price paid per
share (1)
Total # of shares purchased as part of
publicly announced program (2)
Approximate dollar value of shares
that may yet be purchased as part
of publicly announced program (3)
833 $
286.84
5,499,088
see (1) below
1,803,379 $
330.62
7,303,300
see (1) below
— $
5,497,926 $
1,802,418 $
7,300,344
5,323,335,866
4,165,793,043
3,569,880,748
N/A
(1)
Includes shares tendered by employees under the Company's equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and
units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered 833 shares in
October, 1,162 shares in November and 961 shares in December 2022. Amount purchased in November 2022 also reflects the final settlement of 1.9 million shares
pursuant to the Accelerated Share Repurchase ("ASR") agreements. See Note 8 to the Consolidated Financial Statements for further details on the average share
price for total shares purchased under the ASR agreements. Such repurchase was made pursuant to the Company's share repurchase program described in note
(2), below. Average price paid per share for the period November 1 to November 30, 2022 for shares not purchased pursuant to the ASR agreements was $315.56.
(2) Additionally, the Company maintains a share repurchase program authorized by the Board. Under this program, the Company may repurchase shares from time to
time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors,
including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans,
open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or
discontinued at any time and does not have an expiration date. From January 1, 2023 through February 22, 2023, the Company repurchased 2.1 million shares for
approximately $646 million, leaving repurchase authority at $2.9 billion as of February 22, 2023.
(3) Approximate dollar value of shares is as of the last date of the applicable month.
50
Stock Price Performance Graph
The graph below compares the cumulative total shareholder return on our common stock for the five years ended December 31, 2022
with the cumulative total return of the Standard & Poor's ("S&P") 500 Index and the S&P 500 Health Care Index. The stock
performance shown in the graph is not intended to forecast or be indicative of future performance.
Item 6. [Reserved]
51
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview .......................................................................................................................................................................
Liquidity and Capital Resources ...................................................................................................................................................
Critical Accounting Estimates .......................................................................................................................................................
Segment Reporting ........................................................................................................................................................................
Evernorth Health Services ..........................................................................................................................................................
Cigna Healthcare ........................................................................................................................................................................
Other Operations ........................................................................................................................................................................
Corporate ....................................................................................................................................................................................
Investment Assets ...........................................................................................................................................................................
PAGE
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58
63
66
67
69
71
71
72
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide
information to assist you in better understanding and evaluating The Cigna Group's financial condition as of December 31, 2022
compared with December 31, 2021 and our results of operations for 2022 compared with 2021 and 2020 and is intended to help you
understand the ongoing trends in our business. For comparisons of our results of operations for 2021 compared with 2020, please
refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021. We
encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this
Annual Report on Form 10-K ("Form 10-K") and the "Risk Factors" contained in Part I, Item 1A of this Form 10-K.
Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). See Note 2 to the Consolidated Financial Statements in this Form 10-K for
additional information regarding the Company's significant accounting policies. In some of our financial tables in this MD&A, we
present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages
are expressed in basis points ("bps").
In this MD&A, our consolidated measures "adjusted income from operations," earnings per share on that same basis and "adjusted
revenues" are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable
GAAP measures of "shareholders' net income," "earnings per share" and "total revenues." We also use pre-tax adjusted income (loss)
from operations and adjusted revenues to measure the results of our segments.
The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of
segment operating performance because management believes these metrics best reflect the underlying results of business operations
and permit analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as
shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the
segment metric) excluding net realized investment results, amortization of acquired intangible assets, and special items. The Cigna
Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity
method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying
results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for
consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined
in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders'
net income. See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to
shareholders' net income.
The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's
share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting. Special items are matters that management believes are not representative of the underlying results of operations due to
their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future
underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a
substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a
reconciliation of consolidated adjusted revenues to total revenues.
52
EXECUTIVE OVERVIEW
The Cigna Group, together with its subsidiaries, is a global health company. On February 13, 2023, we changed our corporate name
from Cigna Corporation to The Cigna Group. We will not distinguish between our prior and current corporate name and will refer to
our current corporate name throughout this Annual Report on Form 10-K. As such, unless expressly indicated or the context requires
otherwise, the terms "Company," "we," "us," and "our" in this document refer to The Cigna Group, a Delaware corporation, and,
where appropriate, its subsidiaries. On February 13, 2023, we also changed the name of our Evernorth segment to Evernorth Health
Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout
this Annual Report on Form 10-K. Our common stock continues to be listed with, and trades on, the New York Stock Exchange under
the ticker symbol "CI". The Cigna Group has a mission of helping those we serve improve their health and vitality. Our subsidiaries
offer a differentiated set of pharmacy, medical, behavioral, dental and related products and services. For further information on our
business and strategy, see Item 1, "Business" in this Form 10-K.
Financial Highlights
See Note 1 to the Consolidated Financial Statements for a description of our segments.
Summarized below are certain key measures of our performance by segment:
Financial highlights by segment
(Dollars in millions, except per share amounts)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
For the Years Ended December 31,
Increase
(Decrease)
Increase
(Decrease)
Revenues
Adjusted revenues by segment
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate, net of eliminations
Adjusted revenues
Net realized investment results from certain equity method investments
Special item related to contractual adjustment for a former client
Total revenues
Shareholders' net income
Adjusted income from operations
Earnings per share (diluted)
Shareholders' net income
Adjusted income from operations
Pre-tax adjusted income (loss) from operations by segment
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate, net of eliminations
Consolidated pre-tax adjusted income from operations
Income attributable to noncontrolling interests
Net realized investment (losses) gains (1)
Amortization of acquired intangible assets
Special items
$ 140,335 $ 131,912 $
116,130
6 %
14 %
45,036
2,262
44,652
3,989
(6,991)
(6,475)
41,135
8,446
(5,644)
180,642
174,078
160,067
(126)
—
—
—
130
204
$ 180,516 $ 174,078 $
160,401
$
$
$
$
$
6,668 $
5,365 $
7,284 $
6,980 $
21.30 $
15.73 $
23.27 $
20.47 $
6,127 $
5,818 $
4,072
500
(1,466)
9,233
84
(621)
(1,876)
1,533
3,609
889
(1,339)
8,977
58
196
(1,998)
(451)
8,458
6,795
22.96
18.45
5,363
4,031
966
(1,552)
8,808
37
279
(1,982)
3,726
1
(43)
(8)
4
N/M
N/M
4 %
24 %
4 %
35 %
14 %
9
(53)
(15)
9
N/M
N/M
9 %
(37) %
3 %
(31) %
11 %
5 %
8 %
13
(44)
(9)
3
45
N/M
6
N/M
(10)
(8)
14
2
57
(30)
(1)
N/M
Income before income taxes
(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting.
6,782 $
8,353 $
23 %
10,868
$
(38) %
For further analysis and explanation of each segment's results, see the "Segment Reporting" section of this MD&A.
53
Consolidated Results of Operations (GAAP basis)
(Dollars in millions)
Pharmacy revenues
Premiums
Fees and other revenues
Net investment income
Total revenues
Pharmacy and other service costs
Medical costs and other benefit expenses
Selling, general and administrative expenses
Amortization of acquired intangible assets
Total benefits and expenses
Income from operations
Interest expense and other
Debt extinguishment costs
Gain on sale of businesses
Net realized investment (losses) gains
Income before income taxes
Total income taxes
Net income
Less: Net income attributable to noncontrolling
interests
For the Years Ended December 31,
Increase (Decrease)
Increase (Decrease)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
$ 128,566
$ 121,413
$ 107,769
$
7,153
6 % $ 13,644
39,915
10,880
1,155
180,516
124,834
32,206
13,186
1,876
41,154
9,962
1,549
174,078
117,553
33,562
13,030
1,998
42,627
8,761
1,244
160,401
103,484
32,710
14,072
1,982
172,102
166,143
152,248
8,414
(1,228)
—
1,662
(495)
8,353
1,607
6,746
78
7,935
(1,208)
(141)
—
196
6,782
1,367
5,415
50
8,153
(1,438)
(199)
4,203
149
10,868
2,379
8,489
(1,239)
918
(394)
6,438
7,281
(1,356)
156
(122)
5,959
479
(20)
141
1,662
(691)
1,571
240
1,331
(3)
9
(25)
4
6
(4)
1
(6)
4
6
(2)
N/M
N/M
N/M
23
18
25
56
(1,473)
1,201
305
13,677
14,069
852
(1,042)
16
13,895
(218)
230
58
(4,203)
47
(4,086)
(1,012)
(3,074)
19
13 %
(3)
14
25
9
14
3
(7)
1
9
(3)
16
29
N/M
32
(38)
(43)
(36)
61
(37) %
31
28
Shareholders' net income
Consolidated effective tax rate
$
6,668
$
5,365
$
8,458
$
1,303
24 % $ (3,093)
19.2 %
20.2 %
21.9 %
(100) bps
(170) bps
Medical customers (in thousands)
18,004
17,081
16,650
923
5 %
431
3 %
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
(Dollars in millions)
Shareholders' net income
Adjustments to reconcile to adjusted income from operations
Net realized investment losses (gains) (1)
Amortization of acquired intangible assets
Special items
Integration and transaction-related costs
Charge for organizational efficiency plan
(Benefits) charges associated with litigation matters
(Gain) on sale of businesses
Debt extinguishment costs
Risk corridors recovery
Contractual adjustment for a former client
Total special items
For the Years Ended December 31,
2022
2021
2020
Pre-tax After-tax
Pre-tax After-tax
Pre-tax After-tax
$
6,668
$
5,365
$
8,458
$
621
503 $
(196)
(158) $
(279)
(244)
1,876
1,345
1,998
1,494
1,982
1,431
135
22
(28)
103
17
(20)
(1,662)
(1,332)
—
—
—
—
—
—
169
168
(27)
—
141
—
—
71
119
(21)
—
110
—
—
527
31
25
404
24
19
(4,203)
(3,217)
199
(101)
(204)
151
(76)
(155)
$
(1,533)
(1,232) $
451
279 $
(3,726)
(2,850)
Adjusted income from operations
$
(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting.
7,284
6,980
$
$
6,795
54
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
(Diluted Earnings Per Share)
Shareholders' net income
Adjustments to reconcile to adjusted income from operations
Net realized investment losses (gains) (1)
Amortization of acquired intangible assets
Special items
Integration and transaction-related costs
Charge for organizational efficiency plan
(Benefits) charges associated with litigation matters
(Gain) on sale of businesses
Debt extinguishment costs
Risk corridors recovery
Contractual adjustment for a former client
Total special items
For the Years Ended December 31,
2022
2021
2020
Pre-tax After-tax
Pre-tax After-tax
Pre-tax After-tax
$
21.30
$
15.73
$
22.96
$
1.98
5.99
0.43
0.07
(0.09)
(5.31)
—
—
—
1.61 $
(0.57)
(0.46) $
(0.76)
(0.66)
4.30
5.86
4.38
5.38
3.88
0.33
0.05
(0.06)
(4.26)
—
—
—
0.50
0.49
0.21
0.35
(0.08)
(0.06)
—
0.41
—
—
—
0.32
—
—
1.43
0.08
0.07
1.10
0.07
0.05
(11.41)
(8.73)
0.54
(0.27)
(0.55)
0.41
(0.21)
(0.42)
(7.73)
$
(4.90)
(3.94) $
1.32
0.82 $
(10.11)
Adjusted income from operations
(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting.
20.47
23.27
$
$
$
18.45
Recent Events
Inflation
The United States economy continues to be impacted by rising inflation. We are proactively addressing potential impacts from
inflation on our workforce, third party relationships (including relationships with vendors and health care providers) and drug pricing.
We are also monitoring the potential impact inflation may have on client and customer health care needs. We have not experienced
material impacts from inflation on our results of operations or cash flows for the year ended December 31, 2022. For further
information regarding risks we encounter in our business due to economic conditions including inflationary pressures, see "Risk
Factors" contained in Part I, Item 1A of this Form 10-K.
Russian Invasion of Ukraine
The war in Ukraine has significantly affected individuals, economic activity and financial markets on a global scale. The Cigna Group
does not have operations or employees in Ukraine or Russia and serves a limited number of customers and clients in these countries.
We have not experienced significant impacts to date on our investment portfolio, financial position or results of operations. For a more
complete discussion of the risks we encounter in our business, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.
COVID-19
The Cigna Group's commitment to the health and vitality of our employees and the people we serve remains our focus as the pandemic
environment evolves. We continue to actively manage our response as the COVID-19 pandemic environment evolves and assess
impacts to our financial position and operating results, as well as mitigate adverse developments in our business. For further
information regarding the potential impact of the COVID-19 pandemic on the Company, see "Risk Factors" contained in Part I, Item
1A of this Form 10-K.
Commentary: 2022 versus 2021
The commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2022
with results for the year ended December 31, 2021.
Shareholders' net income increased 24% due to the gain on the sale of our life, accident and supplemental benefits businesses in six
countries (the "Chubb transaction"), higher adjusted income from operations and the absence of debt extinguishment costs. These
favorable effects were partially offset by lower realized investment results due to declines in equity securities resulting in unfavorable
mark to market adjustments in 2022.
55
Adjusted income from operations increased 4%, driven by a lower medical care ratio and increased specialty contributions in Cigna
Healthcare, as well as within Evernorth Health Services, increased earnings primarily reflecting continued contract affordability
improvements and growth in our accelerated businesses. These favorable effects were partially offset by the absence of earnings in the
second half of 2022 from the businesses sold in the Chubb transaction and lower net investment income.
Medical customers increased 5%, reflecting growth in our fee-based products from Middle Market and Select market segments as
well as growth in International Health, partially offset by a decrease in U.S. Government customers, including the disposition of the
Medicaid business. See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.
Pharmacy revenues increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services' collaboration
with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs. See the "Evernorth Health Services segment"
section of this MD&A for further discussion.
Premiums declined 3%, reflecting the impact of the Chubb transaction and the disposition of the Medicaid business in Cigna
Healthcare. Partially offsetting these decreases were the favorable impact of increased specialty contributions and higher premium
rates in Cigna Healthcare due to anticipated underlying medical cost trend. See the "Cigna Healthcare segment" section of this MD&A
for further discussion.
Fees and other revenues increased 9%, primarily reflecting customer growth from our continued contract affordability services. See
the "Evernorth Health Services segment" section of this MD&A for further discussion.
Net investment income decreased 25%, primarily reflecting lower returns on our partnership investments and the impact of the Chubb
transaction. See the "Investment Assets" section of this MD&A for further discussion.
Pharmacy and other service costs increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services'
collaboration with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs.
Medical costs and other benefit expenses decreased 4%, primarily reflecting the impact of the Chubb transaction and the disposition
of the Medicaid business in Cigna Healthcare. Decreases also reflect lower direct COVID-19 testing, treatment and vaccine costs and
are partially offset by medical cost trend in Cigna Healthcare.
Selling, general and administrative expenses increased 1%, primarily driven by higher expenses in Cigna Healthcare and strategic
investments in expanding our services portfolio and digital capabilities in Evernorth Health Services, partially offset by decreased
expenses in Other Operations driven by the impact of the Chubb transaction.
Interest expense and other increased 2%, primarily reflecting higher interest rates on our indebtedness.
Debt extinguishment costs. We did not incur debt extinguishment costs in 2022 as we did not early retire any debt in 2022.
Gain on sale of businesses primarily reflects the Chubb transaction, which closed on July 1, 2022.
Realized investment results were substantially lower, primarily due to declines in equity securities resulting in unfavorable mark to
market adjustments on investments in 2022. See Note 11 to the Consolidated Financial Statements for further discussion.
The effective tax rate decreased by 100 basis points, driven largely by the foreign tax rate differential, including the impact of the
Chubb transaction.
Key Transactions and Business Developments
VillageMD
As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion
in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is an independent primary
care group committed to offering high-quality, accessible primary care options for communities across the country through Village
Medical. VillageMD partners with physicians to provide the tools, technology, operations, staffing support and industry relationships
to deliver high-quality clinical care and better patient outcomes, while reducing the total cost of care. VillageMD and Village Medical
operate in 22 markets and are responsible for more than 1.6 million patients.
56
Risk Adjustment Data Validation Audit Rule
On January 30, 2023, the Centers for Medicare and Medicaid Services ("CMS") issued the Final Rule titled "Medicare and Medicaid
Programs; Policy and Technical Changes to the Medicare Advantage, Medicare Prescription Drug Benefit, Program for All-inclusive
Care for the Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 2021", effective
April 3, 2023. The Final Rule addresses CMS's audit methodology and related policies for the Risk Adjustment Data Validation
("RADV"). RADV is the primary mechanism for CMS to determine risk adjustment revenue overpayments to Medicare Advantage
organizations. Although CMS did not specify their sampling or extrapolation methodology the rule did codify that CMS will use a
statistically valid method for sampling and extrapolation of error rates and the decision not to apply a fee for service adjuster when
determining RADV audit findings. CMS will not apply extrapolation to RADV audits until the 2018 payment year with payment
recoveries for those RADV audits expected in 2025. Audits for payment years prior to 2018 are not subject to extrapolation and the
Company expects the impact for these years will not be material. The Company is not currently subject to RADV audits for the 2018
and subsequent payment years and is unable to estimate the potential impacts of RADV audits subject to extrapolation in the Final
Rule. Although the Final Rule provides additional clarity regarding the structure of the methodology for RADV audits and
quantification of RADV audit findings, further analysis is required to determine all potential implications. The Company continues to
evaluate the recently announced Final Rule including potential legal developments which could impact the ultimate application of the
regulation. See Part I, Item 1 of this Form 10-K for further discussion of RADV.
Centene Corporation
In October 2022, Evernorth Health Services and Centene Corporation ("Centene") announced a multi-year agreement effective
January 2024 to manage pharmacy benefit services and make prescription medications more accessible and affordable for Centene's
approximately 20 million customers. In addition to greater savings on prescription drugs, Centene customers will also have access to
Express Scripts' extensive national network of retail pharmacies. We expect to spend approximately $200 million in 2023 preparing
for the implementation of our multi-year agreement with Centene. We will continue to refine this estimate during 2023.
Inflation Reduction Act
The Inflation Reduction Act of 2022, which was signed into law in August 2022, contains a variety of provisions that impact our
business, including:
•
•
•
•
•
•
•
providing a one percent excise tax on repurchases of stock made after December 31, 2022, which would generally be
recorded in Treasury stock in the Consolidated Balance Sheets;
extending the American Rescue Plan Act of 2021's enhanced Premium Tax Credits for three years from January 2023 to
January 2026;
instituting caps on insulin cost sharing in federal Medicare Part B medical insurance ("Part B") and federal Medicare Part D
prescription drug program ("Part D") beginning in 2023 and removing deductibles for insulin provided via durable medical
equipment under Part B beginning in July 2023;
adding a requirement that drug manufacturers pay rebates beginning in 2023 if prescription drug prices for certain Part B and
Part D drugs increase beyond inflation;
redesigning of the Part D benefit in 2024 and capping of annual out-of-pocket costs starting in 2025;
allowing CMS to select Part D and Part B drugs for the drug price negotiation program beginning in 2023 and 2026,
respectively, with the maximum fair prices for select Part D drugs taking effect in 2026; and
delaying implementation of the 2020 Medicare drug rebate rule to 2032.
We currently do not expect the Inflation Reduction Act to have a material impact on our 2023 Consolidated Financial Statements. We
continue to analyze the impact on future periods.
Sale of International Life, Accident and Supplemental Benefits Businesses in Six Countries
As discussed in Note 4 to the Consolidated Financial Statements, on July 1, 2022, we completed the sale of our life, accident and
supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb
INA Holdings, Inc. ("Chubb") for approximately $5.4 billion in cash (the "Chubb transaction"). The "Liquidity and Capital Resources"
section of this MD&A provides further information on the impact of this transaction to liquidity. See "Other Operations" section of
this MD&A for further information on the results of these businesses prior to the divestiture.
57
Sale of Group Disability and Life Business
The Cigna Group sold its Group Disability and Life business to New York Life Insurance Company for $6.2 billion on December 31,
2020.
Medicare Star Quality Ratings ("Star Ratings")
CMS uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform. Categories of measurement include
quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or
greater with quality bonus payments and the ability to offer enhanced benefits. Approximately 89% of our MA customers were in four
star or greater plans for bonus payments received in 2022 and we expect 84% to be in four star or greater plans for bonus payments to
be received in 2023. On October 7, 2022, CMS announced Medicare Star Ratings for bonus payments to be received in 2024. Based
upon the current customer mix associated with the announced Star Ratings, we estimate 67% of our MA customers will be in four star
or greater plans. See Part 1, "Business - Regulation" section of this Form 10-K for further discussion of Star Ratings.
Medicare Advantage Rates
On April 4, 2022, CMS released the final Calendar Year 2023 Medicare Advantage Capitation Rates and Part C and Part D Payment
Policies (the "2023 Final Notice"). On February 1, 2023, CMS released the Calendar Year 2024 Advance Notice for Medicare
Advantage and Part D Prescription Drug Programs (the "Advance Notice"). CMS will accept comments on the Advance Notice
through March 3, 2023, before publishing the final rate announcement by April 3, 2023. The Advance Notice is subject to the required
notice and comment period, and we cannot predict when or to what extent CMS will adopt the proposals in the Advance Notice. We
are in the process of analyzing the potential implications of the Advance Notice.
LIQUIDITY AND CAPITAL RESOURCES
Financial Summary
(In millions)
Short-term investments
Cash and cash equivalents
Short-term debt
Long-term debt
Shareholders' equity
Liquidity
For the Years Ended December 31,
2022
2021
2020
$
$
$
$
$
139 $
5,924 $
2,993 $
28,100 $
44,872 $
428 $
5,081 $
2,545 $
31,125 $
47,112 $
359
10,182
3,374
29,545
50,321
We maintain liquidity at two levels: the subsidiary level and the parent company level.
Cash requirements at the subsidiary level generally consist of:
•
•
•
•
pharmacy, medical costs and other benefit payments;
expense requirements, primarily for employee compensation and benefits, information technology and facilities costs;
income taxes; and
debt service.
Our subsidiaries normally meet their liquidity requirements by:
using cash flows from operating activities;
• maintaining appropriate levels of cash, cash equivalents and short-term investments;
•
• matching investment durations to those estimated for the related insurance and contractholder liabilities;
•
•
selling investments; and
borrowing from affiliates, subject to applicable regulatory limits.
58
Cash requirements at the parent company level generally consist of:
•
•
•
•
debt service;
payment of declared dividends to shareholders;
lending to subsidiaries as needed; and
pension plan funding.
The parent company normally meets its liquidity requirements by:
• maintaining appropriate levels of cash and various types of marketable investments;
•
•
•
collecting dividends from its subsidiaries;
using proceeds from issuing debt and common stock; and
borrowing from its subsidiaries, subject to applicable regulatory limits.
Dividends from our insurance, Health Maintenance Organization ("HMO") and certain foreign subsidiaries are subject to regulatory
restrictions. See Note 21 to the Consolidated Financial Statements in this Form 10-K for additional information regarding these
restrictions. Most of the Evernorth Health Services segment operations are not subject to regulatory restrictions regarding dividends
and therefore provide significant financial flexibility to The Cigna Group.
Cash flows were as follows:
(In millions)
Net cash provided by operating activities
Net cash provided by (used in) investing activities:
Cash proceeds from sales of businesses, net of cash sold
Acquisitions
Net investment (purchases)
Purchases of property and equipment, net
Other, net
Net investing activities
Net cash (used in) financing activities:
Debt (repayments) issuances
Stock repurchase
Dividend payments
Other, net
Net financing activities
Foreign currency effect on cash
For the Years Ended December 31,
2022
2021
2020
$
8,656 $
7,191 $
10,350
4,835
—
(272)
(1,295)
(170)
3,098
(2,559)
(7,607)
(1,384)
310
(11,240)
(86)
(61)
(1,833)
(660)
(1,154)
97
(3,611)
521
(7,742)
(1,341)
350
(8,212)
(65)
5,592
(139)
(1,406)
(1,094)
23
2,976
(4,736)
(4,042)
(15)
260
(8,533)
41
4,834
Change in cash, cash equivalents and restricted cash
$
428 $
(4,697) $
The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2022 compared
with the same period in 2021. For comparisons of liquidity and capital resources for the year ended December 31, 2021 compared with
the year ended December 31, 2020, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the
year ended December 31, 2021.
Operating activities
Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs,
premiums, fees, investment income, taxes, benefit costs and other expenses.
Operating cash flows for the year ended December 31, 2022 include the benefits from the delayed 2021 CMS Part D settlement. The
remaining increase was driven by timing of accrued liabilities and lower income tax payments, partially offset by lower insurance
liabilities and higher inventories.
Investing activities
In 2022, the Company received cash proceeds from the Chubb transaction. In 2021, the Company had cash outflows related to the
acquisition of MDLIVE. These factors, along with lower net purchases of investments in 2022, resulted in higher cash inflow from
investing activities in 2022 compared with 2021.
59
Financing activities
The Company repaid more debt, in 2022, which resulted in an increase in cash used in financing activities in 2022.
Capital Resources
Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to
underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and the issuance of
long-term debt and equity securities. Our businesses generate significant cash flow from operations, some of which is subject to
regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends from U.S. regulated
subsidiaries were $1.9 billion for the year ended December 31, 2022 and $2.8 billion for the year ended December 31, 2021. Non-
regulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to the
parent company for general corporate purposes.
We prioritize our use of capital resources to:
•
•
•
•
invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide the
capital necessary to maintain or improve the financial strength ratings of subsidiaries and to repay debt and fund pension
obligations if necessary;
pay dividends to shareholders;
consider acquisitions that are strategically and economically advantageous; and
return capital to shareholders through share repurchases.
Funds Available
Commercial Paper Program. The Cigna Group maintains a commercial paper program and may issue short-term, unsecured
commercial paper notes privately placed on a discount basis through certain broker-dealers at any time not to exceed an aggregate
amount of $5.0 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes.
Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate
purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above.
As of December 31, 2022, The Cigna Group's revolving credit agreements include: a $3.0 billion five-year revolving credit and letter
of credit agreement that expires in April 2027; a $1.0 billion three-year revolving credit agreement that expires in April 2025; and a
$1.0 billion 364-day revolving credit agreement that expires in April 2023.
As of December 31, 2022, we had $5.0 billion of undrawn committed capacity under our revolving credit agreements (these amounts
are available for general corporate purposes, including providing liquidity support for our commercial paper program), $5.0 billion of
remaining capacity under our commercial paper program and $6.1 billion in cash and short-term investments, approximately $1.2
billion of which was held by the parent company or certain non-regulated subsidiaries.
See Note 7 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.
Our debt-to-capitalization ratio was 40.9% at December 31, 2022 and 41.7% at December 31, 2021.
We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital
management strategy.
Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $3.0
billion from its subsidiaries without further approvals as of December 31, 2022.
60
Other Sources of Funds
Sale of international life, accident and supplemental benefits businesses in six countries. On July 1, 2022, we completed the sale of
our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan
and Thailand) to Chubb for approximately $5.4 billion in cash. Net after-tax proceeds of approximately $5.1 billion were utilized
primarily for share repurchases, with $3.5 billion used to fund the purchases of our common stock pursuant to the ASR agreements (as
described below).
Use of Capital Resources
Capital expenditures. Capital expenditures for property, equipment and computer software were $1.3 billion in 2022 compared to $1.2
billion in the year ended December 31, 2021. This increase reflects our continued strategic investment in technology for future growth.
We expect to deploy approximately $1.4 billion to capital expenditures in 2023. Anticipated capital expenditures will be funded
primarily from operating cash flow.
Dividends. For 2022, The Cigna Group declared and paid quarterly cash dividends of $1.12 per share of its common stock, compared
to $1.00 per share in 2021. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On
February 2, 2023, the Board of Directors declared the first quarter cash dividend of $1.23 per share of The Cigna Group common
stock to be paid on March 23, 2023 to shareholders of record on March 8, 2023. The Cigna Group currently intends to pay regular
quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the
declaration of dividends remains in the best interests of the Company and its shareholders. The decision of whether to pay future
dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows,
capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.
Share repurchases. We maintain a share repurchase program authorized by our Board of Directors, under which we may repurchase
shares of our common stock from time to time. The timing and actual number of shares repurchased will depend on a variety of factors
including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected
through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including through Rule 10b5-1 trading plans or privately negotiated transactions. The program may be suspended or
discontinued at any time.
In June 2022, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements ("2022 ASR
agreements") to repurchase $3.5 billion of common stock in aggregate. In July 2022, in accordance with the 2022 ASR agreements,
we remitted $3.5 billion and received an initial delivery of 10.4 million shares of our common stock. Upon final settlement of the 2022
ASR agreements in November 2022, we received an additional 1.9 million shares of our common stock for no additional
consideration.
In August 2021, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements to
repurchase $2.0 billion of common stock. The total number of shares repurchased under the agreements was 9.5 million.
We repurchased 27.4 million shares for approximately $7.6 billion during the year ended December 31, 2022, including the $3.5
billion paid under ASR agreements, compared to 35.2 million shares for approximately $7.7 billion during the year ended
December 31, 2021 including the $2.0 billion paid under ASR agreements. From January 1, 2023, through February 22, 2023, we
repurchased 2.1 million shares for approximately $646 million. Share repurchase authority was $2.9 billion as of February 22, 2023.
See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.
Strategic investments. As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by
investing up to $2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is
an independent primary care group with expertise in value-based care and operates primary care practices across 22 markets.
Pension plans. Our pension plans were overfunded by $238 million and reported in Other assets in our Consolidated Balance Sheets
as of December 31, 2022. This represents a funding improvement of $615 million from an underfunded pension liability of $377
million primarily reported in Other non-current liabilities in our Consolidated Balance Sheets as of December 31, 2021. This
improvement was primarily attributable to an increase in discount rates of 261 basis points, partially offset by investment asset losses
in 2022. In 2022, we made immaterial contributions to the qualified pension plans as required under the Pension Protection Act of
2006 and we expect the required contributions for 2023 to be immaterial. See Note 17 to the Consolidated Financial Statements for
additional information.
61
Risks to our liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could
exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects
from one or more risks or uncertainties described more fully in the "Risk Factors" section of this Form 10-K. Though we believe we
have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access
those markets for additional borrowings or increase costs.
Supply Chain Financing Program
We facilitate a voluntary supply chain finance program (the "program") that provides suppliers the opportunity to sell their receivables
due from us (i.e., our payment obligations to the suppliers) to a financial institution, on a non-recourse basis in order to be paid earlier
than our payment terms provide. The Cigna Group is not a party to the program and agrees to commercial terms with its suppliers
independently of their participation in the program. A supplier's participation in the program has no impact on our payment terms and
the Company has no economic interest in a supplier's decision to participate in the program. The suppliers, at their sole discretion,
determine which invoices, if any, to sell to the financial institution. No guarantees are provided by the Company or any of our
subsidiaries under the program. We have been informed by the financial institution that $471 million as of December 31, 2022 and
$331 million as of December 31, 2021 of our outstanding payment obligations were voluntarily elected by suppliers to be sold to the
financial institution under the program. These amounts are reflected in Accounts payable in our Consolidated Balance Sheets.
Guarantees and Contractual Obligations
We are contingently liable for various contractual obligations and financial and other guarantees entered into in the ordinary course of
business. See Note 23 to the Consolidated Financial Statements for discussion of various guarantees.
On balance sheet:
•
•
•
•
•
Insurance liabilities
◦
◦
◦
◦
Insurance liabilities are $16.3 billion, which include contractholder deposit funds, future policy benefits and unpaid
claims and claim expenses.
Of the total obligation amount, $4.9 billion of insurance liabilities are associated with the sold retirement benefits,
individual life insurance and annuity businesses, guaranteed minimum death benefit ("GMDB") business, as well as the
group life and personal accident businesses as their related net cash flows are not expected to impact our cash flows.
The $14.0 billion of total obligations exceeds the corresponding insurance and contractholder liabilities of $11.4 billion
recorded on the balance sheet. This is because some of the recorded insurance liabilities reflect discounting for interest
and the recorded contractholder liabilities exclude future interest crediting, charges and fees. The timing and amount of
actual future cash flows may differ from the projected amount disclosed.
See Note 9 to the Consolidated Financial Statements for information regarding insurance liabilities.
◦ We expect $4.6 billion of insurance liabilities to be paid within the next twelve months beginning January 1, 2023.
◦
Long-term debt
◦
Total scheduled payments on long-term debt are $46.9 billion, which include scheduled interest payments and maturities
of long-term debt.
◦ We expect $4.2 billion of long-term debt payments (including scheduled interest payments) to be paid within the next
twelve months beginning January 1, 2023.
Finance leases are included in Long-term debt and primarily represent obligations for information technology network
storage, servers and equipment. See Note 20 to the Consolidated Financial Statements for information regarding finance
leases.
See Note 7 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.
These include approximately $415 million of estimated payments for other postretirement and postemployment benefit
obligations, non-qualified pension plans, reinsurance liabilities, supplemental and deferred compensation plans and
interest rate and foreign currency swap contracts.
These include operating lease payments of $494 million.
See Note 17 to the Consolidated Financial Statements for further information on pension obligations and funded status.
◦ We expect $85 million of other liabilities to be paid within the next twelve months beginning January 1, 2023.
◦
Operating leases
◦
◦ We expect $114 million of operating lease payments to be due within the next twelve months beginning January 1, 2023.
◦
Uncertain tax positions
◦
In the event we are unable to sustain all of our $1.3 billion of uncertain tax positions, it could result in future tax
payments of approximately $1.0 billion. We are adequately reserved for such positions. As a result, there is minimal
See Note 20 to the Consolidated Financial Statements for additional information.
62
◦
Other non-current liabilities
◦
direct risk to earnings should we fail to sustain our positions. We cannot reasonably estimate the timing of such future
payments.
See Note 22 to the Consolidated Financial Statements for additional information on uncertain tax positions.
◦
Off-balance sheet:
•
Purchase obligations
◦
These include agreements to purchase goods or services that are enforceable and legally binding. Purchase obligations
exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of
goods or services to be purchased.
As of December 31, 2022, purchase obligations consisted of a total of $6.5 billion of estimated payments required under
contractual arrangements. This includes:
◦
▪
▪
$5.1 billion of investment commitments, primarily comprised of commitment to purchase up to $2.7 billion of
preferred equity in VillageMD as well as other long-term investments.
$1.4 billion of future service commitments, primarily comprised of contracts for certain outsourced businesses
processes and information technology maintenance and support.
◦ We expect $3.9 billion of purchase obligations to be paid within the next twelve months beginning January 1, 2023. This
includes:
▪
$3.5 billion relates to investment commitments, which includes commitment to purchase up to $2.7 billion in
VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion.
$402 million relates to future service commitments.
▪
◦
See Note 11 of the Consolidated Financial Statements for additional information on investment commitments.
CRITICAL ACCOUNTING ESTIMATES
The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and
assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements. Management considers an
accounting estimate to be critical if:
•
•
it requires assumptions to be made that were uncertain at the time the estimate was made; and
changes in the estimate or different estimates that could have been selected could have a material effect on our consolidated
results of operations or financial condition.
Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of
Directors and the Audit Committee has reviewed the disclosures presented in this Form 10-K. We regularly evaluate items that may
impact critical accounting estimates.
63
In addition to the estimates presented in the following tables, the Notes to the Consolidated Financial Statements describe other
estimates that management has made in preparation of the financial statements. Management believes the current assumptions used to
estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly
differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes
could have a material adverse effect on our consolidated results of operations and in certain situations, could have a material adverse
effect on liquidity and our financial condition. The tables below present the adverse impacts of certain possible changes in
assumptions. The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of
operations, liquidity or financial condition, except for assessing impairment of goodwill.
Effect if Different Assumptions Used
We completed our normal annual evaluations for impairment of goodwill and
intangible assets during the third quarter of 2022. The evaluations indicated that
the fair value estimates of our reporting units exceed their carrying values by
sufficient margins. Changes in assumptions concerning future financial results or
other underlying assumptions, including macroeconomic factors, government
legislation, changes in the competitive landscape or other market conditions could
impact our ability to achieve profitability projections. If we consistently do not
achieve our earnings and cash flow projections or our cost of capital rises
significantly, the assumptions and estimates underlying the goodwill and
intangible asset impairment evaluations could be adversely affected and result in
future impairment charges that would negatively impact our operating results and
financial position.
Specific to the U.S. Government reporting unit, the two most critical factors
affecting our future cash flows assumptions are customer growth and profit
margins. If we do not realize our targeted customer growth or profit margins, the
cash flow projections could be impacted and significantly reduce the fair value of
the reporting unit.
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Goodwill and other intangible assets
Goodwill represents the excess of the cost of businesses acquired over the fair
value of their net assets at the acquisition date. Intangible assets primarily reflect
the value of customer relationships and other intangibles acquired in business
combinations.
Fair values of reporting units are estimated based on discounted cash flow analysis
and market approach models using assumptions that we believe a hypothetical
market participant would use to determine a current transaction price. The
significant assumptions and estimates used in determining fair value primarily
include the discount rate and future cash flows. A discount rate is selected to
correspond with each reporting unit's weighted average cost of capital, consistent
with that used for investment decisions considering the specific and detailed
operating plans and strategies within each reporting unit. Projections of future
cash flows differ by reporting unit and are consistent with our ongoing strategic
projections. Future cash flows for Evernorth Health Services are primarily driven
by the forecasted gross margins of the business, as well as operating expenses and
long-term growth rates. Future cash flows for our other reporting units are
primarily driven by forecasted revenues, benefit expenses, operating expenses and
long-term growth rates.
The fair value of intangibles and the amortization method were determined using
an income approach that relies on projected future cash flows including key
assumptions for customer attrition and discount rates. Management revises
amortization periods if it believes there has been a change in the length of time
that an intangible asset will continue to have value.
Our U.S. Government reporting unit contracts with CMS to provide managed
health care services, including Medicare Advantage and Medicare-approved
prescription drug plans. Estimated future cash flows for this reporting unit's
Medicare Advantage business incorporate the current reimbursement structure for
2023 and beyond. Revenues from the Medicare programs are dependent, in whole
or in part, upon annual funding from the federal government through CMS.
Funding levels for these programs are dependent on many factors including
changes to the risk adjustment payment methodology, government efforts to
contain health care costs, budgetary constraints and general political issues and
priorities. In 2022, we experienced a decrease in U.S. Government customers,
including the disposition of the Medicaid business, while investing to support
future growth. The U.S. Government reporting unit goodwill balance was $4.0
billion as of December 31, 2022 and December 31, 2021.
The Company conducts its quantitative evaluation for goodwill impairment at
least annually during the third quarter at the reporting unit level and performs
qualitative impairment assessments on a quarterly basis to determine if events or
changes in circumstances indicate that it is more likely than not that the carrying
value of a reporting unit exceeds its estimated fair value.
Goodwill and other intangibles as of December 31 were as follows (in millions):
·2022 – Goodwill $45,811; Other intangible assets $32,492
·2021 – Goodwill $45,811; Other intangible assets $34,102
See Note 19 to the Consolidated Financial Statements for additional discussion of
our goodwill and other intangible assets.
64
Effect if Different Assumptions Used
The factors that could impact our estimates of uncertain tax positions include the
likelihood of being sustained upon audit based on the technical merits of the tax
position and related assumed interest and penalties. If our positions are upheld
upon audit, our net income would increase.
Effect if Different Assumptions Used
Based on studies of our claim experience, it is reasonably possible that a 100 basis
point change in the medical cost trend and a 50 basis point change in completion
factors could occur in the near term.
A 100 basis point increase in the medical cost trend rate would increase this
liability by approximately $75 million, resulting in a decrease in net income of
approximately $60 million after-tax, and a 50 basis point decrease in completion
factors would increase this liability by approximately $150 million, resulting in a
decrease in net income of approximately $120 million after-tax.
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Income taxes – uncertain tax positions
We evaluate tax positions to determine whether the benefits are more likely than
not to be sustained on audit based on their technical merits. The Company
establishes a liability if the probability that the position will be sustained is 50% or
less. For uncertain positions that management believes are more likely than not to
be sustained, the Company recognizes a liability based upon management's
estimate of the most likely settlement outcome with the taxing authority. These
amounts primarily relate to federal and state uncertain positions of the value and
timing of deductions and uncertain positions of attributing taxable income to
states.
Balances that are included in the Consolidated Balance Sheets within Accrued
expenses and other liabilities are as follows (in millions):
·2022 – $1,343
·2021 – $1,230
See Note 22 to the Consolidated Financial Statements for additional discussion
around uncertain tax positions and the Liquidity and Capital Resources section of
this MD&A for a discussion of their potential impact on liquidity.
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Unpaid claims and claim expenses – Cigna Healthcare
Unpaid claims and claim expenses include both reported claims and estimates for
losses incurred but not yet reported.
Unpaid claims and claim expenses in Cigna Healthcare are primarily impacted by
assumptions related to completion factors and medical cost trend. Variation of
actual results from either assumption could impact the unpaid claims balance as
noted below. A large number of factors may cause the medical cost trend to vary
from the Company's estimates, including: changes in health management
practices, changes in the level and mix of benefits offered and services utilized
and changes in medical practices. Completion factors may be affected if actual
claims submission rates from providers differ from estimates (that can be
influenced by a number of factors, including provider mix and electronic versus
manual submissions), or if changes to the Company's internal claims processing
patterns occur.
Unpaid claims and claim expenses for the Cigna Healthcare segment as of
December 31 were as follows (in millions):
·2022 – gross $4,176; net $3,955
·2021 – gross $4,261; net $4,000
These liabilities are presented above both gross and net of reinsurance and other
recoverables.
See Note 9 to the Consolidated Financial Statements for additional information
regarding assumptions and methods used to estimate this liability.
65
Effect if Different Assumptions Used
If the derived market rates used to calculate fair value increased by 100 basis
points, the fair value of the total debt security portfolio of $9.9 billion would
decrease by approximately $0.6 billion, resulting in an after-tax decrease to
shareholders' equity of approximately $0.4 billion as of December 31, 2022.
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Valuation of debt security investments
Most debt securities are classified as available for sale and are carried at fair value
with changes in fair value recorded in Accumulated other comprehensive loss
within Shareholders' equity.
Fair value is defined as the price at which an asset could be exchanged in an
orderly transaction between market participants at the balance sheet date.
Determining fair value for a financial instrument requires management judgment.
The degree of judgment involved generally correlates to the level of pricing
readily observable in the markets. Financial instruments with quoted prices in
active markets or with market observable inputs to determine fair value, such as
public securities, generally require less judgment. Conversely, private placements
including more complex securities that are traded infrequently are typically
measured using pricing models that require more judgment as to the inputs and
assumptions used to estimate fair value. There may be a number of alternative
inputs to select based on an understanding of the issuer, the structure of the
security and overall market conditions. In addition, these factors are inherently
variable in nature as they change frequently in response to market conditions.
Approximately 60% of our debt securities are public securities and approximately
40% are private placement securities.
Typically, the most significant input in the measurement of fair value is the
market interest rate used to discount the estimated future cash flows of the
instrument. Such market rates are derived by calculating the appropriate spreads
over comparable U.S. Treasury securities, based on the credit quality, industry and
structure of the asset.
Balances that are included in the Consolidated Balance Sheets within Investments
and Long-term investments are as follows, inclusive of amounts held for sale as of
December 31, 2021 (in millions):
·2022 - $9,872
·2021 - $16,958
See Notes 11A. and 12 to the Consolidated Financial Statements for a discussion
of our fair value measurements, the procedures performed by management to
determine that the amounts represent appropriate estimates and our accounting
policy regarding unrealized appreciation on debt securities.
SEGMENT REPORTING
The following section of this MD&A discusses the results of each of our segments.
On February 13, 2023, we changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between
our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.
On July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong,
Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash.
See Note 1 to the Consolidated Financial Statements for further description of our segments.
In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss)
before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results,
amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized investment results of its joint
ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters
that management believes are not representative of the underlying results of operations due to their nature or size. Ratios presented in
this segment discussion exclude the same items as adjusted revenues and pre-tax adjusted income (loss) from operations. See Note 24
to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of Income before income taxes
to pre-tax adjusted income from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 24 to the
Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments
that are eliminated in Corporate.
In these segment discussions, we also present "pre-tax adjusted margin," defined as pre-tax adjusted income (loss) from operations
divided by adjusted revenues.
66
See the "Executive Overview" section of this MD&A for summarized financial results of each of our segments.
Evernorth Health Services Segment
Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those
from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and
Care Delivery and Management Solutions. As described in the introduction to Segment Reporting, Evernorth Health Services'
performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.
The key factors that impact Evernorth Health Services' Pharmacy revenues and Pharmacy and other service costs are volume, mix of
claims and price. These key factors are discussed further below. See Note 2 to the Consolidated Financial Statements included in this
Form 10-K for additional information on revenue and cost recognition policies for this segment.
•
•
•
As our clients' claim volumes increase or decrease, our resulting revenues and cost of revenues correspondingly increase or
decrease. Our gross profit, defined as Total revenues less Pharmacy and other service costs, could also increase or decrease as
a result of changes in purchasing discounts.
The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. Types of
drugs can have an impact on our Pharmacy revenues, Pharmacy and other service costs and gross profit, including amounts
payable under certain financial and performance guarantees with our clients. In addition to the types of drugs, the mix of
generic claims (i.e., generic fill rate) also impacts our gross profit. Generally, higher generic fill rates reduce revenues, as
generic drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies
on generic drugs is incrementally lower than the price charged to our clients, higher generic fill rates generally have a
favorable impact on our gross profit. The home delivery generic fill rate is currently lower than the network generic fill rate
as fewer generic substitutions are available among maintenance medications (such as therapies for chronic conditions)
commonly dispensed from home delivery pharmacies as compared to acute medications that are primarily dispensed by
pharmacies in our retail networks. Furthermore, our gross profit differs among network, home delivery and specialty
distribution methods and can impact our profitability.
Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network,
pharmaceutical and wholesaler purchasing and manufacturer rebates. As we seek to improve the effectiveness of our
integrated solutions for the benefit of our clients, we are continuously innovating and improving affordability. Our gross
profit could also increase or decrease as a result of drug purchasing contract initiatives implemented. Inflation also impacts
our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized
price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation
for our clients continues to be a significant driver of our revenues and cost of revenues in the current environment.
In this MD&A, we present revenues and gross profit, as well as adjusted revenues and adjusted gross profit, consistent with our
segment reporting metrics, which exclude special items. For the year ended December 31, 2020, we recorded an adjustment related to
a former client contract that was excluded from our adjusted metrics.
67
Results of Operations
Financial Summary
(Dollars in millions)
Total revenues
Less: Contractual adjustment for a former client
Adjusted revenues (1)
Pharmacy and other service costs
Gross profit (2)
Adjusted gross profit (1),(2)
Pre-tax adjusted income from operations
Pre-tax adjusted margin
Adjusted expense ratio (3)
Selected Financial Information
(Dollars and adjusted scripts in millions)
Pharmacy revenue by distribution channel
Adjusted network revenues (1)
Adjusted home delivery and specialty revenues (1)
Other pharmacy revenues
Total adjusted pharmacy revenues (1)
Adjusted fees and other revenues (1)
Net investment income
Adjusted revenues (1)
Pharmacy script volume (4)
Adjusted network scripts
Adjusted home delivery and specialty scripts
Total adjusted scripts
Generic fill rate (5)
Network
Home delivery
Overall generic fill rate
For the Years Ended December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
$ 140,335
$ 131,912
$ 116,334
$
8,423
6 % $ 15,578
13 %
—
—
(204)
$ 140,335
$ 131,912
$ 116,130
$ 131,284
$ 123,504
$ 108,537
$
$
$
9,051
9,051
6,127
$
$
$
8,408
8,408
5,818
$
$
$
7,797
7,593
5,363
—
8,423
7,780
643
643
309
$
$
$
$
$
N/M
204
N/M
6 % $ 15,782
6 % $ 14,967
8 % $
8 % $
5 % $
611
815
455
14 %
14 %
8 %
11 %
8 %
4.4 %
2.0 %
4.4 %
1.9 %
4.6 %
1.9 %
— bps
(10) bps
(20) bps
— bps
For the Years Ended December 31,
Change
Favorable
(Unfavorable)
Change
Favorable
(Unfavorable)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
$
64,946
$
64,992
$
56,181
— %
16 %
61,283
6,753
54,391
6,428
49,886
5,403
13
5
9
19
$ 132,982
$ 125,811
$ 111,470
6 %
13 %
7,267
86
6,084
17
4,628
32
19
N/M
31
(47)
$ 140,335
$ 131,912
$ 116,130
6 %
14 %
1,295
280
1,575
1,355
283
1,638
1,206
287
1,493
(4) %
12 %
(1)
(1)
(4) %
10 %
86.4 %
85.1 %
86.3 %
85.4 %
85.9 %
85.5 %
87.4 %
85.2 %
87.2 %
100
bps
(80) bps
80
bps
(200) bps
70
bps
(170) bps
(1) Total revenues and gross profit were equal to adjusted revenues and adjusted gross profit for the years ended December 31, 2022 and December 31, 2021 as there
were no special items in those periods. Amounts exclude special items for the year ended December 31, 2020.
(2) Gross profit and adjusted gross profit are calculated as total revenues or adjusted total revenues less pharmacy and other services costs.
(3) Adjusted expense ratio is calculated as selling, general and administrative expenses as a percentage of adjusted revenues.
(4) Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted
as one script.
(5) Generic fill rate is defined as the total number of generic scripts divided by the total overall scripts filled.
2022 versus 2021
Adjusted network revenues slightly decreased, reflecting a decrease in claims volume; partially offset by inflation on branded drugs.
Adjusted home delivery and specialty revenues increased 13%, reflecting higher specialty claims volume, due in part to our
collaboration with Prime Therapeutics, inflation on, and higher sales of, branded drugs. These increases were partially offset by lower
home delivery claims volume.
Other pharmacy revenues increased 5%, reflecting higher volume from our CuraScript SD business.
Adjusted fees and other revenues increased 19%, reflecting customer growth from our continued contract affordability services and
the growth of our Care Delivery and Management Solutions.
68
Adjusted gross profit and pre-tax adjusted income from operations increased 8% and 5%, respectively, reflecting continued contract
affordability improvements and growth in our accelerated businesses; partially offset by strategic investments in expanding our
services portfolio and digital capabilities, as well as lower volume in our network and home delivery businesses.
The adjusted expense ratio increased 10 bps, reflecting higher revenues and expense discipline, which enabled us to increase strategic
investments in expanding our services portfolio and digital capabilities.
Cigna Healthcare Segment
Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health businesses, which provide comprehensive
medical and coordinated solutions to clients and customers. As described in the introduction to Segment Reporting, performance of the
Cigna Healthcare segment is measured using adjusted revenues and pre-tax adjusted income from operations. Key factors affecting
results for this segment include:
customer growth;
revenue growth;
percentage of Medicare Advantage customers in plans eligible for quality bonus payments;
•
•
•
• medical costs as a percentage of premiums (medical care ratio or "MCR") for our insured businesses; and
selling, general and administrative expenses as a percentage of adjusted revenues (adjusted expense ratio).
•
Results of Operations
Financial Summary
(Dollars in millions)
Adjusted revenues
Pre-tax adjusted income from operations
Pre-tax adjusted margin
Medical care ratio
Adjusted expense ratio
2022 versus 2021
For the Years Ended December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2022
45,036
4,072
$
$
2021
2020
2022 vs. 2021
2021 vs. 2020
$
$
44,652
$ 41,135
3,609
$
4,031
$
$
384
1 % $
3,517
9 %
463
13 % $
(422)
(10) %
9.0 %
81.7 %
21.8 %
8.1 %
84.0 %
21.0 %
9.8 %
78.3 %
23.5 %
90 bps
230 bps
(80) bps
(170) bps
(570) bps
250 bps
Adjusted revenues increased 1%, primarily reflecting increased specialty contributions, higher premium rates due to anticipated
underlying medical cost trend and customer growth in International Health and U.S. Commercial, mostly offset by a decrease in U.S.
Government customers, including the disposition of the Medicaid business, as well as lower net investment income.
Pre-tax adjusted income from operations increased 13%, primarily due to lower medical care ratios in U.S. Commercial and U.S.
Government and increased specialty contributions in U.S. Commercial, partially offset by lower net investment income.
The medical care ratio decreased 230 bps, primarily due to lower medical costs, reflecting decreased direct COVID-19 testing,
treatment and vaccine costs in U.S. Commercial and U.S. Government, as well as effective pricing execution, including affordability
initiatives, partially offset by U.S. Government risk adjustment updates related to prior years.
The adjusted expense ratio increased 80 bps, primarily due to a higher expense ratio in U.S. Government reflecting increased
investments to support future growth as well as the disposition of the Medicaid business, partially offset by revenue growth and
expense efficiencies in U.S. Commercial and International Health.
69
Medical Customers
A medical customer is defined as a person meeting any one of the following criteria:
•
•
•
is covered under a medical insurance policy, managed care arrangement or service agreement issued by us;
has access to our provider network for covered services under their medical plan; or
has medical claims that are administered by us.
Cigna Healthcare Medical Customers
(In thousands)
Insured
U.S. Commercial
U.S. Government
International Health (1)
Services only
U.S. Commercial
U.S. Government
International Health (1)
As of December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
4,756
2,238
1,349
1,169
13,248
12,614
5
629
4,757
2,166
1,510
1,081
12,324
11,688
—
636
4,538
2,141
1,387
1,010
12,112
11,485
—
627
16,650
(1)
72
(161)
88
924
926
5
(7)
923
— %
3
(11)
8
7
8
N/M
(1)
5 %
219
25
123
71
212
203
—
9
431
5 %
1
9
7
2
2
N/M
1
3 %
Total
(1) International Health excludes medical customers served by less than 100% owned subsidiaries.
18,004
17,081
Our medical customer base increased 5%, reflecting growth in our fee-based products from Middle Market and Select market
segments as well as growth in International Health, partially offset by a decrease in U.S. Government customers, including the
disposition of the Medicaid business.
See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.
Unpaid Claims and Claim Expenses
(In millions)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
Unpaid claims and claim expenses – Cigna Healthcare
$
4,176 $
4,261 $
3,695
$
(85)
(2) % $
566
15 %
As of December 31,
Change Increase
(Decrease)
Change Increase
(Decrease)
Our unpaid claims and claim expenses liability decreased 2%, primarily driven by lower Medicare Advantage volumes and the
disposition of the Medicaid business, partially offset by higher U.S. Commercial volumes.
70
Other Operations
Other Operations includes corporate owned life insurance ("COLI"), the International businesses sold to Chubb on July 1, 2022, our
interest in a joint venture in Türkiye sold to our partner in December 2022, the Group Disability and Life business sold on December
31, 2020 and the Company's run-off operations. As described in the introduction of Segment Reporting, performance of Other
Operations is measured using adjusted revenues and pre-tax adjusted income from operations.
Results of Operations
Financial Summary
(Dollars in millions)
Adjusted revenues
Pre-tax adjusted income from operations
Pre-tax adjusted margin
2022 versus 2021
For the Years Ended December 31,
2022
2,262
500
$
$
2021
3,989
889
$
$
2020
8,446
966
$
$
22.1 %
22.3 %
11.4 %
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2022 vs. 2021
2021 vs. 2020
$
$
(1,727)
(389)
(43) %
(44) %
(20) bps
$
$
(4,457)
(77)
(53) %
(8) %
1,090 bps
Adjusted revenues and pre-tax adjusted income from operations decreased 43% and 44%, respectively, primarily due to the absence
of revenues and earnings from the businesses divested in the Chubb transaction.
Other Items Related to the Divested International Businesses
Other Operations' adjusted revenues associated with the divested International businesses were 77% and 86% for 2022 and 2021,
respectively. Other Operation's pre-tax adjusted income from operations associated with the divested International businesses were
83% and 89% for 2022 and 2021, respectively.
Corporate
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt
less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated
with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and
intersegment eliminations for products and services sold between segments.
Financial Summary
(In millions)
For the Years Ended December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2022
2021
2020
2022 vs. 2021
2021 vs. 2020
Pre-tax adjusted loss from operations
$
(1,466) $
(1,339) $
(1,552) $
(127)
(9) % $
213
14 %
2022 versus 2021
Pre-tax adjusted loss from operations increased 9%, reflecting an increase in operating expenses for enterprise-wide initiatives.
71
INVESTMENT ASSETS
The following table presents our investment asset portfolio excluding separate account assets. Additional information regarding our
investment assets is included in Notes 11, 12, 13 and 15 to the Consolidated Financial Statements.
(In millions)
Debt securities
Equity securities
Commercial mortgage loans
Policy loans
Other long-term investments
Short-term investments
Total
Investments classified as Assets of businesses held for sale(1)
December 31,
2022
December 31,
2021
$
9,872 $
16,958
622
1,614
1,218
3,728
139
603
1,566
1,338
3,574
428
24,467
(5,109)
Investments per Consolidated Balance Sheets
19,358
(1) Investments related to the divested International businesses that were held for sale. See Note 4 to the Consolidated Financial Statements for additional information.
17,193 $
$
Investment Outlook
We continue to actively monitor economic conditions including the impact of inflation, higher interest rates and the potential for a
recession in 2023 on the portfolio. Future realized and unrealized investment results will be driven largely by market conditions and
these future conditions are not reasonably predictable. We believe that the vast majority of our investments will continue to perform
under their contractual terms. We manage the portfolio for long-term economics and therefore we expect to hold a significant portion
of these assets for the long term. The following discussion addresses the strategies and risks associated with our various classes of
investment assets. Although future declines in investment fair values remain possible due to interest rate movements and credit
deterioration due to both investment-specific uncertainties and global economic uncertainties as discussed below, we do not expect
these losses to have a material adverse effect on our financial condition or liquidity.
Debt Securities
Investments in debt securities include publicly traded and privately placed bonds, mortgage and other asset-backed securities and
preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value in our
Consolidated Balance Sheets. Additional information regarding valuation methodologies, key inputs and controls is included in Note
12 to the Consolidated Financial Statements.
The following table reflects our portfolio of debt securities by type of issuer:
(In millions)
Federal government and agency
State and local government
Foreign government
Corporate
Mortgage and other asset-backed
Total
December 31,
2022
December 31,
2021
$
312 $
41
365
8,806
348
387
171
2,616
13,266
518
$
9,872 $
16,958
Our debt securities portfolio decreased during the year ended December 31, 2022 primarily due to the completion of the Chubb
transaction during the third quarter (see Note 4 to the Consolidated Financial Statements) and a decrease in valuations due to a
significant rise in interest rates, causing our portfolio to change to a net unrealized depreciation position at December 31, 2022, from a
net unrealized appreciation position at December 31, 2021. More detailed information about debt securities by type of issuer, maturity
dates and net unrealized position is included in Note 11 to the Consolidated Financial Statements.
As of December 31, 2022, $8.0 billion, or 81%, of the debt securities in our investment portfolio were investment grade (Baa and
above, or equivalent) and the remaining $1.9 billion were below investment grade. The majority of the bonds that are below
investment grade were rated at the higher end of the non-investment grade spectrum. These quality characteristics have not materially
changed since the prior year and remain consistent with our investment strategy.
Debt securities include private placement assets of $4.1 billion. These investments are generally less marketable than publicly traded
bonds; however, yields on these investments tend to be higher than yields on publicly traded bonds with comparable credit risk. We
72
perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating
financial strength and pursue remedial actions, if warranted.
Investments in debt securities are diversified by issuer, geography and industry. On an aggregate basis, the debt securities portfolio
continues to perform according to original expectations, which includes a long-term economic investment strategy. Elevated global
inflation and rising interest rates experienced during 2022, as well as continuing supply chain disruptions are the primary risks that
many of the issuers in our portfolio are facing. To date, most issuers have been successful in managing the cost escalation and product
shortages without undue margin pressure. We continue to monitor the economic environment and its effect on our portfolio and
consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11
to the Consolidated Financial Statements.
Commercial Mortgage Loans
As of December 31, 2022, our $1.6 billion commercial mortgage loan portfolio consisted of approximately 50 fixed-rate loans,
diversified by property type, location and borrower. These loans are carried in our Consolidated Balance Sheets at their unpaid
principal balance, net of an insignificant allowance for expected credit losses. As a result of increasing market interest rates since the
majority of these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2022. See Note 12
to the Consolidated Financial Statements for further details. Given the quality and diversity of the underlying real estate, positive debt
service coverage and significant borrower cash invested in the property generally ranging between 30 and 40%, we remain confident
that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results
and changes in key loan metrics, see Note 11 to the Consolidated Financial Statements.
Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at less than
65% of the property's value at origination of the loan. Property value, debt service coverage, quality, building tenancy and stability of
cash flows are all important financial underwriting considerations. We hold no direct residential mortgage loans and do not originate
or service securitized mortgage loans.
We assess the credit quality of our commercial mortgage loan portfolio annually, generally in the second fiscal quarter by reviewing
each holding's most recent financial statements, rent rolls, budgets and relevant market reports. The review performed in the second
quarter of 2022 confirmed ongoing strong overall credit quality in line with the previous year's results.
Office sector fundamentals have been and continue to be weak and values are experiencing stress due to multiple headwinds:
expanded work from home flexibility, shorter term leases, elevated tenant improvement allowances and corporate migration to lower
cost states. Additionally, the current macroeconomic headwinds are impacting capital markets and reducing investor appetite for
capital intensive assets (e.g., offices and regional shopping malls). Our commercial mortgage loan portfolio has no exposure to
regional shopping malls and less than 30% exposure to office properties.
Other Long-term Investments
Other long-term investments of $3.7 billion as of December 31, 2022 included investments in securities limited partnerships and real
estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various
insurance and health services businesses. Accounting policies for these investments are discussed in Note 11 to the Consolidated
Financial Statements. The increase in other long-term investments of $0.2 billion since December 31, 2021 is primarily driven by net
additional funding activity partially offset by the effects of completing the Chubb transaction during the third quarter of 2022 (see
Note 4 to the Consolidated Financial Statements). These limited partnership entities typically invest in mezzanine debt or equity of
privately-held companies and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we
assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified across approximately 190
separate partnerships and 90 general partners who manage one or more of these partnerships. Also, the underlying investments are
diversified by industry sector or property type and geographic region. No single partnership investment exceeded 3% of our securities
and real estate limited partnership portfolio.
Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial
information is received from the general partner or manager of the investments. Our Net investment income during 2022 was strong,
but decreased significantly year over year as 2021 reflected even stronger corporate earnings and higher public and private asset
valuations as a result of the broad recovery coming out of the COVID-19 pandemic. We expect continued volatility in private equity
and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less
than 5% of our other long-term investments are exposed to real estate in the office sector.
We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture under the equity
method of accounting and report our share of the net assets of $0.9 billion in Other assets. Our 50% share of the investment portfolio
73
supporting the joint venture's liabilities is approximately $9.2 billion as of December 31, 2022. These investments were comprised of
approximately 75% debt securities, including government and corporate debt diversified by issuer, industry and geography; 15%
equities, including mutual funds, equity securities and private equity partnerships; and 10% long-term deposits and policy loans. We
participate in the approval of the joint venture's investment strategy and continuously review its execution. There were no investments
with a material unrealized loss as of December 31, 2022.
MARKET RISK
Financial Instruments
Our assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and
prices. Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for
financial instruments:
•
•
•
changes in the fair values of insurance-related assets and liabilities because their primary risks are insurance rather than market
risk;
changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other
postretirement and postemployment benefit plans (and related assets); and
changes in the fair values of other significant assets and liabilities, such as goodwill, deferred policy acquisition costs, taxes and
various accrued liabilities. Because they are not financial instruments, their primary risks are other than market risk.
Our primary market risk exposures changed significantly since December 31, 2021 as a result of completing the Chubb transaction
during the third quarter 2022, as described in Note 4 to the Consolidated Financial Statements. Our exposure to foreign currency
exchange rate risk from financial instruments is no longer significant. Excluding the items noted in the paragraph above, our primary
market risk exposure from financial instruments is our interest-rate risk exposure to fixed-rate, medium-term instruments. Changes in
market interest rates affect the value of instruments that promise a fixed return.
Our Management of Market Risks
We predominantly rely on three techniques to manage our exposure to market risk:
•
•
•
Investment/liability matching. We generally select investment assets with characteristics (such as duration, yield, currency
and liquidity) that correspond to the underlying characteristics of our related insurance and contractholder liabilities so that
we can match the investments to our obligations. Shorter-term investments generally support shorter-term life and health
liabilities. Medium-term, fixed-rate investments support interest-sensitive and health liabilities. Longer-term investments
generally support products with longer payout periods such as annuities.
Use of local currencies for foreign operations. We generally conduct our international business through foreign operating
entities that maintain assets and liabilities in local currencies. This technique limits exchange rate risk to our net assets.
Use of derivatives. We use derivative financial instruments to reduce our primary market risks. See Note 11 to the
Consolidated Financial Statements for additional information about derivative financial instruments.
Effect of Market Fluctuations
We determine the sensitivity of our financial instruments, primarily debt securities and commercial mortgage loans, to our primary
market risk exposure by estimating the present value of future cash flows using various models, primarily duration modeling.
According to this analysis, assuming a 100 basis point increase in interest rates, the effect of hypothetical changes in market rates on
the fair value of certain financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have
been as follows:
Market scenario for certain non-insurance financial instruments
(in billions)
100 basis point increase in interest rates (excluding the Company's long-term debt)
Loss in Fair Value
December 31,
2022
December 31,
2021
$
0.7 $
1.4
In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease
approximately $1.8 billion at December 31, 2022 and $2.9 billion at December 31, 2021. Changes in the fair value of our long-term
debt do not impact our financial position or operating results since long-term debt is not required to be recorded at fair value. See Note
7 to the Consolidated Financial Statements for additional information about the Company's debt.
74
The decrease in the effect of this hypothetical change in interest rates is a result of decreases in the fair value of our debt securities and
long-term debt since December 31, 2021, as well as disposals associated with completing the Chubb transaction during the third
quarter of 2022, see Note 4 to the Consolidated Financial Statements for further details.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained under the caption "Market Risk" in the MD&A section of this Form 10-K is incorporated by reference.
75
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of The Cigna Group
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of The Cigna Group and its subsidiaries (the "Company") as of
December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, changes in total equity and
cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement
schedules listed in the index appearing on page FS-1 of this Form 10-K (collectively referred to as the "consolidated financial
statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's
Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect
on the financial statements.
76
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment - U.S. Government Reporting Unit
As described in Note 19 to the consolidated financial statements, as of December 31, 2022, goodwill in the Cigna Healthcare segment
was $10.7 billion, of which a portion of the balance relates to the U.S. Government reporting unit. Management conducts its annual
quantitative evaluation for goodwill impairment during the third quarter at the reporting unit level and writes it down through
shareholders' net income if impaired. On a quarterly basis, management performs a qualitative impairment assessment to determine if
events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its
estimated fair value. Fair value of a reporting unit is generally estimated based on both a discounted cash flow analysis and a market
approach using assumptions that management believes a hypothetical market participant would use to determine a current transaction
price. The significant assumptions and estimates used in determining fair value primarily include the discount rate and future cash
flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital. Future cash flows for the
U.S. Government reporting unit is primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term
growth rates.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the
U.S. Government reporting unit is a critical audit matter are the significant judgment by management when developing the fair value
estimate of the reporting unit. This 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 discount rate, forecasted revenues, benefit expenses, operating
expenses, and long-term growth rates (collectively referred to as the "significant assumptions"). In addition, 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 assessment, including controls over management's methodology, inputs, and assumptions used in developing the
fair value estimate of the U.S. Government reporting unit. These procedures also included, among others (i) testing management's
process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the discounted cash flow
analysis and market approach; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow analysis
and market approach; and (iv) evaluating the reasonableness of the significant assumptions used by management. Evaluating the
reasonableness of the significant assumptions involved consideration of (i) the current and past performance of the reporting unit; (ii)
the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in
other areas of the audit, as applicable. Professionals with specialized skill and knowledge were used to assist in the evaluation of the
reasonableness related to the discount rate and long-term growth rates significant assumptions.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 23, 2023
We have served as the Company's auditor since 1983.
77
a
The Cigna Group
Consolidated Statements of Income
(In millions, except per share amounts)
Revenues
Pharmacy revenues
Premiums
Fees and other revenues
Net investment income
TOTAL REVENUES
Benefits and expenses
Pharmacy and other service costs
Medical costs and other benefit expenses
Selling, general and administrative expenses
Amortization of acquired intangible assets
TOTAL BENEFITS AND EXPENSES
Income from operations
Interest expense and other
Debt extinguishment costs
Gain on sale of businesses
Net realized investment (losses) gains
Income before income taxes
TOTAL INCOME TAXES
Net income
Less: Net income attributable to noncontrolling interests
SHAREHOLDERS' NET INCOME
Shareholders' net income per share
Basic
Diluted
For the Years Ended December 31,
2022
2021
2020
$
128,566 $
121,413 $
39,915
10,880
1,155
180,516
124,834
32,206
13,186
1,876
172,102
8,414
(1,228)
—
1,662
(495)
8,353
1,607
6,746
78
41,154
9,962
1,549
174,078
117,553
33,562
13,030
1,998
166,143
7,935
(1,208)
(141)
—
196
6,782
1,367
5,415
50
$
$
$
6,668 $
5,365 $
21.54 $
21.30 $
15.87 $
15.73 $
107,769
42,627
8,761
1,244
160,401
103,484
32,710
14,072
1,982
152,248
8,153
(1,438)
(199)
4,203
149
10,868
2,379
8,489
31
8,458
23.17
22.96
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
78
The Cigna Group
Consolidated Statements of Comprehensive Income
(In millions)
Net income
Other comprehensive income (loss), net of tax
Net unrealized depreciation on securities and derivatives
Net translation gains (losses) on foreign currencies
Postretirement benefits liability adjustment
Other comprehensive (loss) income, net of tax
Total comprehensive income
Comprehensive income (loss) attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interests
Net income attributable to other noncontrolling interests
Other comprehensive loss attributable to redeemable noncontrolling interests
Total comprehensive income attributable to noncontrolling interests
For the Years Ended December 31,
2022
2021
2020
$
6,746 $
5,415 $
8,489
(1,005)
72
420
(513)
6,233
11
67
(2)
76
(215)
(232)
410
(37)
5,378
19
31
(14)
36
(75)
252
(105)
72
8,561
14
17
(8)
23
SHAREHOLDERS' COMPREHENSIVE INCOME
$
6,157 $
5,342 $
8,538
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
79
143
The Cigna Group
Consolidated Balance Sheets
(In millions)
Assets
Cash and cash equivalents
Investments
Accounts receivable, net
Inventories
Other current assets
Assets of businesses held for sale
Total current assets
Long-term investments
Reinsurance recoverables
Property and equipment
Goodwill
Other intangible assets
Other assets
Separate account assets
TOTAL ASSETS
Liabilities
Current insurance and contractholder liabilities
Pharmacy and other service costs payable
Accounts payable
Accrued expenses and other liabilities
Short-term debt
Liabilities of businesses held for sale
Total current liabilities
Non-current insurance and contractholder liabilities
Deferred tax liabilities, net
Other non-current liabilities
Long-term debt
Separate account liabilities
TOTAL LIABILITIES
Contingencies — Note 23
Redeemable noncontrolling interests
Shareholders' equity
Common stock (1)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Less: Treasury stock, at cost
TOTAL SHAREHOLDERS' EQUITY
Other noncontrolling interests
Total equity
As of December 31,
2022
2021
$
5,924 $
905
17,218
4,777
1,296
—
30,120
16,288
4,743
3,774
45,811
32,492
3,426
7,278
5,081
920
15,071
3,722
1,283
10,057
36,134
18,438
4,970
3,692
45,811
34,102
3,405
8,337
143,932 $
154,889
$
$
5,385 $
17,070
7,775
8,006
2,993
—
41,229
11,481
7,751
3,142
28,100
7,278
98,981
66
4
30,233
(1,395)
37,874
(21,844)
44,872
13
44,885
5,318
15,309
6,655
7,322
2,545
6,423
43,572
12,563
8,346
3,762
31,125
8,337
107,705
54
4
29,574
(884)
32,593
(14,175)
47,112
18
47,130
154,889
Total liabilities and equity
(1) Par value per share, $0.01; shares issued, 398 million as of December 31, 2022 and 394 million as of December 31, 2021; authorized shares, 600 million.
143,932 $
$
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
80
The Cigna Group
Consolidated Statements of Changes in Total Equity
(In millions)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss)
Retained
Earnings
Treasury
Stock
Shareholders'
Equity
Other
Non-
controlling
Interests
Total
Equity
Redeemable
Noncontrolling
Interests
Balance at December 31, 2019
$
4 $ 28,306 $
(941) $ 20,162 $
(2,193) $
45,338 $
6 $ 45,344 $
35
Cumulative effect of adopting
new credit loss guidance (ASU
2016-13)
Effect of issuing stock for
employee benefit plans
Other comprehensive income
(loss)
Net income
Common dividends declared
(per share: $0.04)
Repurchase of common stock
Other transactions impacting
noncontrolling interests
(30)
672
(90)
80
8,458
(15)
(4,089)
(30)
582
80
8,458
(15)
(4,089)
(30)
582
80
17
8,475
(15)
(4,089)
(3)
(3)
(16)
(19)
Balance at December 31, 2020
$
4 $ 28,975 $
(861) $ 28,575 $
(6,372) $
50,321 $
7 $ 50,328 $
Effect of issuing stock for
employee benefit plans
Other comprehensive loss
Net income
Common dividends declared
(per share: $4.00)
Repurchase of common stock
Other transactions impacting
noncontrolling interests
604
(93)
(23)
5,365
(1,347)
(7,710)
511
(23)
5,365
(1,347)
(7,710)
511
(23)
31
5,396
(1,347)
(7,710)
(5)
(5)
(20)
(25)
Balance at December 31, 2021
$
4 $ 29,574 $
(884) $ 32,593 $ (14,175) $
47,112 $
18 $ 47,130 $
Effect of issuing stock for
employee benefit plans
Other comprehensive loss
Net income
Common dividends declared
(per share: $4.48)
Repurchase of common stock
Other transactions impacting
noncontrolling interests
659
(76)
(511)
6,668
(1,387)
(7,593)
583
(511)
6,668
(1,387)
(7,593)
583
(511)
67
6,735
(1,387)
(7,593)
—
(72)
(72)
Balance at December 31, 2022
$
4 $ 30,233 $
(1,395) $ 37,874 $ (21,844) $
44,872 $
13 $ 44,885 $
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
(8)
14
17
58
(14)
19
(9)
54
(2)
11
3
66
81
The Cigna Group
Consolidated Statements of Cash Flows
(In millions)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Realized investment losses (gains), net
Deferred income tax benefit
Gain on sale of businesses
Debt extinguishment costs
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable, net
Inventories
Reinsurance recoverable and Other assets
Insurance liabilities
Pharmacy and other service costs payable
Accounts payable and Accrued expenses and other liabilities
Other, net
NET CASH PROVIDED BY OPERATING ACTIVITIES
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities
Investment maturities and repayments:
Debt securities and equity securities
Commercial mortgage loans
Other sales, maturities and repayments (primarily short-term and other long-term investments)
Investments purchased or originated:
Debt securities and equity securities
Commercial mortgage loans
Other (primarily short-term and other long-term investments)
Property and equipment purchases, net
Acquisitions, net of cash acquired
Divestitures, net of cash sold
Other, net
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds
Withdrawals and benefit payments from contractholder deposit funds
Net change in short-term debt
Net proceeds on issuance of term loan
Repayment of term loan
Payments for debt extinguishment
Repayment of long-term debt
Net proceeds on issuance of long-term debt
Repurchase of common stock
Issuance of common stock
Common stock dividend paid
Other, net
NET CASH USED IN FINANCING ACTIVITIES
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash January 1, (1)
Cash, cash equivalents and restricted cash, December 31,
Cash and cash equivalents reclassified to Assets of businesses held for sale
Cash, cash equivalents and restricted cash December 31, per Consolidated Balance Sheets (2)
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds
Interest paid
(1) Includes $425 million reported in Assets of businesses held for sale as of January 1, 2022.
(2) Restricted cash and cash equivalents were reported in other long-term investments.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
82
For the Years Ended December 31,
2022
2021
2020
$
6,746 $
5,415 $
8,489
2,937
495
(480)
(1,662)
—
(2,237)
(1,055)
(38)
291
1,760
1,574
325
8,656
1,744
1,327
98
1,039
(2,756)
(161)
(1,563)
(1,295)
—
4,835
(170)
3,098
164
(220)
(2,059)
—
—
—
(500)
—
(7,607)
389
(1,384)
(23)
(11,240)
(86)
428
5,548
5,976
—
5,976 $
1,850 $
1,229 $
$
$
$
2,923
(196)
(220)
—
141
(2,843)
(557)
(656)
967
1,961
(77)
333
7,191
2,030
1,628
180
1,936
(3,553)
(327)
(2,554)
(1,154)
(1,833)
(61)
97
(3,611)
153
(168)
975
—
—
(136)
(4,578)
4,260
(7,742)
326
(1,341)
39
(8,212)
(65)
(4,697)
10,245
5,548
(425)
5,123 $
2,240 $
1,253 $
2,802
(149)
(386)
(4,203)
199
(1,496)
(504)
(77)
841
2,891
1,346
597
10,350
2,283
1,519
19
1,575
(4,765)
(113)
(1,924)
(1,094)
(139)
5,592
23
2,976
1,023
(979)
60
1,398
(1,400)
(212)
(8,047)
3,465
(4,042)
376
(15)
(160)
(8,533)
41
4,834
5,411
10,245
—
10,245
1,837
1,439
THE CIGNA GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Note Number Footnote
Description of Business ...........................................................................................................
Summary of Significant Accounting Policies .........................................................................
Accounts Receivable, Net .......................................................................................................
Mergers, Acquisitions and Divestitures ..................................................................................
Assets and Liabilities of Businesses Held for Sale .................................................................
Earnings Per Share ..................................................................................................................
Debt .........................................................................................................................................
Common and Preferred Stock .................................................................................................
Insurance and Contractholder Liabilities .................................................................................
Reinsurance .............................................................................................................................
Investments ..............................................................................................................................
Fair Value Measurements ........................................................................................................
Variable Interest Entities .........................................................................................................
Collectively Significant Operating Unconsolidated Subsidiaries ...........................................
Accumulated Other Comprehensive Income (Loss) ...............................................................
Organizational Efficiency Plan ................................................................................................
Pension ....................................................................................................................................
Employee Incentive Plans .......................................................................................................
BUSINESS AND CAPITAL STRUCTURE
1
2
3
4
5
6
7
8
INSURANCE INFORMATION
9
10
INVESTMENTS
11
12
13
14
15
WORKFORCE MANAGEMENT AND COMPENSATION
16
17
18
PROPERTY, LEASES AND OTHER ASSET BALANCES
19
20
COMPLIANCE, REGULATION AND CONTINGENCIES
21
22
23
RESULTS DETAILS
24
Goodwill, Other Intangibles and Property and Equipment .....................................................
Leases ......................................................................................................................................
Shareholders' Equity and Dividend Restrictions .....................................................................
Income Taxes ..........................................................................................................................
Contingencies and Other Matters ............................................................................................
Segment Information ...............................................................................................................
Page
84
84
91
92
92
93
94
96
97
102
104
110
115
117
118
119
119
122
125
127
129
130
132
134
83
Note 1 – Description of Business
The Cigna Group, together with its subsidiaries, is a global health company. On February 13, 2023, we changed our corporate name
from Cigna Corporation to The Cigna Group. We will not distinguish between our prior and current corporate name and will refer to
our current corporate name throughout the Financial Statements and related footnotes. As such, unless expressly indicated or the
context requires otherwise, the terms "Company," "we," "us," and "our" in this document refer to The Cigna Group, a Delaware
corporation, and, where appropriate, its subsidiaries. On February 13, 2023, we also changed the name of our Evernorth segment to
Evernorth Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment
name throughout the Financial Statements and related footnotes. Our common stock continues to be listed with, and trades on, the
New York Stock Exchange under the ticker symbol "CI". The Cigna Group has a mission of helping those we serve improve their
health and vitality. Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental and supplemental products and
services.
The majority of these products are offered through employers and other groups such as governmental and non-governmental
organizations, unions and associations. Cigna Healthcare also offers commercial health and dental insurance and Medicare products to
individuals in the United States and selected international markets. In addition to these ongoing operations, The Cigna Group also has
certain run-off operations.
A full description of our segments follows:
Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those
from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and
Care Delivery and Management Solutions, which are provided to health plans, employers, government organizations and health care
providers.
Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health operating segments which provide
comprehensive medical and coordinated solutions to clients and customers. U.S. Commercial products and services include medical,
pharmacy, behavioral health, dental and other products and services for insured and self-insured clients. U.S. Government solutions
include Medicare Advantage, Medicare Supplement and Medicare Part D plans for seniors and individual health insurance plans.
International Health solutions include health care coverage in our international markets, as well as health care benefits for globally
mobile individuals and employees of multinational organizations.
Other Operations comprises the remainder of our business operations, which includes ongoing businesses and exiting businesses. Our
ongoing businesses include continuing business, corporate-owned life insurance ("COLI") and our run-off businesses. Our run-off
businesses include (i) guaranteed minimum death benefit ("GMDB") and guaranteed minimum income benefit ("GMIB") business that
was effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska ("Berkshire") in 2013, (ii)
settlement annuity business, and (iii) individual life insurance and annuity and retirement benefits businesses comprised of deferred
gains from the sales of these businesses. Our exiting businesses include our interest in a joint venture in Türkiye, which was sold to
our partner in December 2022, the international life, accident and supplemental benefits businesses sold on July 1, 2022, and the
Group Disability and Life business sold on December 31, 2020.
On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong
Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc. ("Chubb") for approximately $5.4
billion in cash (the "Chubb transaction") (see Note 4).
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt
less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated
with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and
intersegment eliminations for products and services sold between segments.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries. Intercompany
transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in
conformity with accounting principles generally accepted in the United States of America ("GAAP"). Certain amounts in prior years
have been reclassified to conform to the current year presentation.
84
Amounts recorded in the Consolidated Financial Statements necessarily reflect management's estimates and assumptions about
medical costs, investment and receivable valuations, interest rates and other factors. Significant estimates are discussed throughout
these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in
earnings in the period of adjustment.
Recent Accounting Pronouncements
There were no new accounting standards adopted during the year ended December 31, 2022 that had a material impact on our
Consolidated Financial Statements.
Accounting Guidance Not Yet Adopted
Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12) and related amendments ("LDTI")
Effective date of January 1, 2023 for The Cigna Group and requires the following key provisions (for insurance entities that issue
long-duration contracts):
•
Changes to the measurement of the future policy benefits liability for traditional and limited-pay insurance contracts:
•
•
Assumptions used to measure cash flows (such as mortality, morbidity and lapse assumptions) to be updated at least
annually with the effect of changes in those assumptions remeasured retrospectively and reflected in current period
net income.
Discount rate assumptions to be updated quarterly based on market-level yields for low credit risk fixed income
instruments ("upper-medium grade fixed-income instrument"), with any changes reflected in other comprehensive
income. The upper-medium grade fixed-income instrument yield is interpreted to mean A-rated.
•
Deferred policy acquisition costs ("DAC") related to long-duration insurance contracts to be amortized on a constant-level
basis over the expected term of the related contracts. Other related deferred or capitalized balances (such as unearned revenue
liability and value of business acquired) may use this simplified amortization method.
• Market risk benefits (defined as protecting the contractholder from other-than-nominal capital market risk and exposing the
insurer to that risk) to be measured at fair value, with changes in fair value recognized in net income each period, except for
the effect of changes in the insurance entity's credit risk to be recognized in other comprehensive income.
Additional disclosures, including disaggregated roll forwards for the liability for future policy benefits, market risk benefits,
separate account liabilities and DAC, as well as information about significant inputs, judgments, assumptions and methods
used in measurement.
Transition methods at adoption vary:
•
•
•
Changes to the liability for future policy benefits and DAC to use a modified retrospective approach applied to all
outstanding contracts on the basis of their existing carrying amounts as of the beginning of the earliest period
presented, with an option to elect a full retrospective transition under certain criteria. Remeasuring the future policy
benefits liability for the discount rate to be recorded through accumulated other comprehensive loss at transition.
• Market risk benefits to be transitioned retrospectively and measured at fair value at the beginning of the earliest
period presented. The difference between this fair value and carrying value to be recognized in the opening balance
of retained earnings, excluding the effect of credit risk changes that are to be recognized in accumulated other
comprehensive loss.
Expected effects:
•
•
•
•
The new guidance applies to our long-duration insurance products predominantly within the Cigna Healthcare segment and
Other Operations.
The Company developed a cross-functional implementation project plan and executed on the necessary changes to our
systems, processes and controls.
The Company adopted the standard on January 1, 2023, using the modified retrospective transition method for changes to the
liability for future policy benefits and DAC. The impact of adoption was not material to Shareholders' equity and did not
result in a material restatement of prior periods.
It is possible that our income recognition pattern could change on a prospective basis for several reasons:
•
•
•
Applying periodic assumption updates, versus the current locked-in model, may change our timing of profit or loss
recognition.
DAC amortization will be on a constant level basis over the expected term of the related contracts and no longer tied
to the emergence of profit on such contracts.
Features, such as the Company's GMDB product, that provide market-risk benefits are not currently measured at fair
value, so these liabilities and related reinsurance recoverables will become subject to market sensitivity, notably to
interest rates.
85
In December 2022, the Financial Accounting Standards Board ("FASB") published Accounting Standards Update (ASU) 2022-05,
which simplifies the retrospective adoption of LDTI. The ASU permits companies to make an accounting policy election to exclude
contracts that are sold and removed from the balance sheet prior to the effective date of the standard from the retrospective adoption of
LDTI. The Cigna Group made this policy election for the contracts sold in the Chubb transaction and our divested interest in a joint
venture in Türkiye.
Significant Accounting Policies
The Company's accounting policies are described either in this Note or in the applicable Notes to the Consolidated Financial
Statements as listed in the table of contents on page 83.
A. Cash and Cash Equivalents
Cash and cash equivalents are carried at cost that approximates fair value. Cash equivalents consist of short-term investments with
maturities of three months or less from the time of purchase. The Company reclassifies cash overdraft positions to liabilities when the
legal right of offset does not exist.
B.
Inventories
Inventories consist of prescription drugs and medical supplies and are stated at the lower of first-in-first-out cost or net realizable
value.
C. Deferred Policy Acquisition Costs
Costs eligible for deferral, recorded within Other assets (non-current), include incremental, direct costs of acquiring new or renewal
insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs
include commissions, sales compensation and benefits, policy issuance and underwriting costs. The Company records acquisition costs
differently depending on the product line. Acquisition costs for:
•
•
•
Supplemental health, life and accident insurance products (primarily individual products) that comprise the majority of the
Company's deferred policy acquisition costs and group health and accident insurance products are deferred and amortized,
generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.
Universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the
expected lives of the contracts.
Other products are expensed as incurred.
Deferred policy acquisition costs also include the value of business acquired ("VOBA") for certain acquisitions with material long-
duration insurance contracts. The Company recorded amortization of deferred policy acquisition costs of $319 million in 2022, $478
million in 2021 and $502 million in 2020 primarily in Selling, general and administrative expenses.
Each year, deferred policy acquisition costs are tested for recoverability. For universal life and other individual products, management
estimates the present value of future revenues less expected payments. For group health and accident insurance products, management
estimates the sum of unearned premiums and anticipated net investment income less future expected claims and related costs. If
management's estimates of these sums are less than the deferred costs, the Company reduces deferred policy acquisition costs and
records an additional expense.
D. Other Assets (Current and Non-Current)
Other current assets consist primarily of prepaid expenses, accrued investment income, the current portion of reinsurance recoverables
and income tax receivables. Other assets (non-current) consist primarily of the carrying value of our equity-method investments in
business-related joint ventures in China, India, the U.S. and other foreign jurisdictions. Earnings or losses from these equity-method
investments in joint ventures are recorded in Fees and other revenues. See Note 14 for additional information on unconsolidated
subsidiaries. Additionally, Other assets (non-current) include deferred policy acquisition costs, operating lease right-of-use assets,
GMIB assets, overfunded pension obligations (see Note 17) and various other insurance-related assets. See Note 10 for the Company's
accounting policy for GMIB assets and Note 20 for the Company's accounting policy related to leases.
E. Redeemable Noncontrolling Interests
Redeemable noncontrolling interests in our Consolidated Balance Sheets represents the noncontrolling shareholders' preferred and
common stock interests of the Company's consolidated less than fully owned subsidiaries. Those shareholders may choose to require
86
the Company to purchase their equity interest. For certain entities, we may also have the right to require those shareholders to sell their
equity interest to us. As these redeemable noncontrolling interests provide for redemption features not solely within our control, we
classify the redeemable noncontrolling interests outside of permanent equity. The noncontrolling interest was initially recorded at fair
value. In subsequent reporting periods, the values are adjusted to reflect the earnings, losses and distributions attributable to the
noncontrolling interest. When a shareholder's right to require the Company to purchase its equity interest is exercisable, the
redeemable noncontrolling interest is recorded at estimated redemption value. When the estimated redemption value for a redeemable
noncontrolling interest exceeds its initial carrying value, an adjustment to increase or decrease the redeemable noncontrolling interest
is recorded with an offsetting adjustment to Retained earnings or Additional paid-in capital in the absence of Retained earnings. When
an adjustment is made to the carrying value of the redeemable noncontrolling interest, the calculation of shareholders' net income per
share will be adjusted if the redemption value exceeds fair value.
F. Accrued Expenses and Other Current and Non-Current Liabilities
Accrued expenses and other liabilities (current) primarily includes financial and performance guarantee liabilities under pharmacy
contracts (see section H), management compensation and various insurance-related liabilities, including experience-rated refunds,
reinsurance contracts and the risk adjustment and minimum medical loss ratio rebate accruals under The Patient Protection and
Affordable Care Act (the "ACA"). Other non-current liabilities primarily include uncertain tax positions (see Note 22), GMIB contract
liabilities (see Note 10), lease liabilities (see Note 20), self-insured exposures not expected to be settled within one year and
underfunded pension obligations (see Note 17).
The Company accrues for legal and regulatory matters when a loss contingency is both probable and estimable. The estimated loss is
generally recorded in Selling, general and administrative expenses and represents the Company's best estimate of the loss contingency.
If the loss estimate is a range, the Company accrues the minimum amount in the range if no amount is better than any other estimated
amount in the range. Legal costs to defend the Company's litigation and arbitration matters are expensed as incurred in cases that the
Company cannot reasonably estimate the ultimate cost to defend. If the Company can reasonably estimate the cost to defend, a liability
for these costs is accrued when the claim is reported. Litigation and legal or regulatory matters that the Company has identified with a
reasonable possibility of material loss are described in Note 23.
G. Translation of Foreign Currencies
The Company generally conducts its international business through foreign operating entities that maintain assets and liabilities in
local currencies that are their functional currencies. The Company uses exchange rates as of the balance sheet date to translate assets
and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in
Accumulated other comprehensive loss. The Company uses average monthly exchange rates during the year to translate revenues and
expenses into U.S. dollars.
H. Pharmacy Revenues and Costs
Pharmacy revenues. Pharmacy revenues are primarily derived from providing pharmacy benefit management services to clients and
customers. Pharmacy revenues are recognized when control of the promised goods or services is transferred to clients and customers,
in an amount that reflects the consideration the Company expects to receive for those goods or services.
The Company provides or makes available various services supporting benefit management and claims administration and is generally
obligated to provide prescription drugs to clients' members using multiple distribution methods including retail networks, home
delivery and specialty pharmacies. These goods and services are integrated into a single performance obligation to process claims,
dispense prescription drugs and provide other services over the contract period (generally three years). This performance obligation is
satisfied as the business stands ready to fulfill its obligation.
Revenues for dispensing prescription drugs through retail pharmacies are reported gross and consist of the prescription price
(ingredient cost and dispensing fee) contracted with clients, including the customer copayment and any associated fees for services,
because the Company acts as the principal in these arrangements. When a prescription is presented to a retail network pharmacy, the
Company is solely responsible for customer eligibility, drug utilization review, drug-to-drug interaction review, any required clinical
intervention, plan provision information, payment to the pharmacy and client billing. These revenues are recognized based on the full
prescription price when the pharmacy claim is processed and approved for payment. The Company also provides benefit design and
formulary consultation services to clients and negotiates separate contractual relationships with clients and network pharmacies. These
factors indicate that the Company has control over these transactions until the prescription is processed. Revenues are billed, due and
recognized at contract rates either on a periodic basis or as services are provided (such as based on volume of claims processed). This
recognition pattern aligns with the benefits from services provided.
87
Home delivery and specialty pharmacy revenues are due and recognized as each prescription is shipped, net of reserves for discounts
and contractual allowances estimated based on historical experience. Any differences between estimates and actual collections are
reflected in Pharmacy revenues when payments are received. Historically, adjustments to original estimates and returns have not been
material. The Company has elected the practical expedient to account for shipping and handling as a fulfillment activity.
We may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive,
generic utilization rates and various service levels. Clients may be entitled to receive compensation if we fail to meet the guarantees.
Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue
for any estimated payouts within Accrued expenses and other liabilities (current). These estimates are adjusted and paid at the end of
the annual guarantee period. Historically, adjustments to original estimates have not been material. The liability for these financial and
performance guarantees was $1.3 billion as of December 31, 2022 and $1.1 billion as of December 31, 2021.
The Company administers programs through which we may receive rebates and other vendor consideration from pharmaceutical
manufacturers. The amounts of such rebates or other vendor consideration shared with pharmacy benefit management services clients
vary based on the contractual arrangement with the client and in some cases the type of consideration received from the
pharmaceutical manufacturer. Rebates and other vendor consideration payable to pharmacy benefit management services clients are
recorded as a reduction of Pharmacy revenues. Estimated amounts payable to clients are based on contractual sharing arrangements
between the Company and the client and these amounts are adjusted when amounts are collected from pharmaceutical manufacturers
in accordance with the contractual arrangement between the Company and the client. Historically, these adjustments have not been
material.
In retail, home delivery and specialty transactions, amounts may be collected from third-party payors. These are billed and collected in
accordance with the Company's standard accounts receivable collection procedures.
Other pharmacy service revenues are earned by distributing specialty pharmaceuticals and medical supplies to providers, clinics and
hospitals. These revenues are billed, due and recognized at contracted rates as prescriptions and supplies are shipped and services are
provided.
Pharmacy costs. Pharmacy costs include the cost of prescriptions sold, network pharmacy claim costs and copayments. Also included
are direct costs of dispensing prescriptions including supplies, shipping and handling and direct costs associated with clinical
programs, such as drug utilization management and medication adherence counseling. Home delivery and specialty pharmacy costs
are recognized when the drug is shipped and retail network costs are recognized when the drug is processed and approved for
payment. Rebates and other vendor consideration received when providing pharmacy benefit management services are recorded as a
reduction of pharmacy costs. Rebates are recognized as prescriptions are shipped or processed and approved for payment. Historically,
the effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected, net of contractual
allowances, has not been material. The Company maintains reimbursement guarantees with certain retail network pharmacies. For
each such guarantee, the Company records a pharmacy and other service costs payable or prepaid asset for applicable retail network
claims based on our actual performance throughout the period against the contractual reimbursement rate. The Company's contracts
with certain retail pharmacies give the Company the right to adjust reimbursement rates during the annual guarantee period.
Other. Incremental costs of obtaining service and pharmacy contracts for short-term arrangements are expensed as incurred.
I. Premiums and Related Expenses
Premiums for short-duration group health, accident and life insurance and managed care coverages are recognized as revenue on a pro
rata basis over the contract period. Benefits and expenses are recognized when incurred and, for our Cigna Healthcare business, are
presented net of pharmaceutical manufacturer rebates. For experience-rated contracts, premium revenue includes an adjustment for
experience-rated refunds based on contract terms and calculated using the customer's experience (including estimates of incurred but
not reported claims).
Premiums received for the Company's Medicare Advantage plans, Medicare Part D products and Individual and Family Plans from the
Centers for Medicare and Medicaid Services ("CMS") and customers are recognized as revenue ratably over the contract period.
CMS provides risk-adjusted premium payments for Medicare Advantage Plans and Medicare Part D products based on our customer
demographics and medical diagnoses, which may change from period to period based on the underlying health of our customers. The
Company recognizes changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably
assured. Revenue adjustments are generally settled semi-annually with CMS. The final revenue adjustment is generally settled with
CMS in the year following the contract year.
Medicare Part D premiums include payments from CMS for risk-sharing adjustments that are estimated quarterly based on claim
experience by comparing actual incurred prescription drug costs to the estimated costs submitted in the original contracts. These
88
adjustments may result in more or less revenue from CMS. Final revenue adjustments generally occur in the year following the
contract year.
The ACA prescribed a risk-adjustment program to mitigate the risk for participating health insurance companies selling coverage on
the public exchanges. The risk-adjustment program reallocates funds from insurers with lower risk populations to insurers with higher
risk populations based on the relative risk scores of participants. We estimate our receivable or payable based on the risk of our
customers compared to the risk of other customers in the same state and market, considering data obtained from industry studies and
the United States Department of Health and Human Services ("HHS"). Receivables or payables are recorded as adjustments to
premium revenue based on our year-to-date experience when the amounts are reasonably estimable and collection is reasonably
assured. Final revenue adjustments are determined by HHS in the year following the policy year.
Premium revenue may also include an adjustment to reflect the estimated effect of rebates due to customers under medical loss ratio
provisions of the ACA. These rebate liabilities are settled in the subsequent year.
Premiums for long-duration insurance contracts, including individual life, accident and supplemental health insurance and annuity
products, and excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are
matched with premiums.
Revenue for universal life products is recognized as follows:
•
•
Investment income on assets supporting universal life products is recognized in Net investment income as earned.
Charges for mortality, administration and policy surrender are recognized in Premiums as earned. Administrative fees are
considered earned when services are provided.
Benefits and expenses for universal life products consist of benefit claims in excess of policyholder account balances and income
earned by policyholders. Expenses are recognized when claims are incurred and income is credited to policyholders in accordance
with contract provisions.
The unrecognized portion of premiums received is recorded as unearned premiums included in Insurance and contractholder liabilities
(current and non-current) (see Note 9 for further information).
J. Fees and Related Expenses
The majority of the Company's service fees are derived from administrative services only ("ASO") arrangements, fee-for-service
clinical solutions, Wholesale Marketplace Drug Formulary Management services, health benefit management services and
administration of services to specialty pharmacy manufacturers.
ASO arrangements allow plan sponsors to self-fund claims and assume the risk of medical or other benefit costs. Most of the
Company's ASO arrangements are for medical and specialty services, including pharmacy benefits. Generally, the Company's ASO
arrangements are short-term. Contract modifications typically occur on renewal and are prospective in nature.
In return for fees from these clients, the Company provides access to our participating provider networks and other services supporting
benefit management, including claims administration, behavioral health services, disease management, utilization management and
cost containment programs. In general, the Company considers these services to be a combined performance obligation to provide cost
effective administration of plan benefits over the contract period. Fees are billed, due and recognized monthly at contracted rates based
on current membership or utilization. This recognition pattern aligns with the benefits from services provided to clients. These
revenues are reported in Fees and other revenues in the Consolidated Statements of Income.
The Company may also provide performance guarantees that provide potential refunds to clients if certain service standards, clinical
outcomes or financial metrics are not met. If these standards, outcomes and metrics are not met, the Company may be financially at
risk up to a stated percentage of the contracted fee or a stated dollar amount. The Company defers revenue by recording a liability for
estimated payouts associated with these guarantees within Accrued expenses and other liabilities. The amount of revenue deferred is
estimated for each type of guarantee using either a most likely amount or expected value method depending on the nature of the
guarantee and the information available to estimate refunds. Estimates are refined each reporting period as additional information on
the Company's performance becomes available and upon final reconciliation and settlement following the guarantee period. Amounts
accrued and paid for these performance guarantees during the reporting periods were not material.
Expenses associated with administrative programs and services are recognized as incurred in Selling, general and administrative
expenses.
89
The Company also earns revenue, as part of its integrated pharmacy benefits performance obligation, by offering fee-for-service
clinical solutions to our clients, such as drug utilization management and medication adherence counseling. These clinical programs
help clients to drive better health outcomes at a lower cost by identifying and addressing potentially unsafe or wasteful prescribing,
dispensing and utilization of prescription drugs and communicating with, or supporting communications with physicians, pharmacies
and patients. Fees are billed, due and recognized at contracted rates either on a periodic basis or as services are provided. This
recognition pattern aligns with the benefits from services provided. These revenues are reported in Fees and other revenues in the
Consolidated Statements of Income. Direct costs associated with these programs are recognized in Pharmacy and other service costs,
and other related expenses are recorded as incurred in Selling, general and administrative expenses.
The Company earns fees from our Wholesale Marketplace Drug Formulary Management services. These services include either our
drug formulary administrative service arrangements or our formulary processing arrangements. Drug formulary administrative
services may include formulary consultation, administration of rebate contracts, rebate submission, collection from drug
manufacturers and the distribution of rebates to clients. Services may also include facilitating audits of data submissions and reporting
of rebates to clients. Clients agree to pay administrative fees that are billed, due and recognized at contracted rates as services are
performed. These revenues are reported gross in Fees and other revenues and associated costs are reported in Pharmacy and other
service costs in the Consolidated Statements of Income. For certain other clients in our formulary processing arrangements, the
Company does not control the right to retain rebates before they are transferred to the client for services performed. Clients agree to
allow the Company to retain a portion of each rebate collected in exchange for formulary processing services provided. These drug
formulary service and administrative fee revenues are reported net in Fees and other revenues in the Consolidated Statements of
Income. Revenue is recognized as rebates are processed.
The Company also earns fees by providing health benefit management solutions that drive cost reductions and improve quality
outcomes. Clients are primarily sponsors of health benefit plans and fees may be stated as a per-member-per-month fee or as a per-
claim fee. The Company considers the services to be a single performance obligation to stand ready to provide utilization management
services over the contract period (generally three years). In certain arrangements, the Company assumes the financial obligation for
third-party provider costs for medical services provided to the health plan's customers. Fees are recorded gross in Fees and other
revenues in the Consolidated Statements of Income because the Company is acting as a principal in arranging for and controlling the
services provided by third-party network providers. Contractual fees vary based on enrollment and provider costs and are billed, due
and recognized monthly. Direct costs associated with these programs are recognized in Pharmacy and other service costs, and other
related expenses are recorded in Selling, general and administrative expenses as incurred.
Certain health benefit management contracts require the Company to share the results of medical cost experience that differ from
specified targets. This variable consideration is estimated at contract inception and adjusted through the contract period. The estimated
profits and costs are recognized net in Fees and other revenues.
The Company also earns other service fees related to administrating services to specialty pharmacy manufacturers that are recorded in
Fees and other revenues in the Consolidated Statements of Income. These revenues are billed, due and recognized at contracted rates
as services are provided.
90
Note 3 – Accounts Receivable, Net
Accounting policy. We bill pharmaceutical manufacturers based on management's interpretation of contractual terms and estimate a
contractual allowance based on the best information available at the time a claim is processed. Contractual allowances for certain
rebates receivable from pharmaceutical manufacturers are determined by reviewing payment experience and specific known items that
could be adjusted under contract terms. The Company's estimation process for contractual allowances for pharmaceutical manufacturer
receivables generally results in an allowance for balances outstanding greater than 90 days.
Contractual allowances for certain receivables from third-party payors are based on their contractual terms and are estimates based on
the Company's best information available at the time revenue is recognized.
Allowances, discounts and claims adjustments issued to customers in the form of client credits and other non-credit adjustments are
based on the current status of each customer's receivable balance, current economic and market conditions and a variety of other
factors, including the length of time the receivables are past due, the financial health of customers and our past experience.
The allowance for expected credit losses for current accounts receivable is based primarily on past collections experience relative to
the length of time receivables are past due; however, when available evidence reasonably supports an assumption that counterparty
credit risk over the expected payment period will differ from current and historical payment collections, a forecasting adjustment is
reflected in the allowance for expected credit losses.
Receivables and any associated allowance are written off only when all collection attempts have failed and such amounts are
determined unrecoverable. We regularly review the adequacy of these allowances based on a variety of factors, including age of the
outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the
recoverability of receivables are adjusted.
The Company's accounts receivable include amounts due from pharmaceutical manufacturers, clients, third-party payors and
customers, and are presented net of allowances. These balances include:
•
•
•
•
Pharmaceutical manufacturers receivables - amounts due from pharmaceutical manufacturers.
Noninsurance customer receivables - amounts due from customers for noninsurance services, primarily pharmacy benefit
management and ASO contracts.
Insurance customer receivables - amounts due from customers under insurance and managed care contracts, primarily
premiums receivable and amounts due from CMS.
Other receivables - all other accounts receivable not included in the categories above.
The following amounts were included within Accounts receivable, net:
(In millions)
Pharmaceutical manufacturers receivables
Noninsurance customer receivables
Insurance customer receivables
Other receivables
Total
Accounts receivable, net classified as Assets of businesses held for sale
Accounts receivable, net per Consolidated Balance Sheets
December 31,
2022
December 31,
2021
$
7,108 $
6,899
2,963
248
5,463
6,274
2,932
456
15,125
(54)
$
17,218 $
15,071
These receivables are reported net of our allowances of $1.9 billion as of December 31, 2022 and $1.4 billion as of December 31,
2021 as follows:
•
•
•
Included in our Pharmaceutical manufacturers receivables are contractual allowances for certain rebates receivable with
pharmaceutical manufacturers of $1.3 billion as of December 31, 2022 and $926 million as of December 31, 2021.
Included in our Noninsurance customer receivables are contractual allowances from third-party payors of $336 million as of
December 31, 2022 and $321 million as of December 31, 2021 based upon the contractual payment terms.
The remaining allowances of $226 million as of December 31, 2022 and $186 million as of December 31, 2021 include
allowances, discounts and claims adjustments issued to customers in the form of client credits, an allowance for current
expected credit losses and other non-credit adjustments.
91
The Company's allowance for current expected credit losses was $86 million as of December 31, 2022 and $60 million as of
December 31, 2021.
Note 4 – Mergers, Acquisitions and Divestitures
A. Divestiture of International Businesses
On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong
Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash. The Company
recognized a gain of $1.7 billion pre-tax ($1.4 billion after-tax), which includes recognition of previously unrealized capital losses on
investments sold and translation loss on foreign currencies (see Note 15 for further information). Also see Note 5 for further
information regarding the assets and liabilities of these divested businesses.
In December 2022, the Company also divested its ownership interest in a joint venture in Türkiye.
B. Divestiture of Group Disability and Life Business
On December 31, 2020, the Company completed the sale of its Group Disability and Life business to New York Life Insurance
Company for cash proceeds of $6.2 billion. The Company recognized a gain of $4.2 billion pre-tax ($3.2 billion after-tax), which
included recognition of previously unrealized capital gains on investments sold (see Note 15 for further information).
C.
Integration and Transaction-related Costs
As part of our strategic plan, we incurred non-routine costs associated with the disposition and acquisition of certain businesses. In
2022 and 2021, the Company incurred costs related to the Chubb transaction, the sale of the Group Disability and Life business,
acquisition of MDLIVE and the terminated merger with Elevance Health, Inc. ("Elevance"), formerly known as Anthem, Inc. In 2020,
the Company incurred costs related to the acquisition and integration of Express Scripts Holding Company ("Express Scripts"), the
terminated merger with Elevance, the sale of the Group Disability and Life business and other transactions. These costs were $135
million pre-tax ($103 million after-tax) for the year ended December 31, 2022, compared with $169 million pre-tax ($71 million after-
tax) for the year ended December 31, 2021 and $527 million pre-tax ($404 million after-tax) for the year ended December 31, 2020.
These costs consisted primarily of certain projects to separate or integrate the Company's systems, products and services, fees for
legal, advisory and other professional services and certain employment-related costs. After-tax costs for the year ended December 31,
2021 included a tax benefit from the resolution of a tax matter related to the sold Group Disability and Life business.
Note 5 – Assets and Liabilities of Businesses Held for Sale
Accounting policy. The Company classifies assets and liabilities as held for sale ("disposal group") when management commits to a
plan to sell the disposal group, the sale is probable within one year and the disposal group is available for immediate sale in its present
condition. The Company considers various factors, particularly whether actions required to complete the plan indicate it is unlikely
that significant changes to the plan will be made or the plan will be withdrawn. Assets held for sale are measured at the lower of
carrying value or fair value less costs to sell. Any loss resulting from the measurement is recognized in the period the held-for-sale
criteria are met. Conversely, gains are not recognized until the date of the sale. When the disposal group is classified as held for sale,
depreciation and amortization for most long-lived assets ceases and the Company tests the assets for impairment. Deferred policy
acquisition costs continue to be amortized.
On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries to Chubb
for approximately $5.4 billion in cash. Additionally, in December 2022, the Company divested its interest in a joint venture in
Türkiye. See Note 4 for additional information. The Company aggregated and classified the assets and liabilities of these businesses as
held for sale in our Consolidated Balance Sheets as of December 31, 2021.
92
The assets and liabilities of businesses held for sale were as follows:
(In millions)
Cash and cash equivalents
Investments
Deferred policy acquisition costs
Separate account assets
Goodwill, other intangible assets and all other assets
Total assets of businesses held for sale
Insurance and contractholder liabilities
Accounts payable, accrued expenses and other liabilities
Deferred tax liabilities, net
Separate account liabilities
Total liabilities of businesses held for sale
December 31,
2021
$
406
5,109
2,755
878
909
10,057
4,644
452
449
878
$
6,423
The held for sale businesses reported Gross unrealized appreciation on securities and derivatives of $137 million and Gross cumulative
translation losses on foreign currencies of $209 million within Accumulated other comprehensive loss in our Consolidated Balance
Sheets as of December 31, 2021.
These amounts, as well as subsequent activity through the sale dates, were recognized within Gain on sale of businesses in our
Consolidated Statements of Income as of December 31, 2022, as described in Note 4.
Note 6 – Earnings Per Share
Accounting policy. The Company computes basic earnings per share using the weighted-average number of unrestricted common and
deferred shares outstanding. Diluted earnings per share also includes the dilutive effect of outstanding employee stock options and
restricted stock using the treasury stock method and the effect of strategic performance shares.
Basic and diluted earnings per share were computed as follows:
(Shares in thousands, dollars in
millions, except per share
amounts)
Basic
2022
Effect of
Dilution
Diluted
Basic
2021
Effect of
Dilution
Diluted
Basic
2020
Effect of
Dilution
Shareholders' net income
$
6,668
$
6,668 $
5,365
$
5,365 $
8,458
For the Years Ended December 31,
Shares:
Weighted average
309,546
309,546
337,962
337,962
364,979
Common stock equivalents
Total shares
309,546
3,519
3,519
3,519
313,065
337,962
3,004
3,004
3,004
340,966
364,979
3,410
3,410
Diluted
$
8,458
364,979
3,410
368,389
Earnings per share
$
21.54 $
(0.24) $
21.30 $
15.87 $
(0.14) $
15.73 $
23.17 $
(0.21) $
22.96
The following outstanding employee stock options were not included in the computation of diluted earnings per share because their
effect was anti-dilutive:
(In millions)
Anti-dilutive options
For the Years Ended December 31,
2022
1.0
2021
1.5
2020
4.1
93
Note 7 – Debt
The outstanding amounts of debt, net of issuance costs, discounts or premiums, and finance leases were as follows:
(In millions)
Short-term debt
Commercial paper
$500 million, 3.05% Notes due November 2022
$17 million, 8.3% Notes due January 2023
$63 million, 7.65% Notes due March 2023
$700 million, Floating Rate Notes due July 2023
$1,000 million, 3.0% Notes due July 2023
$1,187 million, 3.75% Notes due July 2023
Other, including finance leases
Total short-term debt
Long-term debt
$17 million, 8.3% Notes due January 2023
$63 million, 7.65% Notes due March 2023
$700 million, Floating Rate Notes due July 2023
$1,000 million, 3% Notes due July 2023
$1,187 million, 3.75% Notes due July 2023
$500 million, 0.613% Notes due March 2024
$1,000 million, 3.5% Notes due June 2024
$900 million, 3.25% Notes due April 2025 (1)
$2,200 million, 4.125% Notes due November 2025
$1,500 million, 4.5% Notes due February 2026
$800 million, 1.25% Notes due March 2026
$1,500 million, 3.4% Notes due March 2027
$259 million, 7.875% Debentures due May 2027
$600 million, 3.05% Notes due October 2027
$3,800 million, 4.375% Notes due October 2028
$1,500 million, 2.4% Notes due March 2030
$1,500 million, 2.375% Notes due March 2031 (1)
$45 million, 8.3% Step Down Notes due January 2033 (2)
$190 million, 6.15% Notes due November 2036
$2,200 million, 4.8% Notes due August 2038
$750 million, 3.2% Notes due March 2040
$121 million, 5.875% Notes due March 2041
$448 million, 6.125% Notes due November 2041
$317 million, 5.375% Notes due February 2042
$1,500 million, 4.8% Notes due July 2046
$1,000 million, 3.875% Notes due October 2047
$3,000 million, 4.9% Notes due December 2048
$1,250 million, 3.4% Notes due March 2050
$1,500 million, 3.4% Notes due March 2051
Other, including finance leases
December 31,
2022
December 31,
2021
— $
—
17
63
700
994
1,186
33
2,993 $
2,027
495
—
—
—
—
—
23
2,545
$
$
$
— $
—
—
—
—
499
990
872
2,195
1,503
797
1,436
259
597
3,785
1,492
1,380
45
190
2,192
743
119
488
315
1,466
989
2,968
1,236
1,478
66
28,100 $
17
63
699
985
1,185
498
983
897
2,193
1,504
796
1,423
259
596
3,782
1,490
1,500
45
190
2,192
743
119
490
315
1,465
988
2,967
1,236
1,477
28
31,125
Total long-term debt
(1) The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 11 for further information about the
Company's interest rate risk management and these derivative instruments.
(2) Interest rate step down to 8.08% effective January 15, 2023.
$
Short-term and Credit Facilities Debt
Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate
purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed below.
As of December 31, 2022, there were no outstanding balances under these revolving credit agreements.
94
In April 2022, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"):
•
•
•
a $3.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2027 with an option to extend
the maturity date for additional one-year periods, subject to consent of the banks. The Company can borrow up to $3.0 billion
under the credit agreement for general corporate purposes, with up to $500 million available for issuance of letters of credit.
a $1.0 billion three-year revolving credit agreement that will mature in April 2025 with an option to extend the maturity date
for additional one-year periods, subject to consent of the banks. The Company can borrow up to $1.0 billion under the credit
agreement for general corporate purposes.
a $1.0 billion 364-day revolving credit agreement that will mature in April 2023. The Company can borrow up to $1.0 billion
under the credit agreement for general corporate purposes. This agreement includes the option to "term out" any revolving
loans that are outstanding at maturity by converting them into a term loan maturing on the one-year anniversary of
conversion.
Each of the Credit Agreements include an option to increase commitments in an aggregate amount of up to $1.5 billion across all three
facilities for a maximum total commitment of $6.5 billion. The Credit Agreements allow for borrowings at either a base rate or an
adjusted term Secured Overnight Funding Rate ("SOFR") plus, in each case, an applicable margin based on the Company's senior
unsecured credit ratings.
Each of the three facilities is diversified among 22 banks. Each facility also contains customary covenants and restrictions, including a
financial covenant that the Company's leverage ratio, as defined in the Credit Agreements, may not exceed 60%, subject to certain
exceptions upon the consummation of an acquisition.
The Credit Agreements replaced a prior $3.0 billion five-year revolving credit and letter of credit agreement maturing on April 2026, a
$1.0 billion three-year revolving credit agreement maturing on April 2024 and a $1.0 billion 364-day revolving credit agreement
maturing in April 2022.
Commercial Paper. Under our commercial paper program, we may issue short-term, unsecured commercial paper notes privately
placed on a discounted basis through certain broker-dealers at any time not to exceed an aggregate amount of $5.0 billion. Amounts
available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been
and are expected to be used for general corporate purposes. There was no commercial paper outstanding balance as of December 31,
2022.
Long-term debt
Debt Issuance and Redemption. The Company did not enter into any debt issuances or redemptions in 2022. During 2021, in order to
decrease future interest expense, mitigate future refinancing risk and raise proceeds for general corporate purposes, the Company
entered into the following transactions:
•
•
Debt issuance: On March 3, 2021, the Company issued $4.3 billion of new senior notes. The proceeds of this issuance were
mainly used to redeem outstanding debt securities. The remaining proceeds were used primarily for general corporate
purposes.
Debt redemption: During 2021, the Company completed the redemption of a total of $4.5 billion in aggregate principal
amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $141 million ($110 million after-
tax), consisting primarily of premium payments.
Debt Covenants. The Company was in compliance with its debt covenants as of December 31, 2022.
95
Debt Maturities. Maturities of outstanding long-term debt as of December 31, 2022 are as follows:
(In millions)
2023
2024
2025
2026
2027
Scheduled
Maturities (1)
$
$
$
$
$
2,967
1,500
3,100
2,300
2,359
Maturities after 2027
(1) Long-term debt maturity amounts include current maturities of long-term debt. Finance leases are excluded from this table. See Note 20 - Leases for finance lease
maturity amounts.
$
19,122
Interest Expense
Interest expense on long-term and short-term debt was $1.3 billion in 2022 and 2021 and $1.4 billion in 2020.
Note 8 – Common and Preferred Stock
The Cigna Group has a total of 25 million shares of $1 par value preferred stock authorized for issuance. No shares of preferred stock
were outstanding at December 31, 2022, 2021 or 2020.
The following table presents the share activity of The Cigna Group:
(Shares in thousands)
Common: Par value $0.01; 600,000 shares authorized
Outstanding- January 1,
Net issued for stock option exercises and other benefit plans
Repurchased common stock
Outstanding- December 31,
Treasury stock
Issued- December 31,
Dividends
For the Years Ended December 31,
2022
2021
2020
322,948
3,173
(27,445)
298,676
99,143
397,819
354,771
3,375
(35,198)
322,948
71,246
394,194
372,531
4,142
(21,902)
354,771
35,505
390,276
In 2022, The Cigna Group declared quarterly cash dividends of $1.12 per share of the Company's common stock. In 2021, The Cigna
Group initiated and declared quarterly cash dividends of $1.00 per share of the Company's common stock.
The following table provides details of the Company's dividend payments:
Record Date
Payment Date
Amount per Share
Total Amount Paid (in millions)
2022
March 9, 2022
June 8, 2022
September 7, 2022
December 6, 2022
2021
March 10, 2021
June 8, 2021
September 8, 2021
December 7, 2021
2020
March 10, 2020
March 24, 2022
June 23, 2022
September 22, 2022
December 21, 2022
March 25, 2021
June 23, 2021
September 23, 2021
December 22, 2021
April 9, 2020
$1.12
$1.12
$1.12
$1.12
$1.00
$1.00
$1.00
$1.00
$0.04
$357
$352
$341
$334
$345
$342
$330
$324
$15
On February 2, 2023, the Board of Directors declared the first quarter cash dividend of $1.23 per share of The Cigna Group common
stock to be paid on March 23, 2023 to shareholders of record on March 8, 2023. The Company currently intends to pay regular
quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the
declaration of dividends remains in the best interests of The Cigna Group and its shareholders. The decision of whether to pay future
96
dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows,
capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.
Accelerated Share Repurchase Agreements
In June 2022, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements
("2022 ASR agreements") with Mizuho Markets Americas LLC and Morgan Stanley & Co. LLC (collectively, the "2022
Counterparties") to repurchase $3.5 billion of common stock in aggregate. In July 2022, we remitted $3.5 billion to the 2022
Counterparties and received an initial delivery of 10.4 million shares of our common stock representing $2.8 billion of the total
remitted. Upon final settlement of the 2022 ASR agreements in November 2022, we received an additional 1.9 million shares of our
common stock for no additional consideration as the value of this stock was held back by the 2022 Counterparties pending final
settlement of the agreements. The total number of shares of our common stock repurchased under the 2022 ASR agreements was
12.3 million based on an average daily Volume-Weighted Average Share Price ("VWAP") of our common stock over the term of the
agreements, less a discount, of $285.10 per share.
In August 2021, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements
("2021 ASR agreements") with Morgan Stanley & Co. LLC and JP Morgan Chase Bank, N.A. (collectively, the "2021
Counterparties") to repurchase $2.0 billion of common stock in aggregate. We remitted $2.0 billion to the 2021 Counterparties and
received an initial delivery of 7.7 million shares of our common stock representing $1.6 billion of the total remitted. Upon final
settlement of the 2021 ASR agreements in fourth quarter of 2021, we received an additional 1.8 million shares of our common stock
for no additional consideration as the value of this stock was held back by the 2021 Counterparties pending final settlement of the
agreements. The total number of shares of our common stock repurchased under the 2021 ASR agreements was 9.5 million based on
an average daily VWAP of our common stock over the term of the agreements, less a discount, of $209.53 per share.
Note 9 – Insurance and Contractholder Liabilities
A. Account Balances – Insurance and Contractholder Liabilities
The Company's insurance and contractholder liabilities were comprised of the following:
(In millions)
Current
Non-current
Total
Current
Non-current
Total
December 31, 2022
December 31, 2021
Contractholder deposit funds
$
365 $
6,515 $
6,880 $
352 $
6,702 $
Future policy benefits
Unearned premiums
Unpaid claims and claim expenses
Cigna Healthcare
Other Operations
Total
Insurance and contractholder liabilities classified as
Liabilities of businesses held for sale (1)
229
576
4,117
98
4,708
22
59
177
4,937
598
4,176
275
312
558
4,159
548
5,929
9,194
418
102
180
16,596
7,054
9,506
976
4,261
728
22,525
(611)
(4,033)
(4,644)
Total insurance and contractholder liabilities per
Consolidated Balance Sheets
17,881
(1) Amounts classified as Liabilities of businesses held for sale primarily include $3.8 billion of Future policy benefits, $0.4 billion of Unpaid claims and $0.4 billion of
Unearned premiums as of December 31, 2021.
12,563 $
11,481 $
16,866 $
5,318 $
5,385 $
$
Insurance and contractholder liabilities expected to be paid within one year are classified as current.
Accounting policy - Contractholder Deposit Funds. Liabilities for contractholder deposit funds primarily include deposits received
from customers for investment-related and universal life products and investment earnings on their fund balances. These liabilities are
adjusted to reflect administrative charges and, for universal life fund balances, mortality charges. In addition, this caption includes: 1)
premium stabilization reserves under group health insurance contracts representing experience refunds left with the Company to pay
future premiums; 2) deposit administration funds used to fund non-pension retiree insurance programs; 3) retained asset accounts and
4) annuities or supplementary contracts without significant life contingencies. Interest credited on these funds is accrued ratably over
the contract period.
Accounting policy - Future Policy Benefits. Future policy benefits represent the present value of estimated future obligations under
long-term life and supplemental health insurance policies and annuity products currently in force. These obligations are estimated
using actuarial methods and consist primarily of reserves for annuity contracts, life insurance benefits, GMDB contracts (GMDB
97
contracts are fully reinsured, see Note 10 for additional information) and certain life and accident insurance products of our sold
international businesses.
Obligations for annuities represent specified periodic benefits to be paid to an individual or groups of individuals over their remaining
lives. Obligations for life insurance policies and GMDB contracts represent benefits expected to be paid to policyholders, net of future
premiums expected to be received. Management estimates these obligations based on assumptions as to premiums, interest rates,
mortality or morbidity, future claim adjudication expenses and surrenders, allowing for adverse deviation as appropriate. Mortality,
morbidity and surrender assumptions are based on the Company's own experience and published actuarial tables. Interest rate
assumptions are based on management's judgment considering the Company's experience and future expectations and range from 2%
to 9%. Obligations for the direct and assumed run-off settlement annuity business include adjustments for realized and unrealized
investment returns consistent with GAAP when a premium deficiency exists. As of December 31, 2022, approximately 24% of the
liability for future policy benefits was supported by assets held in trust for the benefit of the ceding company under reinsurance
agreements.
Accounting policy - Unearned Premium. The unrecognized portion of premiums received is recorded as unearned premiums included
in Insurance and contractholder liabilities (current and non-current).
B. Unpaid Claims and Claim Expenses – Cigna Healthcare
This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development
on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and
services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and
facilities.
Accounting policy. The Company uses actuarial principles and assumptions that are consistently applied each reporting period and
recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent
with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.
The Company compares key assumptions used to establish the medical costs payable to actual experience for each reporting period.
The unpaid claims liability is adjusted through current period shareholders' net income when actual experience differs from these
assumptions. Additionally, the Company evaluates expected future developments and emerging trends that may impact key
assumptions. The process used to determine this liability requires the Company to make critical accounting estimates that involve
considerable judgment, reflecting the variability inherent in forecasting future claim payments. These estimates are highly sensitive to
changes in the Company's key assumptions, specifically completion factors and medical cost trend.
The liability is primarily calculated using "completion factors" developed by comparing the claim incurral date to the date claims were
paid. Completion factors are impacted by several key items including changes in: 1) electronic (auto-adjudication) versus manual
claim processing; 2) frequency and timeliness of provider claims submissions; 3) number of customers and 4) the mix of products. The
Company uses historical completion factors combined with an analysis of current trends and operational factors to develop current
estimates of completion factors. The Company estimates the liability for claims incurred in each month by applying the current
estimates of completion factors to the current paid claims data. This approach implicitly assumes that historical completion rates will
be a useful indicator for the current period.
The Company relies more heavily on medical cost trend analysis that reflects expected claim payment patterns and other relevant
operational considerations for more recent months. Medical cost trend is primarily impacted by medical service utilization and unit
costs that are affected by changes in the level and mix of health benefits offered, including inpatient, outpatient and pharmacy, the
impact of copays and deductibles, changes in provider practices and changes in consumer demographics and consumption behavior.
The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process,
was $3.9 billion at December 31, 2022 and $4.0 billion at December 31, 2021.
98
Activity, net of intercompany transactions, in the unpaid claims liability for the Cigna Healthcare segment was as follows:
(In millions)
Beginning balance
Less: Reinsurance and other amounts recoverable
Beginning balance, net
Incurred costs related to:
Current year
Prior years
Total incurred
Paid costs related to:
Current year
Prior years
Total paid
Ending balance, net
Add: Reinsurance and other amounts recoverable
Ending balance
For the Years Ended December 31,
2022
2021
2020
$
4,261 $
3,695 $
261
4,000
31,342
(259)
31,083
27,583
3,545
31,128
3,955
221
237
3,458
31,755
(219)
31,536
27,929
3,065
30,994
4,000
261
$
4,176 $
4,261 $
3,336
318
3,018
27,494
(144)
27,350
24,187
2,723
26,910
3,458
237
3,695
Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported
and pending claims of certain business for which the Company administers the plan benefits without any right of offset. See Note 10
for additional information on reinsurance.
Variances in incurred costs related to prior years' unpaid claims and claim expenses that resulted from the differences between actual
experience and the Company's key assumptions were as follows:
(Dollars in millions)
Actual completion factors
Medical cost trend
$
$
Total favorable variance
(1) Percentage of current year incurred costs as reported for the year ended December 31, 2021.
(2) Percentage of current year incurred costs as reported for the year ended December 31, 2020.
$
For the Years Ended December 31,
2022
2021
% (1)
$
% (2)
62
197
259
0.2 % $
0.6
0.8 % $
81
138
219
0.3 %
0.5
0.8 %
Favorable prior year development in both years reflects lower than expected utilization of medical services as compared to our
assumptions.
99
The following table depicts the incurred and paid claims development and unpaid claims liability as of December 31, 2022 (net of
reinsurance) reported in the Cigna Healthcare segment. The information about incurred and paid claims development for the year
ended December 31, 2021 is presented as supplementary information and is unaudited.
Incurral Year
(In millions)
2021
2022
Cumulative incurred costs for the periods presented
Incurral Year
(In millions)
2021
2022
Cumulative paid costs for the periods presented
Outstanding liabilities for the periods presented, net of reinsurance
Other long-duration liabilities not included in development table above
Net unpaid claims and claims expenses - Cigna Healthcare
Reinsurance and other amounts recoverable
Unpaid claims and claim expenses - Cigna Healthcare
Incurred Costs
2021
(Unaudited)
2022
Unpaid Claims &
Claim Expenses
$
30,735 $
$
30,493
30,309
60,802
180
3,622
Cumulative Costs Paid
2021
(Unaudited)
2022
$
27,039 $
$
$
$
30,313
26,687
57,000
3,802
153
3,955
221
4,176
Incurred claims do not typically remain outstanding for multiple years; more than 95% of health claims incurred in a year are paid by
the end of the following year.
There is no single or common claim frequency metric used in the health care industry. The Company believes a relevant metric for its
health insurance business is the number of customers for whom an insured medical claim was paid. Customers for whom no insured
medical claim was paid are excluded from the calculation. Claims that did not result in a liability are not included in the frequency
metric. The claim frequency for 2022 and 2021 was approximately 5 million.
C. Unpaid Claims and Claim Expenses – Other Operations
Accounting policy. Liabilities for unpaid claims and claim expenses are established by book of business within Other Operations
including the liabilities divested in the Chubb transaction and divested through the sale of our ownership interest in a joint venture in
Türkiye ("divested International businesses"). Unpaid claims and claim expenses within Other Operations consist of (1) case or claims
reserves for reported claims that are unpaid as of the balance sheet date; (2) incurred but not reported reserves for claims when the
insured event has occurred but has not been reported to the Company and (3) loss adjustment expense reserves for the expected costs
of settling these claims. The Company consistently estimates incurred but not yet reported losses using actuarial principles and
assumptions based on historical and projected claim incidence patterns, claim size and the expected payment period. The Company
recognizes the actuarial best estimate of the ultimate liability within a level of confidence, consistent with actuarial standards of
practice that the liabilities be adequate under moderately adverse conditions. The Company immediately records an adjustment in
Medical costs and other benefit expenses when estimates of these liabilities change.
See Note 4 for a discussion of the divestiture of the Group Disability and Life business on December 31, 2020. Prior to the sale, the
liabilities for unpaid claims and claim expenses in the Group Disability and Life business reflected reserves for long-term and short-
term disability, life insurance and accident products. The majority of the unpaid claim liability related to disability claims that was
measured as the present value of estimated future benefit payments, including expected development, for each reported claim that was
receiving benefit payments over the expected disability period or pending a decision on eligibility for benefits.
100
Liability balance details. The liability details for unpaid claims and claim expenses are presented in the following table.
(In millions)
Other Operations
Divested International businesses
Other Operations
Unpaid claims and claim expenses - Other Operations
December 31,
2022
December 31,
2021
$
$
— $
275
275 $
447
281
728
Activity in the unpaid claims and claim expenses for the divested International and Group Disability and Life business is presented in
the following table. Liabilities associated with Other Operations are excluded because they pertain to obligations for long-duration
insurance contracts or, if short-duration, the liabilities have been largely reinsured.
(In millions)
Beginning balance
Less: Reinsurance
Beginning balance, net
Incurred claims related to:
Current year
Prior years:
Interest accretion
All other incurred
Total incurred
Paid claims related to:
Current year
Prior years
Total paid
Foreign currency
Divestiture of businesses(2)
Ending balance, net
For the Years Ended December 31,
2022 (1)
2021
2020
$
447 $
452 $
46
401
507
—
3
510
322
187
509
(28)
(374)
—
45
407
982
—
11
993
738
227
965
(34)
—
401
5,372
169
5,203
4,205
154
48
4,407
2,392
1,690
4,082
21
(5,142)
407
Add: Reinsurance
Ending balance
(1) Beginning balance includes unpaid claims amounts classified as Liabilities of businesses held for sale.
(2) 2020 amounts include Group Disability and Life reserves sold or reinsured to New York Life Insurance Company as part of the sale of the Group Disability and Life
business and immaterial retained balances which are now excluded from this table.
447 $
— $
452
45
46
—
$
Reinsurance in the table above reflects amounts due from reinsurers related to unpaid claims liabilities. See Note 10 for additional
information on reinsurance.
101
Note 10 – Reinsurance
The Company's insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and
to permit recovery of a portion of incurred losses. Reinsurance is ceded primarily in acquisition and disposition transactions when the
underwriting company is not being acquired. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured
liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial
condition of its reinsurers and monitors concentrations of its credit risk.
A. Reinsurance Recoverables
Accounting policy. Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the
Company's insurance businesses. The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable
to meet their reinsurance obligations to the Company. Most reinsurance recoverables are classified as non-current assets. The current
portion of reinsurance recoverables is reported in Other current assets and consists primarily of recoverables on paid claims expected
to be settled within one year. Reinsurance recoverables are presented net of allowances, consisting primarily of an allowance for
expected credit losses which is recognized on reinsurance recoverable balances each period and adjusted through Medical costs and
other benefit expenses. Estimates of the allowance for expected credit losses are based on internal and external data used to develop
expected loss rates over the anticipated duration of the recoverable asset that vary by external credit rating and collateral level.
The majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the
underwriting company was not acquired. The Company reviews its reinsurance arrangements and establishes reserves against the
recoverables.
The Company's reinsurance recoverables as of December 31, 2022 are presented in the following table by range of external credit
rating and collateral level:
(In millions)
Ongoing Operations
A- equivalent and higher current ratings (1)
BBB- to BBB+ equivalent current credit ratings (1)
Not rated
Total recoverables related to ongoing operations (2)
Acquisition, disposition or run-off activities
BBB+ equivalent and higher current ratings (1)
Lincoln National Life and Lincoln Life & Annuity of New York
Berkshire Hathaway Life Insurance Company of Nebraska
Empower Annuity Insurance Company
Prudential Insurance Company of America
Life Insurance Company of North America
Other
Not rated
Total recoverables related to acquisition, disposition or run-off
activities
Fair value of
collateral
contractually
required to meet or
exceed carrying
value of
recoverable
Collateral
provisions exist
that may mitigate
risk of credit loss (3)
No collateral
Total
$
— $
— $
87 $
—
139
139
—
248
—
375
—
203
—
826
—
4
4
2,795
432
—
—
387
19
12
58
43
188
—
—
133
—
—
16
3
3,645
3,649 $
152
340 $
87
58
186
331
2,795
680
133
375
387
238
15
4,623
4,954
(37)
4,917
Total
$
965 $
Allowance for uncollectible reinsurance
Total reinsurance recoverables (2)
(1) Certified by a Nationally Recognized Statistical Rating Organization ("NRSRO").
(2) Includes $174 million of current reinsurance recoverables that are reported in Other current assets.
(3) Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.
$
Collateral levels are defined internally based on the fair value of the collateral relative to the carrying amount of the reinsurance
recoverable, the frequency at which collateral is required to be replenished and the potential for volatility in the collateral's fair value.
102
B. Effects of Reinsurance
The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It
also presents reinsurance recoveries that have been netted against Medical costs and other benefit expenses in the Company's
Consolidated Statements of Income.
(In millions)
Premiums
Short-duration contracts
Direct
Assumed
Ceded
Total short-duration contract premiums
Long-duration contracts
Direct
Assumed
Ceded
Total long-duration contract premiums
Total premiums
Total reinsurance recoveries
For the Years Ended December 31,
2022
2021
2020
$
36,746 $
36,513 $
38,425
416
(265)
335
(148)
85
(230)
36,897
36,700
38,280
3,219
85
(286)
3,018
4,753
99
(398)
4,454
$
$
39,915 $
41,154 $
702 $
552 $
4,517
99
(269)
4,347
42,627
431
C. Effective Exit of GMDB and GMIB Business
The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance
transaction in 2013. Berkshire reinsured 100% of the Company's future claim payments in this business, net of other reinsurance
arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.1 billion remaining
at December 31, 2022.
GMDB is accounted for as assumed and ceded reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as
discussed below. GMIB assets are reported in Other current assets and Other assets and GMIB liabilities are reported in Accrued
expenses and other liabilities and Other non-current liabilities.
GMDB
The GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death. The Company's
exposure arises when the guaranteed minimum death benefit exceeds the fair value of the related mutual fund investments at the time
of a contractholder's death.
Accounting policy. The Company estimates the gross liability and reinsurance recoverable with an internal model based on the
Company's experience and future expectations over an extended period, consistent with the long-term nature of this product. As a
result of the reinsurance transaction, reserve increases have a corresponding increase in the recorded reinsurance recoverable, provided
the increased recoverable remains within the overall Berkshire limit (including the GMIB asset presented below).
The following table presents the account value, net amount at risk and the number of contractholders for guarantees assumed by the
Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as
of the specified date. As of December 31, 2022, the account value decreased primarily due to unfavorable equity market performance,
which resulted in an increase to the net amount at risk. The Company should be reimbursed in full for these payments unless the
Berkshire reinsurance limit is exceeded.
(Dollars in millions, excludes impact of reinsurance ceded)
Account value
Net amount at risk
Average attained age of contractholders (weighted by exposure)
Number of contractholders (estimated)
December 31,
2022
December 31,
2021
$
$
7,436 $
2,114 $
75
9,795
1,392
77
150,000
170,000
103
GMIB
The Company reinsured contracts with issuers of GMIB products. The Company's exposure represents the excess of a contractually
guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in
the related underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income
payments that can only occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased
retrocessional coverage ("GMIB assets") for these contracts including retrocessional coverage from Berkshire.
Accounting policy. The Company reports GMIB liabilities and assets as derivatives at fair value because cash flows of these liabilities
and assets are affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum
payments. The Company receives and pays fees periodically based on either contractholders' account values or deposits increased at a
contractual rate. The Company will also pay and receive cash depending on changes in account values and interest rates when
contractholders first elect to receive minimum income payments.
Assumptions used in fair value measurement. GMIB assets and liabilities are established using capital market assumptions and
assumptions related to future annuitant behavior (including mortality, lapse and annuity election rates). The Company classifies GMIB
assets and liabilities in Level 3 of the fair value hierarchy described in Note 12 because assumptions related to future annuitant
behavior are largely unobservable.
The only assumption expected to impact future shareholders' net income is non-performance risk. The non-performance risk
adjustment reflects a market participant's view of nonpayment risk by adding an additional spread to the discount rate in the
calculation of both (a) the GMIB liabilities to be paid by the Company and (b) the GMIB assets to be paid by the reinsurers, after
considering collateral. The impact of non-performance risk was immaterial for the years ended December 31, 2022 and December 31,
2021.
GMIB liabilities totaled $404 million as of December 31, 2022 and $572 million as of December 31, 2021. The GMIB liabilities
reflect the Company's credit risk, while the reinsurance recoverable reflects the credit risk of the reinsurers. There were three
reinsurers covering 100% of the GMIB exposures as of December 31, 2022 and December 31, 2021 as follows:
(In millions)
Line of Business
GMIB
Reinsurer
Berkshire
Sun Life Assurance Company of Canada
Liberty Re (Bermuda) Ltd.
Total GMIB recoverables reported in Other current assets and Other assets
All reinsurers are rated A- equivalent and higher by an NRSRO.
Note 11 – Investments
December 31,
2022
December 31,
2021
Collateral and Other Terms at
December 31, 2022
$
$
203 $
283 100% were secured by assets in a trust.
119
108
167
151 100% were secured by assets in a trust.
430 $
601
The Cigna Group's investment portfolio consists of a broad range of investments including debt securities, equity securities,
commercial mortgage loans, policy loans, other long-term investments, short-term investments and derivative financial instruments.
The sections below provide more detail regarding our investment balances and realized investment gains and losses. See Note 12 for
information about the valuation of the Company's investment portfolio.
Debt securities, commercial mortgage loans, derivative financial instruments and short-term investments with contractual maturities
during the next twelve months are classified on the balance sheet as current investments, unless they are held as statutory deposits or
restricted for other purposes and then they are classified in Long-term investments. Equity securities may include funds that are used
in our cash management strategy and are classified as current investments. All other investments are classified as Long-term
investments.
104
The following table summarizes the Company's investments by category and current or long-term classification:
(In millions)
Debt securities
Equity securities
Commercial mortgage loans
Policy loans
Other long-term investments
Short-term investments
Total
Investments classified as Assets of businesses held for sale (1)
December 31, 2022
December 31, 2021
Current
Long-term
Total
Current
Long-term
Total
$
654 $
9,218 $
9,872 $
796 $
16,162 $
16,958
45
67
—
—
139
577
1,547
1,218
3,728
—
622
1,614
1,218
3,728
139
—
40
—
—
428
1,264
(344)
603
1,526
1,338
3,574
—
23,203
(4,765)
603
1,566
1,338
3,574
428
24,467
(5,109)
Investments per Consolidated Balance Sheets
(1) Investments related to the divested International businesses that were held for sale as of December 31, 2021. These investments were primarily comprised of debt
securities and other long-term investments, and to a lesser extent, equity securities and short-term investments. See Note 4 for additional information.
17,193 $
18,438 $
16,288 $
920 $
905 $
$
19,358
A.
Investment Portfolio
Debt Securities
Accounting policy. Debt securities (including bonds, mortgage and other asset-backed securities and preferred stocks redeemable by
the investor) are classified as available for sale and are carried at fair value with changes in fair value recorded either in Accumulated
other comprehensive loss within Shareholders' equity or in credit loss expense based on fluctuations in the allowance for credit losses,
as further discussed below. Net unrealized appreciation on debt securities supporting the Company's run-off settlement annuity
business is reported in Non-current insurance and contractholder liabilities rather than Accumulated other comprehensive loss. When
the Company intends to sell or determines that it is more likely than not to be required to sell an impaired debt security, the excess of
amortized cost over fair value is directly written down with a charge to Net realized investment (losses) gains. Certain asset-backed
securities are considered variable interest entities. See Note 13 for additional information.
The Company reviews declines in fair value from a debt security's amortized cost basis to determine whether a credit loss exists, and
when appropriate, recognizes a credit loss allowance with a corresponding charge to credit loss expense, presented in Net realized
investment (losses) gains in the Company's Consolidated Statements of Income. The allowance for credit loss represents the excess of
amortized cost over the greater of its fair value or the net present value of the debt security's projected future cash flows (based on
qualitative and quantitative factors, including the probability of default and the estimated timing and amount of recovery). Each
period, the allowance for credit loss is adjusted as needed through credit loss expense.
The Company does not measure an allowance for credit losses for accrued interest receivables. When interest payments are delinquent
based on contractual terms or when certain terms (interest rate or maturity date) of the investment have been restructured, accrued
interest, reported in Other current assets, is written off through a charge to Net investment income and interest income is recognized
on a cash basis.
The amortized cost and fair value by contractual maturity periods for debt securities were as follows:
(In millions)
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage and other asset-backed securities
Total
December 31, 2022
Amortized
Cost
Fair
Value
$
681 $
3,817
3,457
2,497
390
$
10,842 $
674
3,583
3,052
2,215
348
9,872
Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the
right to call or prepay obligations, with or without penalties.
105
Our allowance for credit losses on debt securities was not material as of December 31, 2022 and December 31, 2021. Gross unrealized
appreciation (depreciation) on debt securities by type of issuer is shown below:
(In millions)
December 31, 2022
Federal government and agency
State and local government
Foreign government
Corporate
Mortgage and other asset-backed
Total
December 31, 2021
Federal government and agency
State and local government
Foreign government
Corporate
Mortgage and other asset-backed
Total
Amortized
Cost
Allowance for
Credit Loss
Unrealized
Appreciation
Unrealized
Depreciation
Fair
Value
$
292 $
— $
32 $
(12) $
43
375
9,742
390
—
—
(44)
—
—
11
89
1
(2)
(21)
(981)
(43)
$
10,842 $
(44) $
133 $
(1,059) $
$
287 $
— $
101 $
(1) $
154
2,468
12,361
505
—
—
(23)
—
17
194
1,008
17
—
(46)
(80)
(4)
312
41
365
8,806
348
9,872
387
171
2,616
13,266
518
$
15,775 $
(23) $
1,337 $
(131) $
16,958
Investments supporting liabilities of the Company's run-off settlement
annuity business (included in total above) (1)
(1) Net unrealized appreciation for these investments is excluded from Accumulated other comprehensive loss. As of December 31, 2022, net unrealized
depreciation for these investments is included in Accumulated other comprehensive loss.
2,262 $
720 $
(5) $
$
(10) $
2,967
Review of declines in fair value. Management reviews impaired debt securities to determine whether a credit loss allowance is needed
based on criteria that include:
•
•
•
severity of decline;
financial health and specific prospects of the issuer; and
changes in the regulatory, economic or general market environment of the issuer's industry or geographic region.
The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses
has not been recorded, by investment grade and the length of time these securities have been in an unrealized loss position. Unrealized
depreciation on these debt securities is primarily due to declines in fair value resulting from increasing interest rates since these
securities were purchased.
(Dollars in millions)
One year or less
December 31, 2022
December 31, 2021
Fair
Value
Amortized
Cost
Unrealized
Depreciation
Number
of Issues
Fair
Value
Amortized
Cost
Unrealized
Depreciation
Number
of Issues
Investment grade
$
5,533 $
6,127 $
Below investment grade
887
964
More than one year
Investment grade
Below investment grade
1,151
330
1,487
382
(594)
(77)
(336)
(52)
1,659
$
2,785 $
2,861 $
1,287
462
369
561
382
162
578
412
170
Total
$
7,901 $
8,960 $
(1,059)
3,777 $
3,890 $
4,021 $
(76)
(17)
(30)
(8)
(131)
909
781
143
53
1,886
Equity Securities
Accounting policy. Equity securities with a readily determinable fair value consist primarily of public equity investments in the health
care sector and mutual funds that invest in fixed income debt securities while those without a readily determinable fair value consist of
private equity investments. Changes in the fair values of equity securities that have a readily determinable fair value are reported in
Net realized investment (losses) gains. Equity securities without a readily determinable fair value are carried at cost minus impairment,
if any, plus or minus changes resulting from observable price changes.
106
The following table provides the values of the Company's equity security investments. The amount of impairments or value changes
resulting from observable price changes on equity securities with no readily determinable fair value still held was not material to the
financial statements as of December 31, 2022 or 2021.
(In millions)
Equity securities with readily determinable fair values
Equity securities with no readily determinable fair value
Total
December 31, 2022
December 31, 2021
Cost
Carrying
Value
Cost
Carrying
Value
$
$
673 $
380
1,053 $
138 $
484
622 $
257 $
270
527 $
207
396
603
As of December 31, 2022, the Company had a commitment to purchase up to $2.7 billion of preferred equity in VillageMD. We
funded $2.5 billion of this commitment during January 2023. Approximately 70% of our investments in equity securities as of
December 31, 2022 are in the health care sector, consistent with our strategy to invest in targeted startup and growth-stage companies
in the health care industry.
Commercial Mortgage Loans
Accounting policy. Commercial mortgage loans are carried at unpaid principal balances, net of an allowance for expected credit
losses, and classified as either current or long-term investments based on their contractual maturities. Changes in the allowance for
expected credit losses are recognized as credit loss expense and presented in Net realized investment (losses) gains in the Company's
Consolidated Statements of Income.
Each period, the Company establishes (or adjusts) its allowance for expected credit losses for commercial mortgage loans. The
allowance for expected credit losses is based on a credit risk category that is assigned to each loan at origination using key credit
quality indicators, including debt service coverage and loan-to-value ratios. Credit risk categories are updated as key credit quality
indicators change. An expected loss rate, assigned based on the credit risk category, is applied to each loan's unpaid principal balance
to develop the aggregate allowance for expected credit losses. Commercial mortgage loans are considered impaired and written off
against the allowance when it is probable that the Company will not collect all amounts due per the terms of the promissory note. In
the event of a foreclosure, the allowance for credit losses is based on the excess of the carrying value of the mortgage loan over the fair
value of its underlying collateral.
Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and
borrower. Loans are generally issued at fixed rates of interest and are secured by high quality, primarily completed and substantially
leased operating properties.
Credit quality. The Company regularly evaluates and monitors credit risk, beginning with the initial underwriting of a mortgage loan
and continuing throughout the investment holding period. Mortgage origination professionals employ an internal credit quality rating
system designed to evaluate the relative risk of the transaction at origination that is then updated each year as part of the annual
portfolio loan review. The Company evaluates and monitors credit quality on a consistent and ongoing basis.
Quality ratings are based on our evaluation of a number of key inputs related to the loan, including real estate market-related factors
such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However,
the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios. The debt
service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on debt,
with a ratio below 1.0 indicating that there is not enough cash flow to cover the required loan payments. The loan-to-value ratio,
commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the
loan.
The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio:
(Dollars in millions)
December 31, 2022
December 31, 2021
Loan-to-Value Ratio
Below 60%
60% to 79%
80% to 100%
Total
Carrying
Value
Average Debt
Service
Coverage Ratio
Average
Loan-to-
Value Ratio
Carrying
Value
Average Debt
Service
Coverage Ratio
Average
Loan-to-
Value Ratio
$
$
901
564
149
1,614
2.12
1.73
1.17
1.89
107
$
560
883
123
60 % $
1,566
2.18
1.89
1.47
1.96
61 %
Policy Loans
Accounting policy. Policy loans, primarily associated with our corporate-owned life insurance business, are carried at unpaid principal
balances plus accumulated interest, the total of which approximates fair value. These loans are collateralized by life insurance policy
cash values and therefore have minimal exposure to credit loss. Interest rates are reset annually based on a rolling average of
benchmark interest rates.
Other Long-term Investments
Accounting policy. Other long-term investments include investments in unconsolidated entities, including certain limited partnerships
and limited liability companies holding real estate, securities or loans and health care-related investments. These investments are
carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the
underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag
due to the timing of when financial information is received from the general partner or manager of the investments.
Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair
value when cash flows indicate that the carrying value may not be recoverable. Depreciation is generally recorded using the straight-
line method based on the estimated useful life of each asset. Investment real estate as of December 31, 2022 and 2021 is expected to
be held longer than one year and may include real estate acquired through the foreclosure of commercial mortgage loans.
Additionally, foreign currency swaps carried at fair value as well as statutory and other restricted deposits are reported in the table
below as "Other." See discussion below for information on the Company's accounting policies for derivative financial instruments.
Other long-term investments and related commitments are diversified by issuer, property type and geographic regions. These
investments are primarily unconsolidated variable interest entities (see Note 13 for additional information). The following table
provides unfunded commitment and carrying value information for these investments. The Company expects to disburse
approximately 30% of the committed amounts in 2023.
Our limited partnership investments are reduced as the Company receives cash distributions for returns on its investment that were
previously recognized in Net investment income. The amount of these cash distributions was $487 million in 2022, $568 million in
2021 and $227 million in 2020.
(In millions)
Real estate investments
Securities partnerships
Other
Total
Carrying Value as of December 31,
Unfunded
Commitments as of
2022
2021
December 31, 2022
$
$
1,319 $
1,152 $
2,166
243
2,272
150
3,728 $
3,574 $
668
1,704
—
2,372
Short-Term Investments and Cash Equivalents
Accounting policy. Security investments with maturities of greater than three months to one year from time of purchase are classified
as short-term, available for sale and carried at fair value that approximates cost. Cash equivalents consist of short-term investments
with maturities of three months or less from the time of purchase and are carried at cost that approximates fair value.
B. Derivative Financial Instruments
The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield,
currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities. The Company also uses
derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in
foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt. The Company has written and purchased
GMIB reinsurance contracts in its run-off reinsurance business that are accounted for as freestanding derivatives as discussed in Note
10. Derivatives in the Company's separate accounts are excluded from the following discussion because associated gains and losses
generally accrue directly to separate account policyholders.
Accounting policy. Derivatives are recorded in our Consolidated Balance Sheets at fair value and are classified as current or non-
current according to their contractual maturities. Further information on our policies for determining fair value are discussed in Note
12. The Company applies hedge accounting when derivatives are designated, qualified and highly effective as hedges. Under hedge
accounting, the changes in fair value of the derivative and the hedged risk are generally recognized together and offset each other
108
when reported in Shareholders' net income Various qualitative or quantitative methods appropriate for each hedge are used to formally
assess and document hedge effectiveness at inception and each period throughout the life of a hedge.
The Company's derivative financial instruments are presented as follows:
•
•
•
•
Fair value hedges of the foreign exchange-related changes in fair values of certain foreign-denominated bonds: Swap fair
values are reported in Long-term investments or Other non-current liabilities. Offsetting changes in fair values attributable to
the foreign exchange risk of the swap contracts and the hedged bonds are reported in Net realized investment (losses) gains.
The portion of the swap contracts' changes in fair value excluded from the assessment of hedge effectiveness is recorded in
Other comprehensive (loss) income and recognized in Net investment income as swap coupon payments are accrued,
offsetting the foreign-denominated coupons received on the designated bonds. Net cash flows are reported in Operating
activities, while exchanges of notional principal amounts are reported in Investing activities.
Fair value hedges of the interest rate exposure on the Company's long-term debt: Using fair value hedge accounting, the fair
values of the swap contracts are reported in other assets or other liabilities. The critical terms of these swaps match those of
the long-term debt being hedged. As a result, the carrying value of the hedged debt is adjusted to reflect changes in its fair
value driven by the Secured Overnight Financing Rate ("SOFR"). The effects of those adjustments on interest expense are
offset by the effects of corresponding changes in the swaps' fair value. The net impact from the hedge reported in Interest
expense and other reflects interest expense on the hedged debt at the variable interest rate. Cash flows relating to these
contracts are reported in Operating activities.
Net investment hedges of certain foreign subsidiaries that conduct their business principally in currencies other than the U.S.
dollar: The fair values of the foreign currency swap and forward contracts are reported in other assets or other liabilities. The
changes in fair values of these instruments are reported in Other comprehensive (loss) income, specifically in translation of
foreign currencies. The portion of the change in fair values relating to foreign exchange spot rates will be recognized in
earnings upon deconsolidation of the hedged foreign subsidiaries. The remaining changes in fair value of these instruments
are excluded from our effectiveness assessment and recognized in Interest expense and other over the term of the instrument.
Cash flows relating to these contracts are reported in Investing activities.
Economic hedges for derivatives not designated as accounting hedges: Fair values of forward contracts are reported in
Investments (current) or Accrued expenses and other liabilities. The changes in fair values are reported in Net realized
investment (losses) gains. Cash flows relating to these contracts are reported in Investing activities.
The gross fair values of our derivative financial instruments are presented in Note 12. Although we may incur a loss if dealers failed to
perform under derivative contracts, collateral has been posted to cover substantially all of the net fair value owed to the Company. As
of December 31, 2022 and December 31, 2021, the effects of derivative financial instruments used in these individual hedging
strategies were not material to the Consolidated Financial Statements. The following table summarizes the types and notional quantity
of derivative instruments held by the Company:
(In millions)
Purpose
Type of Instrument
Notional Value as of
December 31,
2022
December 31,
2021
Fair value hedge: To hedge the foreign exchange-related changes in fair values of
certain foreign-denominated bonds. The notional value of these derivatives matches
the amortized cost of the hedged bonds. A majority of these instruments are
denominated in Euros, with the remaining instruments denominated in British Pounds
Sterling and Australian Dollars.
Fair value hedge: To convert a portion of the interest rate exposure on the Company's
long-term debt from fixed to variable rates. This more closely aligns the Company's
interest expense with the interest income received on its cash equivalent and short-term
investment balances. The variable rates are benchmarked to SOFR.
Net investment hedge: To reduce the risk of changes in net assets due to changes in
foreign currency spot exchange rates for certain foreign subsidiaries that conduct their
business principally in currencies other than the U.S. Dollar. The notional value of
hedging instruments matches the hedged amount of subsidiary net assets. Foreign
currency swap contracts are denominated in Euros.
Foreign currency swap contracts
$
1,083 $
1,081
Interest rate swap contracts
$
1,500 $
750
Foreign currency swap contracts
$
460 $
526
Foreign currency forward contracts used in net investment hedge and economic hedge strategies with notional values of approximately
$1.4 billion and $0.7 billion as of December 31, 2021, respectively, were associated with the International businesses divested to
Chubb during 2022. See Note 4 to the Consolidated Financial Statements for further information.
Concentration of Risk
The Company did not have a concentration of investments in a single issuer or borrower exceeding 10% of shareholders' equity as of
December 31, 2022 or 2021.
109
C. Net Investment Income
Accounting policy. When interest and principal payments on investments are current, the Company recognizes interest income when it
is earned. The Company recognizes interest income on a cash basis when interest payments are delinquent based on contractual terms
or when certain terms (interest rate or maturity date) of the investment have been restructured. For unconsolidated entities that are
included in other long-term investments investment income is generally recognized according to the Company's share of the reported
income or loss on the underlying investments. Investment income attributed to the Company's separate accounts is excluded from our
earnings because associated gains and losses generally accrue directly to separate account policyholders.
The components of Net investment income were as follows:
(In millions)
Debt Securities
Equity securities
Commercial mortgage loans
Policy loans
Other long-term investments
Short-term investments and cash
Total investment income
Less investment expenses
Net investment income
For the Years Ended December 31,
2022
2021
2020
$
572 $
689 $
14
59
59
390
115
1,209
54
12
60
63
758
26
1,608
59
$
1,155 $
1,549 $
962
11
80
64
127
52
1,296
52
1,244
D. Realized Investment Gains and Losses
Accounting policy. Realized investment gains and losses are based on specifically identified assets and result from sales, investment
asset write-downs, change in the fair value of certain derivatives and equity securities and changes in allowances for credit losses on
debt securities and commercial mortgage loan investments.
The following realized gains and losses on investments exclude amounts required to adjust future policy benefits for the run-off
settlement annuity business (consistent with accounting for a premium deficiency), as well as realized gains and losses attributed to the
Company's separate accounts because those gains and losses generally accrue directly to separate account policyholders:
(In millions)
Net realized investment (losses) gains, excluding credit loss expense and asset write-downs
Credit loss (expense) recoveries
Other investment asset write-downs
Net realized investment (losses) gains, before income taxes
For the Years Ended December 31,
2022
2021
2020
(459) $
194 $
(36)
—
2
—
(495) $
196 $
186
(27)
(10)
149
$
$
Net realized investment losses for the year ended December 31, 2022 were primarily due to mark-to-market losses on a strategic
health care equity securities investment.
Note 12 – Fair Value Measurements
The Company carries certain financial instruments at fair value in the financial statements including debt securities, certain equity
securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions,
such as when impaired or when there are observable price changes for equity securities with no readily determinable fair value.
Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the
balance sheet date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a market participant,
not the amount that would be paid to settle the liability with the creditor.
The Company's financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP. The
hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and
liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level
3). An asset's or a liability's classification is based on the lowest level of input that is significant to its measurement. For example, a
financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significant to the instrument's
110
fair value, even though the measurement may be derived using inputs that are both observable (Levels 1 and 2) and unobservable
(Level 3).
The Company estimates fair values using prices from third parties or internal pricing methods. Fair value estimates received from
third-party pricing services are based on reported trade activity and quoted market prices when available and other market information
that a market participant would use to estimate fair value. The internal pricing methods are performed by the Company's investment
professionals and generally involve using discounted cash flow analyses, incorporating current market inputs for similar financial
instruments with comparable terms and credit quality as well as other qualitative factors. In instances where there is little or no market
activity for the same or similar instruments, fair value is estimated using methods, models and assumptions that the Company believes
a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of
estimation and judgment that becomes significant with increasingly complex instruments or pricing models.
The Company is responsible for determining fair value and for assigning the appropriate level within the fair value hierarchy based on
the significance of unobservable inputs. The Company reviews methodologies, processes and controls of third-party pricing services
and compares prices on a test basis to those obtained from other external pricing sources or internal estimates. The Company performs
ongoing analyses of both prices received from third-party pricing services and those developed internally to determine that they
represent appropriate estimates of fair value. The controls executed by the Company include evaluating changes in prices and
monitoring for potentially stale valuations. The Company also performs sample testing of sales values to confirm the accuracy of prior
fair value estimates. The minimal exceptions identified during these processes indicate that adjustments to prices are infrequent and do
not significantly impact valuations. An annual due-diligence review of the most significant pricing service is conducted to review their
processes, methodologies and controls. This review includes a walk-through of inputs for a sample of securities held across various
asset types to validate the documented pricing process.
A. Financial Assets and Financial Liabilities Carried at Fair Value
The following table provides information about the Company's financial assets and liabilities carried at fair value. Separate account
assets are also recorded at fair value on the Company's Consolidated Balance Sheets and are reported separately in the Separate
Accounts section below as gains and losses related to these assets generally accrue directly to contractholders:
(In millions)
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
Significant Other Observable
Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Total
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Financial assets at fair
value
Debt securities
Federal government
and agency
State and local
government
Foreign government
Corporate
Mortgage and other
asset-backed
Total debt securities
Equity securities (1)
Short-term investments
Derivative assets
Financial liabilities at
fair value
$
147 $
147 $
165 $
240 $
— $
— $
312 $
—
—
—
—
147
6
—
—
—
—
—
—
147
16
—
—
41
365
8,394
313
9,278
132
139
230
171
2,611
12,606
418
16,046
160
428
143
—
—
412
35
447
—
—
1
—
5
660
100
765
31
—
—
41
365
8,806
348
9,872
138
139
231
387
171
2,616
13,266
518
16,958
207
428
143
Derivative liabilities
(1) Excludes certain equity securities that have no readily determinable fair value.
— $
— $
$
— $
33 $
— $
— $
— $
33
Level 1 Financial Assets
Inputs for instruments classified in Level 1 include unadjusted quoted prices for identical assets in active markets accessible at the
measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.
111
Assets in Level 1 include actively-traded U.S. government bonds and exchange-listed equity securities. A relatively small portion of
the Company's investment assets are classified in this category given the narrow definition of Level 1 and the Company's investment
asset strategy to maximize investment returns.
Level 2 Financial Assets and Financial Liabilities
Inputs for instruments classified in Level 2 include quoted prices for similar assets or liabilities in active markets, quoted prices from
those willing to trade in markets that are not active or other inputs that are market observable or can be corroborated by market data
for the term of the instrument. Such other inputs include market interest rates and volatilities, spreads and yield curves. An instrument
is classified in Level 2 if the Company determines that unobservable inputs are insignificant.
Debt and equity securities. Approximately 94% of the Company's investments in debt and equity securities are classified in Level 2
including most public and private corporate debt and equity securities, federal agency and municipal bonds, non-government
mortgage-backed securities and preferred stocks. Third-party pricing services and internal methods often use recent trades of securities
with similar features and characteristics because many debt securities do not trade daily. Pricing models are used to determine these
prices when recent trades are not available. These models calculate fair values by discounting future cash flows at estimated market
interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities based on
the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to,
a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data and
industry and economic events. For mortgage-backed securities, inputs and assumptions may also include characteristics of the issuer,
collateral attributes, prepayment speeds and credit rating. Nearly all of these instruments are valued using recent trades or pricing
models.
Short-term investments are carried at fair value that approximates cost. The Company compares market prices for these securities to
recorded amounts on a regular basis to validate that current carrying amounts approximate exit prices. The short-term nature of the
investments and corroboration of the reported amounts over the holding period support their classification in Level 2.
Derivative assets and liabilities classified in Level 2 represent over-the-counter instruments such as foreign currency forward and
swap contracts. Fair values for these instruments are determined using market observable inputs including forward currency and
interest rate curves and widely published market observable indices. Credit risk related to the counterparty and the Company is
considered when estimating the fair values of these derivatives. However, the Company is largely protected by collateral arrangements
with counterparties and determined that no adjustments for credit risk were required as of December 31, 2022 or December 31, 2021.
The nature and use of these derivative financial instruments are described in Note 11.
Level 3 Financial Assets and Financial Liabilities
Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their
resulting fair value measurement. Unobservable inputs reflect the Company's best estimate of what hypothetical market participants
would use to determine a transaction price for the asset or liability at the reporting date.
The Company classifies certain newly-issued, privately-placed, complex or illiquid securities in Level 3. Approximately 5% of debt
and equity securities are priced using significant unobservable inputs and classified in this category.
Fair values of mortgage and other asset-backed securities, as well as corporate and government debt securities, are primarily
determined using pricing models that incorporate the specific characteristics of each asset and related assumptions including the
investment type and structure, credit quality, industry and maturity date in comparison to current market indices, spreads and liquidity
of assets with similar characteristics. Inputs and assumptions for pricing may also include characteristics of the issuer, collateral
attributes and prepayment speeds for mortgage and other asset-backed securities. Recent trades in the subject security or similar
securities are assessed when available, and the Company may also review published research in its evaluation, as well as the issuer's
financial statements.
112
Quantitative Information about Unobservable Inputs
The significant unobservable input used to value our corporate and government debt securities and mortgage and other asset-backed
securities is an adjustment for liquidity. This adjustment is needed to reflect current market conditions and issuer circumstances when
there is limited trading activity for the security.
The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and
used in pricing these debt securities. The range and weighted average basis point ("bps") amounts for liquidity reflect the Company's
best estimates of the unobservable adjustments a market participant would make to calculate these fair values.
(Fair value in millions)
Debt securities
Fair Value as of
Unobservable Adjustment Range
(Weighted Average by Quantity) as of
December 31,
2022
December 31,
2021
Unobservable input
December 31, 2022
December 31,
2022
December 31,
2021
Corporate and government debt securities
Mortgage and other asset-backed securities
Other debt securities
Total Level 3 debt securities
$
$
412 $
35
—
447 $
664
100
1
765
Liquidity
Liquidity
60 - 1060 (265) bps
60 - 1060 (410) bps
105 - 520 (310) bps
60 - 390 (100) bps
A significant increase in liquidity spread adjustments would result in a lower fair value measurement, while a decrease would result in
a higher fair value measurement.
Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value
The following table summarizes the changes in financial assets and financial liabilities classified in Level 3. Gains and losses reported
in the table may include net changes in fair value that are attributable to both observable and unobservable inputs.
(In millions)
Debt and Equity Securities
Beginning balance
Gains (losses) included in Shareholders' net income
Losses included in Other comprehensive (loss) income
Losses required to adjust future policy benefits for settlement annuities (1)
Purchases, sales and settlements
Purchases
Sales
Settlements
Total purchases, sales and settlements
Transfers into/(out of) Level 3
Transfers into Level 3
Transfers out of Level 3
Total transfers into/(out of) Level 3
Ending balance
Total losses included in Shareholders' net income attributable to instruments held at the reporting date
Change in unrealized gain or (loss) included in Other comprehensive (loss) income for assets held at the end of the reporting
period
(1) Amounts do not accrue to shareholders.
For the Years Ended
December 31,
2022
2021
$
796 $
11
(59)
—
158
—
(207)
(49)
124
(376)
(252)
447 $
(2) $
854
(22)
(6)
(8)
138
(36)
(119)
(17)
207
(212)
(5)
796
(17)
$
$
$
(60) $
(10)
Total gains and losses included in Shareholders' net income in the tables above are reflected in the Consolidated Statements of Income
as Net realized investment (losses) gains and Net investment income.
Gains and losses included in Other comprehensive (loss) income, net of tax in the tables above are reflected in Net unrealized
depreciation on securities and derivatives in the Consolidated Statements of Comprehensive Income.
Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company's best estimate of what a market
participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Market
113
activity typically decreases during periods of economic uncertainty and this decrease in activity reduces the availability of market
observable data. As a result, the level of unobservable judgment that must be applied to the pricing of certain instruments increases
and is typically observed through the widening of liquidity spreads. Transfers between Level 2 and Level 3 during 2022 and 2021
primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors. See discussion under
Quantitative Information about Unobservable Inputs above for more information.
Separate Accounts
Accounting policy. Separate account assets and liabilities are contractholder funds maintained in accounts with specific investment
objectives. The assets of these accounts are legally segregated and are not subject to claims that arise out of any of the Company's
other businesses. These separate account assets are carried at fair value with equal amounts recorded for related separate account
liabilities. The investment income and fair value gains and losses of separate account assets generally accrue directly to the
contractholders and, together with their deposits and withdrawals, are excluded from the Company's Consolidated Statements of
Income and Cash Flows. Fees and charges earned for mortality risks, asset management or administrative services are reported in
either Premiums or Fees and other revenues. Investments that are measured using the practical expedient of net asset value ("NAV")
are excluded from the fair value hierarchy.
Fair values of Separate account assets were as follows:
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Total
December
31, 2022
December
31, 2021
December
31, 2022
December
31, 2021
December
31, 2022
December
31, 2021
December
31, 2022
December
31, 2021
$
$
203 $
227 $
382 $
276 $
— $
— $
585 $
211
1,130
5,522
6,406
203
414 $
1,357 $
5,904 $
6,682 $
203 $
334
334
5,936
6,521
757
503
7,870
8,373
842
9,215
(878)
(In millions)
Guaranteed separate accounts (See
Note 23)
Non-guaranteed separate accounts (1)
Subtotal
Non-guaranteed separate accounts
priced at NAV as a practical
expedient (1)
Total
Separate account assets of businesses
classified as held for sale (2)
Separate account assets per
Consolidated Balance Sheets
(1) Non-guaranteed separate accounts include $4.0 billion as of December 31, 2022 and $4.5 billion as of December 31, 2021 in assets supporting the Company's
pension plans, including $0.2 billion classified in Level 3 as of December 31, 2022 and $0.3 billion as of December 31, 2021.
(2) Investments related to the divested International businesses that were held for sale as of December 31, 2021. See Note 4 for additional information.
7,278 $
$
8,337
Separate account assets classified as Level 1 primarily include exchange-listed equity securities. Level 2 assets primarily include:
•
•
corporate and structured bonds valued using recent trades of similar securities or pricing models that discount future cash
flows at estimated market interest rates as described above; and
actively-traded institutional and retail mutual fund investments.
114
Separate account assets classified in Level 3 primarily support the Company's pension plans and include certain newly-issued,
privately-placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans.
Activity, including transfers into and out of Level 3, was not material for the years ended December 31, 2022 or 2021.
Separate account investments in securities partnerships, real estate and hedge funds are generally valued based on the separate
account's ownership share of the equity of the investee (NAV as a practical expedient), including changes in the fair values of its
underlying investments. Substantially all of these assets support the Company's pension plans. The following table provides additional
information on these investments:
(In millions)
Securities partnerships
Real estate funds
Hedge funds
Total
Fair Value as of
December 31,
2022
December 31,
2021
Unfunded
Commitment as of
December 31, 2022
Redemption Frequency
(if currently eligible)
Redemption Notice
Period
$
$
451 $
513 $
302
4
325
4
249
—
Not applicable
Quarterly
— Up to annually, varying by fund
Not applicable
30 - 90 days
30 - 90 days
757 $
842 $
249
As of December 31, 2022, the Company does not have plans to sell any of these assets at less than fair value. These investments are
structured to satisfy longer-term investment objectives. Securities partnerships are contractually non-redeemable and the underlying
investment assets are expected to be liquidated by the fund managers within ten years after inception.
B. Assets and Liabilities Measured at Fair Value under Certain Conditions
Some financial assets and liabilities are not carried at fair value, such as commercial mortgage loans that are carried at unpaid
principal, investment real estate that is carried at depreciated cost and equity securities with no readily determinable fair value when
there are no observable market transactions. However, these financial assets and liabilities may be measured using fair value under
certain conditions, such as when investments become impaired and are written down to their fair value, or when there are observable
price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.
For the years ended December 31, 2022 and 2021, impairments recognized requiring these assets to be measured at fair value were not
material. Realized investment gains and losses from these observable price changes for the years ended December 31, 2022 and
December 31, 2021 were not material.
C. Fair Value Disclosures for Financial Instruments Not Carried at Fair Value
The following table includes the Company's financial instruments not recorded at fair value but for which fair value disclosure is
required. In addition to universal life products and finance leases, financial instruments that are carried in the Company's Consolidated
Balance Sheets at amounts that approximate fair value are excluded from the following table:
(In millions)
Commercial mortgage loans
Long-term debt, including current maturities, excluding finance leases
Note 13 – Variable Interest Entities
Classification in
Fair Value
Hierarchy
December 31, 2022
December 31, 2021
Fair Value
Carrying
Value
Fair Value
Carrying
Value
Level 3
Level 2
$
$
1,491 $
1,614 $
1,598 $
28,653 $
30,994 $
35,621 $
1,566
31,593
When the Company becomes involved with a variable interest entity and when there is a change in the Company's involvement with
an entity, the Company must determine if it is the primary beneficiary and must consolidate the entity. The Company is considered the
primary beneficiary if it has the power to direct the entity's most significant economic activities and has the right to receive benefits or
obligation to absorb losses that could be significant to the entity. The Company evaluates the following criteria:
•
•
•
the structure and purpose of the entity;
the risks and rewards created by and shared through the entity; and
the Company's ability to direct its activities, receive its benefits and absorb its losses relative to the other parties involved
with the entity including its sponsors, equity holders, guarantors, creditors and servicers.
The Company determined it was not a primary beneficiary in any material variable interest entity as of December 31, 2022 or 2021.
115
The Company's involvement in variable interest entities for which it is not the primary beneficiary is described below.
Securities limited partnerships and real estate limited partnerships. The Company owns interests in securities limited partnerships
and real estate limited partnerships that are defined as unconsolidated variable interest entities. These partnerships invest in the equity
or mezzanine debt of privately-held companies and real estate properties. General partners unaffiliated with the Company control
decisions that most significantly impact the partnership's operations and the limited partners do not have substantive kick-out or
participating rights. The Company has invested in approximately 175 limited partnerships that have a carrying value of $2.7 billion as
of December 31, 2022 reported in other long-term investments. We have commitments to contribute an additional $2.1 billion to these
entities. The Company's maximum exposure to loss from these investments is $4.8 billion, calculated as the sum of our carrying value
and the additional funding commitments. Our noncontrolling interest in each of these limited partnerships is generally less than 10%
of the partnership ownership interests. See Note 11 for further information on the Company's accounting policy for other long-term
investments.
The Company has guaranteed debt payments to mortgage lenders for certain real estate limited partnerships should potential
environmental obligations arise. No liability has been incurred related to these guarantees, and the Company's maximum exposure to
these guarantees was approximately $340 million as of December 31, 2022.
Other variable interest entities. The Company is involved in other types of variable interest entities, including certain asset-backed
and corporate securities, real estate joint ventures that develop properties for residential and commercial use, independent physician
associations ("IPAs") that provide care management services and international health care joint ventures. The Company's maximum
exposure to loss is $0.6 billion from certain asset-backed and corporate securities and $0.6 billion from real estate joint ventures,
which represents the sum of our carrying value and the additional funding commitments for these entities. The carrying values and
maximum exposures for the remaining unconsolidated variable interest entities were not material as of December 31, 2022.
The Company has not provided, and does not intend to provide, financial support to any of the variable interest entities in excess of its
maximum exposure. We perform ongoing qualitative analyses of our involvement with these variable interest entities to determine if
consolidation is required.
116
Note 14 – Collectively Significant Operating Unconsolidated Subsidiaries
In addition to equity method investments, including certain limited partnerships and limited liability companies holding real estate,
securities or loans (as disclosed in Note 11), we maintain a portfolio of operating joint ventures accounted for as equity method
investments. Operating joint ventures accounted for under the equity method had a carrying value of $1.1 billion as of December 31,
2022 and $1.2 billion as of December 31, 2021.
For the years ended December 31, 2022, 2021 and 2020, none of our unconsolidated subsidiary investments were individually
significant.
Accounting policy. We record in our Consolidated Statements of Income our proportionate share of net income or loss generated by
equity method operating joint ventures within Fees and other revenues. In certain instances, income or loss is reported on a one month
lag due to the timing of when financial information is received.
The below summarized results of operations and financial position of the operating joint venture investments accounted for under the
equity method reflects the latest available financial information and does not represent the Company's proportionate share of the
assets, liabilities or earnings of such entities. The net loss for the year ended December 31, 2022 is primarily attributable to realized
investment losses as a result of market volatility experienced by our joint venture in China.
(In millions)
Revenues
Net (loss) income
(In millions)
Total assets
Total liabilities
For the Years Ended December 31,
2022
2021
2020
$
$
4,208 $
(15) $
3,400 $
200 $
2,457
401
December 31,
2022
December 31,
2021
$
$
20,676 $
18,441 $
18,942
16,510
117
Note 15 – Accumulated Other Comprehensive Income (Loss) ("AOCI")
AOCI includes net unrealized (depreciation) appreciation on securities and derivatives (excluding appreciation on investments
supporting future policy benefit liabilities of the run-off settlement annuity business) (see Note 11), foreign currency translation and
the net postretirement benefits liability adjustment. AOCI also includes the Company's share from unconsolidated entities accounted
for under the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to
Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized. Changes in the components
of AOCI were as follows:
(In millions)
Securities and Derivatives
Beginning balance
Unrealized (depreciation) appreciation on securities and derivatives
Tax benefit (expense)
Net unrealized (depreciation) appreciation on securities and derivatives
Reclassification adjustment for losses (gains) included in Shareholders' net income (Gain on sale of
businesses)
Reclassification adjustment for losses (gains) included in Shareholders' net income (Net realized
investment (losses) gains)
Reclassification adjustment for tax (benefit) expense included in Shareholders' net income
Net losses (gains) reclassified from AOCI to Shareholders' net income
Other comprehensive (loss), net of tax
Ending balance
Translation of foreign currencies
Beginning balance
Translation of foreign currencies
Tax (expense) benefit
Net translation of foreign currencies
Reclassification adjustment for losses included in Net income (Gain on sale of businesses)
Reclassification adjustment for tax expense (benefit) included in Net income
Net translation losses reclassified from AOCI to Net income
Other comprehensive income (loss), net of tax
Less: Net translation (loss) on foreign currencies attributable to noncontrolling interests
Shareholders' other comprehensive income (loss), net of tax
Ending balance
Postretirement benefits liability
Beginning balance
Reclassification adjustment for amortization of net prior actuarial losses and prior service costs (Interest
expense and other)
Reclassification adjustment for (gains) included in Shareholders' net income (Gain on sale of businesses)
Reclassification adjustment for settlement (Interest expense and other)
Reclassification adjustment for tax (benefit) included in Shareholders' net income
Net adjustments reclassified from AOCI to Shareholders' net income
Valuation update
Tax (expense) benefit
Net change due to valuation update
Other comprehensive income (loss), net of tax
Ending balance
Total Accumulated other comprehensive loss
Beginning balance
Shareholders' other comprehensive (loss) income, net of tax
Ending balance
118
$
$
$
$
$
$
$
For the Years Ended December 31,
2022
2021
2020
$
685 $
900 $
(1,528)
310
(1,218)
172
52
(11)
213
(1,005)
(320) $
(230)
31
(199)
—
(21)
5
(16)
(215)
685 $
975
776
(150)
626
(862)
(26)
187
(701)
(75)
900
(233) $
(15) $
(275)
(282)
(33)
(315)
358
29
387
72
(2)
74
(213)
(19)
(232)
—
—
—
(232)
(14)
(218)
(159) $
(233) $
232
12
244
11
(3)
8
252
(8)
260
(15)
(1,336) $
(1,746) $
(1,641)
65
(1)
—
(16)
48
487
(115)
372
420
85
—
4
(21)
68
448
(106)
342
410
70
—
—
(17)
53
(206)
48
(158)
(105)
(916) $
(1,336) $
(1,746)
(884) $
(511)
(1,395) $
(861) $
(23)
(884) $
(941)
80
(861)
Note 16 – Organizational Efficiency Plan
During 2021, the Company approved a strategic plan to further leverage its ongoing growth to drive operational efficiency through
enhancements to organizational structure and increased use of automation and shared services. As of December 31, 2022, the
remaining accrued liability recorded in Accrued expenses and other liabilities was $39 million. We expect substantially all of the
accrued liability to be paid by the end of 2023.
Note 17 – Pension
A. About Our Plans
The Company sponsors U.S. and non-U.S. defined benefit pension plans; future benefit accruals for the domestic plans are frozen.
Accounting policy. The Company measures the assets and liabilities of its domestic pension plans as of December 31. Benefit
obligations are measured at the present value of estimated future payments based on actuarial assumptions. The Company uses the
corridor method to account for changes in the benefit obligation when actual results differ from those assumed, or when assumptions
change. These changes are called net unrecognized actuarial gains (losses). Under the corridor method, net unrecognized actuarial
gains (losses) are initially recorded in Accumulated other comprehensive loss. When the unrecognized gain (loss) exceeds 10% of the
benefit obligation, that excess is amortized to expense over the expected remaining lives of plan participants. The net plan expense is
reported in Interest expense and other in the Consolidated Statements of Income.
For balance sheet purposes, we measure plan assets at fair value. When the actual return differs from the expected return, those
differences are reflected in the net unrealized actuarial gain (loss) discussed above. However, to measure pension benefit costs, we use
a market-related asset valuation that differs from the actual fair value for domestic pension plan assets invested in non-fixed income
investments. The market-related value recognizes the difference between actual and expected long-term returns in the portfolio over
five years, a method that reduces the short-term impact of market fluctuations on pension costs. The market-related asset value was
approximately $3.8 billion, compared with a fair value of approximately $4.2 billion at December 31, 2022.
B. Funded Status and Amounts Included in Accumulated Other Comprehensive Loss
The following table summarizes the projected benefit obligations and assets related to our U.S. and non-U.S. pension plans:
(In millions)
Change in benefit obligation
Benefit obligation, January 1
Service cost
Interest cost
Actuarial (gains), net (1)
Benefits paid from plan assets
Other
Benefit obligation, December 31
Change in plan assets
Fair value of plan assets, January 1
Actual return on plan assets
Benefits paid
Contributions
Fair value of plan assets, December 31
Funded status
Amounts presented in Consolidated Balance Sheets
Other assets
Accrued expenses and other liabilities
Other non-current liabilities
(1) 2022 and 2021 gains reflect an increase in the discount rate.
For the Years Ended
December 31,
2022
2021
$
5,223 $
5,600
2
140
(1,094)
(296)
(27)
3,948
4,846
(366)
(296)
2
4,186
$
$
$
$
238 $
238 $
— $
— $
2
132
(189)
(304)
(18)
5,223
4,623
522
(304)
5
4,846
(377)
—
(14)
(363)
We fund our qualified pension plans at least at the minimum amount required by the Employee Retirement Income Security Act of
1974 and the Pension Protection Act of 2006. The Company made immaterial contributions to the qualified pension plans in 2022. For
2023, contributions to the qualified pension plans are expected to be immaterial. Future years' contributions will ultimately be based
119
on a wide range of factors including but not limited to asset returns, discount rates and funding targets. Non-qualified pension plans
are generally funded on a pay-as-you-go basis as there are no plan assets for these plans.
Benefit payments. The following benefit payments are expected to be paid in:
(In millions)
2023
2024
2025
2026
2027
2028 - 2032
$
$
$
$
$
$
320
316
316
316
313
1,508
Amounts reflected in the pension assets/(liabilities) shown above that have not yet been reported in Net income and, therefore, have
been included in Accumulated other comprehensive loss consisted of the following:
(In millions)
Unrecognized net (losses)
Unrecognized prior service cost
Postretirement benefits liability adjustment
C. Cost of Our Plans
Net pension cost was as follows:
(In millions)
Service cost
Interest cost
Expected long-term return on plan assets
Amortization of:
Prior actuarial losses, net
Settlement loss
Net (benefit) cost
D. Assumptions Used for Pension
Discount rate:
Pension benefit obligation
Pension benefit cost
Expected long-term return on plan assets:
Pension benefit cost
Mortality table for pension obligations
December 31,
2022
December 31,
2021
$
$
(1,208) $
(1,753)
(5)
(5)
(1,213) $
(1,758)
For the Years Ended December 31,
2022
2021
2020
$
2 $
2 $
140
(272)
89
—
132
(269)
78
4
$
(41) $
(53) $
2
168
(260)
78
—
(12)
For the Years Ended December 31,
2022
5.43%
2.82%
6.75%
2021
2.82%
2.49%
6.75%
White Collar mortality table
with MP 2021 projection scale
White Collar mortality table with
MP 2021 projection scale
The Company develops discount rates by applying actual annualized yields for high-quality bonds by duration to the expected pension
plan liability cash flows. The bond yields represent a diverse mix of actively traded high quality fixed-income securities that have an
above average return at each duration as management believes this approach is representative of the yield achieved through plan asset
investment strategy.
The expected long-term return on plan assets was developed considering historical long-term actual returns, expected long-term
market conditions, plan asset mix and management's plan asset investment strategy.
120
E. Pension Plan Assets
As of December 31, 2022, pension assets included $4.0 billion invested in the separate accounts of Connecticut General Life Insurance
Company, a subsidiary of the Company, and an additional $0.2 billion invested in funds of unaffiliated investment managers.
The fair values of pension assets by category are as follows:
(In millions)
Debt securities:
Federal government and agency
Corporate
Asset-backed
Fund investments
Total debt securities
Equity securities:
Domestic
International, including funds and pooled separate accounts (1)
Total equity securities
Securities partnerships
Real estate funds, including pooled separate accounts (1)
Commercial mortgage loans
Hedge funds
Guaranteed deposit account contract
Cash equivalents and other current assets, net
December 31,
2022
December 31,
2021
$
11 $
2,349
109
478
2,947
89
35
124
452
315
63
—
50
235
9
1,653
108
731
2,501
789
358
1,147
514
334
77
—
91
182
4,846
Total pension assets at fair value
(1) A pooled separate account has several participating benefit plans and each owns a share of the total pool of investments.
$
4,186 $
The Company's current target investment allocation percentages are 80% fixed income and 20% in other investments, including
private equity (securities partnerships), public equity securities, and real estate, and are developed by management as guidelines,
although the fair values of each asset category are expected to vary as a result of changes in market conditions. These allocation
percentages were updated during 2022 to increase the allocation to fixed income investments as a result of improvements in the plan's
funding status, as interest rates increased during the year. The Company will evaluate further allocation changes to equity securities,
other investments and fixed income securities as funding levels change.
See Note 12 for further details regarding how fair value is determined, including the level within the fair value hierarchy and the
procedures we use to validate fair value measurements. The Company classifies substantially all debt securities in Level 2 for pension
plan assets. These assets are valued using recent trades of similar securities or are fund investments priced using their daily net asset
value that is the exit price. Approximately one-third of equity securities are classified in Level 1 because they are priced according to
unadjusted quotes from active markets, while another one-third of this balance is classified in Level 2 and priced using the daily net
asset value. The remaining balance of equity securities is classified in Level 3.
Securities partnerships, real estate and hedge funds are valued using net asset value as a practical expedient and are excluded from the
fair value hierarchy. See Note 12 for additional disclosures related to these assets invested in the separate accounts of the Company's
subsidiary. Certain securities as described in Note 12, as well as commercial mortgage loans and guaranteed deposit account contracts,
are classified in Level 3 because unobservable inputs used in their valuation are significant.
F. 401(k) Plan
The Company sponsors a 401(k) plan. All employees are immediately eligible for the plan at hire and the Company matches a portion
of employees' contributions to the plan. Participants in the plan may invest in various funds that invest in the Company's common
stock, several diversified stock funds, a bond fund or stable value funds. The Company common stock fund under the plan constitutes
121
an "employee stock ownership plan" as defined in the Internal Revenue Code. Dividends from the Company common stock fund are
reinvested in a participant's stock fund account unless the participant elects to receive the dividends in cash.
The Company may elect to increase its matching contributions if the Company's annual performance meets certain targets. The
Company's annual expense for the plan was as follows:
(In millions)
Expense
Note 18 – Employee Incentive Plans
A. About Our Plans
For the Years Ended December 31,
2022
2021
2020
$
274 $
268 $
243
The People Resources Committee (the "Committee") of the Board of Directors awards stock options, restricted stock grants, restricted
stock units, deferred stock and strategic performance shares to certain employees. The Company issues original issue shares for these
awards.
The Company records compensation expense for stock and option awards over their vesting periods primarily based on the estimated
fair value at the grant date. Fair value is determined differently for each type of award as discussed below.
Shares of common stock available for award were as follows:
(In millions)
Common shares available for award
B. Stock Options
December 31,
2022
December 31,
2021
December 31,
2020
16.6
19.1
20.6
Accounting policy. The Company awards options to purchase The Cigna Group common stock at the market price of the stock on the
grant date. Options vest over periods ranging from one year to three years and expire no later than 10 years from grant date. Fair value
is estimated using the Black-Scholes option-pricing model by applying the assumptions presented below. That fair value is reduced by
options expected to be forfeited during the vesting period. The Company estimates forfeitures at the grant date based on our
experience and adjusts the expense to reflect actual forfeitures over the vesting period. The fair value of options, net of forfeitures, is
recognized in Selling, general and administrative expenses on a straight-line basis over the vesting period.
Black-Scholes option-pricing model assumptions and the resulting fair value of options are presented in the following table:
Dividend yield
Expected volatility
Risk-free interest rate
Expected option life
Weighted average fair value of options
2022
2021
2020
1.98 %
30.0 %
1.6 %
1.85 %
30.0 %
0.5 %
— %
30.0 %
1.4 %
4.5 years
4.5 years
4.5 years
$
50.61
$
44.84
$
52.42
The dividend yield reflects expected future dividends. The Company intends to continue to pay dividends for the foreseeable future.
The expected volatility reflects the past daily stock price volatility of The Cigna Group stock. The Company does not consider
volatility implied in the market prices of traded options to be a good indicator of future volatility because remaining traded options
will expire within one year. The risk-free interest rate is derived using the four-year U.S. Treasury bond yield rate as of the award date
for the primary annual grant. Expected option life reflects the Company's historical experience.
122
The following table shows the status of, and changes in, common stock options:
(Options in thousands)
Outstanding - January 1
Granted
Exercised
Expired or canceled
Outstanding - December 31
Options exercisable at year-end
For the Years Ended December 31,
2022
2021
2020
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
8,490 $
1,375 $
(2,617) $
(256) $
6,992 $
4,410 $
169.47
226.95
149.97
211.22
186.54
168.97
9,742 $
1,524 $
(2,584) $
(192) $
8,490 $
5,612 $
152.40
213.81
129.08
199.10
169.47
152.92
11,438 $
1,851 $
(3,289) $
(258) $
9,742 $
6,837 $
136.19
191.86
115.38
188.79
152.40
137.08
Compensation expense of $63 million related to unvested stock options at December 31, 2022 will be recognized over the next two
years (weighted average period).
The table below summarizes information for stock options exercised:
(In millions)
Intrinsic value of options exercised
Cash received for options exercised
Tax benefit from options exercised
The following table summarizes information for outstanding common stock options:
Number (in thousands)
Total intrinsic value (in millions)
Weighted average exercise price
Weighted average remaining contractual life
C. Restricted Stock
For the Years Ended December 31,
2022
2021
2020
$
$
$
313 $
389 $
47 $
268 $
326 $
50 $
304
376
57
December 31, 2022
Options
Outstanding
Options
Exercisable
$
$
6,992
1,012 $
4,410
716
186.54 $
168.97
6.2 years
4.9 years
The Company awards restricted stock (grants and units) to the Company's employees that vest over periods ranging from one to three
years. Recipients of restricted stock awards accumulate dividends during the vesting period, but generally forfeit their awards and
accumulated dividends if their employment terminates before the vesting date.
Accounting policy. Fair value of restricted stock awards is equal to the market price of The Cigna Group's common stock on the date
of grant. This fair value is reduced by awards that are expected to forfeit. At the grant date, the Company estimates forfeitures based
on experience and adjusts the expense to reflect actual forfeitures over the vesting period. This fair value, net of forfeitures, is
recognized in Selling, general and administrative expenses over the vesting period on a straight-line basis.
123
The following table shows the status of, and changes in, restricted stock awards:
(Awards in thousands)
Outstanding - January 1
Awarded
Vested
Forfeited
Outstanding - December 31
For the Years Ended December 31,
2022
2021
2020
Weighted
Average Fair
Value at
Award Date
Grants/Units
Weighted
Average Fair
Value at
Award Date
Grants/Units
Weighted
Average Fair
Value at
Award Date
Grants/Units
1,524 $
876 $
(714) $
(151) $
1,535 $
202.85
229.60
197.83
215.02
219.25
1,600 $
899 $
(866) $
(109) $
1,524 $
186.12
213.82
184.07
197.01
202.85
1,945 $
791 $
(1,026) $
(110) $
1,600 $
178.78
191.22
161.58
186.63
186.12
The fair value of vested restricted stock at the vesting date was as follows:
(In millions)
Fair value of vested restricted stock
For the Years Ended December 31,
2022
2021
2020
$
167 $
183 $
190
Approximately 10,000 employees held 1.5 million restricted stock awards at the end of 2022 with $182 million of related
compensation expense to be recognized over the next two years (weighted average period).
D. Strategic Performance Shares ("SPS")
The Company awards SPSs to executives and certain other key employees generally with a performance period of three years. Half of
these shares are subject to a market condition (total shareholder return relative to industry peer companies) and half are subject to a
performance condition (cumulative adjusted net income). These targets are set by the Committee at the beginning of the performance
period. Holders of these awards receive shares of The Cigna Group common stock at the end of the performance period ranging
anywhere from 0 to 200% of the original awards.
Accounting policy. Compensation expense for SPSs is recorded over the performance period. Fair value is determined at the grant
date for "market condition" SPSs using a Monte Carlo simulation model and not subsequently adjusted regardless of the final
outcome. Expense is initially accrued for "performance condition" SPSs based on the most likely outcome, but evaluated for
adjustment each period for updates in the expected outcome. Expense is adjusted to the actual outcome (number of shares awarded
times the share price at the grant date) at the end of the performance period.
The following table shows the status of, and changes in, SPSs:
(Awards in thousands)
Outstanding - January 1
Awarded
Vested
Forfeited
Outstanding - December 31
For the Years Ended December 31,
2022
2021
2020
Weighted
Average Fair
Value at
Award Date
Shares
Weighted
Average Fair
Value at
Award Date
Shares
Weighted
Average Fair
Value at
Award Date
Shares
860 $
294 $
(261) $
(113) $
780 $
197.07
230.69
183.60
207.75
212.68
808 $
331 $
(206) $
(73) $
860 $
190.02
213.90
196.29
197.38
197.07
818 $
362 $
(309) $
(63) $
808 $
177.94
191.52
159.67
187.76
190.02
124
The weighted average fair value per share of SPSs for expense purposes, including the Monte Carlo factor, at the award date for the
years ended December 31, 2022, 2021 and 2020 was $258.37, $239.57 and $206.86, respectively.
The fair value of vested SPSs at the vesting date was as follows:
For the Years Ended December 31,
2022
2021
2020
(Shares in thousands; $ in millions)
Shares
Fair Value
Shares
Fair Value
Shares
Fair Value
Shares of The Cigna Group common stock distributed upon SPS
vesting
137 $
31
243 $
51
306 $
55
Approximately 500 employees held 780,000 SPSs at the end of 2022 and $69 million of related compensation expense is expected to
be recognized over the next two years. The amount of expense for "performance condition" SPSs will vary based on actual
performance in 2023 and 2024.
E. Compensation Cost and Tax Effects of Share-based Compensation
The Company records tax benefits in Shareholders' net income during the vesting period based on the amount of expense being
recognized. The difference between tax benefits based on the expense and the actual tax benefit realized are also recorded in Net
income when stock options are exercised, or when restricted stock and SPSs vest.
(In millions)
Total compensation cost for shared-based awards
Tax benefits recognized
Note 19 – Goodwill, Other Intangibles and Property and Equipment
A. Goodwill
For the Years Ended December 31,
2022
2021
2020
$
$
264 $
80 $
268 $
73 $
289
63
Accounting policy. Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets. The
resulting goodwill is assigned to those reporting units expected to realize cash flows from the acquisition, based on those reporting
units' relative fair values. The Company's reporting units are aligned with its operating segments as described in Note 1.
The Company conducts its annual quantitative evaluation for goodwill impairment during the third quarter at the reporting unit level
and writes it down through shareholders' net income if impaired. On a quarterly basis, the Company performs a qualitative impairment
assessment to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a
reporting unit exceeds its estimated fair value. Fair value of a reporting unit is generally estimated based on discounted cash flow
analysis and market approach models using assumptions that the Company believes a hypothetical market participant would use to
determine a current transaction price. The significant assumptions and estimates used in determining fair value primarily include the
discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of
capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within
each reporting unit. Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections.
Future cash flows for Evernorth Health Services are primarily driven by the forecasted gross margins of the business, as well as
operating expenses and long-term growth rates. Future cash flows for our other reporting units are primarily driven by forecasted
revenues, benefit expenses, operating expenses and long-term growth rates.
125
Goodwill activity. Goodwill activity was as follows:
(In millions)
Balance at January 1, 2021
Goodwill acquired
Goodwill disposed
Impact of foreign currency translation and other adjustments
Goodwill at December 31, 2021 (1)
Goodwill disposed
Impact of foreign currency translation and other adjustments
Evernorth
Health Services
Cigna
Healthcare
Other
Operations
Total
$
33,806 $
10,577 $
265 $
1,322
—
—
35,128
—
2
116
(10)
—
10,683
—
(2)
—
—
(31)
234
(234)
—
44,648
1,438
(10)
(31)
46,045
(234)
—
Goodwill at December 31, 2022
(1) Includes $234 million classified as Assets of businesses held for sale, all reported within Other Operations.
35,130 $
$
10,681 $
— $
45,811
B. Other Intangible Assets
Accounting policy. The Company's Other intangible assets primarily include purchased customer and producer relationships, provider
networks and trademarks. The fair value of purchased customer relationships and the amortization method were determined as of the
dates of purchase using an income approach that relies on projected future net cash flows including key assumptions for customer
attrition and discount rates. The Company's definite-lived intangible assets are amortized on an accelerated or straight-line basis,
reflecting their pattern of economic benefits, over periods from three to 30 years. Management revises amortization periods if it
believes there has been a change in the length of time that an intangible asset will continue to have value. Costs incurred to renew or
extend the terms of these intangible assets are generally expensed as incurred.
The Company's amortized intangible assets are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the total of the expected future undiscounted cash flows generated by the underlying asset
group is less than the carrying amount of the asset group, the Company recognizes an impairment charge equal to the difference
between the carrying value of the asset group and its estimated fair value. The Company's indefinite-lived intangible assets are
reviewed for impairment at least annually by comparing their fair value with their carrying value. If the carrying value exceeds fair
value, that excess is recognized as an impairment loss.
There were no material impairments in the years ended December 31, 2022, 2021 or 2020.
Components of other assets, including other intangibles. Other intangible assets were comprised of the following:
(In millions)
December 31, 2022
Customer relationships
Trade Name - Express Scripts
Other
Other intangible assets
Value of business acquired ("VOBA" reported in Other assets)
Total
December 31, 2021
Customer relationships
Trade Name - Express Scripts
Other
Other intangible assets
Cost
Accumulated
Amortization
Net Carrying
Value
$
29,974
6,099
8,400
348
38,722
210
38,932
29,997
8,400
447
38,844
$
$
131
6,230
133
6,363
4,539
81
4,620
23,875
8,400
217
32,492
77
32,569
25,458
8,400
366
34,224
Value of business acquired (reported in Other assets)
Total (1)
(1) Includes $386 million of VOBA and $122 million of Other intangible assets intangible assets classified as Assets of businesses held for sale.
39,490
4,791
171
646
$
475
34,699
The Company has indefinite-lived intangible assets totaling $8.5 billion at December 31, 2022 and December 31, 2021, largely
consisting of trade names and licenses.
C. Property and Equipment
Accounting policy. Property and equipment is carried at cost less accumulated depreciation. Cost includes interest, real estate taxes
and other costs incurred during construction when applicable. Internal-use software that is acquired, developed or modified solely to
126
meet the Company's internal needs, with no plan to market externally, is also included in this category. Costs directly related to
acquiring, developing or modifying internal-use software are capitalized.
The Company calculates depreciation and amortization principally using the straight-line method generally based on the estimated
useful life of each asset as follows: buildings and improvements, 10 to 40 years; purchased software, three to five years; internally
developed software, three to seven years and furniture and equipment (including computer equipment), three to 10 years.
Improvements to leased facilities are depreciated over the lesser of the remaining lease term or the estimated life of the improvement.
The Company considers events and circumstances that would indicate the carrying value of property, equipment or capitalized
software might not be recoverable. An impairment charge is recorded if the Company determines the carrying value of any of these
assets is not recoverable. The Company also reviews and shortens the estimated useful lives of these assets, if necessary.
Components of property and equipment. Property and equipment was comprised of the following:
(In millions)
December 31, 2022
Internal-use software
Other property and equipment
Total property and equipment
December 31, 2021
Internal-use software
Other property and equipment
Total
Property and equipment classified as Assets of businesses held for sale
Total Property and equipment per Consolidated Balance Sheets
Cost
Accumulated
Amortization
Net Carrying
Value
$
$
$
8,948 $
6,100 $
2,256
1,330
11,204 $
7,430 $
7,869 $
5,060 $
2,839
10,708
(424)
1,653
6,713
(121)
$
10,284 $
6,592 $
2,848
926
3,774
2,809
1,186
3,995
(303)
3,692
Components of depreciation and amortization. Depreciation and amortization expense was comprised of the following:
(In millions)
Internal-use software
Other property and equipment
Value of business acquired (reported in Other assets)
Other intangibles
Total depreciation and amortization
For the Years Ended December 31,
2022
2021
2020
$
1,068 $
1,097 $
251
12
1,606
253
25
1,548
$
2,937 $
2,923 $
971
276
28
1,527
2,802
The Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar
years to be as follows:
(In millions)
2023
2024
2025
2026
2027
Note 20 – Leases
Pre-tax
Amortization
$
$
$
$
$
2,804
2,302
1,988
1,583
1,523
The Company's leases are primarily for office space and certain computer and other equipment and have terms of up to 35 years.
Accounting policy. The Company determines if an arrangement is a lease and its lease classification (operating or finance) at
inception. Both operating and finance leases result in (1) a right-of-use ("ROU") asset that represents our right to use the underlying
asset for the lease term and (2) a lease liability that represents our obligation to make lease payments arising from the lease. ROU
127
assets and lease liabilities are reflected in the following lines in the Company's Consolidated Balance Sheets:
Operating lease
Finance lease
ROU Asset
Other assets
Current Lease Liability
Non-Current Lease Liability
Accrued expenses and other liabilities (current)
Other liabilities (non-current)
Property and equipment
Short-term debt
Long-term debt
These lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over
the lease term. Most of the Company's leases do not provide an implicit rate, so the Company uses its incremental borrowing rate
based on the information available at commencement date in determining the present value of lease payments. The ROU asset also
includes any lease pre-payments made and excludes lease incentives for operating leases. The Company's expected life of a lease may
consider options to extend or terminate a lease when it is reasonably certain that the Company will exercise that option.
The Company has lease agreements with lease and non-lease components that are accounted for as a single lease component.
Operating lease ROU assets are amortized on a straight-line basis over the lease term, which is representative of the pattern in which
benefit is expected to be derived from the right to use the underlying asset. Variable lease payments are expensed as incurred and
represent amounts that are neither fixed in nature, such as maintenance and other services provided by the lessor, nor tied to an index
or rate.
The components of lease expense were as follows:
(In millions)
Operating lease cost
Finance lease cost:
Amortization of ROU assets
Interest on lease liabilities
Total finance lease cost
Variable lease cost
Total lease cost
Supplemental cash flow information related to leases was as follows:
(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
ROU assets obtained in exchange for lease obligations:
Operating leases
Finance leases
For the Years Ended December 31,
2022
2021
2020
$
124 $
170 $
33
2
35
41
22
2
24
39
$
200 $
233 $
For the Years Ended December 31,
2022
2021
2020
$
$
$
$
$
148 $
2 $
33 $
167 $
2 $
22 $
43 $
84 $
122 $
20 $
190
28
3
31
48
269
189
3
26
189
9
128
Operating and finance lease right-of-use ("ROU") assets and lease liabilities were as follows:
(In millions)
Operating leases: (1)
Operating lease ROU assets in Other assets
Accrued expenses and other liabilities
Other non-current liabilities
Total operating lease liabilities
Finance leases:
Property and equipment, gross
Accumulated depreciation
Property and equipment, net
Short-term debt
Long-term debt
December 31,
2022
December 31,
2021
$
$
$
$
$
$
375 $
478
114 $
346
460 $
145 $
(48)
97 $
33 $
66
159
436
595
101
(51)
50
23
28
Total finance lease liabilities
51
(1) Operating leases include $27 million as of December 31, 2021 classified as Assets of businesses held for sale and $28 million as of December 31, 2021 classified as
Liabilities of businesses held for sale.
99 $
$
As of December 31, 2022, the weighted average remaining lease term was 5 years for operating leases and 3 years for finance leases,
and the weighted average discount rate was 2.80% for operating leases and 3.45% for finance leases.
Maturities of lease liabilities are as follows:
(In millions)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: imputed interest
Total
Operating
Leases
Finance
Leases
$
114 $
111
84
64
47
74
494
34
$
460 $
35
31
24
10
3
2
105
6
99
Note 21 – Shareholders' Equity and Dividend Restrictions
State insurance departments and foreign jurisdictions that regulate certain of the Company's subsidiaries prescribe accounting practices
(differing in some respects from GAAP) to determine statutory net income and surplus. The Company's life, accident and health
insurance and Health Maintenance Organization ("HMO") subsidiaries are regulated by such statutory requirements. The statutory net
income of the Company's life, accident and health insurance and HMO subsidiaries for the years ended, and their statutory surplus as
of December 31 were as follows:
(In billions)
Net income
Surplus
2022
2021
2020
$
$
5.7 $
16.4 $
3.4 $
13.3 $
4.0
12.9
129
The Company's HMO and life, accident and health insurance subsidiaries are also subject to minimum statutory surplus requirements
and may be required to maintain investments on deposit with state departments of insurance or other regulatory bodies. Additionally,
these subsidiaries may be subject to regulatory restrictions on the amount of annual dividends or other distributions (such as loans or
cash advances) that insurance companies may extend to their parent companies without prior approval. These amounts, including
restricted GAAP net assets of the Company's subsidiaries, were as follows:
(In billions)
Minimum statutory surplus required by regulators (1)
Investments on deposit with regulatory bodies
Maximum dividend distributions permitted in 2023 without regulatory approval
Maximum loans to the parent company permitted without regulatory approval
Restricted GAAP net assets of The Cigna Group's subsidiaries
(1) Excludes amounts associated with foreign operated equity method joint ventures.
December 31,
2022
$
$
$
$
$
4.2
0.3
3.2
1.4
14.8
Permitted practices used by the Company's insurance subsidiaries in 2022 that differed from prescribed regulatory accounting had an
immaterial impact on statutory surplus.
Undistributed earnings for equity method investments are $1.2 billion as of December 31, 2022.
Note 22 – Income Taxes
Accounting policy. Deferred income taxes are reflected in the Consolidated Balance Sheets for differences between the financial and
income tax reporting bases of the Company's underlying assets and liabilities, and are established based upon enacted tax rates and
laws. Deferred income tax assets are recognized when available evidence indicates that realization is more likely than not and a
valuation allowance is established to the extent this standard is not met. The deferred income tax provision generally represents the net
change in deferred income tax assets and liabilities during the reporting period excluding adjustments to Accumulated other
comprehensive income (loss) or amounts recorded in connection with a business combination. The current income tax provision
generally represents estimated amounts due on income tax returns for the year reported to various jurisdictions plus the effect of any
uncertain tax positions. The Company recognizes a liability for uncertain tax positions if management believes the probability that the
positions will be sustained is 50% or less. For uncertain positions that management believes are more likely than not to be sustained,
the Company recognizes a liability based upon management's estimate of the most likely settlement outcome with the taxing authority.
The liabilities for uncertain tax positions are classified as current when the position is expected to be settled within 12 months or the
statute of limitation expires within 12 months.
Income taxes attributable to the Company's foreign operations are generally provided using the respective foreign jurisdictions' tax
rate.
A.
Income Tax Expense
The components of income taxes were as follows:
(In millions)
Current taxes
U.S. income taxes
Foreign income taxes
State income taxes
Total current taxes
Deferred taxes (benefits)
U.S. income tax benefits
Foreign income (tax benefits) taxes
State income tax benefits
Total deferred tax benefits
Total income taxes
130
For the Years Ended December 31,
2022
2021
2020
$
1,679 $
1,268 $
2,128
219
189
2,087
(283)
(28)
(169)
(480)
207
112
1,587
(167)
69
(122)
(220)
334
303
2,765
(217)
11
(180)
(386)
$
1,607 $
1,367 $
2,379
Total income taxes were different from the amount computed using the nominal federal income tax rate for the following reasons:
(In millions)
Tax expense at nominal rate
Impact of sale of businesses
Effect of foreign earnings
Health insurance industry tax
State income tax (benefit), net of federal income tax benefit
Other
Total income taxes
For the Years Ended December 31,
2022
2021
2020
$
%
$
%
$
%
$
1,754
21.0 % $
1,424
21.0 % $
2,282
21.0 %
(37)
(96)
—
16
(30)
(0.4)
(1.2)
—
0.2
(0.4)
—
(33)
—
(9)
(15)
—
(0.5)
—
(0.1)
(0.2)
104
(61)
93
24
(63)
1.0
(0.6)
0.9
0.2
(0.6)
$
1,607
19.2 % $
1,367
20.2 % $
2,379
21.9 %
Consolidated pre-tax income from the Company's foreign operations was approximately 46% of the Company's pre-tax income in
2022, 26% in 2021 and 14% in 2020. The increase over 2021 is primarily driven by the gain from the Chubb transaction, an increase
to the Company's international pharmaceutical operations, partially offset by a reduction in earnings from the sold entities.
B. Deferred Income Taxes
Deferred income tax assets and liabilities were as follows:
(In millions)
Deferred tax assets
Employee and retiree benefit plans
Other insurance and contractholder liabilities
Loss carryforwards
Other accrued liabilities
Policy acquisition expenses
Unrealized depreciation on investments and foreign currency translation
Other
Deferred tax assets before valuation allowance
Valuation allowance for deferred tax assets
Deferred tax assets, net of valuation allowance
Deferred tax liabilities
Depreciation and amortization
Acquisition-related basis differences
Policy acquisition expenses
Unrealized appreciation on investments and foreign currency translation
Other
Total deferred tax liabilities
Net deferred income tax liabilities
December 31,
2022
December 31,
2021
$
189 $
311
205
265
41
156
190
1,357
(208)
1,149
512
8,347
—
—
41
8,900
304
263
278
412
—
—
246
1,503
(246)
1,257
698
8,726
312
104
212
10,052
(8,795)
(449)
(8,346)
Net deferred income tax liabilities classified as Liabilities of businesses held for sale
Net deferred income tax liabilities per Consolidated Balance Sheets
$
(7,751) $
Management believes that future results will be sufficient to realize a majority of the Company's gross deferred tax assets. As of
December 31, 2022, we had approximately $270 million in deferred tax assets ("DTAs") associated with unrealized investment losses
that are primarily recorded in Accumulated other comprehensive loss. We have determined that a valuation allowance against the
DTAs is not currently required based on the Company's ability to carryback losses and other known investment strategies. We will
monitor and evaluate the need for any valuation allowance in the future. Valuation allowances are established against deferred tax
assets when it is determined that it is more likely than not that the asset will not be recognized. Valuation allowances have been
established against certain federal, state and foreign tax attributes. There are multiple expiration dates associated with these tax
attributes.
131
C. Uncertain Tax Positions
Reconciliations of unrecognized tax benefits were as follows:
(In millions)
Balance at January 1,
Increase due to prior year positions
Increase due to current year positions
Reduction related to settlements with taxing authorities
Reduction related to lapse of applicable statute of limitations
Balance at December 31,
For the Years Ended December 31,
2022
2021
2020
$
1,230 $
1,210 $
8
137
(4)
(28)
21
31
(15)
(17)
1,018
128
88
—
(24)
$
1,343 $
1,230 $
1,210
Substantially all unrecognized tax benefits would impact Shareholders' net income if recognized.
The Company classifies net interest expense on uncertain tax positions as a component of income tax expense and in Other non-
current liabilities in the Consolidated Balance Sheets. In addition to the amounts in the table above, the liability for net interest
expense on uncertain tax positions was approximately $176 million as of December 31, 2022, $148 million as of December 31, 2021
and $127 million as of December 31, 2020.
D. Other Tax Matters
The statutes of limitations for The Cigna Group's consolidated federal income tax returns through 2016 have closed. However, The
Cigna Group filed amended returns for both the 2015 and 2016 tax years, which are under review by the Internal Revenue Service
("IRS"). Additionally, the IRS is examining The Cigna Group's returns for 2017 and 2018. The statutes of limitations for Express
Scripts' consolidated federal income tax returns through 2012 has closed. However, for 2010 through 2012 tax years, there remains a
significant disputed matter. The IRS is also examining Express Scripts' consolidated federal income tax returns for 2013 through 2018.
The Company has established adequate reserves for these matters.
The Company conducts business in a number of state and foreign jurisdictions and may be engaged in multiple audit proceedings at
any given time. Generally, no further state or foreign audit activity is expected for tax years prior to 2013 for The Cigna Group's
entities and 2010 for Express Scripts' entities.
Note 23 – Contingencies and Other Matters
The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.
A. Financial Guarantees: Retiree and Life Insurance Benefits
The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the
majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these
benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the
Company or an affiliate of the buyer of the retirement benefits business has the right to redirect the management of the related assets
to provide for benefit payments. As of December 31, 2022, employers maintained assets that generally exceeded the benefit
obligations under these arrangements of approximately $420 million. An additional liability is established if management believes that
the Company will be required to make payments under the guarantees; there were no additional liabilities required for these
guarantees, net of reinsurance, as of December 31, 2022. Separate account assets supporting these guarantees are classified in Levels 1
and 2 of the GAAP fair value hierarchy.
The Company does not expect that these financial guarantees will have a material effect on the Company's consolidated results of
operations, liquidity or financial condition.
B. Certain Other Guarantees
The Company had indemnification obligations as of December 31, 2022 in connection with acquisition and disposition transactions.
These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as
representations for the presentation of financial statements, filing of tax returns, compliance with law or identification of outstanding
litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as
statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of
the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is
132
possible to determine the maximum potential amount due under these obligations because not all amounts due under these
indemnification obligations are subject to limitation. There were no liabilities for these indemnification obligations as of December 31,
2022.
C. Guaranty Fund Assessments
The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty
association laws. The Company's exposure to assessments for certain obligations of insolvent insurance companies to policyholders
and claimants is based on its share of business written in the relevant jurisdictions.
There were no material charges or credits resulting from existing or new guaranty fund assessments for the year ended December 31,
2022.
D. Legal and Regulatory Matters
The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations,
including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam
relator's filing of a complaint under court seal, and other legal matters arising, for the most part, in the ordinary course of managing a
global health company. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various
governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits
by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under
GAAP guidance for uncertain tax positions, as described in Note 22.
Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss and certain
other material litigation matters are described below. For those matters that the Company has identified with a reasonably possible
material loss, the Company provides disclosure in the aggregate of accruals and range of loss, or a statement that such information
cannot be estimated. The Company's accruals for the matters discussed below under "Litigation Matters" and "Regulatory Matters" are
not material. Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if
any) for these matters at this time. In light of the uncertainties involved in these matters, there is no assurance that their ultimate
resolution will not exceed the amounts currently accrued by the Company. An adverse outcome in one or more of these matters could
be material to the Company's results of operations, financial condition or liquidity for any particular period. The outcomes of lawsuits
are inherently unpredictable and we may be unsuccessful in these ongoing litigation matters or any future claims or litigation.
Litigation Matters
Express Scripts Litigation with Elevance. In March 2016, Elevance filed a lawsuit in the United States District Court for the Southern
District of New York alleging various breach of contract claims against Express Scripts relating to the parties' rights and obligations
under the periodic pricing review section of the pharmacy benefit management agreement between the parties including allegations
that Express Scripts failed to negotiate new pricing concessions in good faith, as well as various alleged service issues. Elevance also
requested that the court enter declaratory judgment that Express Scripts is required to provide Elevance competitive benchmark
pricing, that Elevance can terminate the agreement and that Express Scripts is required to provide Elevance with post-termination
services at competitive benchmark pricing for one year following any termination by Elevance. Elevance claimed it is entitled to $13
billion in additional pricing concessions over the remaining term of the agreement, as well as $1.8 billion for one year following any
contract termination by Elevance and $150 million damages for service issues ("Elevance's Allegations"). On April 19, 2016, in
response to Elevance's complaint, Express Scripts filed its answer denying Elevance's Allegations in their entirety and asserting
affirmative defenses and counterclaims against Elevance. The court subsequently granted Elevance's motion to dismiss two of six
counts of Express Scripts' amended counterclaims. Express Scripts filed its Motion for Summary Judgment on August 27, 2021.
Elevance completed filing of its Response to Express Scripts' Motion for Summary Judgment on October 16, 2021. Express Scripts
filed its Reply in Support of its Motion for Summary Judgment on November 19, 2021. On March 31, 2022, the court granted
summary judgment in favor of Express Scripts on all of Elevance's pricing claims for damages totaling $14.8 billion and on most of
Elevance's claims relating to service issues. Elevance's only remaining service claims relate to the review or processing of prior
authorizations. On June 10, 2022, Express Scripts filed a Motion for Partial Summary Judgment seeking to limit Elevance's remaining
prior authorization claims and a Motion to Exclude certain opinions offered by its experts. Elevance filed its opposition to both
motions, and a cross-motion to submit a supplemental expert report, on July 9, 2022. Express Scripts' pending Motions were fully
briefed at the end of July 2022.
Medicare Advantage. A qui tam action that was filed by a private individual on behalf of the government in the United States District
Court for the Southern District of New York in 2017 was unsealed on August 6, 2020. The action asserts claims related to risk
adjustment practices arising from certain health exams conducted as part of the Company's Medicare Advantage business. In
September 2021, the qui tam action was transferred to the United States District Court for the Middle District of Tennessee. On
133
January 11, 2022, the U.S. Department of Justice ("DOJ") (U.S. Attorney's Offices for the Southern District of New York and the
Middle District of Tennessee) filed a motion to partially intervene, which was granted on August 2, 2022. On October 14, 2022, the
DOJ filed its complaint-in-intervention alleging that certain diagnoses made during in-home exams were invalid for risk adjustment
purposes, seeking unspecified damages and penalties under the federal False Claims Act. The Company filed motions to dismiss the
DOJ's complaint and the remainder of the qui tam complaint on December 16, 2022. Briefing is ongoing.
Regulatory Matters
Civil Investigative Demand. The DOJ is conducting industry-wide investigations of Medicare Advantage organizations' risk
adjustment practices. For certain Medicare Advantage organizations, including The Cigna Group, those investigations have resulted in
litigation (see "Litigation Matters—Medicare Advantage" above). The Company is currently responding to information requests (civil
investigative demands) from the DOJ (U.S. Attorney's Office for the Eastern District of Pennsylvania). The Company is cooperating
with the DOJ and continues to respond to its requests.
Note 24 – Segment Information
See Note 1 for a description of our segments. On February 13, 2023, we changed the name of our Evernorth segment to Evernorth
Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment name. A
description of our basis for reporting segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy-
related transactions between the Evernorth Health Services and Cigna Healthcare segments.
The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of
segment operating performance because management believes these metrics best reflect the underlying results of business operations
and permit analysis of trends in underlying revenue, expenses and profitability. We define pre-tax adjusted income from operations as
income before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results,
amortization of acquired intangible assets, and special items. The Cigna Group's share of certain realized investment results of its joint
ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters
that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income
(loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.
The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's
share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting. Special items are matters that management believes are not representative of the underlying results of operations due to
their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future
underlying performance of the business.
The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment
performance.
The following table presents the special items charges (benefits) recorded by the Company, as well as the respective financial
statement line items impacted:
(In millions)
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
For the Years Ended December 31,
2022
2021
2020
Integration and transaction-related costs
(Selling, general and administrative expenses)
Charge for organizational efficiency plan
(Selling, general and administrative expenses)
(Benefits) charges associated with litigation matters
(Selling, general and administrative expenses)
(Gain) on sale of businesses
Debt extinguishment costs
Risk corridors recovery
(Selling, general and administrative expenses)
Contractual adjustment for a former client
(Pharmacy revenues)
$
135 $
103 $
169 $
71 $
527 $
404
22
17
(28)
(20)
(1,662)
(1,332)
—
—
—
—
—
—
168
(27)
—
141
—
—
119
(21)
—
110
—
—
31
25
24
19
(4,203)
(3,217)
199
(101)
151
(76)
(204)
(155)
Total impact from special items
$
(1,533) $
(1,232) $
451 $
279 $
(3,726) $
(2,850)
134
Summarized segment financial information was as follows:
(In millions)
2022
Revenues from external customers
Intersegment revenues
Net investment income
Total revenues
Net realized investment results from certain equity method investments
Adjusted revenues
Depreciation and amortization
Income (loss) before income taxes
Pre-tax adjustments to reconcile to adjusted income from operations
$
$
$
(Income) attributable to noncontrolling interests
Net realized investment losses (1)
Amortization of acquired intangible assets
Special items
Integration and transaction-related costs
Charge for organizational efficiency plan
(Benefits) associated with litigation matters
(Gain) on sale of businesses
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
$
135,786 $
41,737 $
1,838 $
— $
179,361
4,463
86
140,335
—
2,535
638
44,910
126
—
424
2,262
—
(6,998)
7
1,155
(6,991)
180,516
—
126
140,335 $
45,036 $
2,262 $
(6,991) $
180,642
2,283 $
4,421 $
638 $
6 $
10 $
3,443 $
2,084 $
(1,595) $
(66)
—
1,772
—
—
—
—
(4)
530
103
—
—
—
—
(14)
91
1
—
—
—
(1,662)
—
—
—
135
22
(28)
—
Pre-tax adjusted income (loss) from operations
$
6,127 $
4,072 $
500 $
(1,466) $
(In millions)
2021
Revenues from external customers
Intersegment revenues
Net investment income (loss)
Total revenues
Net realized investment results from certain equity method investments
Adjusted revenues
Depreciation and amortization
Income (loss) before income taxes
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
Net realized investment losses (gains) (1)
Amortization of acquired intangible assets
Special items
Integration and transaction-related costs
Charge for organizational efficiency plan
(Benefits) associated with litigation matters
Debt extinguishment costs
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
$
127,692 $
41,378 $
3,459 $
— $
172,529
4,203
17
131,912
—
2,271
1,003
44,652
—
—
530
3,989
—
(6,474)
(1)
1,549
(6,475)
174,078
—
—
$
$
$
131,912 $
44,652 $
3,989 $
(6,475) $
174,078
2,316 $
3,908 $
551 $
3,812 $
52 $
4 $
852 $
(1,790) $
2,923
6,782
(31)
4
1,937
—
—
—
—
(3)
(247)
47
—
—
—
—
(24)
47
14
—
—
—
—
—
—
—
169
168
(27)
141
Pre-tax adjusted income (loss) from operations
(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting.
(1,339) $
3,609 $
5,818 $
889 $
$
135
2,937
8,353
(84)
621
1,876
135
22
(28)
(1,662)
9,233
(58)
(196)
1,998
169
168
(27)
141
8,977
(In millions)
2020
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
Revenues from external customers
$
112,647 $
38,826 $
7,684 $
— $
159,157
Intersegment revenues
Net investment income
Total revenues
Net realized investment results from certain equity method investments
Special item related to contractual adjustment for a former client
Adjusted revenues
Depreciation and amortization
Income (loss) before income taxes
$
$
$
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
Net realized investment (gains) (1)
Amortization of acquired intangible assets
Special items
Integration and transaction-related costs
Charge for organizational efficiency plan
Charges associated with litigation matters
(Gain) on sale of businesses
Debt extinguishment costs
Risk corridors recovery
Contractual adjustment for a former client
3,655
32
116,334
—
(204)
1,966
473
41,265
(130)
—
23
739
8,446
—
—
(5,644)
—
(5,644)
—
—
1,244
160,401
(130)
(204)
116,130 $
41,135 $
8,446 $
(5,644) $
160,067
2,248 $
3,684 $
458 $
71 $
25 $
4,291 $
5,227 $
(2,334) $
(17)
(17)
1,917
—
—
—
—
—
—
(204)
(1)
(202)
44
—
—
—
—
—
(101)
—
(19)
(60)
21
—
—
—
(4,203)
—
—
—
—
—
—
527
31
25
—
199
—
—
2,802
10,868
(37)
(279)
1,982
527
31
25
(4,203)
199
(101)
(204)
8,808
Pre-tax adjusted income (loss) from operations
$
(1) Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of
accounting.
(1,552) $
5,363 $
4,031 $
966 $
136
Revenue from external customers includes Pharmacy revenues, Premiums and Fees and other revenues. The following table presents
these revenues by product, premium and service type:
(In millions)
Products (Pharmacy revenues) (ASC 606)
Network revenues
Home delivery and specialty revenues
Other revenues
Intercompany eliminations
Total pharmacy revenues
Insurance premiums (ASC 944)
Cigna Healthcare
U.S. Commercial
Insured
Stop loss
Other
U.S. Government
Medicare Advantage
Medicare Part D
Other
International Health
Total Cigna Healthcare
Divested International businesses
Domestic disability, life and accident
Other
Intercompany eliminations
Total premiums
Services (Fees) (ASC 606)
Evernorth Health Services
Cigna Healthcare
Other Operations
Other revenues
Intercompany eliminations
Total fees and other revenues
Total revenues from external customers
For the Years Ended December 31,
2022
2021
2020
$
64,946 $
64,992 $
61,283
6,753
(4,416)
128,566
54,391
6,428
(4,398)
121,413
15,199
5,461
1,418
7,896
1,224
3,990
2,906
38,094
1,596
—
224
1
14,315
4,868
1,290
8,362
1,499
4,815
2,588
37,737
3,205
—
221
(9)
56,365
49,906
5,403
(3,905)
107,769
13,389
4,614
1,135
7,565
1,593
4,301
2,472
35,069
3,039
4,423
124
(28)
39,915
41,154
42,627
7,234
6,053
9
167
(2,583)
10,880
6,070
5,743
19
197
(2,067)
9,962
4,611
5,491
116
254
(1,711)
8,761
$
179,361 $
172,529 $
159,157
U.S. and foreign revenues from external customers are shown below. The Company's foreign revenues are generated by its foreign
operating entities. In the periods shown, no single foreign country contributed more than 2% of consolidated revenues from external
customers.
(In millions)
United States
Foreign countries (1)
For the Years Ended December 31,
2022
2021
2020
$
174,539 $
166,626 $
154,042
4,822
5,903
5,115
159,157
Total
172,529 $
(1) The divested International businesses as described in Note 4 comprised $1.6 billion, $3.2 billion and $3.1 billion in 2022, 2021 and 2020, respectively.
179,361 $
$
Revenues from U.S. Federal Government agencies, under a number of contracts, were 14% of consolidated revenues in 2022 and 2021
and 15% in 2020. These amounts were reported in the Evernorth Health Services and Cigna Healthcare segments.
137
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
Based on an evaluation of the effectiveness of The Cigna Group's disclosure controls and procedures conducted under the supervision
and with the participation of The Cigna Group's management (including The Cigna Group's Chief Executive Officer and Chief
Financial Officer), The Cigna Group's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period
covered by this report, The Cigna Group's disclosure controls and procedures are effective to ensure that information required to be
disclosed by The Cigna Group in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and is accumulated and
communicated to The Cigna Group's management, including The Cigna Group's Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
B.
Internal Control Over Financial Reporting
Management's Annual Report on Internal Control over Financial Reporting
Management of The Cigna Group is responsible for establishing and maintaining adequate internal control over financial reporting.
The Company's internal controls were designed to provide reasonable assurance that the Company's consolidated published financial
statements for external purposes were prepared in accordance with accounting principles generally accepted in the United States. The
Company's internal control over financial reporting includes those policies and procedures that:
(i)
(ii)
(iii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States and that receipts and expenditures of the
Company are being made only in accordance with authorization of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of
the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO") in Internal Control-Integrated Framework (2013). Based on management's assessment and the criteria set forth by COSO,
it was determined that the Company's internal control over financial reporting is effective as of December 31, 2022.
The Company's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the
Company's internal control over financial reporting, as stated in their report located in Item 8 of this Form 10-K.
Change in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2022 that have
materially affected, or are reasonably likely to materially affect, The Cigna Group's internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
138
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
A. Directors of the Registrant
PART III
The information under the captions "Corporate Governance Matters – Board of Directors' Nominees" and "Corporate Governance
Matters – Board Meetings and Committees" (as it relates to Audit Committee disclosure) in The Cigna Group's definitive proxy
statement related to the 2023 annual meeting of shareholders ("the 2023 Proxy Statement") is incorporated herein by reference.
B. Executive Officers of the Registrant
See Part I – "Information about our Executive Officers" in this Form 10-K.
C. Code of Ethics and Other Corporate Governance Disclosures
The information under the caption "Corporate Governance Matters – Codes of Ethics" in the 2023 Proxy Statement is incorporated
herein by reference. We intend to promptly disclose on our website, in accordance with applicable rules, any required disclosure of
changes to or waivers, if any, of our Code of Ethics or our Director Code of Business Conduct and Ethics.
D. Delinquent Section 16(a) Reports
The information under the caption "Ownership of The Cigna Group Common Stock – Delinquent Section 16(a) Reports", if included
in the 2023 Proxy Statement, is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the captions "Corporate Governance Matters – Non-Employee Director Compensation," "Certain Transactions
– Compensation Committee Interlocks and Inside Participation," "Compensation Matters – Compensation Discussion and Analysis,"
"Compensation Matters – Report of the People Resources Committee" and "Compensation Matters – Executive Compensation Tables"
in the 2023 Proxy Statement is incorporated herein by reference.
139
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table presents information regarding The Cigna Group's equity compensation plans as of December 31, 2022:
(c) (3)
(b) (2)
(a) (1)
Plan Category
Equity Compensation Plans Approved by Security Holders
Equity Compensation Plans Not Approved by Security Holders
Total
Securities To Be Issued
Upon Exercise Of
Outstanding Options,
Warrants And Rights
Weighted Average
Exercise Price Of
Outstanding Options,
Warrants And Rights
Securities Remaining
Available For Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected In Column (a))
8,676,085 $
—
8,676,085 $
186.54
—
186.54
16,567,134
—
16,567,134
(1)
Includes, in addition to outstanding stock options:
(i) 64,250 restricted stock units, 58,849 deferred shares and 1,560,744 strategic performance shares that are reported at the maximum 200% payout rate granted
under the Cigna Long-Term Incentive Plan, the Cigna Corporation Stock Plan and the Cigna Corporation Director Equity Plan; and
(ii) 256,005 shares of common stock underlying stock option awards granted under the Express Scripts Holding Company 2016 Long-Term Incentive Plan, 530,191
shares of common stock underlying stock option awards granted under the Express Scripts, Inc. 2011 Long-Term Incentive Plan, and 216,008 shares of common
stock underlying stock option awards granted under the Medco Health Solutions, Inc. 2002 Stock Incentive Plan that were all approved by the applicable
company's shareholders before The Cigna Group's acquisition of Express Scripts in December 2018.
(2) The weighted-average exercise price is based only on outstanding stock options. The outstanding stock options assumed due to The Cigna Group's acquisition of
Express Scripts, in aggregate, have a weighted-average exercise price of $156.88. Excluding the assumed options from this acquisition results in a weighted-
average exercise price of $191.51.
(3) Represents 16,567,134 shares of common stock available as of the close of business December 31, 2022 for future issuance under the Cigna Long-Term Incentive
Plan. No further grants may be made and no shares remain available for future issuance under any plan other than the Cigna Long-Term Incentive Plan.
The information under the captions "Ownership of The Cigna Group Common Stock – Stock Held by Directors, Nominees and
Executive Officers" and "Ownership of The Cigna Group Common Stock – Stock Held by Certain Beneficial Owners" in the 2023
Proxy Statement is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information under the captions "Corporate Governance Matters – Director Independence" and "– Certain Transactions" in the
2023 Proxy Statement is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the captions "Audit Matters – Policy for the Pre-Approval of Audit and Non-Audit Services" and "Audit
Matters – Fees to Independent Registered Public Accounting Firm" in the 2023 Proxy Statement is incorporated herein by reference.
140
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
(1) The following Financial Statements can be found under Part II Item 8 of this Form 10-K:
PART IV
Report of Independent Registered Public Accounting Firm. (Public Company Accounting Oversight Board ID: 238)
Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020.
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020.
Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consolidated Statements of Changes in Total Equity for the years ended December 31, 2022, 2021 and 2020.
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020.
Notes to the Consolidated Financial Statements.
(2) The financial statement schedules listed in the Index to Financial Statement Schedules on page FS-1 which list is incorporated
herein.
(3) Set forth in this Item 15 is a list of exhibits filed or incorporated by reference as part of this Annual Report on Form 10-K.
(b) The exhibits listed in the accompanying "Index to Exhibits" in this Item 15 are filed or incorporated by reference as part of this
Annual Report on Form 10-K.
(c) The financial statement schedules listed in the Index to Financial Statement Schedules on page FS-1 are filed as part of this
Annual Report on Form 10-K.
141
Number
2.1(a)
2.1(b)
3.2
3.3
4.1(a)
4.1(b)
4.1(c)
4.1(d)
4.1(e)
4.1(f)
4.2
4.3(a)
4.3(b)
4.3(c)
4.3(d)
INDEX TO EXHIBITS
Description
Agreement and Plan of Merger, dated as of March 8, 2018, by and
among Cigna Corporation (formerly Halfmoon Parent, Inc.),
Express Scripts Holding Company, Cigna Holding Company
(formerly Cigna Corporation), Halfmoon I, Inc. and Halfmoon II,
Inc.
Amendment No. 1, dated as of June 27, 2018, to the Agreement and
Plan of Merger, dated as of March 8, 2018, by and among Cigna
Corporation, Express Scripts Holding Company, Cigna Holding
Company, Halfmoon I, Inc. and Halfmoon II, Inc.
Restated Certificate of Incorporation of the registrant effective as of
February 13, 2023
Amended and Restated By-Laws of the registrant as last amended
February 13, 2023
Method of Filing
Filed by Cigna Holding Company ("CHC") as
Exhibit 2.1 to the Current Report on Form 8-
K on March 13, 2018 and incorporated herein
by reference.
Filed by CHC as Exhibit 2.1 to the Current
Report on Form 8-K on July 2, 2018 and
incorporated herein by reference.
Filed by the registrant as Exhibit 3.2 to the
Current Report on Form 8-K on February 13,
2023 and incorporated herein by reference.
Filed by the registrant as Exhibit 3.3 to the
Current Report on Form 8-K on February 13,
2023 and incorporated herein by reference.
Indenture, dated as of September 17, 2018, between Cigna
Corporation (formerly Halfmoon Parent, Inc.) and U.S. Bank
National Association, as trustee
Filed by CHC as Exhibit 4.1 to the Current
Report on Form 8-K on September 21, 2018
and incorporated herein by reference.
Supplemental Indenture, dated as of September 17, 2018, between
Cigna Corporation (formerly Halfmoon Parent, Inc.) and U.S. Bank
National Association, as trustee
Filed by CHC as Exhibit 4.2 to the Current
Report on Form 8-K on September 21, 2018
and incorporated herein by reference.
Second Supplemental Indenture dated as of December 20, 2018, by
and among Express Scripts Holding Company, Cigna Holding
Company and U.S. Bank National Association, as trustee
Filed by the registrant as Exhibit 4.7 to the
Current Report on Form 8-K on December 20,
2018 and incorporated herein by reference.
Third Supplemental Indenture, dated as of October 11, 2019, by and
among Cigna Corporation, as the Issuer, Cigna Holding Company
and Express Scripts Holding Company, each as guarantors, and U.S.
Bank, National Association, as trustee
Filed by the registrant as Exhibit 4.1 to the
Current Report on Form 8-K on October 11,
2019 and incorporated herein by reference.
Fourth Supplemental Indenture, dated as of March 16, 2020,
between Cigna Corporation and U.S. Bank, National Association, as
trustee
Filed by the registrant as Exhibit 4.1 to the
Current Report on Form 8-K on March 16,
2020 and incorporated herein by reference.
Fifth Supplemental Indenture, dated as of March 3, 2021, between
Cigna Corporation and U.S. Bank National Association, as trustee
Registration Rights Agreement, dated as of October 11, 2019, by
and among Cigna Corporation, as the Issuer, Cigna Holding
Company and Express Scripts Holding Company, each as
guarantors, and J.P. Morgan Securities LLC, Deutsche Bank
Securities Inc., and Wells Fargo Securities, LLC, each as dealer
managers
Senior Indenture dated as of August 16, 2006 between Cigna
Holding Company (formerly Cigna Corporation) and U.S. Bank
National Association
Supplemental Indenture No. 1 dated as of November 10, 2006
between Cigna Holding Company and U.S. Bank National
Association
Supplemental Indenture No. 2 dated as of March 15, 2007 between
Cigna Holding Company and U.S. Bank National Association
Supplemental Indenture No. 3 dated as of March 7, 2008 between
Cigna Holding Company and U.S. Bank National Association
Filed by the registrant as Exhibit 4.1 to the
Current Report on Form 8-K on March 3,
2021 and incorporated herein by reference.
Filed by the registrant as Exhibit 4.2 to the
Current Report on Form 8-K on October 11,
2019 and incorporated herein by reference.
Filed by CHC as Exhibit 4.1(a) to the Annual
Report on Form 10-K for the year ended
December 31, 2012 and incorporated herein
by reference.
Filed by CHC as Exhibit 4.1(b) to the Annual
Report on Form 10-K for the year ended
December 31, 2012 and incorporated herein
by reference.
Filed by CHC as Exhibit 4.1(c) to the
Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2011 and
incorporated herein by reference.
Filed by CHC as Exhibit 4.1 to the Current
Report on Form 8-K on March 10, 2008 and
incorporated herein by reference.
142
4.3(e)
4.3(f)
4.3(g)
4.3(h)
4.3(i)
4.3(j)
4.4(a)
4.4(b)
4.4(c)
4.5(a)
4.5(b)
4.6(a)
4.6(b)
4.6(c)
4.6(d)
4.6(e)
Supplemental Indenture No. 7 dated as of March 7, 2011 between
Cigna Holding Company and U.S. Bank National Association
Filed by CHC as Exhibit 99.2 to the Current
Report on Form 8-K on March 8, 2011 and
incorporated herein by reference.
Supplemental Indenture No. 8 dated as of November 10, 2011
between Cigna Holding Company and U.S. Bank National
Association
Filed by CHC as Exhibit 4.1 to the Current
Report on Form 8-K on November 14, 2011
and incorporated herein by reference.
Supplemental Indenture No. 9 dated as of March 20, 2015, between
Cigna Holding Company and U.S. Bank National Association, as
trustee
Filed by CHC as Exhibit 4.1 to the Current
Report on Form 8-K on March 26, 2015 and
incorporated herein by reference.
Supplemental Indenture No. 10 dated as of September 14, 2017
between Cigna Holding Company and U.S. Bank National
Association, as trustee
Filed by CHC as Exhibit 4.1 to the Current
Report on Form 8-K filed September 14, 2017
and incorporated herein by reference.
Supplemental Indenture No. 11 dated as of December 20, 2018, by
and among Cigna Corporation, Cigna Holding Company and U.S.
Bank National Association, as trustee
Filed by the registrant as Exhibit 4.1 to the
Current Report on Form 8-K on December 20,
2018 and incorporated herein by reference.
Supplemental Indenture No. 12, dated as of October 11, 2019,
among Cigna Holding Company, as Issuer, Cigna Corporation, as
parent guarantor, and U.S. Bank National Association, as trustee
Filed by the registrant as Exhibit 4.3 to the
Current Report on Form 8-K on October 11,
2019 and incorporated herein by reference.
Indenture dated as of January 1, 1994 between Cigna Holding
Company (formerly Cigna Corporation) and Marine Midland Bank
Supplemental Indenture No. 1 dated as of December 20, 2018, by
and among Cigna Corporation (formerly Halfmoon Parent, Inc.),
Cigna Holding Company and HSBC Bank USA, National
Association (as successor to Marine Midland Bank, N.A.), as trustee
Filed by CHC as Exhibit 4.2 to the Annual
Report on Form 10-K for the year ended
December 31, 2009 and incorporated herein
by reference.
Filed by the registrant as Exhibit 4.2 to the
Current Report on Form 8-K on December 20,
2018 and incorporated herein by reference.
Supplemental Indenture No. 2, dated as of October 11, 2019, among
Cigna Holding Company, as Issuer, Cigna Corporation, as parent
guarantor, and HSBC Bank USA, National Association, as trustee
Filed by the registrant as Exhibit 4.4 to the
Current Report on Form 8-K on October 11,
2019 and incorporated herein by reference.
Indenture dated as of June 30, 1988 between Cigna Holding
Company (formerly Cigna Corporation) and Bankers Trust
Company
Supplemental Indenture No. 1 dated as of December 20, 2018, by
and among Cigna Corporation (formerly Halfmoon Parent, Inc.),
Cigna Holding Company and Deutsche Bank Trust Company
Americas, a New York banking corporation (as successor to Bankers
Trust Company), as trustee
Indenture, dated as of November 21, 2011, among Express Scripts,
Inc., Express Scripts Holding Company (formerly Aristotle Holding,
Inc.), the other subsidiaries of Express Scripts Holding Company
party thereto and Wells Fargo Bank, National Association, as trustee
Fourth Supplemental Indenture, dated as of November 21, 2011,
among Express Scripts, Inc., Express Scripts Holding Company, the
other subsidiaries of Express Scripts Holding Company party thereto
and Wells Fargo Bank, National Association, as trustee
Eighth Supplemental Indenture, dated as of April 2, 2012, among
Express Scripts, Inc., Express Scripts Holding Company, Medco
Health Solutions, Inc., the other subsidiaries of Express Scripts
Holding Company party thereto and Wells Fargo Bank, National
Association, as trustee
Thirteenth Supplemental Indenture, dated as of June 5, 2014, among
Express Scripts Holding Company, the Subsidiary Guarantors party
thereto and Wells Fargo Bank, National Association, as trustee
Seventeenth Supplemental Indenture, dated as of February 25, 2016,
among Express Scripts Holding Company, the Subsidiary
Guarantors party thereto and Wells Fargo Bank, National
Association, as trustee
Filed by CHC as Exhibit 4.3 to the Annual
Report on Form 10-K for the year ended
December 31, 2009 and incorporated herein
by reference.
Filed by the registrant as Exhibit 4.3 to the
Current Report on Form 8-K on December 20,
2018 and incorporated herein by reference.
Filed by Express Scripts, Inc. ("ESI") as
Exhibit 4.1 to the Current Report on Form 8-
K filed November 25, 2011 and incorporated
herein by reference.
Filed by ESI as Exhibit 4.5 to the Current
Report on Form 8-K on November 25, 2011
and incorporated herein by reference.
Filed by Express Scripts Holding Company
("ESRX") as Exhibit 4.1 to the Current Report
on Form 8-K on April 6, 2012 and
incorporated herein by reference.
Filed by ESRX as Exhibit 4.3 to the Current
Report on Form 8-K on June 5, 2014 and
incorporated herein by reference.
Filed by ESRX as Exhibit 4.2 to the Current
Report on Form 8-K on February 25, 2016
and incorporated herein by reference.
143
4.6(f)
4.6(g)
4.6(h)
4.6(i)
4.6(j)
Eighteenth Supplemental Indenture, dated as of July 5, 2016, among
Express Scripts Holding Company, the Subsidiary Guarantors party
thereto and Wells Fargo Bank, National Association, as trustee
Filed by ESRX as Exhibit 4.1 to the Current
Report on Form 8-K on July 5, 2016 and
incorporated herein by reference.
Nineteenth Supplemental Indenture, dated as of July 5, 2016, among
Express Scripts Holding Company, the Subsidiary Guarantors party
thereto and Wells Fargo Bank, National Association, as trustee
Filed by ESRX as Exhibit 4.2 to the Current
Report on Form 8-K on July 5, 2016 and
incorporated herein by reference.
Twentieth Supplemental Indenture, dated as of July 5, 2016, among
Express Scripts Holding Company, the Subsidiary Guarantors party
thereto and Wells Fargo Bank, National Association, as trustee
Filed by ESRX as Exhibit 4.3 to the Current
Report on Form 8-K on July 5, 2016 and
incorporated herein by reference.
Twenty-Fifth Supplemental Indenture dated as of December 20,
2018, by and among Cigna Corporation, Express Scripts Holding
Company and Wells Fargo Bank, National Association, as trustee
Filed by the registrant as Exhibit 4.4 to the
Current Report on Form 8-K on December 20,
2018 and incorporated herein by reference.
Twenty-Sixth Supplemental Indenture, dated as of October 11,
2019, among Express Scripts Holding Company, as Issuer, Cigna
Corporation, as parent guarantor, and Wells Fargo Bank, National
Association, as trustee
Filed by the registrant as Exhibit 4.5 to the
Current Report on Form 8-K on October 11,
2019 and incorporated herein by reference.
4.7
Description of Securities
Filed by the registrant as Exhibit 4.8 to the
Annual Report on Form 10-K for the year
ended December 31, 2020 and incorporated
herein by reference.
Exhibits 10.1 through 10.37 are identified as compensatory plans, management contracts or arrangements pursuant to Item 15 of Form
10-K.
10.1(a)
10.1(b)
Cigna Long-Term Incentive Plan, amended and restated effective
April 28, 2021 (the "Cigna LTIP")
Filed by the registrant as Exhibit 10.1 to the
Current Report on Form 8-K on May 3, 2021
and incorporated herein by reference.
Amendment No.1 to the Cigna Long-Term Incentive Plan effective
December 1, 2022
Filed herewith.
10.1(c)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
10.1(d)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
10.1(e)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
10.1(f)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
10.1(g)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
Filed by CHC as Exhibit 10.3 to Form 10-Q
for the period ended March 31, 2015 and
incorporated herein by reference.
Filed by CHC as Exhibit 10.3 to Form 10-Q
for the period ended March 31, 2017 and
incorporated herein by reference.
Filed by CHC as Exhibit 10.5 to Quarterly
Report on Form 10-Q for the period ended
March 31, 2018 and incorporated herein by
reference.
Filed by the registrant as Exhibit 10.2 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2019 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.2 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2020 and incorporated
herein by reference.
10.1(h)
Form of Cigna LTIP: Strategic Performance Share Grant Agreement Filed by the registrant as Exhibit 10.1 to
10.1(i)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.2 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
144
10.1(j)
Form of Cigna LTIP: Restricted Stock Grant Agreement
10.1(k)
Form of Cigna Stock Unit Plan: Restricted Stock Unit Grant
Agreement
Filed by the registrant as Exhibit 10.3 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.4 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
10.1(l)
Form of Cigna LTIP: Strategic Performance Share Grant Agreement Filed by the registrant as Exhibit 10.1 to
10.1(m)
Form of Cigna LTIP: Nonqualified Stock Option Grant Agreement
10.1(n)
Form of Cigna LTIP: Restricted Stock Grant Agreement
10.1(o)
Form of Cigna LTIP: Restricted Stock Unit Grant Agreement
10.1(p)
Form of Cigna LTIP: Covenant Agreement
10.2
Cigna Corporation Stock Plan, as amended through July 2000
10.3
Cigna Stock Unit Plan, as amended and restated effective February
22, 2017
10.4(a)
Express Scripts Holding Company 2016 Long-Term Incentive Plan
(the "ESRX LTIP")
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.2 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.3 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.4 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.5 to
Quarterly Report on Form 10-Q for the period
ended March 31, 2020 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.7 to the Annual
Report on Form 10-K for the year ended
December 31, 2009 and incorporated herein
by reference.
Filed by CHC as Exhibit 10.5 to the Quarterly
Report on Form 10-Q for the quarterly period
ended March 31, 2017 and incorporated
herein by reference.
Filed by ESRX as Appendix A to ESRX's
Definitive Proxy Statement on Schedule 14A
for its 2016 Annual Meeting of Stockholders,
filed March 21, 2016 and incorporated herein
by reference.
Filed by ESRX as Exhibit 10.4 to the Current
Report on Form 8-K on May 4, 2016 and
incorporated herein by reference.
10.4(b)
10.4(c)
10.5(a)
10.5(b)
Form of Stock Option Grant Notice for Non-Employee Directors
used with respect to grants of stock options by Express Scripts
Holding Company to non-employee directors under the ESRX LTIP
Form of Stock Option Grant Notice used with respect to grants of
stock options by Express Scripts Holding Company under the ESRX
LTIP
Filed by ESRX as Exhibit 10.7 to Current
Report on Form 8-K on May 4, 2016 and
incorporated herein by reference.
Express Scripts, Inc. 2011 Long-Term Incentive Plan (as amended
and restated effective April 2, 2012) (the "ESI LTIP")
Form of Stock Option Grant Notice for Non-Employee Directors
used with respect to grants of stock options by Express Scripts
Holding Company under the ESI LTIP
Filed by the registrant as Exhibit 4.10 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Filed by ESRX as Exhibit 10.6 to Quarterly
Report on Form 10-Q for the quarter ended
June 30, 2012 and incorporated herein by
reference.
145
10.5(c)
Form of Stock Option Grant Notice used with respect to grants of
stock options by Express Scripts Holding Company under the ESI
LTIP
10.6
10.7
10.8
10.9
Medco Health Solutions, Inc. 2002 Stock Incentive Plan (as
amended and restated effective April 2, 2012)
Deferred Compensation Plan for Directors of Cigna Corporation, as
amended and restated January 1, 1997
Cigna Deferred Compensation Plan, as amended and restated
October 24, 2001
Cigna Deferred Compensation Plan of 2005 effective as of January
1, 2005
10.10
10.11(a)
Express Scripts, Inc. Amended and Restated Executive Deferred
Compensation Plan (effective December 31, 2004 and grandfathered
for the purposes of Section 409A of the Code)
Express Scripts, Inc. Executive Deferred Compensation Plan of
2005 (as amended and restated effective December 20, 2018)
10.11(b)
Amendment No. 1 to the Express Scripts, Inc. Executive Deferred
Compensation Plan of 2005
10.11(c)
Amendment No. 2 to the Express Scripts, Inc. Executive Deferred
Compensation Plan of 2005
10.12(a)
Cigna Supplemental Pension Plan as amended and restated effective
August 1, 1998
10.12(b)
Amendment No. 1 to the Cigna Supplemental Pension Plan,
amended and restated effective as of September 1, 1999
10.12(c)
Amendment No. 2 dated December 6, 2000 to the Cigna
Supplemental Pension
10.13(a)
Cigna Supplemental Pension Plan of 2005 effective as of January 1,
2005
Filed by ESRX as Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2013 and
incorporated herein by reference.
Filed by the registrant as Exhibit 4.11 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Filed by CHC as Exhibit 10.1 to the Annual
Report on Form 10-K for the year ended
December 31, 2011 and incorporated herein
by reference.
Filed by CHC as Exhibit 10.14 to the Annual
Report on Form 10-K for the year ended
December 31, 2011 and incorporated herein
by reference.
Filed by the registrant as Exhibit 4.6 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Filed by ESI as Exhibit No. 10.1 to the
Current Report on Form 8-K on May 25, 2007
and incorporated herein by reference.
Filed by the registrant as Exhibit 4.13 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Filed by the registrant as Exhibit 10.12(b) to
the Annual Report on Form 10-K for the year
ended December 31, 2019 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.3 to
Quarterly Report on Form 10-Q for the period
ended June 30, 2021 and incorporated herein
by reference.
Filed by CHC as Exhibit 10.15(a) to the
Annual Report on Form 10-K for the year
ended December 31, 2009 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.15(b) to the
Annual Report on Form 10-K for the year
ended December 31, 2009 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.16(c) to the
Annual Report on Form 10-K for the year
ended December 31, 2011 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.15 to the Annual
Report on Form 10-K for the year ended
December 31, 2007 and incorporated herein
by reference.
10.13(b)
10.14(a)
Amendment No. 1 to the Cigna Supplemental Pension Plan of 2005 Filed by CHC as Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarterly period
ended June 30, 2009 and incorporated herein
by reference.
Filed by the registrant as Exhibit 4.7 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Cigna Supplemental 401(k) Plan effective January 1, 2010
146
10.14(b)
Amendment No. 1 to the Cigna Supplemental 401(k) Plan
10.14(c)
Amendment No. 2 to the Cigna Supplemental 401(k) Plan
10.14(d)
Amendment No. 3 to the Cigna Supplemental 401(k) Plan
10.15
Cigna Corporation Non-Employee Director Compensation Program
amended and restated effective February 26, 2014
10.16(a)
Cigna Corporation Non-Employee Director Compensation Program,
amended and restated effective January 1, 2022
10.16(b)
Cigna Corporation Non-Employee Director Compensation Program,
amended and restated effective April 1, 2022
Cigna Corporation Director Equity Plan, as amended December 4,
2020
Cigna Restricted Share Equivalent Plan for Non-Employee Directors
as amended and restated effective January 1, 2008
Deferred Compensation Plan of 2005 for Directors of Cigna
Corporation, Amended and Restated effective April 28, 2010
10.17
10.18
10.19
10.20
10.21
10.22
Description of Cigna Corporation Financial Services Program
10.23
Offer Letter for Eric P. Palmer dated June 16, 2017
10.24
Nicole Jones' Offer of Employment dated April 27, 2011
10.25
Employment Agreement for Jason D. Sadler dated May 7, 2010
147
Filed by the registrant as Exhibit 10.15(b) to
the Annual Report on Form 10-K for the year
ended December 31, 2019 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.15(c) to
the Annual Report on Form 10-K for the year
ended December 31, 2019 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.15(d) to
the Annual Report on Form 10-K for the year
ended December 31, 2019 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarterly period
ended March 31, 2014 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.17(a) to
the Annual Report on Form 10-K for the year
ended December 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.17(b) to
the Annual Report on Form 10-K for the year
ended December 31, 2021 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.18 to the
Annual Report on Form 10-K for the year
ended December 31, 2020 and incorporated
herein by reference.
Filed by CHC as Exhibit 10.4 to the Annual
Report on Form 10-K for the year ended
December 31, 2012 and incorporated herein
by reference.
Filed by the registrant as Exhibit 4.8 to the
Registration Statement on Form S-8 (No.
333-228930) on December 20, 2018 and
incorporated herein by reference.
Filed by the registrant as Exhibit 10.1 to the
Current Report on Form 8-K on October 30,
2020 and incorporated herein by reference.
Filed by CHC as Exhibit 10.18 to the Annual
Report on Form 10-K for the year ended
December 31, 2009 and incorporated herein
by reference.
Filed by CHC as Exhibit 10.1 to the Current
Report on Form 8-K on June 19, 2017 and
incorporated herein by reference.
Filed by CHC as Exhibit 10.2 to the Quarterly
Report on Form 10-Q for the period ended
March 31, 2012 and incorporated herein by
reference.
Filed by CHC as Exhibit 10.1(a) to the
Quarterly Report on Form 10-Q for the period
ended March 31, 2015 and incorporated
herein by reference.
Form of Indemnification Agreement with Express Scripts Holding
Company's executive officers and former members of the Express
Scripts Holding Company's board of directors
Filed by ESRX as Exhibit 10.1 to the Current
Report on Form 8-K on March 5, 2014 and
incorporated herein by reference.
Cigna Executive Severance Benefits Plan as amended and restated
effective December 21, 2020
10.26
Promotion Letter for Jason Sadler dated June 2, 2014
10.27
Offer letter for Eric Palmer dated December 6, 2020
10.28
Offer letter for Brian Evanko dated December 6, 2020
10.29
10.30
21
23
31.1
31.2
32.1
32.2
101
Revolving Credit and Letter of Credit Agreement, dated as of April
28, 2022, with the banks named therein, JPMorgan Chase Bank,
N.A., as administrative agent, BofA Securities, Inc., Citibank, N.A.,
Morgan Stanley Senior Funding, Inc., MUFG Bank, LTD and Wells
Fargo Securities, LLC, as joint lead arrangers and joint bookrunners
Master Transaction Agreement, dated February 4, 2013 among
Connecticut General Life Insurance Company, Berkshire Hathaway
Life Insurance Company of Nebraska and, solely for purposes of
Sections 3.10, 6.1, 6.3, 6.4, 6.6, 6.9 and Articles II, V, VII and VIII,
thereof, National Indemnity Company (including the Forms of
Retrocession Agreement, the Collateral Trust Agreement, the
Security and Control Agreement, the Surety Policy and the ALC
Model Purchase Option Agreement as exhibits)
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer of The Cigna Group
pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934
Certification of Chief Financial Officer of The Cigna Group
pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934
Certification of Chief Executive Officer of The Cigna Group
pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section
1350
Certification of Chief Financial Officer of The Cigna Group
pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section
1350
The following materials from The Cigna Group's Annual Report on
Form 10-K for the year ended December 31, 2022, formatted in
inline XBRL (Extensible Business Reporting Language): (i) the
Consolidated Balance Sheets; (ii) the Consolidated Statements of
Income; (iii) the Consolidated Statements of Comprehensive
Income; (iv) the Consolidated Statements of Cash Flows; (v) the
Consolidated Statements of Changes in Total Equity; (vi) the Notes
to Consolidated Financial Statements; and (vii) Financial Statement
Schedules I and II.
Filed by CHC as Exhibit 10.1(b) to the
Quarterly Report on Form 10-Q for the period
ended March 31, 2015 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.35 to the
Annual Report on Form 10-K for the year
ended December 31, 2020 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.37 to the
Annual Report on Form 10-K for the year
ended December 31, 2020 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.1 to the
Current Report on Form 8-K on April 29,
2022 and incorporated herein by reference.
Filed by CHC as Exhibit 10.29 to the Annual
Report on Form 10-K for the year ended
December 31, 2012 and incorporated herein
by reference.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Furnished herewith.
Furnished herewith.
Filed herewith.
104
Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101)
Filed herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure
other than the terms of the agreements or other documents themselves and you should not rely on them for that purpose. In particular,
any representations and warranties made by the Company in these agreements or other documents were made solely within the
specific context of the relevant agreement or document and may not describe the actual state of affairs at the date they were made or at
any other time.
148
Item 16. FORM 10-K SUMMARY
None.
149
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 23, 2023
SIGNATURES
THE CIGNA GROUP
/s/ Brian C. Evanko
By:
Brian C. Evanko
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated as of February 23, 2023.
Signature
Title
/s/ David M. Cordani
David M. Cordani
/s/ Brian C. Evanko
Brian C. Evanko
/s/ Mary T. Agoglia Hoeltzel
Mary T. Agoglia Hoeltzel
/s/ William J. DeLaney
William J. DeLaney
/s/ Eric J. Foss
Eric J. Foss
/s/ Elder Granger, M.D.
Elder Granger, M.D.
/s/ Neesha Hathi
Neesha Hathi
Chairman and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Tax and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
150
/s/ George Kurian
George Kurian
/s/ Kathleen M. Mazzarella
Kathleen M. Mazzarella
/s/ Mark B. McClellan, M.D.
Mark B. McClellan, M.D.
/s/ Kimberly A. Ross
Kimberly A. Ross
/s/ Eric C. Wiseman
Eric C. Wiseman
/s/ Donna F. Zarcone
Donna F. Zarcone
Director
Director
Director
Director
Lead Independent Director
Director
151
(This page has been left blank intentionally.)
THE CIGNA GROUP AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedules
I
II
Condensed Financial Information of The Cigna Group (Registrant) ...................................................................
Statements of Income for the Years Ended December 31, 2022, 2021 and 2020 ..............................................
Balance Sheets as of December 31, 2022 and 2021 ...........................................................................................
Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 .......................................
Notes to Condensed Financial Statements .........................................................................................................
Valuation and Qualifying Accounts and Reserves for the Years Ended December 31, 2022, 2021 and 2020 ....
PAGE
FS-2
FS-2
FS-3
FS-4
FS-5
FS-7
Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
FS-1
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE CIGNA GROUP
(REGISTRANT)
STATEMENTS OF INCOME
(In millions)
Revenues
Net investment income
Intercompany interest income
Total revenues
Operating expenses
Selling, general and administrative expenses
Total operating expenses
Income from operations
Interest and other expense
Intercompany interest expense
Debt extinguishment costs
Loss before income taxes
Income tax benefits
Loss of Parent Company
Equity in income of subsidiaries
Shareholders' net income
Shareholders' other comprehensive income (loss), net of tax
Net unrealized depreciation on securities and derivatives
Net translation gains (losses) of foreign currencies
Postretirement benefits liability adjustment
Shareholders' other comprehensive (loss) income, net of tax
Shareholders' comprehensive income
See Notes to Financial Statements on the following pages.
For the Years Ended December 31,
2022
2021
2020
$
5 $
— $
478
483
2
2
481
(1,215)
(147)
—
(881)
(183)
(698)
7,366
6,668
(1,005)
74
420
(511)
471
471
8
8
463
(1,197)
(13)
(131)
(878)
(180)
(698)
6,063
5,365
(215)
(218)
410
(23)
1
475
476
4
4
472
(1,324)
(48)
(171)
(1,071)
(234)
(837)
9,295
8,458
(75)
260
(105)
80
$
6,157 $
5,342 $
8,538
FS-2
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE CIGNA GROUP
(REGISTRANT)
BALANCE SHEETS
(In millions)
Assets
Cash and cash equivalents
Short-term investments
Other current assets
Total current assets
Intercompany receivable
Investments in subsidiaries
Other non-current assets
TOTAL ASSETS
Liabilities
Short-term debt
Other current liabilities
Total current liabilities
Intercompany payable
Other non-current liabilities
Long-term debt
TOTAL LIABILITIES
Shareholders' Equity
Common stock (shares issued, 398 and 394; authorized, 600)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Less treasury stock, at cost
TOTAL SHAREHOLDERS' EQUITY
As of December 31,
2022
2021
$
115 $
—
6
121
10,366
70,877
99
33
99
9
141
8,962
70,896
17
81,463 $
80,016
$
$
2,749 $
1,296
4,045
5,705
26
26,815
36,591
4
30,233
(1,395)
37,874
(21,844)
44,872
2,453
775
3,228
5
—
29,671
32,904
4
29,574
(884)
32,593
(14,175)
47,112
80,016
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
81,463 $
See Notes to Financial Statements on the following pages.
FS-3
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE CIGNA GROUP
(REGISTRANT)
STATEMENTS OF CASH FLOWS
(In millions)
Cash Flows from Operating Activities
Shareholders' net income
Adjustments to reconcile shareholders' net income
to net cash provided by operating activities
Equity in income of subsidiaries
Debt extinguishment costs
Dividends received from subsidiaries
Other liabilities
Other, net
NET CASH PROVIDED BY OPERATING ACTIVITIES
Cash Flows from Investing Activities
Net change in loans due from affiliates
Net proceeds from short-term investments sold (purchased)
NET CASH USED IN INVESTING ACTIVITIES
Cash Flows from Financing Activities
Net change in amounts due to affiliates
Net change in commercial paper
Payments for debt extinguishment
Repayment of long-term debt
Net proceeds on issuance of long-term debt
Issuance of common stock
Common dividends paid
Repurchase of common stock
Tax withholding on stock compensation and other
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash,cash equivalents and restricted cash
Cash and cash equivalents, beginning of year
Cash, cash equivalents and restricted cash, end of year (1)
(1) Includes restricted cash reported in Other non-current assets as of December 31, 2022.
See Notes to Financial Statements on the following pages.
For the Years Ended December 31,
2022
2021
2020
$
6,668 $
5,365 $
8,458
(7,366)
(6,063)
(9,295)
—
2,085
5
269
1,661
(901)
99
(802)
10,392
(2,027)
—
(430)
—
389
(1,384)
(7,607)
(73)
(740)
119
33
131
2,751
184
414
2,782
(1,007)
(50)
(1,057)
2,062
997
(126)
(4,199)
4,260
326
(1,341)
(7,742)
(86)
(5,849)
(4,124)
4,157
$
152 $
33 $
171
8,627
112
500
8,573
(265)
(19)
(284)
2,262
86
(181)
(5,996)
3,465
376
(15)
(4,042)
(87)
(4,132)
4,157
—
4,157
FS-4
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF THE CIGNA GROUP
(REGISTRANT)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the
accompanying notes thereto contained in this Annual Report on Form 10-K ("Form 10-K").
Note 1 — For purposes of these condensed financial statements, The Cigna Group's (the "Company") wholly-owned and majority-
owned subsidiaries are recorded using the equity method of accounting.
Cigna Holding Company (formerly Cigna Corporation) was incorporated in Delaware in 1981. Halfmoon Parent, Inc. was
incorporated in Delaware in March 2018. Halfmoon Parent, Inc. was renamed Cigna Corporation and Cigna Holding Company
became its subsidiary concurrent with the consummation of the combination with Express Scripts on December 20, 2018. Cigna
Corporation was renamed The Cigna Group in February 2023.
Note 2 — See Note 7 – Debt included in Part II, Item 8 of this Form 10-K for a description of the short-term and long-term debt
obligations of The Cigna Group and its subsidiaries.
Short-term and Credit Facilities Debt
Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate
purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed below.
As of December 31, 2022, there were no outstanding balances under these revolving credit agreements.
In April 2022, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"):
•
•
•
a $3.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2027 with an option to extend
the maturity date for additional one-year periods, subject to consent of the banks. The Company can borrow up to $3.0 billion
under the credit agreement for general corporate purposes, with up to $500 million available for issuance of letters of credit.
a $1.0 billion three-year revolving credit agreement that will mature in April 2025 with an option to extend the maturity date
for additional one-year periods, subject to consent of the banks. The Company can borrow up to $1.0 billion under the credit
agreement for general corporate purposes.
a $1.0 billion 364-day revolving credit agreement that will mature in April 2023. The Company can borrow up to $1.0 billion
under the credit agreement for general corporate purposes. This agreement includes the option to "term out" any revolving
loans that are outstanding at maturity by converting them into a term loan maturing on the one-year anniversary of
conversion.
Each of the Credit Agreements include an option to increase commitments in an aggregate amount of up to $1.5 billion across all three
facilities for a maximum total commitment of $6.5 billion. The Credit Agreements allow for borrowings at either a base rate or an
adjusted term Secured Overnight Funding Rate ("SOFR") plus, in each case, an applicable margin based on the Company's senior
unsecured credit ratings.
Each of the three facilities is diversified among 22 banks. Each facility also contains customary covenants and restrictions, including a
financial covenant that the Company's leverage ratio, as defined in the Credit Agreements, may not exceed 60%, subject to certain
exceptions upon the consummation of an acquisition.
The Credit Agreements replaced a prior $3.0 billion five-year revolving credit and letter of credit agreement maturing on April 2026, a
$1.0 billion three-year revolving credit agreement maturing on April 2024 and a $1.0 billion 364-day revolving credit agreement
maturing in April 2022.
Commercial Paper. Under our commercial paper program, we may issue short-term, unsecured commercial paper notes privately
placed on a discounted basis through certain broker-dealers at any time not to exceed an aggregate amount of $5.0 billion. Amounts
available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been
and are expected to be used for general corporate purposes. There was no commercial paper outstanding balance as of December 31,
2022.
FS-5
Long-Term Debt
Debt Issuance and Redemption. The Company did not enter into any debt issuances or redemptions in 2022. In order to decrease
future interest expense, mitigate future refinancing risk and raise proceeds for general corporate purposes, the Company entered into
the following transactions during 2021:
•
•
Debt issuance: On March 3, 2021, the Company issued $4.3 billion of new senior notes. The proceeds of this issuance were
mainly used to redeem outstanding debt securities. The remaining proceeds were used primarily for general corporate
purposes.
Debt redemption: During 2021, the Company completed the redemption of a total of $4.2 billion in aggregate principal
amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $131 million ($101 million after-
tax), consisting primarily of premium payments.
Maturities of the Company's long-term debt are as follows:
(In millions)
2023
2024
2025
2026
2027
Maturities after 2027
$
$
$
$
$
$
2,754
1,214
2,957
2,034
2,056
18,891
Debt Covenants. The Company was in compliance with its debt covenants as of December 31, 2022.
Note 3 — The Company's intercompany receivables consist primarily of net intercompany loan amounts due from Evernorth Health,
Inc. of $8.3 billion as of December 31, 2022 and $7.8 billion as of December 31, 2021. Interest income on the loan receivable was
accrued at an average rate of 4.65% in 2022.
The Company's intercompany payables consist primarily of net intercompany loan borrowing from three indirect wholly-owned
subsidiaries as of December 31, 2022. Interest expense on the loan payable was accrued at an average rate of 2.82% in 2022.
Note 4 — The Company guaranteed approximately $730 million of payment obligations primarily related to certain indirect wholly-
owned subsidiaries. There were no liabilities required for these guarantees as of December 31, 2022.
FS-6
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)
Description
2022
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans
Accounts receivable, net
Deferred tax asset valuation allowance
Reinsurance recoverables
2021
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans
Accounts receivable, net
Deferred tax asset valuation allowance
Reinsurance recoverables
2020
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans (1)
Accounts receivable, net
Balance at
beginning of year
Charged
(Credited) to
costs and
expenses
Charged
(Credited) to
other
accounts
Other
deductions
Balance at
end of year
$
$
$
$
$
$
$
$
$
$
$
$
$
23 $
6 $
126 $
246 $
30 $
26 $
6 $
156 $
207 $
32 $
— $
— $
252 $
43 $
15 $
99 $
(13) $
7 $
29 $
— $
54 $
23 $
(2) $
82 $
(1) $
(50) $
— $
— $
— $
(25) $
— $
— $
— $
— $
16 $
— $
— $
7 $
(12) $
1 $
31 $
(22) $
— $
(65) $
— $
— $
(32) $
— $
(84) $
— $
— $
(56) $
— $
(34) $
— $
— $
44
21
160
208
37
23
6
126
246
30
26
6
156
207
32
Deferred tax asset valuation allowance
Reinsurance recoverables (2)
(1) The Company recorded an additional allowance of $7 million on January 1, 2020 upon the adoption of ASU 2016-13.
(2) The Company recorded an additional allowance of $31 million on January 1, 2020 upon the adoption of ASU 2016-13.
196 $
10 $
(1) $
2 $
$
$
FS-7
Exhibit 21 – Subsidiaries of the Registrant
Listed below are subsidiaries of The Cigna Group as of December 31, 2022 with their jurisdictions of organization. Those subsidiaries
not listed would not, in the aggregate, constitute a “significant subsidiary” of The Cigna Group, as that term is defined in Rule 1-02(w)
of Regulation S-X.
Entity Name
Accredo Health Group, Inc.
Accredo Health, Incorporated
Allegiance Life & Health Insurance Company
American Retirement Life Insurance Company
Ascent Health Services LLC
Bravo Health Mid-Atlantic, Inc.
Bravo Health Pennsylvania, Inc.
Care Continuum, Inc.
CareCore NJ, LLC
Chiro Alliance Corporation
Cigna & CMB Life Insurance Company Limited
Cigna Arbor Life Insurance Company
Cigna Dental Health Of California, Inc.
Cigna Dental Health Of Colorado, Inc.
Cigna Dental Health Of Delaware, Inc.
Cigna Dental Health Of Florida, Inc.
Cigna Dental Health of Illinois, Inc.
Cigna Dental Health Of Kansas, Inc.
Cigna Dental Health Of Kentucky, Inc.
Cigna Dental Health Of Maryland, Inc.
Cigna Dental Health Of Missouri, Inc.
Cigna Dental Health Of New Jersey, Inc.
Cigna Dental Health Of North Carolina, Inc.
Cigna Dental Health Of Ohio, Inc.
Cigna Dental Health Of Pennsylvania, Inc.
Cigna Dental Health Of Texas, Inc.
Cigna Dental Health Of Virginia, Inc.
Cigna Dental Health Plan Of Arizona, Inc.
Cigna Europe Insurance Company S.A.-N.V.
Cigna Global Insurance Company Limited
Cigna Global Reinsurance Company, Ltd.
Cigna Health and Life Insurance Company
Cigna HealthCare Mid-Atlantic, Inc.
Cigna HealthCare of Arizona, Inc.
Cigna HealthCare of California, Inc.
Cigna HealthCare of Colorado, Inc.
Cigna HealthCare of Connecticut, Inc.
Jurisdiction
Delaware
Delaware
Montana
Ohio
Delaware
Maryland
Pennsylvania
Kentucky
New Jersey
Florida
China
Connecticut
California
Colorado
Delaware
Florida
Illinois
Kansas
Kentucky
Maryland
Missouri
New Jersey
North Carolina
Ohio
Pennsylvania
Texas
Virginia
Arizona
Belgium
Guernsey
Bermuda
Connecticut
Maryland
Arizona
California
Colorado
Connecticut
Cigna HealthCare of Florida, Inc.
Cigna HealthCare of Georgia, Inc.
Cigna HealthCare of Illinois, Inc.
Cigna HealthCare of Indiana, Inc.
Cigna HealthCare of Maine, Inc.
Cigna HealthCare of Massachusetts, Inc.
Cigna HealthCare of New Hampshire, Inc.
Cigna HealthCare of New Jersey, Inc.
Cigna HealthCare of North Carolina, Inc.
Cigna HealthCare of Pennsylvania, Inc.
Cigna HealthCare of South Carolina, Inc.
Cigna HealthCare of St. Louis, Inc.
Cigna HealthCare of Tennessee, Inc.
Cigna HealthCare of Texas, Inc.
Cigna HealthCare of Utah, Inc.
Cigna Holding Company
Cigna Holdings, Inc.
Cigna Insurance Company
Cigna Insurance Middle East S.A.L.
Cigna Life Insurance Company of Canada
Cigna Life Insurance Company of Europe S.A.-N.V.
Cigna National Health Insurance Company
Cigna Services Middle East FZE
Cigna Worldwide General Insurance Company Limited
Cigna Worldwide Insurance Company
Connecticut General Corporation
Connecticut General Life Insurance Company
CuraScript, Inc.
ESI Mail Pharmacy Service, Inc.
Evernorth Enterprise Services, Inc.
Evernorth Health, Inc.
eviCore healthcare MSI, LLC
Express Reinsurance Company
Express Scripts Administrators LLC
Express Scripts Pharmaceutical Procurement, LLC
Express Scripts Pharmacy, Inc.
Express Scripts Strategic Development, Inc.
Express Scripts Utilization Management Company
Express Scripts, Inc.
HealthSpring Life & Health Insurance Company, Inc.
HealthSpring of Florida, Inc.
Inside RX, LLC
Loyal American Life Insurance Company
Florida
Georgia
Illinois
Indiana
Maine
Massachusetts
New Hampshire
New Jersey
North Carolina
Pennsylvania
South Carolina
Missouri
Tennessee
Texas
Utah
Delaware
Delaware
Ohio
Lebanon
Canada
Belgium
Ohio
Dubai
Hong Kong
Delaware
Connecticut
Connecticut
Delaware
Delaware
Delaware
Delaware
Tennessee
Missouri
Delaware
Delaware
Delaware
New Jersey
Delaware
Delaware
Texas
Florida
Delaware
Ohio
ManipalCigna Health Insurance Company Limited
Matrix Healthcare Services, Inc.
Medco Containment Insurance Company of NY
Medco Containment Life Insurance Company
Medco Health Services, Inc.
Medco Health Solutions, Inc.
MSI Health Organization of Texas, Inc.
Provident American Life & Health Insurance Company
Sterling Life Insurance Company
Temple Insurance Company Limited
India
Florida
New York
Pennsylvania
Delaware
Delaware
Texas
Ohio
Illinois
Bermuda
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-268633 and 333-236877)
and S-8 (Nos. 333-228930, 333-228931 and 333-258507) of The Cigna Group of our report dated February 23, 2023 relating to the
financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in
this Form 10-K.
Exhibit 23
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 23, 2023
Exhibit 31.1
CERTIFICATION
I, DAVID M. CORDANI, certify that:
1.
I have reviewed this Annual Report on Form 10-K of The Cigna Group;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
b)
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
c)
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
d)
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
all significant deficiencies and material weaknesses in the design or operation of internal control
a)
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
significant role in the registrant’s internal control over financial reporting.
any fraud, whether or not material, that involves management or other employees who have a
Date: February 23, 2023
/s/ David M. Cordani
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, BRIAN C. EVANKO, certify that:
1.
I have reviewed this Annual Report on Form 10-K of The Cigna Group;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
b)
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
c)
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
d)
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
all significant deficiencies and material weaknesses in the design or operation of internal control
a)
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
significant role in the registrant’s internal control over financial reporting.
any fraud, whether or not material, that involves management or other employees who have a
Date: February 23, 2023
/s/ Brian C. Evanko
Chief Financial Officer
Certification of Chief Executive Officer of
The Cigna Group pursuant to 18 U.S.C. Section 1350
Exhibit 32.1
I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of The Cigna Group for the
fiscal period ending December 31, 2022 (the “Report”):
(1)
(2)
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of The Cigna Group.
/s/ David M. Cordani
David M. Cordani
Chief Executive Officer
February 23, 2023
Certification of Chief Financial Officer of
The Cigna Group pursuant to 18 U.S.C. Section 1350
Exhibit 32.2
I certify that, to the best of my knowledge and belief, the Annual Report on Form 10-K of The Cigna Group for the
fiscal period ending December 31, 2022 (the “Report”):
(1)
(2)
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of The Cigna Group.
/s/ Brian C. Evanko
Brian C. Evanko
Chief Financial Officer
February 23, 2023
(This page has been left blank intentionally.)
E N D N O T E S
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
The Cigna Group Newsroom, Cigna Champions Vitality as a
Next Generation Health Measure, October 26, 2022.
The Cigna Group Newsroom, Cigna Reports Strong Fourth
Quarter and Full Year 2022 Results, Establishes 2023 Guidance
and Increases Dividend, February 3, 2023. Q4 Presentation; Q4
Financial Supplement.
Our consolidated measures “adjusted income from operations,”
earnings per share on that same basis and “adjusted revenues”
are not determined in accordance with principles generally
accepted in the United States (GAAP) and should not be
viewed as substitutes for the most directly comparable GAAP
measures “shareholders’ net income,” “earnings per share”
and “total revenues.” These measures are each defined and
reconciled to the comparable GAAP measures in Part II, Item 7,
"Executive Overview" section of our Form 10-K. We use adjusted
income from operations as our principal financial measure of
operating performance because management believes it best
reflects the underlying results of our business operations and
permits analysis of trends in underlying revenue, expenses and
profitability. Management is not able to provide a reconciliation
to shareholders’ net income (loss) or adjusted revenues to total
revenues on a forward basis because we are unable to predict
certain components thereof including (i) future net realized
investment results (from equity method investments with
respect to adjusted revenues) and (ii) future special items.
These items are inherently uncertain and depend on various
factors, many of which are beyond our control. As such,
any associated estimate and its impact on shareholders’
net income and total revenues could vary materially.
The Cigna Group internal analysis of existing arrangements
as of December 2022.
Evernorth Health Services Newsroom, What Is Drug Trend
and How to Manage It, April 21, 2022.
Evernorth Health Services, Biosimilars 101,
evernorth.com/articles/biosimilars.
Evernorth Health Services Newsroom, Evernorth and Kaiser
Permanente Enter Strategic Collaboration to Deliver More
Convenient, Affordable and Accessible Health Care, April 19, 2022.
The Cigna Group Newsroom, Express Scripts Announces Strategic
Partnership with Centene to Unlock Greater Prescription Drug
Savings, October 25, 2022.
The Cigna Group Newsroom, Cigna Expands Its Medicare
Advantage Plans for 2023, Giving Americans More Health Care
Choices, Personalization and Social Support, October 3, 2022.
The Cigna Group Newsroom, Cigna Transforms Care Experience
for Patients with Complex Conditions with Launch of Full
Spectrum, Cost-Saving Products, September 28, 2022.
The Cigna Group Newsroom, VillageMD Acquires Summit
Health-CityMD, Creating One of the Largest Independent
Provider Groups in the U.S., November 7, 2022.
The Cigna Group Newsroom, Cigna Named Corporate
Sustainability Leader by Dow Jones for Sixth Consecutive
Year, December 19, 2022.
The Cigna Group Newsroom, Cigna Earned the #1 Ranking
for Corporate Citizenship in the Health Care Industry by JUST
Capital and CNBC, January 11, 2023.
The Cigna Group Newsroom, Cigna’s Dr. Luis Torres Selected
for National Fellowship to Drive Social Change, February 2, 2022.
2021 Cigna Diversity Scorecard Report, 2021-cigna-diversity-
equity-and-inclusion-scorecard-report.pdf.
16. DiversityInc., 2022 Top 50 Companies For Diversity, diversityinc.
com/top-50-list/2022.
17.
18.
National Minority Supplier Development Council, Inc., NMSDC
launches The Forefront 50 to recognize corporations that are
leveling the playing field, October 11, 2022.
The Cigna Group Newsroom, Evernorth’s Accredo Earns URAC
Rare Disease Pharmacy Center of Excellence Designation,
February 10, 2022.
19. U.S. News & World Report, Best Medicare Advantage Plan
Companies of 2023, health.usnews.com/medicare/best-medicare-
plans/best-insurance-companies-for-medicare-advantage-plans.
20. Evernorth Health Services Newsroom, Express Scripts To
Begin Adding Inflammatory Conditions Biosimilars to Largest
Formularies Next Year, December 5, 2022.
21.
22.
23.
24.
25.
Evernorth Health Services Newsroom, MDLIVE Announces
Evolution of Virtual Primary Care To Improve Health Outcomes
for Patients with Chronic Conditions, November 14, 2022.
The Cigna Group Newsroom, Cigna Grows ACA Marketplace
Presence, Giving More Customers and Communities Access
to Quality, Cost-Effective Care, August 29, 2022 .
The Cigna Group Newsroom, Cigna Announces $3.5 Billion
Accelerated Stock Repurchase Agreements, June 16, 2022.
The Cigna Group Newsroom, Cigna Completes Transaction
with Chubb, July 1, 2022.
The Cigna Group Newsroom, New $450M Investment in Cigna
Ventures to Drive Health Care Transformation, Innovation, and
Growth, March 2022 .
26. Cigna 2021 Corporate Responsibility Report, cigna.com/
static/www-cigna-com/docs/cigna-connects-2021-corporate-
responsibility-report.pdf.
27.
28.
The Cigna Group internal analysis of existing arrangements
as of December 2022. Includes 2022 Cigna Foundation grants,
employee volunteerism and giving, Cigna charitable giving,
and undertaking payments to nonprofits in CA and NY, which
were precipitated by The Cigna Group’s combination with Express
Scripts in late 2018.
The Cigna Group internal analysis of existing arrangements as
of December 2022. Value is derived from self-reported hours.
Calculated by multiplying total number of employee volunteer
hours (self-reported and program specific) by the national value
of a traditional hands-on volunteer hour of $29.95 and a
skills-based, mentoring, pro bono volunteer hour of $195; the
latter reflects a change to our 2022 methodology over 2021.
independentsector.org/resource/value-of-volunteer-time.
29. Brave Of Heart Fund – New York Life Insurance Company,
Cigna & E4E Relief, May 18, 2022, engageforgood.com/halo-
award/2022-best-covid-19-initiative-gold.
30.
The Cigna Group Newsroom, Cigna Honored by Business
Group on Health as Best Employer for Health and Well-being,
April 26, 2022.
31. Human Rights Campaign, Best Places to Work for LGBTQ+
Equality 2022, hrc.org/resources/best-places-to-work-for-
lgbtq-equality-2022.
32. Cigna Healthcare, Member Guide, cigna.com/individuals-families/
member-guide.
33.
EcoVadis, ecovadis.com.
34. MSCI ESG Ratings & Climate Search Tool, msci.com/
our-solutions/esg-investing/esg-ratings-climate-search-tool/
issuer/cigna-corporation/IID000000002920541.
All products and services are provided exclusively by or through operating subsidiaries
of The Cigna Group, including Cigna Health and Life Insurance Company, Connecticut
General Life Insurance Company, Evernorth Health Services companies or their affiliates,
and Express Scripts companies or their affiliates. Such products and services include an
integrated suite of health services, such as medical, dental, behavioral health, pharmacy,
vision, supplemental benefits, and other related products.
956190 03/23 © 2023 The Cigna Group. Some content provided under license.