Healthy Today
.
Building a Better
.
Tomorrow
T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
1. The Cigna Group Newsroom, Vitality 2023: Americans are optimistic despite facing physical, mental, and financial health challenges, October 25, 2023.2. The Cigna Group Newsroom, The Cigna Group Reports Strong Fourth Quarter and Full Year 2023 Results, Raises 2024 Adjusted EPS Outlook, and Increases Dividend, February 2, 2024. Q4 Presentation; Q4 Financial Supplement. 3. 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 U.S. (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.4. The Cigna Group Newsroom, The Cigna Group Announces Significant Increase to Share Repurchase Program of $10 Billion, December 10, 2023.5. The Cigna Group internal analysis as of December 2023.6. Evernorth Health Services, Evernorth EncircleRx, evernorth.com/our-solutions/cardiovascular-disease-diabetes-obesity.7. Evernorth Health Services Newsroom, Express Scripts Announces Strategic Partnership with Centene to Unlock Greater Prescription Drug Savings, October 25, 2022.8. The Cigna Group Newsroom, Express Scripts Further Advances Transparency and Affordability for Consumers and Clients, April 13, 2023.9. Evernorth Health Services Newsroom, Express Scripts Introduces New Option to Give Clients Maximum Simplicity in Drug Pricing, November 13, 2023.10. Evernorth Health Services Newsroom, Express Scripts Launches New Initiative to Expand Rural Health Care Access Through Partnerships with Independent Pharmacies, April 20, 2023.11. Evernorth Health Services Newsroom, Evernorth Introduces Innovative Behavioral Health Measurement-Based Care Program, October 5, 2023.12. Cigna Healthcare Newsroom, Cigna Worldwide Insurance Company Receives Branch License in Saudi Arabia, Plans Growth in the Kingdom, February 6, 2023.13. The Cigna Group Newsroom, The Cigna Group to Sell Medicare Businesses and CareAllies to Health Care Services Corporation (HCSC), January 31, 2024.14. The Cigna Group Newsroom, The Cigna Group Recognized as Corporate Sustainability Industry Leader by Dow Jones Sustainability Indices for 7th Consecutive Year, December 12, 2023.15. The Cigna Group Newsroom, The Cigna Group Named No. 6 Among Best Corporate Citizens by JUST Capital and CNBC, February 5, 2024.16. Fair360, 2023 Top 50 Companies for Diversity, fair360.com/top-50-list/2023/.17. National LGBT Chamber of Commerce, 2023 NBIC Corporations for Inclusion Named by NGLCC and Partners in the National Business Inclusion Consortium (NBIC), nglcc.org/news/6837/.18. The Cigna Group internal analysis of existing arrangements as of December 2023. Includes The Cigna Group Foundation grants for 2023, employee volunteerism and giving, The Cigna Group charitable giving, and undertaking payments to nonprofits in California and New York, which were precipitated by The Cigna Group combining with Express Scripts in late 2018.19. The Cigna Group internal analysis of existing arrangements as of December 2023. 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 $31.80 and a skills-based, mentoring, pro bono volunteer hour of $195, taprootfoundation.org/taproot-foundation-announces-that-the-average-hourly-value-of-pro-bono-service-is-now-195/.20. The Cigna Group 2022 Diversity Scorecard Report, thecignagroup.com/static/www-thecignagroup-com/docs/cigna-diversity-equity-and-inclusion-scorecard-report.pdf.21. The Cigna Group Newsroom, The Cigna Group Announces Appointment of Dr. Philip Ozuah to Board of Directors, May 1, 2023.22. The Cigna Group 2022 ESG Report, thecignagroup.com/static/www-thecignagroup-com/docs/2022-esg-report.pdf.23. Evernorth Health Services Newsroom, Evernorth Partners with CarepathRx Health System Solutions to Enhance Specialty Care for Patients and Drive Physician Performance, May 31, 2023. 24. Monogram Health, Monogram Health’s In-Home Services Now Available to More Older Adults Living with Chronic Kidney Conditions, February 7, 2023, monogramhealth.com/press/monogram-healths-in-home-services-now- available-to-more-older-adults-living-with-chronic-kidney-conditions.25. The Cigna Group Newsroom, Cigna Healthcare Removes 25 Percent of Medical Services from Prior Authorization, Simplifying the Care Experience for Customers and Clinicians, August 24, 2023. 26. Evernorth Health Services Newsroom, Evernorth Acquires Bright.md Technology Platform, Enhances MDLIVE’s Virtual Care Experience for Patients and Clinicians, September 27, 2023.27. Evernorth Health Services Newsroom, Improving Access to Care for Rural Americans by Supporting and Empowering Independent Pharmacies, August 18, 2023. 28. PR Newswire, Octave Raises $52M in Series C Funding to Expand In-Network Mental Health, June 15, 2023, prnewswire.com/news-releases/octave-raises- 52m-in-series-c-funding-to-expand-in-network-mental-health-301851235.html.29. Business Wire, NOCD Completes Additional Funding in its Quest to End the OCD Crisis, January 31, 2023, businesswire.com/news/home/20230131005743/en/NOCD-Completes-Additional-Funding-in-its-Quest-to-End-the-OCD-Crisis.30. Evernorth Health Services Newsroom, The University of Texas at Austin’s Institute for Public School Initiatives, MDLIVE Expand Access to Mental Health Care for Texas Youth, May 11, 2023. 31. Harris Health System Newsroom, Harris Health Awarded $500,000 Sponsorship from Cigna Healthcare to Address Chronic Diabetes, Food Insecurity through Expansion of the Food Rx Program, October 16, 2023, harrishealth.org/about-us-hh/news/Pages/harris-health-awarded-$500,000-sponsorship-from-cigna-healthcare.aspx.32. The Cigna Group Newsroom, Cigna Healthcare Takes Action to Fight Food Insecurity Among Seniors, September 25, 2023. 33. The Cigna Group Newsroom, The Cigna Group Earns 11th Consecutive Perfect Score for LGBTQ+ Workplace Inclusion, December 20, 2023.34. The Cigna Group internal analysis of existing arrangements and MDLIVE treatments as of December 2023. Calculated using publicly available travel behavior information from the Federal Highway Administration’s National Household Travel Survey (NHTS), as well as emissions factors from the EPA.35. The Cigna Group CDP Water Security 2023, thecignagroup.com/static/www-thecignagroup-com/docs/cigna-cdp-water-security-questionnaire.pdf. 36. Cigna Healthcare, Member Guide, cigna.com/individuals-families/member-guide/.37. MSCI ESG Ratings & Climate Search Tool, Page Last Accessed February 14, 2024, msci.com/our-solutions/esg-investing/esg-ratings-climate-search-tool/issuer/cignacorporation/IID000000002920541.38. Sustainalytics, Company ESG Risk Ratings, Page Last Accessed February 14, 2024, sustainalytics.com/esg-rating/the-cigna-group/2006080571.39. ISS Corporate, ESG Gateway, Page last accessed February 14, 2024, iss-corporate.com/solutions/esg-solutions/iss-esg-gateway/.40. The Cigna Group internal analysis of existing arrangements as of December 2023. Refers to 2023 procurement spend and data received from Tier 1 suppliers.41. The Cigna Group internal analysis of existing arrangements as of December 2023. Refers to U.S. Employer and Medicare provider population.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.979219 03/24 © 2024 The Cigna Group. Some content provided under license. All rights reserved. O U R M I S S I O N
To improve the health
and vitality of those we serve.
A L E T T E R F R O M 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
Healthy today.
Building a better
tomorrow.
Throughout 2023, a common theme emerged in my conversations
with clients and partners, civic and business leaders, co-workers,
health care industry professionals, and others.
People want more than just bearing the disruption and challenges
that have become commonplace in the U.S. and around the world.
They want to thrive and live their most healthy, productive, and fulfilling
life. At The Cigna GroupSM, we call this vitality – and helping improve
it for the individuals, businesses, and communities we serve is a
driving force for our company.
From life-changing new treatments and improved insights to more
personalized, coordinated care, the tools have never been better. While
the needs are clear, the challenges, however, have never been greater.
According to our second annual Vitality in America study, overall vitality
levels among U.S. adults have plateaued. Additionally, many individuals are
increasingly struggling with their physical, emotional, and financial health
and well-being. When this happens, people struggle. When that happens,
companies struggle. And when that happens, communities struggle.1
I remain optimistic even in the face of these challenges. Our determination
to support greater vitality continues to strengthen. As I visited dozens of
large and small communities in 2023, I saw firsthand what can be achieved
when like-minded individuals combine their collective knowledge, depth
of resources, and shared commitment to action.
In that same spirit, I’m proud to report the progress we made across
The Cigna Group in 2023. The strong performance and achievements
of our approximately 72,500 co-workers globally underscored our
commitment to a Healthy Today as we delivered top-quality access
to care, affordable treatment options, and day-to-day support for our
customers and patients, employer clients, and health plan partners.
2 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
At the same time, we are leveraging our capabilities and expertise to look
toward the future by Building a Better Tomorrow. This requires that we not just
understand what our stakeholders currently need from us but also anticipate
what they will need tomorrow – and meet them there with industry-leading
services and support.
Healthy Today: Our results and our progress
2023 was a very strong year of consistent performance and sustained growth for
The Cigna Group. Our company:
• Grew full-year total revenues to $195.3 billion, an increase of 8% year over year.2
• Achieved shareholders’ net income for 2023 of $5.2 billion, or $17.39 per share,
and adjusted income from operations of $7.4 billion, or $25.09 per share.2, 3
• Generated cash flow from operations of $11.8 billion, an increase of
36% year over year.2
• Expanded our total share repurchase authority to $11.3 billion, representing
a value-enhancing deployment of capital. We expect to repurchase at least
$5 billion in common stock by the end of the first half of 2024, as well as use
the majority of our discretionary cash flow for share repurchase this year.4
Our determination
to support greater
vitality continues
to strengthen.
3 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
Our performance in 2023 extends our track record of delivering consistent
positive results in the face of dynamic market conditions and reflects
the intentional design of our company’s growth platforms. Over the
past decade, as a result of our focus, discipline, and sustained execution,
we have delivered adjusted earnings per share (EPS) growth of more
than 13% on an annualized basis.3, 5 Additionally, in the five years since
our combination with Express Scripts®, we have realized key goals we
established for the combined company. Through 2023, we have grown
adjusted revenue by over $50 billion and met or exceeded our adjusted
EPS objectives each year,3, 5 and we have returned $27 billion5 to shareholders
through share repurchase, as well as attractive dividend payments.
In short, only by delivering value to our customers, patients, clients, and
communities are we able to grow and deliver value back to our shareholders.
Building a Better Tomorrow: Advancing our strategy
We are focused on improving the way care is accessed, delivered, and
coordinated to drive better health outcomes, affordability, and growth across
our Evernorth Health Services® and Cigna HealthcareSM benefits platforms.
EVERNORTH HEALTH SERVICES
Evernorth Health Services continued demonstrating its ability to create value
with leading capabilities in pharmacy benefits, specialty, and care.
One major area of focus is managing the expanding wave of pharmacological
innovation bringing life-changing medications, as well as addressing growing
pressures on access and affordability. In 2023, our pharmacy benefits services
business took action to increase access to affordable medicines and drive
greater transparency and predictability, such as with our EncircleRxSM GLP-1
solution that helps employers and organizations manage the complexity and
costs of obesity, diabetes, and cardiovascular disease.6 We also implemented
the single largest contract ever in the pharmacy benefits industry, successfully
preparing to serve about 20 million Centene customers at the start of 2024.7
We launched a series of other innovations throughout 2023, including
ClearCareRx to provide clients with additional transparency and broader choice
and Express Scripts ClearNetworkSM to provide an option for clients looking to
simplify what they pay for prescription drugs.8, 9 We also announced our new
IndependentRx initiative, recognizing the critical role of pharmacists in rural
areas in improving access for millions of Americans by filling gaps in care.10
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5 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
Accredo® by Evernorth, our leading and fast-growing specialty
pharmacy business, has an increasingly critical role as the rate of
complex drug innovation accelerates. For example, we are focused
on the multi-year biosimilar wave to drive greater savings and value
for our clients. With Accredo and CuraScript SD®, we are supporting
patients and providers with safe and effective use of the growing
volume of high-cost clinically compliant specialty drugs.
Within care services in Evernorth, we supported millions of people,
providers, and health plans with our expertise and capabilities across
the full spectrum of care to improve access, deliver better health
outcomes, and lower costs.
We advanced our efforts across Evernorth through new and expanded
relationships with partners, including VillageMD and CarepathRx
Health System Solutions.
Recognizing the growing need for mental health care, we launched
a value-based care program to strengthen our collaboration with
providers and outcomes in our behavioral health network.11 We also
focused on expanding access to care – where and when people need
it – at home, virtually, at work, or in person. Our MDLIVE® virtual care
platform, for example, is now available to over 60 million individuals
and supported more than 2.2 million virtual visits in 2023.5
We are focused on the way care is
accessed, delivered, and coordinated
to drive better health outcomes,
affordability, and growth across our
Evernorth Health Services and
Cigna Healthcare benefits platforms.
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CIGNA HEALTHCARE
In Cigna Healthcare, we offer services and solutions to
employers, groups, and individuals that improve the quality
of care, affordability, and value.
Our U.S. Employer business delivered an outstanding year of growth.
This was driven by our team’s continued success in strengthening our
competitive position through improved affordability and leveraging
our high-performance networks and digitally enabled services as we
expand care access, coordination of care, and overall value.
In International Health, we continued to show our leadership in
managing health needs for governmental, non-governmental, and
intergovernmental organizations, as well as globally mobile individuals.
We also advanced and enhanced our portfolio of solutions and
extended our reach, including being the first international health
insurer to receive a branch license from the Saudi Central Bank to
operate in the Kingdom of Saudi Arabia.12
Our Medicare Advantage and Individual Exchange businesses
performed in line with our expectations in 2023. We balanced high-
quality and competitive benefit offerings, targeted market expansion,
and disciplined pricing activity. Notably, early in 2024, we announced
a definitive agreement to sell our Medicare businesses and CareAllies
for a total transaction value of approximately $3.7 billion.13 We expect
this transaction to be accretive to our adjusted EPS in 2025 and also
sharpen our focus on businesses where our investments can create
significant value across our enterprise.
6 • T H E C I G N A G R O U P 2 0 2 3 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.
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Making an impact
We believe that the strongest organizations drive higher growth and
profit guided by their mission. Our mission guides us to help people
achieve their health and vitality potential.
We are pleased by the continued recognition our efforts have earned,
including being listed on the Dow Jones Sustainability Indices for the
seventh consecutive year;14 ranking No. 1 within health care among
America’s Most JUST Companies by JUST Capital and CNBC;15 being
named No. 14 in Fair360’s Top Companies for Diversity;16 and being
named to the 2023 “Best-of-the-Best” Corporations for Inclusion by
the National LGBT Chamber of Commerce (NGLCC).17
In 2023, we continued to make strides across our environmental,
social, and governance (ESG) strategic framework and each of its
four connected pillars: Healthy Society, Healthy Workforce,
Healthy Environment, and Healthy Company.
Our mission guides
us to help people
achieve their health
and vitality.
8 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
HEALTHY SOCIETY
Our efforts to drive improvement toward a sustainable and equitable health care
system are embedded within our business strategy. Last year, we continued to
advance our long-standing commitment to improving health equity. Among other
initiatives, we established a program focused on supporting virtual engagement
of those with unmanaged diabetes. We also expanded a program promoting
healthy birth outcomes and improved prenatal care. The goal is to decrease racial
disparities in pregnancy-related outcomes by identifying members who would
benefit from screenings for social determinants of health and by providing referrals,
free prenatal vitamins, behavioral screenings for depression and anxiety, and
transportation for medical appointments.
In 2023, The Cigna Group Foundation awarded approximately $15.6 million in grant
funding to more than 120 nonprofit organizations, supporting efforts to reduce
barriers to health equity, veterans and active-duty members of the military, first
responders, social issues, and disaster relief. We harness the spirit of caring and
volunteerism deeply embedded in our culture and deliver positive change in the
communities we serve.18 Members of our team collectively volunteered more than
69,000 hours in 2023, preparing meals for local food banks, supporting children with
type 1 diabetes, providing care packages for veterans, mentoring young people, and
contributing to many other meaningful initiatives.19 Collectively, we focus our time,
energy, and philanthropic support to make the greatest possible impact on improving
the health and vitality of those who need us most.
HEALTHY WORKFORCE
Supporting the health and vitality of our people continues to be one of our highest
priorities, and we regularly expand the programs and resources available to members of
our team. Last year, we made the Confide Behavioral Health Navigator solution available,
and many of our co-workers and members of their families value its information and
personalized follow-up for better finding and accessing the care they need.
We continue to build upon our long-standing and deep commitment to fair
opportunity for all, regardless of gender, race, or ethnicity. Guided by our diversity,
equity, and inclusion strategy, we focus on cultivating a strong workforce culture
of inclusion that makes us more effective in serving our stakeholders and our
communities. We hold ourselves accountable and report our progress each year in
our annual Diversity Scorecard Report. In last year’s report, for example, we noted
our efforts to improve our ethnic minority representation in management and senior
leadership roles and aspire to reach gender parity in our leadership pipeline by
increasing the representation of women at our director and senior director levels.20
9 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
HEALTHY ENVIRONMENT
We believe there is an intrinsic connection between human health and
environmental health. As such, we continue to take action to ensure
long-term sustainability and reduce our environmental impacts. In 2023, we
continued to make progress on our Scope 3 greenhouse gas (GHG) emissions
inventory and intend to disclose additional categories. We also aim to set
science-based GHG reduction targets.14
We are acting on opportunities to positively impact the environment through
how we operate our business. We prioritize guiding patients to optimal sites
of care, including virtual, digital, and in-home alternatives, which helps reduce
GHG emissions associated with patient travel to and from clinics. As part of our
digital-first orientation, we have made digital health insurance ID cards our
standard approach and are encouraging paperless preferences where possible.
HEALTHY COMPANY
As a company, we are committed to upholding ethical practices and strong
governance, and we also expect our partners to uphold similarly high standards.
Approximately 70% 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 skillsets into our company. In 2023, with our Board
composition, we demonstrated leadership for S&P benchmarks on mean
age, tenure, gender, and ethnic diversity.5 Dr. Philip O. Ozuah, President
and CEO of Montefiore Medicine, became our most recently appointed
independent director to our Board. Dr. Ozuah adds to the deep expertise
and diverse background of our Board, bringing insights from his
experience in medicine, establishing effective value-based care
relationships, and making health care more accessible.21
Through our broad range of capabilities;
deep clinical expertise; and caring,
experienced global team of co-workers,
we continue to make a difference both
at the individual and community level.
1 0 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
We also began incorporating specific language in our supplier
contracts that sets expectations to complete the EcoVadis
Sustainability Assessment, an independent entity that
measures material sustainability impacts.22
Bringing to life our vision
for the future of health care
Good health is fundamental to a thriving society. At The Cigna Group,
we have a pivotal role in supporting the health and vitality of those we
serve and providing them with the strong foundation they need to
thrive. Through our broad range of capabilities; deep clinical expertise;
and caring, experienced global team of co-workers, we continue to
make a difference both at the individual and community level.
With our consistent performance and sustained growth, we delivered
on our commitments, including an 8% increase in full-year total
revenue, shareholders’ net income for 2023 of $5.2 billion, or $17.39 per
share, and adjusted income from operations of $7.4 billion, or $25.09
per share, as well as a 36% year-over-year increase in cash flow
from operations.2, 3
These results reinforce our substantial progress in 2023, demonstrating
our leadership in shaping the future of health care and advancing
innovation for evolving needs. We continued to grow our businesses,
as well as our reach and impact. In 2024, we will accelerate our
momentum and expect another strong year of growth at the higher
end of our long-term strategic targets. Guided by our durable strategic
growth framework, we will continue to leverage our well-balanced
portfolio of complementary businesses while driving accelerated
growth in large and expanding markets. In doing so, we will deliver
value for our shareholders and help to create a health care system that
benefits every individual and every community.
With our focus on supporting being Healthy Today and our work
toward Building a Better Tomorrow, we are fueling the flywheel of
purpose and performance, re-earning the privilege to make a positive
difference in improving the health and vitality of those we serve, and
bringing to life our vision for the future of health care.
DAVID M. CORDANI
Chairman and Chief Executive Officer
The Cigna Group
2 0 2 3 A T A G L A N C E
2 0 2 3 A T A G L A N C E
Growing and
innovating through
strategic partnerships
• Initiated a new strategic partnership with
CarepathRx Health System Solutions to deliver
improved specialty and care services to providers,
hospitals, and health systems.23
• Executed the pharmacy benefits industry’s
largest implementation with Centene to bring
Express Scripts’ best-in-class pharmacy solutions
to 20 million Centene members.7
• Partnered with Monogram Health to provide
in-home primary and specialty care to Medicare
Advantage customers with chronic kidney disease
and end-stage renal disease.24
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Delivering
health and value
• Simplified the care experience for customers and
clinicians by removing 25% of medical services from
prior authorization requirements.25
• Advanced transparency of prescription medications
while preserving and protecting client choice with
the launch of ClearCareRx and ClearNetwork.8, 9
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Expanding
access to care
• Enhanced MDLIVE’s virtual primary care services
to include health coaching for patients with
chronic conditions.26
• Expanded rural health care access through partnerships
with independent pharmacies across the U.S.27
Investing
in our future
• Repurchased $2.3 billion of common stock and authorized
an increase of $10 billion in incremental share repurchase,
bringing the total share repurchase authority to $11.3 billion.2, 4
• Was first global insurer to receive a license in the
Kingdom of Saudi Arabia.12
• Completed several investments through The Cigna
Group Ventures – driving innovation across the health care
ecosystem, especially in mental and behavioral health care,
and data and analytics.28, 29
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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, equitable, and structured around four connected pillars that underscore
our mission to improve the health and vitality of those we serve.
The following are some 2023 highlights within each pillar.
Healthy Society
• Continued to expand access to behavioral health care. For
example, we’re working to expand access to a suite of behavioral
health services for Texas youth through a partnership between
MDLIVE, a leading provider of virtual care services in the U.S., and the
University of Texas at Austin’s Institute for Public School Initiatives.30
• Addressed food insecurity, one example of a social determinant
of health, by supporting Harris Health in expanding its Food Rx
Program. The program supports people who are food insecure and
living with a chronic disease, such as type 2 diabetes.31 We are also
the first health benefits provider to exclusively sponsor the Farmlink
Project, a nonprofit organization that connects farms that have
surplus fresh produce to community food banks across the U.S.32
• Supported nearly $51 million in combined charitable giving
between The Cigna Group and The Cigna Group Foundation,
including approximately $15.6 million toward reducing barriers
to health equity. In particular, we focused on mental health and
education/workforce development as well as grants supporting
veterans, active-duty military, first responders, social issues, and
disaster relief.18
• Logged tens of thousands of volunteer hours to various
causes, equating to approximately $3.7 million in volunteer
engagement value.19
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Healthy Workforce
• Continued to prioritize the health and vitality of our employees
by introducing Confide Behavioral Health Navigator, a more
personalized employee assistance program experience.22
• Published our 2022 Diversity Scorecard Report, which
demonstrates progress toward our goals in three areas: culture
and co-workers, clients and customers, and communities.20
• Earned 11th consecutive perfect score for LGBTQ+ workplace
inclusion on the Human Rights Campaign Foundation’s Corporate
Equality Index.33 As part of our commitment, in mid-2022, we
expanded our health plan’s travel benefit to include travel for
gender-affirming care for The Cigna Group employees and their
dependents who are enrolled in a Cigna Healthcare medical plan
and who live in regions where access is restricted.22
• Were named No. 14 on Fair360’s Top Companies for Diversity,
up 10 spots from last year, for our efforts to advance diversity,
equity, and inclusion for our workforce – and for all.16
Healthy Environment
• Continued to make progress on our Scope 3 greenhouse gas (GHG)
emissions inventory, with the intent to disclose additional categories,
and aim to set science-based GHG reduction targets.22
• Navigated patients to optimal sites of care, including virtual, digital,
and in-home alternatives, which can reduce GHG emissions due to
less patient travel to and from clinics. We estimate that potentially
approximately 9,100 metric tons of GHG emissions were avoided in
2023 as a result of patients using our MDLIVE virtual care services versus
driving to and from clinics.34
• Initiated a project to better understand our use of single-use plastics in
our value chain in locations where we control waste. We plan to use this
information to support portfolio-wide modeling and expand learning
and best practices to other parts of our business.35
• Rolled out digital health insurance ID cards to our customers and
continued to take steps to reduce the amount of paper mailings and
pre-authorization letters by replacing them with electronic messaging.36
1 9 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
1 9 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
Healthy Company
• Maintained our environmental, social, and governance (ESG)
leadership among third-party rating and ranking organizations:
• Member of Dow Jones Sustainability Index for both the
World and North America for the seventh consecutive year.14
• AA in MSCI ESG Ratings, representing industry leadership.37
• “Low Risk” score from Sustainalytics.38
• “Prime” by ISS, awarded to companies with an ESG
performance above the sector-specific Prime threshold.39
• Achieved our goal of $1 billion in annual total diverse supplier spend
two years ahead of schedule.40 Also were named to the 2023 “Best-of-
the-Best” Corporations for Inclusion by the National LGBT Chamber
of Commerce and partners in the National Business Inclusion
Consortium.17
• Began incorporating language in supplier contracts that states
we expect suppliers to complete the EcoVadis Sustainability
Assessment, an independent entity that measures material
sustainability impacts.22
• Were named one of America’s Most JUST Companies for the fourth
year by JUST Capital and CNBC, including No. 1 in the Health Care
Providers industry and No. 6 overall in the JUST 100 (up from No. 16 in
2022). We also earned the No. 1 spot in health care for our approach
to safeguarding customer data and privacy from America’s Most
JUST Companies by JUST Capital and CNBC.15
2 0 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
$195.3B
in total revenues2
1.7M
relationships with medical providers,
clinics, and facilities41
$7.4B
adjusted income
from operations2, 3
370K+
mental and behavioral health
care providers and facilities41
$25.09
adjusted earnings
per share2, 3
164M+
customer relationships2
$11.8B
cash flow from operations2
72K+
employees committed
to changing people’s lives
for the better
7.8M
shares repurchased
for $2.3 billion in 20232
30+
markets and
jurisdictions
Paid a quarterly dividend of
$1.23 per share
in 2023, and announced an
increase of 14% for 20242
The information provided is as of
December 31, 2023, except where
otherwise noted. All information is
subject to change.
2 1 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
Corporate Board
of Directors
MARK B. MCCLELLAN, M.D., PH.D.
Director,
Duke-Robert J. Margolis, M.D.,
Center for Health Policy
PHILIP O. OZUAH, M.D., PH.D.
President and Chief Executive Officer,
Montefiore Medicine, the umbrella organization
for the Albert Einstein College of Medicine and
Montefiore Health System
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
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
2 2 • T H E C I G N A G R O U P 2 0 2 3 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
DAVID J. BRAILER, M.D., PH.D.
Executive Vice President and Chief Health Officer,
The Cigna Group
NOELLE K. EDER
Executive Vice President, Global Chief
Information Officer, The Cigna Group
BRIAN C. EVANKO
Executive Vice President, Chief Financial Officer,
The Cigna Group, and President and Chief
Executive Officer, Cigna Healthcare
Other Officers
KARI KNIGHT STEVENS
Executive Vice President, Chief Human
Resources Officer, and Corporate Secretary,
The Cigna Group
TIMOTHY D. BUCKLEY
Senior Vice President and Treasurer,
The Cigna Group
NICOLE S. JONES
Executive Vice President, Chief Administrative Officer,
and General Counsel, The Cigna Group
ERIC P. PALMER
Executive Vice President, Enterprise Strategy,
The Cigna Group, and President and Chief
Executive Officer, Evernorth Health Services
MICHAEL W. TRIPLETT
Special Advisor
MARY T. AGOGLIA HOELTZEL
Senior Vice President, Tax and
Chief Accounting Officer, The Cigna Group
EXECUTIVE COMMITTEE
David M. Cordani, Chairperson
Eric J. Foss
Elder Granger
Kathleen M. Mazzarella
Kimberly A. Ross
Eric C. Wiseman
Donna F. Zarcone
AUDIT COMMITTEE
Kimberly A. Ross, Chairperson
William J. DeLaney
Neesha Hathi
Donna F. Zarcone
COMPLIANCE COMMITTEE
Elder Granger, Chairperson
George Kurian
Mark B. McClellan
Philip O. Ozuah
CORPORATE GOVERNANCE
COMMITTEE
Donna F. Zarcone, Chairperson
William J. DeLaney
Elder Granger
Mark B. McClellan
FINANCE COMMITTEE
Eric J. Foss, Chairperson
Neesha Hathi
Kathleen M. Mazzarella
Kimberly A. Ross
PEOPLE RESOURCES
COMMITTEE
Kathleen M. Mazzarella, Chairperson
Eric J. Foss
George Kurian
Philip O. Ozuah
2 3 • T H E C I G N A G R O U P 2 0 2 3 A N N U A L R E P O R T
DIRECT STOCK PURCHASE PLAN
Shareholders can automatically reinvest their annual
dividends and make optional cash purchases of common
shares. For information on these services, please contact:
Computershare
P.O. Box 43006
Providence, RI 02940-3006
Toll-free: 800.760.8864; TDD: 800.952.9245
Outside the United States, U.S. territories, and Canada:
201.680.6578; TDD: 201.680.6610
Website: www.computershare.com/investor
SHAREHOLDER ACCOUNT ACCESS
You can access your shareholder account
online through the Computershare website,
www.computershare.com/investor, or by
calling 800.760.8864.
DIRECT DEPOSIT OF DIVIDENDS
Direct deposit of dividends provides a prompt, efficient
way to have your dividends electronically deposited into
your checking or savings account. It avoids the possibility
of lost or delayed dividend checks. The deposit is made
electronically on the payment date.
For more information and an enrollment
authorization form, contact Computershare at
800.760.8864 or, if outside the U.S., U.S. territories,
and Canada, at 201.680.6578. You can access your
account online through the Computershare
website, www.computershare.com/investor.
TRANSFER AGENCY
By regular mail:
Computershare
P.O. Box 43006
Providence, RI 02940-3006
By overnight delivery:
Computershare
150 Royall Street
Suite 101
Canton, MA 02021
Toll-free: 800.760.8864; TDD: 800.952.9245
Outside the United States, U.S. territories, and Canada:
201.680.6578; TDD: 201.680.6610
Website: www.computershare.com/investor
2024 ANNUAL MEETING
The Annual Meeting of
Shareholders will be held virtually
on Wednesday, April 24, 2024,
at 10:30 am 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 5, 2024.
As of December 31, 2023, the
number of shareholders of
record was 23,435.
FINANCIAL INFORMATION
Form 10-K, Form 10-Qs, quarterly
earnings releases, and other
SEC filings for The Cigna Group
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
Common stock for The Cigna
Group 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 3 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, 2023
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, 2023 was approximately $82.8 billion.
☐
☒
☐
☐
☒
As of January 31, 2024, 292,355,022 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 2024 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
Page
30
52
55
56
61
132
136
Cautionary Statement
PART I
Item 1.
Business ...............................................................................................................................
Overview ......................................................................................................................
Evernorth Health Services ...........................................................................................
Cigna Healthcare ..........................................................................................................
Other Operations ..........................................................................................................
Miscellaneous ...............................................................................................................
Investment Management ..............................................................................................
Strategic Investments ...................................................................................................
Digital, Data and Technology ......................................................................................
Human Capital Management .......................................................................................
Environmental, Social and Governance .......................................................................
Regulation ....................................................................................................................
Risk Factors .........................................................................................................................
Item 1A.
Unresolved Staff Comments ...............................................................................................
Item 1B.
Cybersecurity ......................................................................................................................
Item 1C.
Properties .............................................................................................................................
Item 2.
Legal Proceedings ...............................................................................................................
Item 3.
Item 4.
Mine Safety Disclosures ......................................................................................................
Information about our Executive Officers .....................................................................................................
Page
1
1
3
8
13
14
14
15
15
16
18
18
30
45
45
47
47
47
48
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 ..................................................................................
49
50
51
72
73
137
137
137
137
138
138
139
139
139
PART IV
Exhibits and Financial Statement Schedules ...........................................................................
Item 15.
Item 16.
Form 10-K Summary ...............................................................................................................
Signatures ...........................................................................................................................................................
Index to Financial Statement Schedules ............................................................................................................
Exhibits
140
147
148
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; expectations related to our 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; risks related to our use of artificial intelligence and machine learnings; 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, 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; 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 (either individually or collectively referred to as the "Company," "we," "us," or "our"),
is a global health company.
Our Purpose and Mission
The Cigna Group is a global health company committed to creating a better future built on the vitality of every
individual and every community. We relentlessly challenge ourselves to partner and innovate solutions for better
health. Powered by our people and our brands, we advance our mission to improve the health and vitality of those we
serve.
Our 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.
Core Strengths
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 create sustainable impact.
Consultative approach driven by an experienced and talented team.
At The Cigna Group, we relentlessly challenge ourselves to partner and innovate solutions for better health. Our global workforce of
approximately 72,500 colleagues work to fulfill our mission to improve the health and vitality of over 164 million customer
relationships in more than 30 markets and jurisdictions.
We have two growth platforms: Evernorth Health Services and Cigna Healthcare. Evernorth Health Services is our pharmacy benefits,
specialty and care 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. Healthcare and International Health operating
segments, and it allows us to harness our partnership relationship with physicians to deliver affordable and coordinated health care.
Our portfolio of offerings solves diverse challenges across the health care system. 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 those we serve.
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 – pharmacy and medical 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 we expect to continue to grow. These businesses often serve as the key entry point for clients with either a
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.
1
Information about Segments
We present the financial results of our businesses in the following segments (see "Executive Overview" section of Management's
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 partners with health plans, employers, governmental organizations and health care providers to solve
challenges in the areas of pharmacy benefits, home delivery pharmacy, specialty pharmacy, specialty distribution, and care delivery
and management solutions. Within Evernorth Health Services, pharmacy benefits and home delivery pharmacy are foundational
growth businesses and specialty pharmacy, specialty distribution, and care delivery and management solutions are accelerated
growth businesses.
Cigna Healthcare includes the U.S. Healthcare and International Health operating segments, which provide comprehensive medical
and coordinated solutions to clients and customers. During the fourth quarter of 2023, the U.S. Commercial and U.S. Government
operating segments merged to form the U.S. Healthcare operating segment. U.S. Healthcare provides commercial medical plans and
specialty benefits and solutions for insured and self-insured clients (U.S. Employer), Medicare Advantage, Medicare Supplement and
Medicare Part D plans for seniors and individual health insurance plans. International Health provides health care solutions in our
international markets, as well as health care benefits for globally mobile individuals and employees of multinational organizations.
Within Cigna Healthcare, U.S. Employer and International Health are foundational growth businesses.
In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription
Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to
Health Care Service Corporation ("HCSC") for $3.3 billion cash, subject to applicable regulatory approvals and other customary
closing conditions (the "HCSC transaction").
Other Operations comprises the remainder of our business operations, which includes certain ongoing businesses and exited
businesses. Our ongoing businesses include our continuing business, corporate-owned life insurance ("COLI"), and our run-off
businesses. Our run-off businesses include (i) variable annuity reinsurance business (formerly referred to as 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 exited businesses include the international life, accident
and supplemental benefits businesses sold in July 2022 (the "Chubb transaction") and our interest in a joint venture in Türkiye sold in
December 2022.
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate
financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense
associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project
costs and eliminations for products and services sold between segments.
Cross-enterprise Leverage
Cross-enterprise leverage enables us to uniquely use the depth and breadth of our wide-ranging capabilities across the enterprise to
create more value, expand our reach and drive growth. We look across our enterprise at our client relationships within both Evernorth
Health Services and Cigna Healthcare and seek to deepen them by leveraging our entire suite of capabilities. Cross-enterprise leverage
brings teams from across the enterprise together in a quick, efficient and organized manner to move from ideation to solution creation
to meet client's evolving needs.
Evernorth Health Services offerings, such as the Express Scripts PBM, Accredo Specialty Pharmacy, and Evernorth Care behavioral
health solutions, are available within Cigna Healthcare solutions. This broadens Evernorth Health Services’s presence in the total
health care delivery system, and expands the breadth and depth of offerings available to Cigna Healthcare clients and customers while
improving affordability, access, quality of care, care innovations and transparency.
A recent product innovation is Pathwell Bone & Joint - a Cigna Healthcare solution powered by Evernorth Health Services. Pathwell
Bone & Joint delivers affordability to clients via an enhanced digital customer experience and customized clinical navigation through
a care advocate. During 2023, this program was offered to Cigna Healthcare U.S. Employer clients.
Other Information
The financial information included in this Form 10-K for the fiscal year ended December 31, 2023 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
2
Note 25 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, 2023, 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.
The Cigna Group, through its predecessor companies, was incorporated in Delaware in 1981. 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 400 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 independent and coordinated health solutions and capabilities designed to enable
the health care system to work better and help people live richer, healthier lives. Health plans, employers, governmental organizations
and health care providers partner with Evernorth Health Services to solve their biggest challenges in the areas of pharmacy benefits,
home delivery pharmacy, specialty pharmacy, specialty distribution, and care delivery and management solutions. In 2023, Evernorth
Health Services reported adjusted revenues of $153.5 billion and pre-tax adjusted income from operations of $6.4 billion.
Since the launch of the Evernorth Health Services brand, we have continued to grow and serve more people. Today, Evernorth Health
Services is made up of dozens of businesses across pharmacy benefit, specialty and care services. All products and services below are
part of the Evernorth Health Services offering.
How We Deliver
•
•
•
•
Deep clinical expertise when evaluating medicines, digital therapeutics and other health solutions for efficacy
and value to assist clients in selecting a cost effective formulary.
Affordable solutions that provide more value and drive risk-sharing and value-based care.
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.
Talented, experienced and caring people who work as consultative partners to solve complex problems
across a fragmented health care ecosystem, fueled by data and expertise that drives purposeful innovation.
3
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
Pharmacy
Benefit
Services -
Driving
Foundational
Growth
Express Scripts PBM, National Preferred
Formulary, myMatrixx®, Express Scripts
MedRx ManagementSM, Advanced Utilization
Management, Enhanced Fraud, Waste &
Abuse, Ascent Health Services, Econdisc
Contracting Solutions, Copay Assurance®,
Inside Rx®, Evernorth Wholesale
MarketplaceSM, Value-Based Programs
(Express Scripts SafeGuardRx®, Express
Scripts Patient Assurance®, EncircleRxSM)
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
Retail Pharmacies, Home Delivery
Pharmacies
Specialty
Pharmacy
Accredo®, Freedom Fertility Pharmacy®,
Therapeutic Resource Center®
Specialty
Distribution
CuraScript SD®
Clients, Customers,
Health Care Providers,
Specialty Drug
Distributors
Clinics, Hospitals,
Physicians' Offices,
Pharmacies, Alternative
Sites of Care
Specialty Pharmacies
Specialty Drug Distributors
Care Delivery
and
Management
Solutions
eviCore Healthcare®, Evernorth Behavioral
Health, Evernorth Home-Based Care,
MDLIVE®, inMyndSM, Health Connect 360®,
RationalMed®, Evernorth Digital Health
FormularySM
Clients, Customers,
Health Care Providers,
VillageMD, Health
Plans
Managed Care Organizations,
Care Delivery and Care
Management Solutions Providers,
Third-Party Benefit
Administrators, Health Care Data
Analytics Companies
Specialty and
Care Services
- Driving
Accelerated
Growth
Principal Products & Services
Pharmacy Benefit Services
•
Pharmacy Benefits. We drive high-quality, cost-effective pharmacy care through a range of services. We adjudicate drug
claims from Express Scripts Pharmacy, Accredo and retail network participants, and provide retail pharmacy network
administration, benefit design consultation, drug utilization review, drug formulary management and other services.
◦
Retail Pharmacy Network Administration. We contract with retail pharmacies to provide prescription drugs to customers
of the pharmacy benefit plans our clients offer. We negotiate with pharmacies throughout the United States to discount
drug prices and offer national and regional network options 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").
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 for our clients, including standard formularies developed by Express Scripts
and custom formularies in which we play a more limited role. Many of our clients select standard formularies,
governed by our National Pharmacy & Therapeutics Committee ("P&T Committee"), our Therapeutic
Assessment Committee ("TAC") and our Value Assessment Committee ("VAC"). These committees work
together to develop recommendations for formularies that first consider clinical results independent of price
4
▪
considerations. Only after these clinical reviews are completed and codified are other factors such as net cost,
market share and drug utilization trends considered for the final development of our formularies.
One of the ways we manage our drug formulary is through negotiating to secure additional affordability for the
benefit of our clients based on the utilization of certain prescription drugs and supplies which can be paid to us
in the form of a rebate. With respect to our clients' rebate arrangements, most chose to receive the greater of a
minimum rebate guarantee or a contractually agreed-upon percentage of rebates. In some rebate arrangements,
Express Scripts PBM takes on the risk of securing the rebate value necessary to meet the value guaranteed to its
client. The actual amount of value secured by Express Scripts PBM is dependent upon the result of its
negotiations for rebates. In 2023, the Express Scripts PBM shared over 95% of the drug formulary management
rebates it received with its PBM clients, and two-thirds of its clients received 100% of rebates.
◦
◦
◦
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.
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.
myMatrixx. myMatrixx is a 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.
◦
◦
◦
◦ 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 helping ensure safety and
healthier outcomes. We also offer Express Scripts MedRx Management, a multifaceted medical drug strategy, developed
to provide both clinical and financial value to clients.
Advanced Utilization Management. These programs include prior authorization, drug quantity management and step
therapy designed to ensure clinically appropriate medication use and avoid unnecessary client pharmacy spend.
Enhanced Fraud, Waste & Abuse. We help plan sponsors identify customers and prescribers with potentially 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 or formulary rebates with pharmaceutical manufacturers on behalf of their
participants. These groups also provide various administrative services to their participants including management and
reporting.
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 nearly 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.
Evernorth Wholesale Marketplace. Evernorth Wholesale Marketplace offers a suite of flexible, private label PBM
solutions including but not limited to a Pharmacy Rebate Program, a Retail Network Program, Value-Based Solutions, a
Medical Rebate Program and Utilization Management Policies. These offerings are captured under either our drug
formulary administrative service arrangements or our formulary processing arrangements.
Value-Based Programs.
▪
◦
◦
◦
Express Scripts SafeGuardRx. We offer a solution platform aimed at therapy classes that pose budgetary threats to
clients and clinical challenges to customers. Our solutions are designed to help keep our clients ahead of the drug
cost curve while providing customers the personalized services 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 Express Scripts SafeGuardRx programs may include utilization
management, specialized expertise from our Therapeutic Resource Centers and financial savings.
Express Scripts Copay Assurance and Patient Assurance Programs. The Copay Assurance program caps consumer
out-of-pocket costs for certain prescription drugs under a client's prescription drug benefit. The Patient Assurance
Program addresses affordability challenges for customers managing their diabetes and cardiovascular conditions by
providing a lower, fixed, out-of-pocket cost to the customer by negotiating additional discounts to reduce customer
out-of-pocket costs, and applies those discounts at the point of service.
Express Scripts EncircleRx. EncircleRx is a data-driven solution that helps clients reduce costs and enhance
outcomes for chronic condition categories. EncircleRx focuses on ensuring the right patient population has the
correct access, prescriber and pharmacy management parameters in place and provides ongoing patient support in
order to track responses to therapy and demonstrate patient outcomes.
▪
▪
5
•
Home Delivery Pharmacy. Our Express Scripts Pharmacy 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 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
coordination with management of our PBM clients' drug costs through operating efficiencies and generic substitutions. The
Home Delivery Pharmacy operations consist of thirteen licensed pharmacies, including four fulfillment pharmacies. Our
fulfillment pharmacies are located in Arizona, Indiana, Missouri and New Jersey.
Specialty and Care Services
•
•
•
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, anchored by Accredo, is organized into Therapeutic
Resource Centers, where pharmacists focus their practice of pharmacy by condition. 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 our
specially trained clinicians and network of in-home nursing services, our nationwide footprint, our drug reimbursement
services and by helping customers access assistance programs. Drug manufacturers may select Accredo for exclusive
dispensing of highly specialized therapies. Freedom Fertility Pharmacy is dedicated exclusively to supporting customers
undergoing fertility treatment. Our Specialty Pharmacy operations consist of 31 licensed pharmacies.
Specialty 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 health care providers who treat customers with chronic diseases and regularly order costly specialty
pharmaceuticals. This business operates three distribution centers and ships most products overnight within the United States.
It is a contracted supplier with most major group purchasing organizations and leverages its 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 and physical primary care) and Care Management (eviCore
benefits management, behavioral health services and health coaching capabilities) offerings.
◦
eviCore Healthcare. eviCore Healthcare is a medical benefits management organization that promotes customers'
optimal treatment at the right site of care by leveraging our team of medical professionals, evidence-based guidelines and
innovative technologies to promote affordable care. eviCore Healthcare 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 Healthcare 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 solutions.
Evernorth 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.
Evernorth Home-Based Care. Our Evernorth Home-Based Care solution is a complete, in-home population health and
clinical service business dedicated to serving the diverse needs of members, providers and customers, including in-home
primary care, care coordination and enablement services. We address common barriers to care faced by older Americans,
including chronic conditions, limited mobility and transportation issues. While most care in this model is home-based,
our solution is digitally and virtually enabled for patients and their caregivers.
◦
◦
◦ MDLIVE. MDLIVE virtual care services provide flexibility for the customer to access a network of virtual care providers
◦
for preventative and routine primary care and wellness, urgent care, dermatology care, behavioral health care needs and
chronic condition management.
Pharmacy Solutions. These programs combine various solutions to coordinate care for customers and include: inMynd,
Condition and Disease Management, Navigation, Health Connect 360, RationalMed and Evernorth Digital Health
Formulary.
6
Clients and 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 pharmacies, including Accredo.
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. We provide online claims adjudication,
home delivery services, specialty pharmacy clinical services, enhanced specialty care and care coordination capabilities, claims
processing and contact center support and other services critical to managing pharmacy trend. Our seven-year pharmacy program
contract is through 2029. Beginning March 1, 2024, the DoD has agreed to expand TRICARE Home Delivery to include specialty
pharmacy services through Accredo. Revenues from this contract are significant to the segment.
Express Scripts and Prime Therapeutics LLC ("Prime") have an agreement to deliver improved choice and affordability for Prime's
clients and their customers by enhancing retail pharmacy networks and pharmaceutical manufacturer value through 2025. The
agreement was expanded to include the option for Prime's plans to access the Accredo specialty pharmacy and Express Scripts home
delivery pharmacies through 2025. Revenues from these contracts are significant to the segment.
Effective January 1, 2024, Express Scripts and Centene Corporation ("Centene") have a multi-year agreement to manage pharmacy
benefit services for Centene's approximately 20 million customers. Centene customers will also have access to Express Scripts'
extensive national network of retail pharmacies. Revenues from these contracts are expected to be significant to the segment.
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; specialize in claim adjudication
and benefit administration; 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. We believe our focus on
improving the health and vitality of those we serve will allow us to further differentiate ourselves from our primary competitors shown
in the chart above.
Suppliers
We maintain an inventory of brand-name and generic pharmaceuticals in our home delivery pharmacies, specialty pharmacies and
specialty distributor. Our specialty pharmacies and specialty distributor 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 for approximately half of our pharmaceutical purchases, but holds contracts with other wholesalers if needs for an
alternate source arise. Generic pharmaceuticals are generally purchased directly from manufacturers.
Growth Strategy
Evernorth Heath Services' strategy is to continue to create value for our clients by leveraging innovation from across our business and
assets to drive affordability, while improving access, service and quality. We relentlessly innovate to make the prediction, prevention
and treatment of disease more accessible to millions of people.
Our growth platform includes our foundational businesses of Pharmacy Benefits and Home Delivery Pharmacy and our accelerated
growth businesses of Specialty Pharmacy, Specialty Distribution and Care Delivery and Management Solutions. As we look to 2024,
we will leverage our strong foundation and continue to capitalize on opportunities including: expanding our markets by evolving our
7
service offerings to meet changing customer demands, including focusing on our Care Solutions businesses; increasing transparency
and predictability; delivering on biosimilar opportunities; driving improved enterprise affordability initiatives value; investing in our
business, infrastructure and people to drive enterprise growth; and continuing to build on our new relationship with Centene.
Cross-enterprise Leverage with Cigna Healthcare. Evernorth Health Services' offerings continue to be cross-leveraged within Cigna
Healthcare solutions, helping broaden our presence in the total health care delivery system, further reducing the total cost of care for
clients and customers. See "Cross-enterprise Leverage" section within Item 1. Business - Overview for further information.
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.
CIGNA HEALTHCARE
Cigna Healthcare includes the U.S. Healthcare and International Health operating segments, which provide comprehensive medical
plan services and coordinated solutions to clients and customers. During the fourth quarter of 2023, the U.S. Commercial and U.S.
Government operating segments merged to form the U.S. Healthcare operating segment. Within Cigna Healthcare, U.S. Employer and
International Health are foundational growth businesses. In 2023, Cigna Healthcare reported adjusted revenues of $51.2 billion and
pre-tax adjusted income from operations of $4.5 billion.
In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription
Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to
HCSC for $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions.
How We Deliver
•
•
•
•
•
•
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.
Technology and data analytics powering actionable insights and promoting solutions to improve health and
vitality with greater precision and personalization.
Innovative integrated benefit solutions that deliver value for our customers, clients and partners.
Talented, experienced and caring team members 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.
We offer a mix of administrative services only and medical insurance solutions to employers, groups and individuals along with
specialty benefits and solutions to improve the quality of care, lower costs and help customers achieve better health outcomes. Many
of these solutions are available on a stand-alone basis, but we believe additional value and savings are created when they are integrated
with a Cigna Healthcare-administered health plan.
8
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)
Primary
Distribution
Channel(s)
Primary Competitors
Employer Medical Plans
(including Consumer-Driven
Products)
Individual and Family Plans
Cigna
Healthcare
Cigna
Healthcare
14 states (2)
Medicare Advantage Plans
Cigna
Healthcare
30 states (3) &
District of Columbia
U.S. Healthcare Plans
Nationwide
ASO, GC, ER
Brokers, Private
Exchanges, Direct
National Insurers, Local
Healthplans, Third-Party
Administrators ("TPAs")
GC
GC
Public Exchanges,
Brokers, Direct
Direct, Brokers
National Insurers,
Local Healthplans,
Provider-led Plans
National Insurers,
Local Healthplans,
Provider-led Plans
Medicare Stand-Alone
Prescription Drug Plans
Cigna
Healthcare,
Express Scripts
Nationwide
ASO, GC
Direct, Brokers
National Insurers
Medicare Supplement Plans
Cigna
Healthcare
48 states (4) &
District of Columbia
GC
Brokers, Direct,
Private Exchanges
National Insurers
U.S. Healthcare Specialty Benefits and Solutions
Behavioral Health
Consumer Health
Engagement
Cost Containment
Dental
Pharmacy Management
Stop-Loss
Cigna
Healthcare
Cigna
Healthcare
Cigna
Healthcare
Cigna Dental
Care®
Cigna
Healthcare
Cigna
Healthcare
ASO, GC, ER
ASO, GC, ER
ASO, GC, ER
Nationwide
Brokers, Direct
ASO, GC, ER
ASO, GC, ER
GC
National Insurers,
Specialty Companies
National Insurers,
Specialty Companies
National Insurers,
Specialty Companies
Dental Insurers,
National Insurers
Independent PBMs,
Managed Care PBMs
National Insurers,
Specialty Companies
(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, IN, MS, NC, PA, SC, TN, TX, UT & VA.
(3) AL, AR, AZ, CO, CT, DE, FL, GA, IL, KS, KY, MD, MO, MS, NC, NJ, NM, NY, OH, OK, OR, PA, SC, TN, TX, UT, VA, VT & WA. Effective January 1, 2024, also
includes NV.
(4) All states except MA & NY.
Principal Products &
Services
Major
Brand(s)
Geography
Funding
Solution(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, India
ASO, GC, ER
Brokers, Direct
Global insurers
Global insurers and local non-
U.S. insurers
9
Principal Products & Services
U.S. Healthcare Plans
•
•
Employer Medical Plans include Health Maintenance Organizations ("HMOs"), LocalPlus®, Network and Open Access
Plus, and are offered through our insurance companies, HMOs and TPAs. These plans use cost-sharing incentives to
encourage the use of "in-network" rather than "out-of-network" health care providers. In addition, Preferred Provider
Organization ("PPO") plan offerings feature broader provider access than the other plans, do not require referrals and
typically have a higher cost share if a customer seeks care with an out-of-network provider.
◦
Consumer-Driven Products are paired with employer medical plans 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.
Individual and Family Plans are Patient Protection and Affordable Care Act ("ACA") compliant exclusive provider
organizations ("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.
Held for Sale
• Medicare Advantage Plans allow Medicare-eligible customers to receive health care benefits, including prescription drugs,
through a managed care health plan. Our 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") Plans 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 waiver
plan. 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 to treatment plans, wellness and affordability.
• Medicare Supplement Plans provide Medicare-eligible customers with federally standardized Medigap plans. Customers may
select among the various plans to meet their unique needs and may visit any health care provider or facility that accepts
Medicare throughout the United States without the need for a referral.
U.S. Healthcare Specialty Benefits and Solutions
•
•
•
•
•
Behavioral Health solutions consist of a broad national network of behavioral health providers that includes one of the largest
virtual networks in the United States, behavioral health specialty case and utilization management, a crisis intervention phone
line accessible anytime, employee assistance programs and work/life programs. We integrate our programs and solutions 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 the overall well-being of our customers.
Consumer Health Engagement solutions are offered to customers covered under plans administered by Cigna Healthcare or
by third-party administrators and consist of an array of health management, disease management and wellness programs. Our
Medical Management programs include case, specialty and utilization management and a 24/7 Health Information phone line
which ensures around-the-clock access to a medical professional. Our Health Advocacy program includes 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.
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, 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.
Dental solutions include HMO plans, PPO plans, exclusive provider organization plans, traditional indemnity plans and a
discount program. Employers and other groups may purchase our products on either an insured or self-insured basis and as
stand-alone products or in conjunction with medical products. Additionally, individual customers may purchase insured
dental PPO plans as stand-alone products or in conjunction with individual medical policies.
Pharmacy Management solutions and benefits may be combined with our medical and behavioral health offerings. We offer a
comprehensive suite of pharmacy management products and services to our clients and customers, leveraging the capabilities
of Evernorth Health Services.
10
•
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.
International Health
•
•
Global Health Care offerings 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.
Local Health Care offerings include medical, dental, pharmacy and vision as well as life coverage. Customers include
employers and individuals located in specific countries where the products and services are purchased.
Premiums and Fees
•
•
ASO. Plan sponsors (i.e., employers, unions and other groups) create self-funded group health plans to fund all claims, but
may purchase stop-loss insurance to limit exposure. We collect fees from ASO clients for providing access to our
participating provider networks and for solutions supporting cost-effective benefit management including: claims
administration, behavioral health solutions, disease management, utilization management, cost containment, and dental and
pharmacy benefit management. Approximately 76% of our U.S. Healthcare 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 adjust premium rates to reflect actual claim experience until the next policy period; the policyholder does not
participate, or share in, actual claim experience, and we retain any surplus or margin if costs are less than the premium
charged (subject to minimum medical loss ratio ("MLR") rebate requirements discussed below). For all insured arrangements,
we bear the risk for actual costs in excess of the premium charged. Approximately 24% of our U.S. Healthcare 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. Healthcare medical plans are subject to minimum MLR
requirements. The MLR represents the percentage of premiums used to pay 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
•
U.S. Healthcare 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. Employers generally with 2 to 50 eligible employees. We offer GC funding solutions in select geographies with
our Cigna + Oscar product.
Individual and Family Plans. Includes GC, medical ACA-compliant plans on and off the public exchanges for
individuals primarily under age 65 who do not have access to health care coverage through an employer or government
program such as Medicare or Medicaid. We also offer individual dental plans to customers of all ages across various
distribution channels.
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◦ Medicare Advantage. 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 United States. Employer
plans in the International Health segment may be ASO or fully insured plans.
Clients and Customers
We provide clients and customers with access to a mix of medical and specialty benefits and solutions.
•
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Clients. Our clients include employers, third-party administrators, union-sponsored benefit plans, government health
programs and other groups.
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 solutions to a broad group of insurance brokers and consultants.
Direct. Cigna Healthcare sales representatives distribute our products and solutions 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
advantages. We believe our focus on improving the health and vitality of those we serve will allow us to further differentiate ourselves
from our primary competitors shown in the chart above.
Growth Strategy
Cigna Healthcare's strategy is to engage customers in their health, partner with providers to help them improve their performance and
connect customers and providers through aligned health goals, incentives and actionable information. This enables informed decisions
and drives better outcomes. Fueled by advanced insights and predictive analytics, Cigna Healthcare continues to develop targeted,
innovative solutions that span the health care delivery system and can be applied to a multitude of providers. 2024 priorities include
continued development of integrated, digital-first, data-driven programs and capabilities to drive affordability and improve clinical
outcomes by promoting the highest value care choices to our customer base while improving customer experience.
Arrangements enabling Cigna Healthcare to deliver growth and cross-enterprise leverage to the enterprise are described below.
Participating provider network. We provide our customers with an extensive national 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.
Provider partnerships. We enter into a variety of provider partnerships to continuously improve the quality of care for those we serve.
•
Accountable Care Program. We have more than 200 collaborative care arrangements with primary care groups and have
been a pioneer in the transition from fee-for-service to value-based payment arrangements with providers. Our flagship
program is the Cigna Collaborative Accountable Care program ("CAC"). The program rewards providers for improving
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quality outcomes as well as improving medical cost performance. The quality model also includes elements related to health
disparities and social determinants of health.
Specialist Programs. We have more than 100 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. These programs include prospective bundled payment
arrangements beginning with orthopedics.
Hospital Quality Program. We have contracts with more than 200 hospital systems, involving more than 800 hospitals, with
reimbursements tied to quality metrics.
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.
Site of care optimization. We encourage the use of clinically appropriate settings to reduce the cost of care through our clinical
programs and partnership with eviCore. This results in significant cost savings while ensuring high quality care and service.
Additionally, we provide access to MDLIVE virtual care services as a way to reduce the cost of care while supporting the patient/
provider relationship, and we provide flexibility for customers to access MDLIVE’s network of virtual care providers for preventative
and routine primary care and wellness, urgent care, dermatology care, behavioral health care needs and chronic condition
management.
Cross-enterprise leverage with Evernorth Health Services. We continue to expand the breadth and depth of the Evernorth Health
Services pharmacy benefit services and specialty and care services available to Cigna Healthcare clients and customers to deliver
value by improving affordability, access, quality of care, care innovations and transparency. See "Cross-enterprise Leverage" section
within Item 1. Business - Overview for further information.
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.
OTHER OPERATIONS
Other Operations comprises the remainder of our business operations, which includes certain ongoing businesses and exited
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) variable annuity reinsurance business (formerly referred to as GMDB and GMIB business) that were
effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska in 2013, (ii) settlement annuity
business, and (iii) individual life insurance and annuity and retirement benefits businesses which were sold through reinsurance
agreements. Our exited businesses include the international life, accident and supplemental benefits businesses sold in July 2022 and
our interest in a joint venture in Türkiye sold in December 2022.
In 2023, Other Operations reported adjusted revenues of $0.6 billion and pre-tax adjusted income from operations of $96 million.
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.
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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 13% 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 variable annuity reinsurance
business (formerly referred to as 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 11 to the Consolidated Financial Statements.
Individual Life Insurance and Annuity and Retirement Benefits Businesses
The individual life insurance and annuity business and the retirement benefits business were sold through reinsurance agreements in
1998 and 2004, respectively. For more information regarding the arrangements that secure our reinsurance recoverables for the
retirement benefits business, see Note 11 to the Consolidated Financial Statements.
Exited Businesses
International Life Accident and Supplemental Benefits and Our Interest in a Joint Venture in Türkiye
We offered life, accident and supplemental benefits insurance products and services in Hong Kong, Indonesia, New Zealand, South
Korea, Taiwan and Thailand until completion of the sale of these businesses in July 2022 to Chubb INA Holdings, Inc. ("Chubb").
South Korea represented our single largest geographic market for these businesses. 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.
MISCELLANEOUS
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Revenues from U.S. Federal Government agencies, under a number of contracts, represented 15% of our consolidated
revenues in 2023 and 14% in both 2022 and 2021.
The Company does not rely on business from one or a few brokers or agents.
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 debt, 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 12 and 13 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 corporate-
owned 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-
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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 products and the run-off
businesses. 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
The Cigna Group 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. The Cigna Group has committed $700 million in aggregate since the formation of The Cigna Group Ventures, our
strategic corporate venture fund which invests in promising startups and growth-stage companies who, like us, are unlocking new
growth possibilities in health care. We invest in companies making groundbreaking progress in three strategic areas: insights and
analytics, digital health and experience, and care delivery and enablement. As of December 31, 2023, The Cigna Group Ventures has
approximately 10 venture capital partners and 25 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. In 2023, we became a minority owner in VillageMD by investing $2.7 billion in VillageMD preferred equity. VillageMD
(majority-owned by Walgreens Boots Alliance, Inc.) provides health care services for individuals and communities across the United
States, with primary, multi-specialty and urgent care providers serving patients in traditional clinic settings, in patients' homes and
online appointments. VillageMD and its subsidiaries operate in 26 markets and are responsible for millions of patients. See Note 12 to
the Consolidated Financial Statements for further discussion of this investment.
CarepathRx Health Systems Solutions. In 2023, we acquired a minority interest in CarepathRx Health Systems Solutions. See Note 5
to the Consolidated Financial Statements for further discussion of this investment.
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, virtual-led vision for health care remains at the forefront of our priorities. The
advancement of our internal innovative 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 2023, the Technology team
continued to deliver value for current business while simultaneously focusing on reducing complexity and cost within our technology
ecosystem. As we continue to simplify our technology ecosystem, we expect an increase in digital advancements, customer
engagement, loyalty and speed to market.
In 2023, 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 enable us to integrate our assets, gather insights and engage with prospects and customers in new ways. For the year ended
December 31, 2023, our capital expenditures for property, equipment and computer software were $1.6 billion.
The Cigna Group continued to transform and improve the way health care is delivered through automation, advanced analytics and
Artificial Intelligence (“AI”) technologies. We utilize these technologies today to analyze data and uncover patterns and insights to
help improve outcomes, increase connectivity between the patient and the health care system, speed up administrative processes, and
improve the overall member experience.
The Cigna Group continued to accelerate the pace of development and innovation through our new AI Center of Enablement ("COE").
Our AI COE focuses on Generative AI ("Gen AI"), and assesses and governs guardrails, systemic controls, and processes to provide
oversight to ensure the responsible use of Gen AI practices. These commitments are intended to ensure our Gen AI capabilities and
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solutions are ethical, defensible, and in compliance with health care privacy and security requirements. With these strict practices and
protocols in place, we anticipate rapidly adapting and capitalizing on new opportunities in an increasingly competitive and fast-
changing digital landscape. Exploring and implementing new and emerging technology opportunities enables us to improve efficiency
via automation, reduce costs and enhance overall decision-making, all while providing real-time, personalized and connected
experiences for our customers, patients, clients and provider partners.
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 2023, 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 imagining the future of health care and creating engaging
experiences that give customers the right information at the right time. We continue to bring new and reusable 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 and enables the design of innovative digital solutions that
improve health care experiences and provide more affordable health care for all. Cybersecurity protections continue to be a top priority
across The Cigna Group's digital offerings to further strengthen our security posture and grow the trust of those we serve. See Part 1.
Item C - Cybersecurity of this Form 10-K for additional information regarding our cybersecurity practices and governance.
Technology Operations. Our Technology team, powered by approximately 9,500 employees and several thousand external resources
collaborating 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 400 United States patents. We use these
patents to protect our proprietary technological advances and to differentiate ourselves in the market.
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 2023, we had approximately 72,500 employees, with approximately 93% 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 are
more productive and engaged in driving our mission and business strategy forward, thereby creating shareholder value. In 2023, 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 multi-dimensional wellness programming to support the physical,
mental, financial, and social health, as well as overall vitality of 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.
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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 2023, based on employee self-reporting, approximately 71% of our employees
were women, and approximately 41% of our employees in the United States were ethnic minorities (which includes Black / African
American, Asian, Hispanic or Latino/a, 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 student groups at our partner colleges and
universities, as well as our engagement with 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 2024, 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 Latino/a, Pacific Islander and
American Indian/Alaskan employees) earn more than 99 cents for every dollar earned by similarly-situated white employees. 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. In 2023, the voluntary turnover rate was approximately 11% for all employees, signaling a return to
pre-pandemic levels.
Our talent acquisition team is both online and on the ground in communities and at colleges and universities to find and recruit the best
and brightest talent. Our top ranked external career website allows candidates to learn about The Cigna Group and search for open
positions. We also leverage technology and an omnichannel strategy to create awareness and attract candidates through email, text
message, social media, a quarterly newsletter, and one-to-one outreach from our recruiters.
We recognize the importance of flexibility in the workplace and provide schedules, tools, and support for employees to balance their
work responsibilities with their life outside of work. We also empower our employees to volunteer by offering two distinct benefit
programs. The first is volunteer time off, referred to as "Use Your 8," for eligible employees to take eight hours of paid leave annually
to volunteer with a nonprofit of their choice. The second is our Community Ambassador Fellowship, a program through which
employees apply for up to three months of paid leave to support a specific community-based project.
To further engage and reward employees, we have an employee recognition program called Cigna Standout that allows employees to
recognize their colleagues for their contributions to our Company and to celebrate both personal and professional milestones. Every
employee is empowered to use this system to recognize colleagues for going above and beyond or simply say thank you.
Our online learning platform and career development tools, including a career portal and career planning tool, offer a broad range of
training, education and development resources to all employees. In 2023, based on internal data, employees on average engaged in 30
hours of learning through these resources. Enterprise leadership development programs are provided to executive, high-potential and
new manager audiences to develop and expand leadership capability across the enterprise. We also offer leadership development
programs to recent graduates who seek valuable career experience with The Cigna Group, as well as opportunities for college students
to join The Cigna Group for a paid summer internship. The Cigna Group 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 connected pillars that
underscore our enterprise 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 Society
We advance better health for all. Building a well-functioning, sustainable, accessible and equitable health care system requires
understanding and addressing social determinants of health and improving medical quality and access while 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 vitality of employees within our own company. A healthy and diverse workforce is essential to achieving our mission, and we
continually invest in our employees to support their health and vitality, to foster their growth and development and to further cultivate
diversity and inclusion. See further discussion of this pillar within Part I, Item 1 "Human Capital Management" section above.
Healthy Environment
We believe that responsible environmental stewardship can improve health and vitality and also makes sound business sense. We
strive to identify new efficiencies and make strategic investments that reduce our environmental impacts and our operating costs. In
addition, we see an opportunity to positively impact the environment through ways we are advancing our business, including through
our continued investment in virtual care.
Healthy Company
We have a deep and long-held commitment to strong governance as well as ethical and resilient business practices. This includes
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.
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.
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.
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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 other settlement agreements such as corporate integrity agreements 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
On May 11, 2023, the COVID-19 Public Health Emergency ("PHE") declared by the Secretary of HHS ended. Some of the legislative
and regulatory flexibilities that the U.S. federal and state governments enacted in response to COVID-19 and its variants which were
not affected by the end of the PHE were made permanent or were extended. Other legislative and regulatory flexibilities, such as
required coverage of COVID-19 tests without cost sharing and certain Medicare and Medicaid waivers for health care providers,
ended on May 11 or were set to expire within a certain period of time after the end of the PHE. The Consolidated Appropriations Act,
2023, also provided that states could restart Medicaid eligibility renewals and terminations for ineligible individuals. As a result, states
resumed Medicaid redeterminations for the first time since the PHE began; these redeterminations are anticipated to continue through
early spring 2024. While state approaches to redeterminations vary, under the redeterminations, many beneficiaries are no longer
eligible for Medicaid. As a result, some of the beneficiaries determined to be ineligible for Medicaid sought or will seek alternate
coverage in the individual marketplace.
The Patient Protection and 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 Cigna Healthcare business.
Certain states have adopted MLR requirements applicable to our employer 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
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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 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
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.
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 awaiting CMS finalization. The Company is not currently subject to RADV audits for the 2018 and subsequent payment
years. The Final Rule is currently being challenged in federal district court.
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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.
In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug
Plans, Medicare and Other Supplemental Benefits and CareAllies businesses to HCSC for $3.3 billion cash, subject to applicable
regulatory approvals and other customary closing conditions.
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 have brought and 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 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.
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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 a number of Medicare Advantage organizations. The Cigna
Group was a party to such an investigation, which was settled during the third quarter of 2023. Please see “—Medicare and Medicaid
Regulations” for further information related to the settlement and the related CIA.
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
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/or anonymized data for our own research and analysis purposes
and, in some cases, when permitted, provide access to such anonymized 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.
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On the federal level we are subject to a number of sector specific regulations. The federal Health Insurance Portability and
Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH")
and the 21st Century Cures Act, Public Law 116-321, and as implemented by the regulation (collectively "HIPAA") impose
requirements on covered entities and business associates that address the privacy and security of PHI. In the conduct of the majority 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, including downstream services providers, that are business associates. HIPAA imposes contracting requirements and
requires breach notifications. HIPAA also regulates permissible uses and disclosures of PHI; for example, HHS has issued guidance
regarding tracking technologies that are used to collect and analyze information about how users interact with covered entities’ and
business associates’ websites and mobile applications. 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. 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.
Other federal and state laws that restrict the use and protect the privacy and security of PII exempt data and/or entities subject to
HIPAA, but several states, such as, Nevada, and Connecticut, have recently enacted privacy laws to protect consumer data and require
consent for the collection, use, and sharing of consumer health data. These laws may impact our businesses and practices where data
collected is outside the reach of HIPAA.
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 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" went into effect, substantially raising the GLBA standards for security, which are
anticipated to be adopted by some state DOIs (as defined herein).
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 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, 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.
In July 2023, the SEC approved final rules relating to cybersecurity disclosure obligations on reporting companies and such new
disclosures can be found beginning on page 45.
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
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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 the National Institute of Standards and Technology
("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 increasingly focused on protecting individuals from data or identity theft and every state has 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, fourteen 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.
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 PII.
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
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. In 2023, we were 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
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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. CMS regulations and guidance implementing the IDR process have
been subject to a significant amount of provider-initiated litigation, and CMS has had to temporarily suspend federal IDR functions,
including dispute initiation. 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. In September and October
2023, the Departments announced proposed rules that outlined fees established for the federal IDR process and that would set forth
new requirements relating to the disclosure of information that group health plans and health insurance issuers offering group or
individual health insurance coverage must include along with an initial payment or notice of denial for payment for certain items and
services subject to the surprise billing protections. The October 2023 proposed rule would also amend requirements related to the open
negotiation period before the federal IDR process, the initiation of the federal IDR process, federal IDR dispute eligibility review, and
the payment and collection of administrative fees and certified IDR entity fees.
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 jurisdictions 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 to review 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.
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
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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, such as the Inflation Reduction Act, which changed Medicare Part B
beneficiary coinsurance for certain drugs and imposed caps on out-of-pocket prescription drug costs in Medicare Part D, and other
policy proposals and regulations, such as proposed legislation aimed at providing transparency with respect to pharmacy benefit
managers, vary broadly in their approaches to achieve that goal. 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 29 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
26
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 Medicaid Drug Rebate Program requires participating drug manufacturers to report certain information and pay rebates on drugs
reimbursed through state Medicaid programs, in accordance with applicable law and regulation. 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 involving manufacturer calculation and reporting with respect to rebates paid by the manufacturers to the
Medicaid programs. Our PBM is not responsible for such calculations, reports or payments. There can be no assurance that our ability
to negotiate rebates with, or sell services to, drug manufacturers will not be unfavorably affected by investigations or regulations in the
future.
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,
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 regulators. 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.
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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 24 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
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. Additionally, our Medicare Advantage
and Medicare Part D plans must follow certain federal marketing and communications regulations. In April 2023, CMS issued a final
rule revising regulations governing marketing by Medicare Advantage and Medicare Part D plans. Among other things, the final rule
requires enrollees to be notified of their ability to opt out of phone calls regarding Medicare Advantage and Part D marketing, requires
agents to explain the effect of an enrollee’s enrollment choice on their current coverage, simplifies plan comparisons by requiring
medical benefits to be listed in a specific order at the top of a plan’s Summary of Benefits, requires Medicare Advantage organizations
and Part D sponsors to have an oversight plan that monitors activities of agents and brokers and to report noncompliance to CMS, and
limits the time a potential enrollee may be contacted about Medicare plan options to 12 months after the enrollee first asked for
information.
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
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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 URAC Pharmacy Benefit Management Standards version 3.1, which includes quality standards
for drug utilization management, and select subsidiaries have received full accreditation for URAC Health Utilization Management
version 7.4, 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. Other countries in which
we do business also have anti-corruption laws to which we are subject. As international regulators often share information, any
voluntary disclosures of violations may be shared with authorities in other countries, thus potentially exposing companies to liability
and potential penalties in multiple jurisdictions.
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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 a 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;
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 and AI;
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•
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the impact or consequences of legislation or regulatory changes;
impacts to distribution channels, including changes to 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/biosimilar drug market or the failure of new generic/biosimilar 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, our key clients in the
Evernorth Health Services segment include the DoD, Prime and Centene. If one or more of our large clients terminates or does not
renew a contract for any reason, including as a result of being acquired, or if the provisions of a contract with a large client are
modified, renewed or otherwise changed with terms less favorable to us, our results of operations could be adversely affected and we
could experience a negative reaction in the investment community resulting in decreases in the trading price of our securities or other
adverse effects.
Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive
markets to keep or increase our market share, increase customers as planned, differentiate our business offerings by innovating and
delivering products and services that provide enhanced value to our customers, provide quality and satisfactory levels of service and
retain accounts with favorable medical cost experience or more profitable products versus retaining or increasing our customer base in
accounts with unfavorable medical cost experience or less profitable products.
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
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.
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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
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
32
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 for non-Medicare services are not limited by any agreement with us in the amounts they bill. For Medicare
Advantage, out-of-network providers can only receive the same rate that CMS pays for Medicare services. 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 non-exclusive 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 non-exclusive 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, 2023. 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 non-exclusive and are terminable on relatively short notice by either party. If one or more of the larger
pharmacy chains terminates its relationship with us, or is able to renegotiate terms substantially less favorable to us, our customers'
access to retail pharmacies or our business could be materially adversely affected. The entry of one or more additional large pharmacy
chains into the pharmacy benefit management business, the consolidation of existing pharmacy chains or increased leverage or market
share by the largest pharmacy providers could increase the likelihood of negative changes in our relationship with such pharmacies.
Changes in the overall composition of our pharmacy networks, or reduced pharmacy access under our networks, could have a negative
impact on our claims volume or our competitiveness in the marketplace, which could cause us to fall short of certain guarantees in our
contracts with clients or otherwise impair our business or results of operations.
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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. Additionally, laws such as the Inflation Reduction Act have granted CMS the ability to negotiate drug prices
for certain Part D and Part B drugs, and other federal and state legislative proposals may lead to changes in drug pricing for federal
health care programs.
Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted
operation, availability and data integrity of our information technology and other business systems.
Our business is highly dependent on maintaining effective information systems as well as the integrity and timeliness of the data we
use to serve our customers and health care providers and to operate our business. If our data were found to be inaccurate or unreliable
due to fraud or other error, or if we, or any of the third-party providers or subcontractors that we or they engage, were to fail to
maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our clients,
customers and health care providers and hinder our ability to provide or establish appropriate pricing for products and services, retain
and attract clients and customers, establish reserves and report financial results timely and accurately and maintain regulatory
compliance, among other things.
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 personal information
("PI"), including Protected Health Information ("PHI") that is subject to privacy, security or data breach notification laws. Computer
networks or systems may be vulnerable to intrusion, computer viruses or malware, programming errors, attacks by third parties or
similar disruptive problems. We have been, and will likely continue to be, the target of computer viruses or other malicious codes,
unauthorized access, cyberattacks or other computer-related penetrations. There have been, and will likely continue to be, large scale
cyberattacks within the health service industry. Additionally, hardware, software or applications we develop or procure from third
parties may contain defects in design, manufacturer defects or other problems that could unexpectedly compromise information
technology. Human or technological error has and could in the future result in, for example, unauthorized access to, acquisition,
disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft of sensitive,
regulated, or confidential data including PI and intellectual property; the loss of access to critical data or systems through ransomware,
destructive attacks or other means; and business delays, service or system disruptions or denials of service.
As we increase the amount of PI that we store and share digitally, our exposure to unauthorized uses and disclosures, and data privacy
and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss or unauthorized access or acquisition
or misappropriation of proprietary or personal information, and the cost of attempting to protect against these risks also increases. The
health care data ecosystem is complex and requires data exchange with vendors, business partners, health care professionals, the
government and others. If disruptions, data disclosures, security incidents or breaches are not detected quickly, their effect could be
compounded. We have dedicated significant resources to implement privacy and security technologies, processes and procedures to
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protect PI and provide employee awareness training around phishing, malware and other cyber risks; however, there are no assurances
that such measures will be effective against all types of security incidents or breaches. Further, we depend on many vendors to support
and assist our business, which requires such vendors to generate, store and use PI.
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 continues to be 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 or inadvertently provide access
to systems 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 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.
Our use of artificial intelligence and machine learning present regulatory and legal challenges that could negatively affect our
business and our reputation.
Our use of artificial intelligence (“AI”), including machine learning (“ML”) technologies, as well as more recent technological
advances in AI/ML, pose risks to us and subject us to new and existing laws and regulations. While we are committed to responsible
use of AI/ML and following applicable laws and regulations, and while we have made progress developing governance as to use of
AI/ML by our organization, any failure to use AI/ML responsibly and to adhere to such laws, regulations and governance could have a
material unfavorable effect on our business, results of operations, and financial condition. Depending on how existing laws and
regulations are interpreted, and as new laws are passed, we may have to make changes to our business practices to comply with such
obligations. These obligations may make it harder for us to conduct our business using AI/ML, lead to regulatory fines or penalties,
require us retrain our AI/ML, or prevent or limit our use of AI/ML. Our use of AI/ML technologies could also result in additional
compliance costs, regulatory investigations and actions, and consumer or other lawsuits. If we are unable to use AI/ML, or if
regulators restrict our ability to use AI/ML for certain purposes, it could make our business less efficient, result in competitive
disadvantages, and subject us to potential unfavorable business impacts. To the extent that we rely on or use the output of AI/ML, any
inaccuracies, biases or errors could have unfavorable impacts on us, our business and our results of operations or financial condition.
The impact of regulatory and legal risks associated with AI/ML is largely unknown.
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:
•
•
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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
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from foreign operations into other currencies; uncertainty with respect to the adoption of new tax laws and 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;
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•
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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, including the ongoing conflict in the Middle East 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 in locations where
•
we operate; and
general economic and political conditions, including conditions that may become unpredictable during a U.S. presidential
election year.
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
could have a material adverse effect on our business, results of operations, financial condition, liquidity and long-term growth. Please
see "—Legal and Compliance Risks" below.
Strategic transactions involve risks and we may not realize the expected benefits because of integration or separation difficulties,
underperformance relative to our expectations and other challenges.
As part of our strategy, we regularly consider and enter into strategic transactions, including mergers, acquisitions, joint ventures,
licensing arrangements, divestitures and other relationships (collectively referred to as "strategic transactions"). 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. For example, in January 2024 we announced the HCSC transaction,
which is subject to regulatory approvals and other closing conditions. We may be unable to satisfy the closing conditions in a timely
manner to complete the HCSC transaction, or we may otherwise fail to receive the anticipated benefits from the transaction, even if it
is completed. We may have continued financial exposure to divested businesses following the completion of any such transaction,
including increased costs due to potential litigation, contingent liabilities and indemnification of the buyer related to, among other
things, lawsuits, regulatory matters or tax liabilities.
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, 2023, our goodwill and other intangible assets had a carrying value of approximately $75 billion,
representing 49% 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 20 to the Consolidated Financial Statements for more information on goodwill and
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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,
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 future pandemics or public health emergencies, or inability to access or deliver products that meet requisite quality safety
standards and patient needs in a timely and efficient manner could adversely impact our business.
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.
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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.
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.
Regulators, customers, investors, employees and other stakeholders are increasingly focusing on ESG matters and related disclosures.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased
general and administrative expenses and increased management time and attention spent complying with such regulations or meeting
such expectations. For example, the European Union's ("EU’s") Corporate Sustainability Reporting Directive (“CSRD”) will require
expansive disclosures on various sustainability topics such as climate change, biodiversity, workforce, supply chain, and business
ethics by in-scope EU entities and certain non-EU entities with significant cross-border business in EU markets. In addition,
California’s recently-enacted Climate Corporate Data Accountability Act will require annual disclosures of covered companies’ Scope
1, 2 and 3 greenhouse gas emissions. We are assessing our obligations under CSRD and other enhanced reporting requirements, and
expect that compliance could require substantial effort in the future. Overall, ESG matters and related stakeholder reaction may impact
our reputation and have other business impacts which could adversely affect our business.
Existing or future laws, rules, U.S. Presidential Executive Orders, regulatory interpretations or judgments could force us to change
how we conduct our business, affect the products and services we offer and where we offer them, restrict revenue and enrollment
growth, increase our costs, including medical, operating, health care technology and administrative costs, and require enhancements to
our compliance infrastructure and internal controls environment. 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
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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. Healthcare business, we contract with CMS and various state governmental agencies to provide managed health care
services including Medicare Advantage plans and Medicare Part D plans. Additionally, our Evernorth Health Services business
provides services to government entities and payors participating in government health care programs and our relationships with these
government entities is subject to laws and regulations regarding government contracts.
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
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.
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
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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 have in the past been, and may in the future be, subject to qui tam actions in which the government may
or may not intervene. With respect to our Medicare Advantage and Medicare Part D businesses, CMS and HHS-OIG perform audits to
determine a health plan's compliance with federal regulations and contractual obligations, including compliance with proper coding
practices and fraud and abuse enforcement practices through audits designed to detect and correct improper payments. Certain of our
contracts currently have RADV audits by CMS and the HHS-OIG that are awaiting CMS finalization. These audits could result in
repayments to the government. There also continues to be heightened review by federal and state regulators of business and reporting
practices within the health services industry, including with respect to claims payment and related escheat practices, and increased
scrutiny by other federal and state governmental agencies (such as state attorneys general) empowered to bring criminal actions in
circumstances that could have previously given rise only to civil or administrative proceedings.
In addition, various government agencies have conducted investigations and audits into certain pharmacy benefit management
practices. For example, the FTC is conducting an ongoing study of the pharmacy benefit manager industry and the impact of pharmacy
benefit managers on the accessibility and affordability of prescription drugs. In June 2022, the FTC issued an enforcement policy
statement indicating the FTC would scrutinize the impact of rebates and fees paid by pharmaceutical manufacturers to pharmacy
benefit managers and other intermediaries to determine if laws such as the FTC Act, the Clayton Act, the Robinson-Patman Act and
the Sherman Act may have been violated. In July 2023, the FTC voted to issue a statement cautioning against reliance on prior
advocacy letters that advocated against proposals to increase regulatory oversight and transparency of pharmacy benefit managers.
The FTC previously required three group purchasing organizations to provide information and records on business practices and the
six largest pharmacy benefit managers to provide information and records on topics including rebate contracts and ancillary
agreements, documents related to strategies, conditions and plans for formulary placement, formulary exclusion, formulary tier
assignment, and prior authorization regarding rebated drug products, and annual pharmacy reimbursement data for drugs on specialty
drug lists and for rebated drug products.
Many investigations and audits have resulted in companies being subject to civil penalties, including the payment of money and entry
into corporate integrity agreements. For example, in September 2023, we resolved certain matters related to our Medicare Advantage
Business and risk adjustment practices by entering into the Corporate Integrity Agreement (the “CIA”) with the HHS-OIG. The CIA
imposes various compliance, reporting and governance obligations on us for five years and requires record reviews by an independent
review organization. Our failure to meet these obligations could result in monetary penalties and our exclusion from participation in
federal healthcare programs (such as Medicare and Medicaid), which could adversely impact our business, cash flows, financial
condition, results of operations and reputation. Any failure, or alleged failure, to comply with various state and federal health care laws
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and regulations, including those related to the CIA or otherwise directed at preventing fraud and abuse in government funded
programs, has resulted in and could in the future result in investigations or litigation, such as actions under the federal False Claims
Act and similar whistleblower statutes under state laws. A successful action or claim against us could subject us to damage awards,
including treble damages, fines, penalties or other enforcement actions, restrictions on our ability to market or enroll new customers,
limits on expansion, restrictions or exclusions from programs or other agreements with federal or state governmental agencies, which
could adversely impact our business, cash flows, financial condition, results of operations and reputation. 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 have resulted in and could result in
changes to our business practices, retroactive adjustments to certain premiums, significant fines, penalties, civil liabilities, criminal
liabilities or other sanctions, including corporate integrity agreements, restrictions on our ability to participate in government programs
or exclusion from such programs, market certain products or engage in business-related activities, that could have a material adverse
effect on our business, results of operation, financial condition and liquidity. 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 24 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' PI, including PHI. We
also use aggregated and/or anonymized data for research and analysis purposes, and in some cases, provide access to such anonymized
data, or analytics created from such data, to pharmaceutical manufacturers and third-party data aggregators and analysts. We may also
use such information to create analytic models designed to predict, and potentially improve, outcomes and patient care. The collection,
dissemination, receipt, maintenance, protection, use, transmission, disclosure, privacy, confidentiality, security, availability, integrity,
creation, processing, and disposal of PI are regulated at the federal, state, international and industry levels and requirements are
imposed on us by contracts with clients. In some cases, such laws, rules, regulations and contractual requirements also apply to our
vendors and require us to obtain written assurances of their compliance with such requirements. We are also subject to various other
consumer protection laws that regulate our communications with customers, such as the FTC Act and the Telephone Consumer
Protection Act. Certain of our businesses are also subject to the Payment Card Industry Data Security Standard, which is designed to
protect credit card account data as mandated by payment card industry entities. International laws, rules and regulations governing the
use and disclosure of such information, such as the GDPR, can be more stringent than similar laws in the United States, and they vary
across jurisdictions. 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 clients and, as a result, collect, receive, use, disclose, transmit and maintain PHI 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 or other HIPAA violation. An audit
resulting in findings or allegations of noncompliance or the implementation of an enforcement action could have an adverse effect on
our results of operations, financial position, cash flows and reputation.
Noncompliance or findings of noncompliance with applicable laws, regulations or requirements, or the occurrence of any privacy or
security breach involving the misappropriation, loss or other unauthorized disclosure of PI, whether by us or by one of our third-party
service providers, could materially adversely affect our business and reputation, including our results of operations, financial position
and cash flows.
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Effective prevention, detection and control systems are critical to maintain regulatory compliance and prevent fraud; 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. 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 18 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 rating 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
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.
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The total indebtedness of The Cigna Group was approximately $30.9 billion as of December 31, 2023. Carrying indebtedness:
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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:
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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 a competitive job
market) and workforce reductions could result in lower enrollment in our employer-based plans (including an increase in the
number of employees who opt out of employer-based plans) or our individual plans.
Because of unfavorable economic conditions or the ACA, employers may stop offering health care coverage to employees or
elect to offer this coverage on a voluntary, employee-funded basis as a means to reduce their operating costs.
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.
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.
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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.
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Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 1C. CYBERSECURITY
Cybersecurity Strategy and Risk Management
The Cigna Group’s comprehensive cybersecurity program is supported by policies and procedures designed to protect our systems and
operations as well as the sensitive personal information and data of our clients and customers from foreseeable cybersecurity threats.
This program is an integral component of our enterprise risk management program.
Core to our security model is our defense-in-depth framework, comprising multiple layers of processes and technologies that help
prevent, detect, and respond to threats. Our approach to safeguarding against external threats incorporates a suite of preventive
technologies, including malicious email blocking, defenses against automated attacks and multifactor authentication. These strategies
act to proactively intercept and neutralize cyber threats to help ensure data remains secure within our environment. Event monitoring
technologies run continuously, detecting suspected intrusion attempts and alerting our Cybersecurity Incident Response team. The
Cigna Group undertakes a number of critical security processes to mitigate and protect against cybersecurity risks, which include but
are not limited to:
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Identity and Access Management. Employees are provided with the minimum amount of access required to perform their jobs
using role-based access control methodology, which defines access to our information systems based on job function.
Privileged or elevated access to our systems is subject to supplemental approval requirements, increased authentication
processes, and additional logging and monitoring.
Security Awareness and Training. Events and education activities are hosted throughout the year, such as the Cybersecurity
Awareness Month, expos, videos, training programs and frequent phishing simulations. The Cigna Group continuously trains
workforce members on the importance of preserving the confidentiality and integrity of customer data. All new hires have
mandatory information protection and privacy training as part of their onboarding, and all workforce members complete an
annual cybersecurity refresh training.
Security Operations and Monitoring. Our operational monitoring processes provide valuable insight into the effectiveness of
our security program. A centralized system collects security logs and performs event correlation that creates an alert if a
trigger occurs. We review any deviations from our established targets and implement corrective actions.
Change Management. Changes to hardware, software, network components, and/or processes introduced into any production
environments are managed by a formal change control process. These requests include the submission of required
documentation as well as the business justification for the change.
Disaster Recovery / Business Continuity. These processes are designed to maintain service to our customers, providers and
members through a wide range of adverse circumstances. Methods of recovery include rerouting business functions,
relocating to an alternative site, independent “hot sites”, mobile recovery and work at home.
Intelligence Feeds. These are used to monitor the security industry for the latest global security threats, exposures and patches
to help keep company servers current with the latest security service packs, patches and hot fixes.
Physical Security. Our physical security system is utilized in an effort to properly identify appropriate individuals, authorize
entry and define the working areas to which they have access. Additional controls at our data centers includes a combination
of guard service, access keys and magnetic card systems.
Third-Party Vendor Security Reviews. Suppliers that have access to, host, or pass sensitive data are subject to a rigorous
vendor security review which includes questionnaires, security controls and maturity assessments, inspection of evidence of
compliance and remediation or acceptance of items identified during a Risk Assessment.
Vulnerability Management / Patching. Any discovered vulnerability is rated by severity and assigned a timeline for
remediation. Patching activities are centrally managed with a focus on the identification, remediation, and analysis and
closure of vulnerabilities throughout the vulnerability management lifecycle.
Cybersecurity Incident Reporting. Our incident reporting protocol assists prompt and efficient response to cybersecurity
threats. This includes links on our internal site listing globally accessible contact numbers for immediate incident reporting, a
user-friendly phishing reporting tool in Outlook, and group email boxes that are monitored 24/7 for incident submissions.
We routinely manage cybersecurity risks through a defined framework that includes activities aimed at the identification, assessment,
treatment and monitoring of risks. Cybersecurity risk assessment results are used by senior management to make informed decisions
about where to allocate resources to reduce cybersecurity risks and improve overall security posture. We examine our entire program
annually with third-parties and measure the program against generally accepted industry standards and frameworks, such as an
internationally recognized security control framework established by the NIST and used by companies to assess and improve their
ability to prevent, detect and respond to cyberattacks. Our cybersecurity policies and standards are reviewed annually and are mainly
guided by the NIST 800-53 Cybersecurity Framework. In addition to the NIST framework, we leverage the International Organization
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for Standardization ("ISO") 27001 and 27002 standards. NIST and ISO standards are internationally accepted and provide best
practice recommendations for initiating, implementing, and maintaining information security management systems. Cigna's
Information Protection policies and standards are informed by NIST 800-53b, moderate level security control baseline requirements.
This includes a myriad of NIST controls/control enhancements which are mapped to Cigna Information Protection policies, standards
and control library.
To enhance our preparedness and practice our collective cybersecurity response capabilities, we conduct tabletop exercises developed
in partnership with external security experts. These events are designed to exercise and engage some of the most critical areas of
cybersecurity incident response and preparedness through an interactive/evolving, simulated scenario. This exercise provides an
opportunity for us to test our response procedures, escalation and communication protocols, roles and responsibilities, legal/privacy
considerations and key decision-making processes, in a safe and controlled environment. The participants in these exercises include
leaders, stakeholders, subject matter experts and certain executives.
In addition to these internal measures, the effectiveness of components of our overall cybersecurity program is frequently evaluated by
external third parties, exclusive to our independent registered public accounting firm and scope of internal control over financial
reporting. This includes work performed over various levels of controls assessments for specific business lines and core processes.
These include Health Information Trust Alliance ("HITRUST") for health care data security, Payment Card Industry Data Security
Standard (PCI DSS) for payment security, and System Organization Controls (SOC) 2 for information security and related controls.
We also perform an annual maturity assessment and benchmark our security controls to identify opportunities to strengthen our
cybersecurity program.
As part of our Global Threat Management Program, a dedicated Incident Handling Team, comprising both technical and management
personnel, determines the severity of a validated cybersecurity event across the enterprise and is responsible for the development and
ongoing maintenance of our comprehensive Global Incident Response Plan ("GIRP"). The GIRP is reviewed quarterly at a minimum
but may be updated as needed based on lessons learned, changes in key teams or processes, or other circumstances as warranted.
Within the GIRP, incident handling procedures dictate actions during each phase, which include communications, actions to be
performed, methods of operation and contingencies for unanticipated outcomes. Using industry best practices and continuous
improvement principles, we validate strategies, document business recovery plans, and test these procedures enterprise-wide annually.
Upon the discovery of an incident, a broad cross-functional Computer Security Incident Response Team is assembled, which may
include but is not limited to experts from key business, technology, legal, privacy and finance sectors, to collaboratively assess the
impact and materiality in order to execute a comprehensive and informed response. After an incident is contained, a thorough review
is performed to determine if any existing detective or preventative controls were bypassed, or if there was a delay in detection or
response. This review, which includes members from our internal audit team, drives the implementation of corrective actions to
enhance and strengthen the effectiveness of our prevention, detection, and incident response controls, as applicable.
Cigna Information Protection ("CIP") maintains a risk register that is used to manage cybersecurity risks associated with its business
activities, technology assets, and its interaction with business, Information Technology ("IT"), and security parties; internal and
external. Cybersecurity risks are also periodically reviewed by Enterprise Risk Management ("ERM") to ensure appropriate oversight
of cybersecurity risk management activities.
Suppliers that have access to, host, or transmit The Cigna Group data are contractually required to comply with our Security Policies
and Standards. Additionally, suppliers may be subject to periodic security audits or risk assessments, which include security
questionnaires, security capabilities and maturity assessments, controls evidence reviews, application vulnerability assessments, public
internet presence monitoring, and alignment reviews with service-specific industry standards (e.g., NIST, ISO, HIPAA, and Payment
Card Industry standards). Follow-up activities are performed as needed to discuss observations, track issues and ensure remediation
plans are completed to maintain compliance. Contracts with suppliers also include critical security requirements including right to
audit, technology requirements, key performance metrics and service levels, and hiring practices including background checks for
those who have access to The Cigna Group's network.
As of the date of this report, we do not believe that any risks from any cybersecurity threats, including as a result of any previous
cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy,
results of operations or financial condition. That said, as discussed more fully under Part 1, Item 1A. "Risk Factors – Strategic and
Operational Risks – 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," the sophistication of cybersecurity threats
continues to increase, and the preventative actions we take to reduce the risk of cybersecurity incidents and protect our systems and
information may become insufficient. Accordingly, no matter how well designed or implemented our controls are, we will not be able
to anticipate all attacks of these types, and we may not be able to implement effective preventive measures against such security
breaches in a timely manner.
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Cybersecurity Governance
The Cigna Group’s Board has ultimate oversight over the Company’s privacy and cybersecurity programs and strategy and is
responsible for ensuring that the Company has risk management policies and processes in place to meet and mitigate evolving risks
and threats. Certain members of the Board have cybersecurity expertise, including certifications. The Board executes this oversight
directly and through both the Audit Committee, for cybersecurity purposes, and the Compliance Committee, for privacy purposes. In
these capacities, these committees are regularly briefed by the Global Chief Information Security Officer ("GCISO") and Chief
Privacy Officer on cybersecurity and privacy matters. These briefings are designed to provide visibility about the identification,
assessment, and management of critical risks, audit findings, and management’s risk mitigation strategies. Additionally, these
briefings include information about current trends in the environment, incident preparedness, artificial intelligence and various
components of the Company’s cybersecurity and privacy programs. Annually, the full Board reviews the Company’s cybersecurity
program, including the threat landscape and related controls and periodically conducts cybersecurity tabletop exercises.
The Cigna Group’s dedicated cybersecurity team is led by our GCISO. Our current GCISO joined Cigna in October 2023 and works
closely with senior management to develop and innovate the cybersecurity strategy and risk management. Prior to joining the team at
The Cigna Group, our GCISO held senior information security roles at other global organizations where this individual defined
information security strategies, built global information security programs, implemented cybersecurity capabilities that protect
consumers, wholesale partners and brand, and oversaw the security of a global payment network, a corporate network and digital
assets.
Item 2. PROPERTIES
At the end of 2023, our global real estate portfolio consisted of approximately 9.2 million square feet of owned and leased properties
to support the operations of our reporting segments. Our domestic portfolio had approximately 8.3 million square feet in 49 states, the
District of Columbia, and the U.S. Virgin Islands. Our international properties contain approximately 934 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, Saudi Arabia, 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), Evernorth Health Services' corporate offices located at and around One Express Way in St. Louis,
Missouri and Two Liberty Place located at 1601 Chestnut Street in Philadelphia, Pennsylvania. The Wilde Building measures
approximately 893 thousand square feet and is owned. The St. Louis campus measures approximately 999 thousand square feet of
leased space and Two Liberty Place measures approximately 209 thousand square feet of leased space.
The pharmacy operations consist of 13 home delivery pharmacies, 31 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.
In the fourth quarter of 2023, we approved a strategic initiative to drive operational improvements and efficiencies. This initiative
includes a reduction in the square footage of leased properties and changes how sites are utilized. See Note 17 to the Consolidated
Financial Statements of this Form 10-K for additional information.
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 "Legal and Regulatory Matters" in Note 24 to the Consolidated Financial Statements of this Form
10-K is incorporated herein by reference.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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Information about our Executive Officers
The principal occupations and employment histories of our executive officers (as of February 29, 2024) are listed below.
DAVID BRAILER, 64, 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, 58, 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, 54, Executive Vice President, Global Chief Information Officer of The Cigna Group beginning September 2020,
with responsibility for the Company's technology and operations function beginning September 2023; 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, 47, Executive Vice President, Chief Financial Officer of The Cigna Group and President and Chief Executive
Officer, Cigna Healthcare beginning January 2024; Executive Vice President and Chief Financial Officer of The Cigna Group from
January 2021 to January 2024; President, Government Business from November 2017 to January 2021; and President, U.S. Individual
Business from August 2013 to November 2017.
NICOLE S. JONES, 53, Executive Vice President, Chief Administrative Officer, and General Counsel for The Cigna Group beginning
September 2023; Executive Vice President and General Counsel of The Cigna Group beginning June 2011 to September 2023; 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.
ERIC P. PALMER, 47, Executive Vice President, Enterprise Strategy of The Cigna Group and President and Chief Executive Officer,
Evernorth Health Services beginning January 2024; President and Chief Executive Officer of Evernorth Health Services beginning
January 2022 to January 2024; 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.
MICHAEL W. TRIPLETT, 62, Special Advisor beginning January 2024; President, U.S. Commercial of Cigna Healthcare beginning
February 2017 to January 2024; and Regional Segment Lead from June 2009 to February 2017.
48
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
As of December 31, 2023, the number of shareholders of record was 23,435. The Cigna Group's common stock is listed with, and
trades on, the New York Stock Exchange under the symbol "CI".
In 2023, The Cigna Group declared and paid quarterly cash dividends of $1.23 per share of The Cigna Group common stock. The
Cigna Group paid quarterly cash dividends of $1.12 per share in 2022 and $1.00 per share in 2021.
On February 2, 2024, the Board of Directors declared the first quarter cash dividend of $1.40 per share of The Cigna Group common
stock to be paid on March 21, 2024 to shareholders of record on March 6, 2024. The Cigna Group currently intends to pay regular
quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the
declaration of dividends remains in the best interests of The 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. See Note 9 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 Related Stockholder Matters."
Stock Price Performance Graph
The graph below compares the cumulative total shareholder return on our common stock for the five years ended December 31, 2023
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.
49
Issuer Purchases of Equity Securities
The following table provides information about The Cigna Group's share repurchase activity for the quarter ended December 31, 2023:
Period
October 1-31, 2023
November 1-30, 2023
December 1-31, 2023
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) (in
millions)
1,520,890 $
131,656 $
3,213 $
300.75
313.82
287.87
1,520,691 $
128,550 $
— $
1,346
1,306
11,306
Total
(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 199 shares in
October, 3,106 shares in November and 3,213 shares in December 2023.
1,655,759 $
1,649,241
301.76
(2) Additionally, the Company maintains a share repurchase program authorized by the Board. Under this program, the Company may repurchase shares from time to
N/A
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. In December 2023, the Board increased repurchasing authority by an additional $10.0 billion. In
February 2024, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements ("2024 ASR agreements") to repurchase
$3.2 billion of common stock in aggregate. We received an initial delivery of approximately 7.6 million shares of our common stock representing $2.6 billion of the
total $3.2 billion remitted. Including the impact of the 2024 ASR agreements, from January 1, 2024 through February 28, 2024, we repurchased 10.1 million shares
for approximately $4.0 billion. Share repurchase authority was $7.3 billion as of February 28, 2024. See Note 9 to the Consolidated Financial Statements for further
information on our ASR agreements.
(3) Approximate dollar value of shares is as of the last date of the applicable month and excludes the impact of excise tax.
Item 6. [Reserved]
50
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
52
56
61
65
65
67
68
69
69
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, 2023
compared with December 31, 2022 and our results of operations for 2023 compared with 2022 and 2021 and is intended to help you
understand the ongoing trends in our business. We adopted amended accounting guidance for long-duration insurance contracts
effective January 1, 2023. This MD&A has been retrospectively adjusted to conform to the new basis of accounting. The impact of this
amended guidance is immaterial. Additionally, during the fourth quarter of 2023, our U.S. Commercial and U.S. Government
operating segments were merged to form the U.S. Healthcare operating segment within the Cigna Healthcare reportable segment. For
comparisons of our results of operations for 2022 compared with 2021, 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, 2022. 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 and additional information regarding the adoption of
amended accounting guidance for long-duration insurance contracts effective January 1, 2023. 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.
51
EXECUTIVE OVERVIEW
The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our")
is a global health company with 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 Part 1, Item 1, "Business" of this Form 10-K.
Financial Highlights
See Note 1 to the Consolidated Financial Statements for a description of our segments. Effective January 1, 2023, we adopted
amended accounting guidance for long-duration insurance contracts. Prior period financial highlights and results of operations have
been retrospectively adjusted to conform to this new basis of accounting. The impact of this amended guidance is immaterial. See
Note 2 to the Consolidated Financial Statements for additional information.
Summarized below are certain key measures of our performance by segment:
Financial highlights by segment
(Dollars in millions, except per share amounts)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
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
$ 153,499 $ 140,335 $ 131,912
9 %
6 %
51,205
596
45,037
2,263
44,643
3,989
(9,978)
(6,991)
(6,475)
195,322
180,644
174,069
14
(74)
(43)
8
55
8 %
(23) %
2 %
(19) %
7 %
1
(43)
(8)
4
N/M
4 %
25 %
5 %
36 %
14 %
5 %
5 %
9
(81)
(16)
1
74
78
3
N/M
14
(44)
(9)
3
45
N/M
6
N/M
Net realized investment results from certain equity method investments
(57)
(126)
—
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
$ 195,265 $ 180,518 $ 174,069
$
$
$
$
$
5,164 $
6,704 $
7,448 $
7,313 $
17.39 $
21.41 $
25.09 $
23.36 $
6,442 $
6,127 $
4,478
96
(1,698)
9,318
146
(135)
(1,819)
(1,997)
4,099
509
(1,466)
9,269
84
(613)
(1,876)
1,533
5,370
6,982
15.75
20.48
5,818
3,601
903
(1,339)
8,983
58
198
(1,998)
(451)
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
5,513 $
8,397 $
(34) %
6,790
$
24 %
accounting.
For further analysis and explanation of each segment's results, see the "Segment Reporting" section of this MD&A.
52
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
(Loss) gain on sale of businesses
Net realized investment (losses) gains
Income before income taxes
Total income taxes
Net income
For the Years Ended December 31,
Increase (Decrease)
Increase (Decrease)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
$ 137,243
$ 128,566
$ 121,413
$
8,677
7 % $ 7,153
6 %
44,237
12,619
1,166
195,265
133,801
36,287
14,822
1,819
39,916
10,881
1,155
180,518
124,834
32,184
13,174
1,876
41,154
9,953
1,549
174,069
117,553
33,565
13,012
1,998
4,321
1,738
11
14,747
8,967
4,103
1,648
(57)
186,729
172,068
166,128
14,661
8,536
(1,446)
—
(1,499)
(78)
5,513
141
5,372
8,450
(1,228)
—
1,662
(487)
8,397
1,615
6,782
7,941
(1,208)
(141)
—
198
6,790
1,370
5,420
86
(218)
—
(3,161)
409
(2,884)
(1,474)
(1,410)
11
16
1
8
7
13
13
(3)
9
1
(18)
N/M
N/M
84
(34)
(91)
(21)
167
(1,238)
928
(394)
6,449
7,281
(1,381)
162
(122)
5,940
509
(20)
141
1,662
(685)
1,607
245
1,362
28
(3)
9
(25)
4
6
(4)
1
(6)
4
6
(2)
N/M
N/M
N/M
24
18
25
56
Less: Net income attributable to noncontrolling
interests
208
78
50
130
Shareholders' net income
Consolidated effective tax rate
$
5,164
$
6,704
$
5,370
$
(1,540)
(23) % $ 1,334
25 %
2.6 %
19.2 %
20.2 %
(1,660) bps
(100) bps
Medical customers (in thousands)
19,780
18,004
17,081
1,776
10 %
923
5 %
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
(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
Loss (gain) on sale of businesses
Charge for organizational efficiency plan
Charges (benefits) associated with litigation matters
Integration and transaction-related costs
Deferred tax (benefits), net
Debt extinguishment costs
Total special items
For the Years Ended December 31,
2023
2022
2021
Pre-tax After-tax
Pre-tax After-tax
Pre-tax After-tax
$
5,164
$
6,704
$
5,370
$
135
114 $
613
496 $
(198)
(161)
1,819
1,413
1,876
1,345
1,998
1,494
1,499
1,429
(1,662)
(1,332)
252
201
45
—
—
193
171
35
(1,071)
—
22
(28)
135
—
—
17
(20)
103
—
—
$
1,997
757 $
(1,533)
(1,232) $
—
168
(27)
169
—
141
451
—
119
(21)
71
—
110
279
6,982
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
7,448
7,313
$
$
$
accounting.
53
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
Loss (gain) on sale of businesses
Charge for organizational efficiency plan
Charges (benefits) associated with litigation matters
Integration and transaction-related costs
Deferred tax (benefits), net
Debt extinguishment costs
Total special items
For the Years Ended December 31,
2023
2022
2021
Pre-tax After-tax
Pre-tax After-tax
Pre-tax After-tax
$
17.39
$
21.41
$
15.75
$
0.45
6.13
5.05
0.85
0.68
0.15
—
—
0.38 $
4.77
1.96
5.99
1.59 $
(0.58)
(0.47)
4.30
5.86
4.38
4.81
0.65
0.58
0.12
(3.61)
—
(5.31)
(4.26)
0.07
0.05
—
0.49
—
0.35
(0.09)
(0.06)
(0.08)
(0.06)
0.43
0.33
—
—
—
—
0.50
—
0.41
1.32
0.21
—
0.32
0.82
20.48
$
6.73
2.55 $
(4.90)
(3.94) $
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
25.09
23.36
$
$
$
accounting.
Commentary: 2023 versus 2022
The commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2023
with results for the year ended December 31, 2022.
Shareholders' net income decreased 23%, reflecting the estimated loss associated with the sale of our Medicare Advantage, Medicare
Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses (the "HCSC
transaction"), the absence of the gain on the sale of our life, accident and supplemental health benefits business in six countries sold on
July 1, 2022 (the "Chubb transaction"), partially offset by foreign deferred tax benefits recorded in the fourth quarter of 2023 as
described further under "effective tax rate" below.
Adjusted income from operations increased 2%, primarily driven by higher earnings in our Cigna Healthcare and Evernorth Health
Services segments, largely offset by the absence of earnings reported in the first half of 2022 from the businesses divested in the
Chubb transaction and increased interest expense and pension costs.
Medical customers increased 10%, reflecting growth in fee-based customers as well as in Individual and Family Plans and Medicare
Advantage customers. See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.
Pharmacy revenues increased 7%, reflecting inflation on branded drugs as well as growth in specialty. See the "Segment Reporting -
Evernorth Health Services Segment" section of this MD&A for further discussion.
Premiums increased 11% reflecting insured customer growth and higher premium rates in Cigna Healthcare due to anticipated
underlying medical cost trend. See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.
These favorable effects were partially offset by a decline in premiums due to the Chubb transaction.
Fees and other revenues increased 16%, primarily reflecting client growth from our continued affordability services within Evernorth
Health Services.
Net investment income increased 1%, primarily due to growth in average assets, largely offset by the unfavorable impact of the Chubb
transaction. See the "Investment Assets" section of this MD&A for further discussion.
Pharmacy and other service costs increased 7%, reflecting inflation on branded drugs as well as growth in specialty.
Medical costs and other benefit expenses increased 13%, primarily reflecting insured customer growth and medical cost trend in
Cigna Healthcare, partially offset by the impact of the Chubb transaction.
Selling, general and administrative expenses increased 13%, primarily driven by volume-related expenses in Cigna Healthcare due to
business growth, as well as increased investments to support the onboarding of new clients and continued advancement of our digital
54
capabilities and care solutions in Evernorth Health Services. Increased expenses were also driven by costs reported in 2023 for an
organizational efficiency plan and litigation settlements. These increases were partially offset by the impact of the Chubb transaction.
Interest expense and other increased 18%, primarily reflecting higher interest rates on our indebtedness and increased pension costs.
See the "Segment Reporting - Corporate" section of this MD&A for further discussion.
(Loss) / gain on sale of businesses. The loss reported in 2023 primarily reflects asset write-downs and estimated costs related to the
HCSC transaction. In 2022, the reported gain reflects the impact of the Chubb transaction, which closed on July 1, 2022.
Realized investment results were substantially improved, primarily due to lower mark-to-market losses on investments. See Note 12
to the Consolidated Financial Statements for further discussion.
The effective tax rate decreased substantially driven by foreign deferred tax benefits. Also contributing to the decrease were favorable
results relative to the Company's foreign operations and the release of uncertain tax positions resulting from favorable audit
developments. These favorable effects were partially offset by the impact of the valuation allowance recorded resulting from the
HCSC transaction. See Note 23 to the Consolidated Financial Statements for additional information.
Recent Events
Economic Conditions
We continue to monitor global economic conditions, including inflation, labor market dynamics and recent geopolitical events. We
continue to proactively address impacts to our pricing with third parties (including vendors, health care providers and drug providers),
our investment portfolio and our workforce. We are also monitoring the potential impact on client and customer health care needs.
Our results of operations or cash flows for the year ended December 31, 2023 were not materially impacted by inflation, labor market
dynamics, or recent geopolitical events. For further information regarding risks we encounter in our business due to economic
conditions, see "Risk Factors" contained in Part I, Item 1A of this Form 10-K.
Conflict in the Middle East
The Cigna Group serves a limited number of customers and clients in the impacted regions in the Middle East. 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.
Key Transactions and Business Developments
Sale of Medicare Advantage and Related Businesses
In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription
Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to
Health Care Service Corporation ("HCSC") for $3.3 billion cash, subject to applicable regulatory approvals and other customary
closing conditions. See Note 6 to the Consolidated Financial Statements for further information.
Organizational Efficiency Plan
During the fourth quarter of 2023, the Company approved a strategic realignment to drive greater operating effectiveness and
efficiency. This plan positions us to be more efficient and focused to deliver differentiated value and services to our clients and
customers. The Company recognized a charge in Selling, general and administrative expenses of $252 million, pre-tax ($193 million,
after-tax). We expect substantially all of the accrued liability to be paid by the end of 2024. We expect to realize annualized after-tax
savings of approximately $280 million. A significant portion of the savings is expected to be recognized in 2024. See Note 17 to the
Consolidated Financial Statements for further information.
CarepathRx Health System Solutions
In July 2023, Evernorth Health, Inc. acquired a minority interest in CarepathRx Health Systems Solutions ("CHSS"). CHSS provides
integrated hospital pharmacy solutions to support patients across their complete health care journey. By pairing Evernorth Health
Services' diverse specialty and care expertise with CHSS' robust pharmacy and infusion management capabilities, technology
solutions and health system relationships, we can further improve, expand and accelerate pharmacy care delivery for the growing
55
number of patients with chronic and complex care needs. See Note 5 to the Consolidated Financial Statements for further discussion of
this investment.
VillageMD
In 2023, the Company became a minority owner in VillageMD by investing $2.7 billion in VillageMD preferred equity. VillageMD
(majority-owned by Walgreens Boots Alliance, Inc.) provides health care services for individuals and communities across the United
States, with primary, multi-specialty and urgent care providers serving patients in traditional clinic settings, in patients' homes and
online appointments. VillageMD and its subsidiaries operate in 26 markets and are responsible for millions of patients. See Note 12 to
the Consolidated Financial Statements for further discussion of this investment.
Centene Corporation
Effective January 1, 2024, Evernorth Health Services and Centene Corporation ("Centene") have a multi-year agreement 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.
Medicare Star Quality Ratings ("Star Ratings")
The Centers for Medicare and Medicaid Services ("CMS") uses a Star Rating system to measure how well Medicare Advantage
("MA") plans perform. Categories of measurement include quality of care and customer service. Star Ratings range from one to five
stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced
benefits. On October 13, 2023, CMS announced Medicare Star Ratings for bonus payments to be received in 2025. We estimate 67%
of our MA customers to be in four star or greater plans for bonus payments to be received in 2024 and 2025 (based upon the current
customer mix associated with the announced Star Ratings). See Part I, Item I, "Business - Regulation" section of this Form 10-K for
further discussion of Star Ratings.
Medicare Advantage Rates
On March 31, 2023, CMS released the final Calendar Year 2024 Medicare Advantage Program and Part D Payment Policies (the
"2024 Final Notice"). On January 31, 2024, CMS released the Calendar Year 2025 Advance Notice for Medicare Advantage and Part
D Prescription Drug Programs (the "Advance Notice"). CMS will accept comments on the Advance Notice through March 1, 2024,
before publishing the final rate announcement by April 1, 2024. 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,
2023
2022
2021
$
$
$
$
$
206 $
7,822 $
2,775 $
28,155 $
46,223 $
139 $
5,924 $
2,993 $
28,100 $
44,675 $
428
5,081
2,545
31,125
46,958
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.
56
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.
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 22 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.
With respect to our investment portfolio, we support the liquidity needs of our businesses by managing the duration of assets to be
consistent with the duration of liabilities. We manage the portfolio to both optimize returns in the current economic environment and
meet our liquidity needs.
Cash flows were as follows:
(In millions)
Net cash provided by operating activities
Net cash (used in) provided by 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,
2023
2022
2021
$
11,813 $
8,656 $
7,191
13
(447)
(2,835)
(1,573)
(332)
(5,174)
(278)
(2,284)
(1,450)
(282)
(4,294)
16
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)
Change in cash, cash equivalents and restricted cash
$
2,361 $
428 $
(4,697)
The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2023 compared
with the same period in 2022. For comparisons of liquidity and capital resources for the year ended December 31, 2022 compared with
the year ended December 31, 2021, please refer to the previously filed MD&A included in Part II, Item 7 of our 2022 Form 10-K.
57
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 increased for the year ended December 31, 2023 due to higher insurance related liabilities, acceleration of cash
proceeds from the accounts receivable factoring facility, lower income tax payments and higher CMS Part D annual settlement.
Investing activities
The Company invested $2.7 billion in VillageMD in 2023. This, combined with the absence of the net $4.9 billion proceeds received
from the Chubb transaction in 2022, resulted in an increase in cash used in investing activities.
Financing activities
The Company had lower share repurchases and lower net debt outflows in 2023. These factors resulted in a decrease in cash used in
financing activities in 2023.
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 received from U.S.
regulated subsidiaries were $1.2 billion for the year ended December 31, 2023 and $1.9 billion for the year ended December 31, 2022.
This decrease was due in part to lower statutory earnings in 2022 and additional capital held at subsidiaries to support business growth,
which is in line with our capital planning. 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 clients and 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 and investments 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. The
commercial paper program had approximately $1.2 billion outstanding at December 31, 2023.
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, 2023, The Cigna Group's revolving credit agreements include: a $4.0 billion five-year revolving credit and letter
of credit agreement that expires in April 2028; and a $1.0 billion 364-day revolving credit agreement that expires in April 2024.
As of December 31, 2023, 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), $3.8 billion of
remaining capacity under our commercial paper program and $8.0 billion in cash and short-term investments, approximately $0.8
billion of which was held by the parent company or certain non-regulated subsidiaries.
See Note 8 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.
Our debt-to-capitalization ratio was 40.1% at December 31, 2023 and 41.0% at December 31, 2022.
58
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 $2.2
billion from its subsidiaries without further approvals as of December 31, 2023.
Use of Capital Resources
Long-term debt. In July 2023, we repaid $2.9 billion of senior notes at maturity.
Capital expenditures. Capital expenditures for property, equipment and computer software were $1.6 billion in 2023 compared to $1.3
billion in the year ended December 31, 2022. This increase reflects our continued strategic investment in technology for future growth.
We expect to deploy approximately $1.5 billion in capital expenditures in 2024. Anticipated capital expenditures will be funded
primarily from operating cash flow.
Dividends. The Cigna Group declared and paid quarterly cash dividends of $1.23 per share of its common stock during 2023,
compared to quarterly cash dividends of $1.12 per share during 2022. See Note 9 to the Consolidated Financial Statements for further
information on our dividend payments. On February 2, 2024, the Board of Directors declared the first quarter cash dividend of $1.40
per share of The Cigna Group common stock to be paid on March 21, 2024 to shareholders of record on March 6, 2024. The Cigna
Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and
the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders. The
decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position,
results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem
relevant.
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.
We repurchased 7.8 million shares for approximately $2.3 billion during the year ended December 31, 2023, compared to 27.4 million
shares for approximately $7.6 billion during the year ended December 31, 2022. In December 2023, the Board increased repurchase
authority by an additional $10.0 billion. We expect to repurchase $5.0 billion of common stock in the first half of 2024. A portion of
this repurchase was executed in February 2024 via an Accelerated Share Repurchase ("ASR") as described below.
In February 2024, as part of our existing share repurchase program, we entered into separate ASR agreements ("2024 ASR
agreements") with Deutsche Bank AG and Bank of America, N.A. (collectively, the "2024 Counterparties") to repurchase $3.2 billion
of common stock in aggregate. We remitted $3.2 billion to the 2024 Counterparties and received an initial delivery of approximately
7.6 million shares of our common stock on February 15, 2024 representing $2.6 billion of the total remitted. We expect final
settlement under the 2024 ASR agreements to occur in the second quarter of 2024. See Note 9 to the Consolidated Financial
Statements for further information on our 2024 ASR agreements.
Including the impact of the 2024 ASR agreements, from January 1, 2024 through February 28, 2024, we repurchased 10.1 million
shares for approximately $4.0 billion. Share repurchase authority was $7.3 billion as of February 28, 2024.
Strategic investments. In 2023, we became a minority owner in VillageMD by investing $2.7 billion in VillageMD preferred equity.
See Note 12 to the Consolidated Financial Statements for further discussion of this investment. In July 2023, Evernorth Health, Inc.
acquired a minority interest in CHSS. See Note 5 to the Consolidated Financial Statements for further discussion of this investment.
Pension plans. Our pension plans were overfunded by $204 million and $238 million as of December 31, 2023 and December 31,
2022, respectively, and reported in Other assets in our Consolidated Balance Sheets. In 2023, 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 2024 to be
immaterial. See Note 18 to the Consolidated Financial Statements for additional information.
59
Other Sources of Funds and Uses of Capital Resources
Divestiture. In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone
Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating
segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions. The transaction is expected to
close in the first quarter of 2025 and provide approximately $3.7B in transaction proceeds, which consists primarily of cash proceeds.
Following the completion of the sale, we anticipate use of the proceeds in alignment with our capital deployment priorities, with the
majority allocated to share repurchases.
Debt Issuance and Debt Tender Offers. On February 5, 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt
were used to pay the consideration for the cash tender offers as described below. We intend to use the remaining net proceeds to fund
the repayment of our senior notes maturing in March 2024 and for general corporate purposes, which may include repayment of
indebtedness and repurchases of shares of our common stock.
Concurrent with the debt issuance, we commenced tender offers to purchase for cash up to $2.25 billion in aggregate principal amount
of outstanding notes, which included any and all of the $1.0 billion senior notes due June 2024. Following the early tender results, we
increased the tender offers to up to $2.55 billion aggregate principal amount. On February 22, 2024, we purchased $1.8 billion
principal amount of notes at early settlement of the tender offers. The tender offers will expire on March 5, 2024.
Risks to Liquidity and Capital Resources
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.
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 24 to the Consolidated Financial Statements for discussion of various guarantees.
The Company adopted amended accounting guidance for long-duration insurance contracts effective January 1, 2023, which impacted
the amounts presented in our Consolidated Balance Sheets. Within our Consolidated Financial Statements, see Note 2 to the
Consolidated Financial Statements for a summary of this accounting change and Note 10 to the Consolidated Financial Statements for
a summary of the insurance liabilities in our Consolidated Balance Sheets as well as future expected cash flow information. With the
adoption of amended accounting guidance for long-duration insurance contracts and enhanced disclosure within Note 10 to the
Consolidated Financial Statements, we will no longer present additional information regarding insurance liabilities within this section.
On balance sheet:
•
•
◦
◦
◦
Long-term debt
◦
Total scheduled payments on long-term debt are $44.8 billion, which include scheduled interest payments and maturities
of long-term debt. This excludes any impact from our February 2024 debt issuance and debt tender offers transactions as
described above.
◦ We expect $2.8 billion of long-term debt payments (including scheduled interest payments) to be paid within the next
twelve months beginning January 1, 2024.
Finance leases are included in Long-term debt and primarily represent obligations for information technology network
storage, servers and equipment. See Note 21 to the Consolidated Financial Statements for information regarding finance
leases.
See Note 8 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.
These include approximately $335 million of estimated payments (of which we expect $52 million to be paid in the next
twelve months beginning January 1, 2024) for other postretirement and postemployment benefit obligations, reinsurance
liabilities, supplemental and deferred compensation plans and interest rate and foreign currency swap contracts.
In connection with our equity method investment in CarepathRx Health Systems Solutions ("CHSS"), we guaranteed
CHSS's credit facilities. See Note 5 to the Consolidated Financial Statements for further information.
See Note 18 to the Consolidated Financial Statements for further information on pension obligations and funded status.
◦
Other non-current liabilities
◦
60
•
•
•
◦
◦
Operating leases
◦
◦
Uncertain tax positions
◦
These include operating lease payments of $497 million (of which we expect $110 million of operating lease payments
to be due within the next twelve months beginning January 1, 2024).
See Note 21 to the Consolidated Financial Statements for additional information.
In the event we are unable to sustain all of our $1.4 billion of uncertain tax positions, it could result in future tax
payments of approximately $950 million. We are adequately reserved for such positions. As a result, there is minimal
direct risk to earnings should we fail to sustain our positions. We cannot reasonably estimate the timing of such future
payments.
See Note 23 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, 2023, purchase obligations consisted of a total of $4.3 billion of estimated payments required under
contractual arrangements (of which we expect $1.3 billion of purchase obligations to be paid within the next twelve
months beginning January 1, 2024). This includes:
▪
▪
$2.8 billion of investment commitments (of which we expect $0.7 billion of the committed amounts to be
disbursed in 2024).
$1.5 billion of future service commitments (of which we expect $0.6 billion of the committed amounts to be
disbursed in 2024), primarily comprised of contracts for certain outsourced business processes and information
technology maintenance and support.
◦
See Note 12 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.
61
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.
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Effect if Different Assumptions Used
Goodwill and other intangible assets
We completed our normal annual evaluations for impairment of goodwill and
intangible assets during the third quarter of 2023, as well as additional qualitative
and quantitative tests as required by GAAP. The evaluations support that as of
December 31, 2023, 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.
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.
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.
During the fourth quarter of 2023, following the change in operating segment
discussed in Note 1 to the Consolidated Financial Statements, U.S. Government's
goodwill was merged with U.S Commercial's goodwill. Certain businesses within
the U.S. Healthcare operating segment were designated as held for sale (see Note
6 to the Consolidated Financial Statements).
Goodwill and other intangibles as of December 31 were as follows (in millions):
·2023 – Goodwill $44,259; Other intangible assets $30,863
·2022 – Goodwill $45,811; Other intangible assets $32,492
See Note 20 to the Consolidated Financial Statements for additional discussion of
our goodwill and other intangible assets.
62
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Effect if Different Assumptions Used
Income taxes – uncertain tax positions
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.
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):
·2023 – $1,399
·2022 – $1,343
See Note 23 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.
Income taxes - valuation allowance
The factors that could impact our estimates of valuation allowances include
changes in forecasted future earnings in foreign jurisdictions and the Company's
future ability to generate capital gains. Decreases in our valuation allowance
would increase net income, while increases in our valuation allowance would
decrease net income.
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. In 2023, the
Company recorded a valuation allowance related to various foreign deferred tax
assets in the amount of $772 million as well as a valuation allowance of $584
million related to the tax benefit associated with the sale of the Medicare
Advantage and related businesses. It is possible that the realization of deferred tax
assets may change due to changes in forecasted future earnings in various foreign
jurisdictions or the Company's ability to generate future capital gains.
Valuation allowances that are included in the Consolidated Balance Sheets within
deferred tax liabilities, net are as follows (in millions):
·2023 – $1,498
·2022 – $208
See Note 23 to the Consolidated Financial Statements for additional discussion
around valuation allowances.
63
Balance Sheet Caption /
Nature of Critical Accounting Estimate
Unpaid claims and claim expenses – Cigna Healthcare
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 $90 million, resulting in a decrease in net income of
approximately $70 million after-tax, and a 50 basis point decrease in completion
factors would increase this liability by approximately $180 million, resulting in a
decrease in net income of approximately $140 million after-tax.
Unpaid claims and claim expenses reflects estimates of the ultimate cost of claims
that have been incurred but not reported, expected development on reported
claims, claims that have been reported but not yet paid (reported claims in
process) and other medical care expenses and services payable that are primarily
comprised of accruals for incentives and other amounts payable to health care
professionals and facilities.
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):
·2023 – gross $5,092; net $4,856
·2022 – gross $4,176; net $3,955
These liabilities are presented above both gross and net of reinsurance and other
recoverables.
See Note 10 to the Consolidated Financial Statements for additional information
regarding assumptions and methods used to estimate this liability.
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.
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 $0.5 billion as of December 31, 2023.
Valuation of debt security investments
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, 2023 (in millions):
·2023 - $9,855
·2022 - $9,872
See Notes 12A. and 13 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.
64
SEGMENT REPORTING
The following section of this MD&A discusses the results of each of our segments.
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 25
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 25 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.
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 partners with health plans, employers, governmental organizations and health care providers to solve
challenges in the areas of pharmacy benefits, home delivery pharmacy, specialty pharmacy, specialty 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, Fees and other 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 on our clients' behalf. Through these affordability
services, we seek to improve the effectiveness of our integrated solutions for the benefit of our clients by continuously
innovating, improving affordability and implementing drug purchasing contract initiatives. Our revenues, cost of revenues
and gross profit could increase or decrease as a result of these affordability services. Pharmaceutical manufacturer inflation
also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally
recognized price index for pharmaceuticals. 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.
65
Results of Operations
Financial Summary
(Dollars in millions)
Total revenues
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)
2023
2022
2021
2023 vs. 2022
Change Favorable
(Unfavorable)
2022 vs. 2021
$ 153,499
$ 140,335
$ 131,912
$ 13,164
$ 153,499
$ 140,335
$ 131,912
$ 13,164
$ 143,571
$ 131,284
$ 123,504
$ 12,287
$
$
$
9,928
9,928
6,442
$
$
$
9,051
9,051
6,127
$
$
$
8,408
8,408
5,818
$
$
$
877
877
315
4.2 %
2.2 %
4.4 %
2.0 %
4.4 %
1.9 %
9 % $
8,423
9 % $
8,423
9 % $
7,780
643
643
309
10 % $
10 % $
5 % $
(20) bps
(20) bps
6 %
6 %
6 %
8 %
8 %
5 %
— bps
(10) bps
For the Years Ended December 31,
Change
Favorable
(Unfavorable)
Change
Favorable
(Unfavorable)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
$
67,514
$
64,946
$
64,992
4 %
— %
65,732
9,047
61,283
6,753
54,391
6,428
7
34
13
5
$ 142,293
$ 132,982
$ 125,811
7 %
6 %
10,965
241
7,267
86
6,084
17
51
180
19
N/M
$ 153,499
$ 140,335
$ 131,912
9 %
6 %
1,327
258
1,585
1,295
280
1,575
1,355
283
1,638
2 %
(4) %
(8)
(1)
1 %
(4) %
86.9 %
85.3 %
86.7 %
86.4 %
85.1 %
86.3 %
85.4 %
85.9 %
85.5 %
50 bps
20 bps
40 bps
100
bps
(80) bps
80
bps
(1) Total revenues and gross profit were equal to adjusted revenues and adjusted gross profit as there were no special items in the periods presented.
(2) Gross profit and adjusted gross profit are calculated as total revenues or adjusted revenues less pharmacy and other service 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.
2023 versus 2022
Adjusted network revenues increased 4%, reflecting inflation on branded drugs and higher claims volume, partially offset by a
decrease in claims mix and an increase in the generic fill rate.
Adjusted home delivery and specialty revenues increased 7%, reflecting higher specialty claims volume and inflation on branded
drugs, partially offset by lower home delivery claims volume.
Other pharmacy revenues increased 34%, reflecting higher volume from our CuraScript Specialty Distribution business, which
distributes pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals.
Adjusted fees and other revenues increased 51%, reflecting client growth in Care Delivery and Management Solutions, including
cross-enterprise leverage, primarily driven by our behavioral health and eviCore Healthcare solutions, and client growth from our
continued affordability services.
66
Adjusted gross profit increased 10%, and pre-tax adjusted income from operations increased 5%, reflecting continued affordability
improvements and growth in Specialty Pharmacy, partially offset by increased strategic investments to support the onboarding of new
clients and continued advancement of our digital capabilities and care solutions.
The adjusted expense ratio increased 20 bps, reflecting increased strategic investments to support the onboarding of new clients and
continued advancement of our digital capabilities and care solutions.
Cigna Healthcare Segment
Cigna Healthcare includes the U.S. Healthcare and International Health businesses, which provide comprehensive medical and
coordinated solutions to clients and customers. During the fourth quarter of 2023, the U.S. Commercial and U.S. Government
operating segments were merged to form the U.S. Healthcare operating segment. 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).
•
Effective January 1, 2023, we adopted amended accounting guidance for long-duration insurance contracts. For the Cigna Healthcare
segment, prior period results of operations have been retrospectively adjusted to conform to this new basis of accounting. The impact
of this amended guidance is immaterial. See Note 2 to the Consolidated Financial Statements for additional information.
In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug
Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to Health
Care Service Corporation for $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions. See
Note 6 to the Consolidated Financial Statements for further information.
Results of Operations
Financial Summary
(Dollars in millions)
Adjusted revenues
Pre-tax adjusted income from operations
2023
51,205
4,478
$
$
2022
2021
2023 vs. 2022
2022 vs. 2021
$
$
45,037
$ 44,643
4,099
$
3,601
$
$
6,168
379
14 % $
394
1 %
9 % $
498
14 %
For the Years Ended December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
Pre-tax adjusted margin
Medical care ratio
Adjusted expense ratio
2023 versus 2022
8.7 %
81.3 %
21.6 %
9.1 %
81.7 %
21.8 %
8.1 %
84.0 %
20.9 %
(40) bps
40 bps
20 bps
100 bps
230 bps
(90) bps
Adjusted revenues increased 14%, primarily reflecting customer growth and higher premium rates due to anticipated underlying
medical cost trend.
Pre-tax adjusted income from operations increased 9%, primarily due to a lower medical care ratio and a lower adjusted expense
ratio. The improvement to the medical care ratio and the adjusted expense ratio for the twelve months ended December 31, 2023, as
compared to the twelve months ended December 31, 2022, was driven by decreases of 160 bps and 190 bps, respectively, for the three
months ended December 31, 2023.
The medical care ratio decreased 40 bps, primarily due to a lower U.S. Healthcare medical care ratio, reflecting improved stop loss
results, effective pricing execution and affordability initiatives.
The adjusted expense ratio decreased 20 bps for the twelve months ended December 31, 2023, primarily due to revenue growth
outpacing volume-related expenses as well as higher technology spend. The adjusted expense ratio decreased 190 bps for the three
months ended December 31, 2023, primarily due to revenue growth and timing of investments outpacing volume-related expenses.
67
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 administrative services 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. Healthcare
International Health (1)
Administrative services only
U.S. Healthcare
International Health (1)
As of December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
5,464
4,280
1,184
14,316
13,890
426
4,756
3,587
1,169
13,248
12,619
629
4,757
3,676
1,081
12,324
11,688
636
708
693
15
1,068
1,271
(203)
15 %
(1)
— %
19
1
8
10
(32)
(89)
(2)
88
924
931
8
7
8
(7)
(1)
Total
5 %
(1) International Health excludes medical customers served by less than 100% owned subsidiaries, as well as certain customers served by our third-party administrator.
10 %
17,081
18,004
19,780
1,776
923
International Health customers as of December 31, 2023 reflect the transition of certain run-off business to Other Operations beginning January 1, 2023.
2023 versus 2022
Total medical customers increased 10%, primarily driven by growth in fee-based customers as well as in Individual and Family Plans
and Medicare Advantage customers.
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)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
Unpaid claims and claim expenses – Cigna Healthcare
$
5,092 $
4,176 $
4,261
$
916
22 % $
(85)
(2) %
As of December 31,
Change Increase
(Decrease)
Change Increase
(Decrease)
2023 versus 2022
Our unpaid claims and claim expenses liability increased 22%, driven by customer growth, primarily within our Individual and Family
Plans business.
Other Operations
Other Operations includes corporate owned life insurance ("COLI") and the Company's run-off operations. See Note 1 to the
Consolidated Financial Statements for additional information regarding these operations. In the prior periods, Other Operations also
included the International businesses sold in July 2022 and our interest in a joint venture in Türkiye sold in December 2022. As
described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax
adjusted income from operations.
Effective January 1, 2023, we adopted amended accounting guidance for long-duration insurance contracts. For the Other Operations
segment, prior period results of operations have been retrospectively adjusted to conform to this new basis of accounting. The impact
of this amended guidance is immaterial. Prior period results related to long-duration contracts sold in the Chubb transaction and our
divested interest in a joint venture in Türkiye were not adjusted (as permitted by ASU 2022-05). See Note 10 to the Consolidated
Financial Statements for additional disclosure of our long-duration insurance contracts and Note 2 to the Consolidated Financial
Statements for additional information regarding the adoption of this amended guidance.
68
Results of Operations
Financial Summary
(Dollars in millions)
Adjusted revenues
Pre-tax adjusted income from operations
Pre-tax adjusted margin
2023 versus 2022
For the Years Ended December 31,
2023
596
96
$
$
2022
2,263
509
$
$
2021
3,989
903
$
$
16.1 %
22.5 %
22.6 %
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2023 vs. 2022
2022 vs. 2021
$
$
(1,667)
(413)
(74) %
(81) %
(640) bps
$
$
(1,726)
(394)
(43) %
(44) %
(10) bps
Adjusted revenues declined reflecting the absence of revenues from the business divested in 2022.
Pre-tax adjusted income from operations decreased primarily due to the absence of earnings from the businesses divested in the
Chubb transaction.
Corporate
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate
financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense
associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project
costs and eliminations for products and services sold between segments.
Financial Summary
(In millions)
2023
2022
2021
2023 vs. 2022
2022 vs. 2021
Pre-tax adjusted loss from operations
$
(1,698) $
(1,466) $
(1,339) $
(232)
(16) % $
(127)
(9) %
For the Years Ended December 31,
Change Favorable
(Unfavorable)
Change Favorable
(Unfavorable)
2023 versus 2022
Pre-tax adjusted loss from operations increased 16% primarily due to an increase in the weighted average interest rate on our
indebtedness and increased pension costs due to lower expected asset returns and a higher discount rate. While our pension expense
has increased year-over-year, we continue to expect the required contributions for 2024 to be immaterial.
INVESTMENT ASSETS
The following table presents our investment asset portfolio excluding separate account assets. Additional information regarding our
investment assets is included in Notes 12, 13, 14 and 16 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,
2023
December 31,
2022
$
9,855 $
3,362
1,533
1,211
4,181
206
9,872
622
1,614
1,218
3,728
139
$
20,348 $
17,193
(1,438)
—
Investments per Consolidated Balance Sheets
(1) Investments related to the HCSC transaction that were held for sale as of December 31, 2023. These investments were primarily comprised of debt securities and
18,910 $
$
17,193
commercial mortgage loans, and to a lesser extent, other long term investments.
Investment Outlook
We continue to actively monitor economic conditions including the impact of inflation, higher interest rates and the potential for a
recession on the investment portfolio. Although there has been very limited impact to date on our investment portfolio as a result of
2023 economic and geopolitical events, including banking system stress, we continue to monitor ongoing developments and the
69
potential impact of 2023 events 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 unfavorable 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
13 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,
2023
December 31,
2022
$
267 $
38
352
8,833
365
$
9,855 $
312
41
365
8,806
348
9,872
The carrying value of our debt securities portfolio was flat during the year ended December 31, 2023 reflecting net sales activity offset
by a valuation increase due to declining market interest rates. Our portfolio remains in a net unrealized depreciation position due to
generally increasing interest rates over the last several quarters. More detailed information about debt securities by type of issuer,
maturity dates and net unrealized position is included in Note 12 to the Consolidated Financial Statements.
As of December 31, 2023, $8.3 billion, or 84%, of the debt securities in our investment portfolio were investment grade (Baa and
above, or equivalent) and the remaining $1.6 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 $4.0 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
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, higher interest rates, continuing supply chain disruptions and potential fallout from the stress in the banking system 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 12 to the Consolidated Financial Statements.
Commercial Mortgage Loans
As of December 31, 2023, our $1.5 billion commercial mortgage loan portfolio consisted of approximately 50 fixed-rate loans,
diversified by property type, location and borrower. These loans are carried in our Consolidated Balance Sheets at their unpaid
principal balance, net of an allowance for expected credit losses. As a result of increasing market interest rates since the majority of
these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2023. See Note 13 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 12 to the Consolidated Financial Statements.
70
Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at
approximately 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 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 2023 confirmed ongoing strong overall credit quality in line with the previous year's results. See Note 12 to the Consolidated
Financial Statements for further information regarding our key credit quality indicators for commercial mortgage loans.
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. Although future losses remain possible due to further credit
deterioration, we do not expect these losses to have a material unfavorable effect on our financial condition or liquidity.
Other Long-term Investments
Other long-term investments of $4.2 billion as of December 31, 2023 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 12 to the Consolidated
Financial Statements. The increase in other long-term investments of $0.5 billion since December 31, 2022 is primarily driven by net
additional funding activity. 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 200 separate partnerships and
100 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 4% 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. 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 4% 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 $0.2 billion in Other assets. Our 50% share of the investment portfolio
supporting the joint venture's liabilities is approximately $11.7 billion as of December 31, 2023. 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
continuously review the joint venture's investment strategy and its execution. There were no investments with a material unrealized
loss as of December 31, 2023.
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 as disclosed in Note 10 to the Consolidated Financial
Statements 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.
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
71
return. Following increased investments in equity securities during 2023, primarily as a result of our investment in VillageMD, our
exposure to equity price risk has increased.
Our Management of Market Risks
We predominantly rely on two 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 derivatives. We use derivative financial instruments to reduce our primary market risks. See Note 12 to the
Consolidated Financial Statements for additional information about derivative financial instruments.
Effect of Market Fluctuations
We determine the sensitivity of market risk for our fixed income financial instruments, including debt securities and commercial
mortgage loans, by estimating the present value of future cash flows using duration modeling and applying a 100 basis point increase
in interest rates. The sensitivity of market risk for equity securities is determined by applying a 10% decrease in market prices. The
effect of these hypothetical changes in market rates or prices 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)
10% decrease in market prices for equity securities
Loss in Fair Value
December 31,
2023
December 31,
2022
$
$
0.7 $
0.3 $
0.7
0.1
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 both December 31, 2023 and December 31, 2022. 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 8 to the
Consolidated Financial Statements for additional information about the Company's debt.
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.
72
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, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023 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,
2023, 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.
73
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.
Assessment of Held for Sale and Associated Loss on Sale
As described in Notes 6 and 20 to the consolidated financial statements, the Company determined that the Medicare Advantage,
Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses met the criteria
to be classified as held for sale and aggregated and classified the assets and liabilities as held for sale in the Consolidated Balance
Sheet as of December 31, 2023. The Company measured the assets and liabilities held for sale at estimated fair value less costs to sell
and recognized an estimated loss of $1.5 billion pre-tax that was included within (Loss) gain on sale of businesses in the Consolidated
Statement of Income for the year ended December 31, 2023. The estimated loss on sale represents primarily asset write-downs and
estimated costs to sell. The fair value of a reporting unit is generally estimated based on discounted cash flow analysis and market
approach models using assumptions that management believes a hypothetical market participant would use to determine a current
transaction price. Following a change in reporting units or held for sale determination, goodwill is allocated using relative fair value.
The significant assumptions and estimates used in determining fair value primarily include the discount rate and future cash flows.
Future cash flows are 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 assessment of held for sale classification
and the associated loss on sale is a critical audit matter are (i) the significant judgment by management when determining the held for
sale classification and developing the fair value estimate of the reporting unit, including goodwill allocated to businesses held for sale
using relative fair value; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit
evidence related to (a) management's determination of the held for sale classification, and (b) management’s significant assumptions
used to develop the fair value estimate of the reporting unit, including goodwill allocated to businesses held for sale using relative fair
value related to the discount rate, forecasted revenues, benefit expenses, operating expenses and long-term growth rates (collectively
referred to as the "significant assumptions"); and (iii) the audit effort involved the use of professionals with specialized skill and
knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to (i) management’s
assessment of held for sale classification and (ii) management’s estimation of the loss on sale of businesses, including controls over
the fair value estimation of the reporting unit, including goodwill allocated to businesses held for sale using relative fair value. These
procedures also included, among others, (i) evaluating the reasonableness of management’s assessment of held for sale classification,
which included reading the written agreement in place between the parties related to the sale; (ii) testing management’s process for
estimating the loss on sale of businesses and developing the fair value estimate of the reporting unit, including goodwill allocated to
businesses held for sale using relative fair value; (iii) evaluating the appropriateness of the discounted cash flow analysis and market
approach used by management; (iv) testing the completeness and accuracy of underlying data used in the discounted cash flow
analysis and market approach; and (v) evaluating the reasonableness of the significant assumptions used by management. Evaluating
management’s significant assumptions involved evaluating whether the assumptions used by management were reasonable
considering (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. Professionals with specialized skill
and knowledge were used to assist in evaluating the reasonableness of the discount rate and long-term growth rates significant
assumptions.
/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
February 29, 2024
We have served as the Company's auditor since 1983.
74
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
(Loss) 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
(1)
For the Years Ended December 31,
2022 (1)
2021 (1)
2023
$
137,243 $
128,566 $
44,237
12,619
1,166
195,265
133,801
36,287
14,822
1,819
186,729
8,536
(1,446)
—
(1,499)
(78)
5,513
141
5,372
208
39,916
10,881
1,155
180,518
124,834
32,184
13,174
1,876
172,068
8,450
(1,228)
—
1,662
(487)
8,397
1,615
6,782
78
$
$
$
5,164 $
6,704 $
17.57 $
17.39 $
21.66 $
21.41 $
121,413
41,154
9,953
1,549
174,069
117,553
33,565
13,012
1,998
166,128
7,941
(1,208)
(141)
—
198
6,790
1,370
5,420
50
5,370
15.89
15.75
Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts ("LDTI") in 2023. See Note 2 to the
Consolidated Financial Statements for further information.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
75
The Cigna Group
Consolidated Statements of Comprehensive Income
(In millions)
Net income
Other comprehensive income (loss), net of tax
Net unrealized appreciation (depreciation) on securities and derivatives
Net long-duration insurance and contractholder liabilities measurement adjustments
Net translation gains (losses) on foreign currencies
Postretirement benefits liability adjustment
Other comprehensive loss, 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
SHAREHOLDERS' COMPREHENSIVE INCOME
(1)
For the Years Ended December 31,
2022 (1)
2021 (1)
2023
$
5,372 $
6,782 $
5,420
503
(715)
5
1
(206)
5,166
180
28
—
208
(1,598)
509
77
420
(592)
6,190
11
67
(2)
76
(302)
67
(232)
410
(57)
5,363
19
31
(14)
36
$
4,958 $
6,114 $
5,327
Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 2 to the
Consolidated Financial Statements for further information.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
76
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
Assets of businesses held for sale, non-current
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
Liabilities of businesses held for sale, non-current
TOTAL LIABILITIES
Contingencies — Note 24
Redeemable noncontrolling interests
Shareholders' equity
Common stock (2)
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,
2023
2022 (1)
$
7,822 $
925
17,722
5,645
2,169
3,068
37,351
17,985
4,835
3,695
44,259
30,863
3,421
7,430
2,922
5,924
905
17,218
4,777
1,298
—
30,122
16,288
5,416
3,774
45,811
32,492
2,704
7,278
—
152,761 $
143,885
$
$
5,514 $
19,815
8,553
9,955
2,775
2,104
48,716
10,904
7,173
3,441
28,155
7,430
591
106,410
107
4
30,669
(1,864)
41,652
(24,238)
46,223
21
46,244
5,409
17,070
7,775
7,978
2,993
—
41,225
11,976
7,786
2,766
28,100
7,278
—
99,131
66
4
30,233
(1,658)
37,940
(21,844)
44,675
13
44,688
143,885
Total liabilities and equity
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 2 to the
152,761 $
$
Consolidated Financial Statements for further information.
(2) Par value per share, $0.01; shares issued, 400 million as of December 31, 2023 and 398 million as of December 31, 2022; authorized shares, 600 million.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
77
The Cigna Group
Consolidated Statements of Changes in Total Equity
(In millions)
Balance at December 31,
2020, as previously disclosed
Cumulative effect of adopting
LDTI (ASU 2018-12)
Balance at December 31, 2020,
as retrospectively restated
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
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
$
4 $ 28,975 $
(861) $ 28,575 $
(6,372) $
50,321 $
7 $ 50,328 $
58
(164)
25
(139)
(139)
4
28,975
(1,025)
28,600
(6,372)
50,182
7
50,189
58
604
(93)
(43)
5,370
(1,347)
(7,710)
511
(43)
5,370
(1,347)
(7,710)
511
(43)
31
5,401
(1,347)
(7,710)
(5)
(5)
(20)
(25)
Balance at December 31, 2021,
as retrospectively restated
$
4 $ 29,574 $
(1,068) $ 32,623 $ (14,175) $
46,958 $
18 $ 46,976 $
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
Balance at December 31,
2022, as retrospectively
restated
Effect of issuing stock for
employee benefit plans
Other comprehensive loss
Net income
Common dividends declared
(per share: $4.92)
Repurchase of common stock
Other transactions impacting
noncontrolling interests
659
—
(590)
6,704
(1,387)
(76)
(7,593)
583
(590)
6,704
(1,387)
(7,593)
583
(590)
67
6,771
(1,387)
(7,593)
—
(72)
(72)
$
4 $ 30,233 $
(1,658) $ 37,940 $ (21,844) $
44,675 $
13 $ 44,688 $
477
—
(41)
(206)
5,164
(1,452)
(112)
(2,282)
365
(206)
5,164
(1,452)
(2,282)
365
(206)
28
5,192
(1,452)
(2,282)
(41)
(20)
(61)
Balance at December 31, 2023
$
4 $ 30,669 $
(1,864) $ 41,652 $ (24,238) $
46,223 $
21 $ 46,244 $
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
78
(14)
19
(9)
54
(2)
11
3
66
—
180
(139)
107
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
Loss (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 (USED IN) PROVIDED BY 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
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,
Cash, cash equivalents and restricted cash, December 31, (2)
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
For the Years Ended December 31,
2023
2022 (1)
2021(1)
$
5,372 $
6,782 $
5,420
3,035
78
(1,659)
1,499
—
(1,663)
(868)
(539)
584
2,030
3,481
463
11,813
1,078
972
186
586
(4,334)
(118)
(1,205)
(1,573)
(447)
13
(332)
(5,174)
167
(223)
1,198
—
(2,967)
1,491
(2,284)
187
(1,450)
(413)
(4,294)
16
2,361
5,976
8,337
$
$
$
(467)
7,870 $
1,471 $
1,330 $
2,937
487
(472)
(1,662)
—
(2,237)
(1,055)
393
(336)
1,760
1,734
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
(198)
(216)
—
141
(2,843)
(557)
(655)
805
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
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 2 to the
Consolidated Financial Statements for further information.
(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.
79
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 .......................................................................................................
Supplier Finance Program .......................................................................................................
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
9
INSURANCE INFORMATION
10
11
INVESTMENTS
12
13
14
15
16
WORKFORCE MANAGEMENT AND COMPENSATION
17
18
19
PROPERTY, LEASES AND OTHER ASSET BALANCES
20
21
COMPLIANCE, REGULATION AND CONTINGENCIES
22
23
24
RESULTS DETAILS
25
Goodwill, Other Intangibles and Property and Equipment .....................................................
Leases ......................................................................................................................................
Shareholders' Equity and Dividend Restrictions .....................................................................
Income Taxes ..........................................................................................................................
Contingencies and Other Matters ............................................................................................
Segment Information ...............................................................................................................
Page
81
81
87
88
88
89
90
91
93
95
101
104
109
114
115
115
117
117
120
123
126
127
128
131
132
80
Note 1 – Description of Business
The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our"),
is a global health company committed to creating a better future built on the vitality of every individual and every community. We
relentlessly challenge ourselves to partner and innovate solutions for better health. Powered by our people and our brands, we advance
our mission to improve the health and vitality of those we serve.
Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental and related products and services. The majority of
these products and services are offered through employers and other 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 operations, The Cigna Group also has certain
run-off operations.
A full description of our segments follows:
Evernorth Health Services partners with health plans, employers, governmental organizations and health care providers to solve
challenges in the areas of pharmacy benefits, home delivery pharmacy, specialty pharmacy, specialty distribution, and care delivery
and management solutions.
Cigna Healthcare includes the U.S. Healthcare and International Health operating segments which provide comprehensive medical
and coordinated solutions to clients and customers. During the fourth quarter of 2023, the U.S. Commercial and U.S. Government
operating segments merged to form the U.S. Healthcare operating segment. U.S. Healthcare provides commercial medical plans and
specialty benefits and solutions for insured and self-insured clients, Medicare Advantage, Medicare Supplement and Medicare Part D
plans for seniors and individual health insurance plans. International Health provides health care solutions in our international markets,
as well as health care benefits for globally mobile individuals and employees of multinational organizations.
In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription
Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to
Health Care Service Corporation ("HCSC") for $3.3 billion cash, subject to applicable regulatory approvals and other customary
closing conditions (the "HCSC transaction").
Other Operations comprises the remainder of our business operations, which includes ongoing businesses and exited businesses. Our
ongoing businesses include continuing business (corporate-owned life insurance ("COLI")), and our run-off businesses. Our run-off
businesses include (i) variable annuity reinsurance business (formerly referred to as 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 which were sold through reinsurance agreements. Our exited businesses
include the international life, accident and supplemental benefits businesses sold in July 2022 (the "Chubb transaction") and our
interest in a joint venture in Türkiye sold in December 2022.
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate
financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense
associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project
costs and eliminations for products and services sold between segments.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries. Intercompany
transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in
conformity with accounting principles generally accepted in the United States of America ("GAAP"). Certain amounts in prior years
related to the adoption of Targeted Improvements for the Accounting of Long-Duration Contracts, have been reclassified to conform
to the current year presentation. See "Recent Accounting Pronouncements" below.
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.
81
Recent Accounting Pronouncements
Targeted Improvements to the Accounting for Long-Duration Contracts, Accounting Standards Update ("ASU") 2018-12 and related
amendments
The Cigna Group adopted LDTI January 1, 2023, which includes the following key provisions:
•
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) are updated at least
annually with the effect of changes in those assumptions remeasured retrospectively and reflected in current period
net income.
Discount rate assumptions are 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 are 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 ("MRB"), defined as protecting the contractholder from other-than-nominal capital market risk and
exposing the insurer to that risk, are measured at fair value, with changes in fair value recognized in net income each period,
except for the effect of the Company's change in nonperformance risk (own credit risk), which is recognized in other
comprehensive income.
Additional disclosures, including disaggregated roll forwards for the liability for future policy benefits, market risk benefits,
contractholder deposit funds and DAC, as well as information about significant inputs, judgments, assumptions and methods
used in measurement.
The transition methods applied at adoption were:
•
•
•
The liability for future policy benefits was remeasured using a modified retrospective approach applied to all
outstanding contracts as of the beginning of the earliest period presented and was recognized in the opening balance
of retained earnings. The impact of remeasuring the future policy benefits liability for the discount rate was recorded
through accumulated other comprehensive income.
DAC followed the transition method used for future policyholder benefits.
•
• Market risk benefits were remeasured at fair value at the beginning of the earliest period presented. The difference
between this fair value and carrying value was recognized in the opening balance of retained earnings, excluding the
effect of the Company's change in nonperformance risk (own credit risk), which was recognized in accumulated
other comprehensive income.
Effects of adoption:
•
•
•
•
•
The new guidance applies to our long-duration insurance products predominantly within the Cigna Healthcare segment and
Other Operations.
The cumulative effects of adopting the new standard were immaterial. The impacts were a decrease to January 1, 2021
Shareholders' equity of $139 million and an increase to Shareholders' net income for the years ended December 31, 2022 and
December 31, 2021 of $36 million and $5 million, respectively. The corresponding impact to diluted earnings per share was
an increase of $0.11 and $0.02 for the years ended December 31, 2022 and December 31, 2021, respectively.
The prior periods within our Consolidated Statements of Income, Consolidated Statements of Comprehensive Income,
Consolidated Balance Sheets, Consolidated Statements of Changes in Total Equity and Consolidated Statements of Cash
Flows were restated to conform to the current presentation.
Prior period balances in the Company's footnote disclosures have been updated to reflect adjustments resulting from the
adoption of this standard. Refer to Note 10 to the Consolidated Financial Statements for the Company's updated accounting
policies.
It is possible that our income recognition pattern could change on a prospective basis for several reasons:
•
•
Applying periodic assumption updates, versus the locked-in model, may change our timing of profit or loss
recognition.
DAC amortization is 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.
Additionally, in December 2022, the Financial Accounting Standards Board ("FASB") published ASU 2022-05, which simplified the
retrospective adoption of LDTI by permitting 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.
82
Accounting Guidance Not Yet Adopted
There are no significant accounting pronouncements not yet adopted as of December 31, 2023.
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 80.
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. Other Assets (Current and Non-Current)
Other current assets consist primarily of prepaid expenses, income tax receivables, accrued investment income and the current portion
of reinsurance recoverables. Other assets (non-current) consist primarily of the Company's net deferred tax asset associated with
foreign tax attributes (see Note 23) and the carrying value of our equity-method investments in business-related joint ventures in
China, 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 15 for additional information on unconsolidated subsidiaries. Additionally, Other assets (non-
current) includes operating lease right-of-use assets, various insurance-related assets and overfunded pension obligations (see Note
18). See Note 21 for the Company's accounting policy related to leases.
D. 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
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.
E. Accrued Expenses and Other Current and Non-Current Liabilities
Accrued expenses and other liabilities (current) primarily includes financial and performance guarantee liabilities (see section G) and
other liabilities arising from pharmacy contracts, management compensation, 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"), and amounts due to financial institutions under the accounts receivable
factoring facility (see Note 3). Other non-current liabilities primarily include uncertain tax positions (see Note 23), amounts held for
self-funded clients to cover the administration and payment of claims that may emerge post contract termination, lease liabilities (see
Note 21) and underfunded pension obligations (see Note 18).
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
83
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 24.
F. 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.
G. 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.
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 $1.6 billion as of December 31, 2023 and $1.3 billion as of December 31, 2022.
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.
84
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.
H. 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 plans 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 plans 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
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 individual
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. Cigna Healthcare's long-
duration premium revenues are associated with contracts that provide coverage greater than one year or are guaranteed to be renewed
at the option of the policyholder beyond one year. 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.
85
The unrecognized portion of premiums received is recorded as unearned premiums included in Insurance and contractholder liabilities
(current and non-current) (see Note 10 to the Consolidated Financial Statements for further information).
I. 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 solutions, 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.
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
86
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.
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 estimated based on
the Company's best information available at the time revenue is recognized.
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
Total
December 31,
2023
December 31,
2022
$
8,169 $
7,108
6,899
2,963
248
8,044
2,359
272
18,844
(1,122)
$
$
17,722 $
17,218
These receivables are reported net of our allowances of $3.7 billion as of December 31, 2023 and $1.9 billion as of December 31,
2022 as follows:
87
•
•
•
Included in our Pharmaceutical manufacturers receivables are contractual allowances for certain rebates receivable with
pharmaceutical manufacturers of $3.1 billion as of December 31, 2023 and $1.3 billion as of December 31, 2022.
Included in our Noninsurance customer receivables are contractual allowances from third-party payors of $386 million as of
December 31, 2023 and $336 million as of December 31, 2022 based upon the contractual payment terms.
The remaining allowances of $219 million as of December 31, 2023 and $226 million as of December 31, 2022 include
discounts and claims adjustments issued to customers in the form of client credits, an allowance for current expected credit
losses and other non-credit adjustments.
The Company's allowance for current expected credit losses was $90 million as of December 31, 2023 and $86 million as of
December 31, 2022.
Accounts Receivable Factoring Facility
In July 2023, the Company entered into an uncommitted factoring facility (the "Facility") under which certain accounts receivable may
be sold on a non-recourse basis to a financial institution. The Facility's total capacity is $1.0 billion with an initial term of two years,
followed by automatic one year renewal terms unless terminated by either party. The transactions under the Facility are accounted for
as a sale and recorded as a reduction to accounts receivable in the Consolidated Balance Sheets because control of, and risk related to,
the accounts receivable are transferred to the financial institution. Although the sale is made without recourse, we provide collection
services related to the transferred assets. Amounts associated with this Facility are reflected within Net cash provided by operating
activities in the Consolidated Statements of Cash Flows. Factoring fees paid under this Facility are reflected in Interest expense and
other in the Consolidated Statements of Income.
For the year ended December 31, 2023, we sold $2.1 billion of accounts receivable under the Facility and factoring fees paid were not
material. As of December 31, 2023, all sold accounts receivable have been collected from manufacturers, $515 million of which have
not been remitted to the financial institution. Such amounts are recorded within Accrued expenses and other liabilities in the
Consolidated Balance Sheets.
Note 4 – Supplier Finance Program
The Company facilitates a voluntary supplier finance program (the "Program") that provides suppliers the opportunity to sell their
accounts receivable due from us (i.e., our payment obligations to the suppliers) to a financial institution, on a non-recourse basis, in
order to be paid earlier than our payment terms require. 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. Amounts due to suppliers that participate in the Program are
generally paid within one month following the invoice date. A supplier's participation in the Program has no impact on the Company's
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 or pledged assets are provided by
the Company or any of our subsidiaries under the Program.
As of December 31, 2023 and December 31, 2022, $1.5 billion and $1.3 billion, respectively, of the Company's outstanding payment
obligations were confirmed as valid within the Program by the financial institution and are reflected in Accounts payable in the
Consolidated Balance Sheets. The amounts confirmed as valid for both periods are predominately associated with one supplier. As of
December 31, 2023, we have been informed by the financial institution that $298 million of the Company's outstanding payment
obligations were voluntarily elected by suppliers to be sold to the financial institution under the Program.
Note 5 – Mergers, Acquisitions and Divestitures
A.
Investment in CarepathRx Health Systems Solutions
In July 2023, Evernorth Health, Inc. acquired a minority interest in CarepathRx Health Systems Solutions ("CHSS"), a provider of
integrated hospital pharmacy solutions to support patients across their complete health care journey. This equity method investment is
reported in Other assets and the Company's share of CHSS' net income or loss is reported in Fees and other revenues. The purchase
price has been allocated to the acquired tangible and intangible assets, including customer relationships, trade names, internal-use
software and goodwill. Amortization of the acquired intangibles is included in Fees and other revenues. The Company's share of
CHSS' net loss and amortization of acquired intangibles were immaterial for the year ended December 31, 2023.
The Company guaranteed $125 million of CHSS' credit facilities through July 2026. The fair value of the guarantee is reflected in
other liabilities and is not material. The acquisition also includes separate put and call options to increase our ownership, which
88
become exercisable annually beginning as early as April 2025. The net fair value of the options, determined using a Monte Carlo
simulation, are not material and are included in Other non-current liabilities and Other assets, respectively.
B. Divestiture of International Businesses
In July 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) (the "Chubb transaction") for approximately $5.4 billion in cash and
recognized a gain of $1.7 billion pre-tax ($1.4 billion after-tax), which included recognition of previously unrealized capital losses on
investments sold and translation loss on foreign currencies. In 2023, we recorded immaterial adjustments to the sales price reflecting
resolution of certain contractual matters. In December 2022, the Company also divested its ownership interest in a joint venture in
Türkiye.
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
2023, the Company incurred net costs related to the HCSC and Chubb transactions. In 2022 and 2021, the Company incurred costs
related to the Chubb transaction, the sale of the Group Disability and Life business, the acquisition of MDLIVE and the terminated
merger with Elevance Health, Inc. ("Elevance"), formerly known as Anthem, Inc. These costs were $45 million pre-tax ($35 million
after-tax) for the year ended December 31, 2023, compared with $135 million pre-tax ($103 million after-tax) for the year ended
December 31, 2022 and $169 million pre-tax ($71 million after-tax) for the year ended December 31, 2021. 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 6 – 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.
In January 2024, the Company entered into the HCSC transaction for a total purchase price of approximately $3.3 billion cash, subject
to applicable regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of
2025.
During the fourth quarter of 2023, the Company determined that the Medicare Advantage, Medicare Stand-Alone Prescription Drug
Plans, Medicare Supplement and CareAllies businesses met the criteria to be classified as held for sale and aggregated and classified
the assets and liabilities as held for sale in our Consolidated Balance Sheet as of December 31, 2023. The Company measured the
assets and liabilities held for sale at estimated fair value less costs to sell and recognized an estimated loss of $1.5 billion pre-tax ($1.4
billion after-tax) that was included within (Loss) gain on sale of businesses in the Consolidated Statements of Income for the year
ended December 31, 2023. The estimated loss on sale represents primarily asset write-downs and estimated costs to sell.
The assets and liabilities of businesses held for sale were as follows:
(In millions)
Cash and cash equivalents
Investments
Accounts receivable, net
Other assets, including Goodwill (1)
Total assets of businesses held for sale
Insurance and contractholder liabilities
All other liabilities
Total liabilities of businesses held for sale
(1) Includes Goodwill of $396 million.
89
December 31,
2023
$
$
467
1,438
1,122
2,963
5,990
1,636
1,059
2,695
Note 7 – 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
2023
Effect of
Dilution
Diluted
Basic
2022
Effect of
Dilution
Diluted
Basic
2021
Effect of
Dilution
Shareholders' net income
$
5,164
$
5,164 $
6,704
$
6,704 $
5,370
For the Years Ended December 31,
Shares:
Weighted average
293,892
293,892
309,546
309,546
337,962
Common stock equivalents
Total shares
293,892
2,990
2,990
2,990
296,882
309,546
3,519
3,519
3,519
313,065
337,962
3,004
3,004
Diluted
$
5,370
337,962
3,004
340,966
Earnings per share
$
17.57 $
(0.18) $
17.39 $
21.66 $
(0.25) $
21.41 $
15.89 $
(0.14) $
15.75
Amounts reflected above for the years ended December 31, 2022 and 2021 have been restated to reflect the impact of adopting
amended accounting guidance for long-duration insurance contracts (discussed in Note 2 to the Consolidated Financial Statements).
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,
2023
2022
2021
0.9
1.0
1.5
90
Note 8 – 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
$17 million, 8.300% Notes due January 2023
$63 million, 7.650% Notes due March 2023
$700 million, Floating Rate Notes due July 2023
$1,000 million, 3.000% Notes due July 2023
$1,187 million, 3.750% Notes due July 2023
$500 million, 0.613% Notes due March 2024
$1,000 million, 3.500% Notes due June 2024 (1)
Other, including finance leases
Total short-term debt
Long-term debt
$500 million, 0.613% Notes due March 2024
$1,000 million, 3.500% Notes due June 2024
$900 million, 3.250% Notes due April 2025 (2)
$2,200 million, 4.125% Notes due November 2025 (1)
$1,500 million, 4.500% Notes due February 2026 (1)
$800 million, 1.250% Notes due March 2026 (1)
$700 million, 5.685% Notes due March 2026
$1,500 million, 3.400% Notes due March 2027
$259 million, 7.875% Debentures due May 2027
$600 million, 3.050% Notes due October 2027 (1)
$3,800 million, 4.375% Notes due October 2028
$1,500 million, 2.400% Notes due March 2030 (1)
$1,500 million, 2.375% Notes due March 2031 (2)
$45 million, 8.080% Step Down Notes due January 2033 (3)
$800 million, 5.400% Notes due March 2033
$190 million, 6.150% Notes due November 2036
$2,200 million, 4.800% Notes due August 2038
$750 million, 3.200% 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, 4.800% Notes due July 2046
$1,000 million, 3.875% Notes due October 2047
$3,000 million, 4.900% Notes due December 2048
$1,250 million, 3.400% Notes due March 2050
$1,500 million, 3.400% Notes due March 2051
Other, including finance leases
December 31,
2023
December 31,
2022
$
$
$
1,237 $
—
—
—
—
—
500
996
42
2,775 $
— $
—
882
2,197
1,502
798
698
1,450
259
597
3,787
1,493
1,397
45
794
190
2,193
744
119
487
315
1,467
989
2,970
1,237
1,479
66
28,155 $
—
17
63
700
994
1,186
—
—
33
2,993
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
Total long-term debt
(1) Included in the February 2024 debt tender offers discussed below.
(2) The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 12 to the Consolidated Financial
$
Statements for further information about the Company's interest rate risk management and these derivative instruments.
(3) Interest rate step down to 8.080% 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 providing liquidity support if necessary under our commercial paper program discussed below. As of
December 31, 2023, there were no outstanding balances under these revolving credit agreements.
91
In April 2023, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"):
•
•
a $4.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2028 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 $4.0 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 364-day revolving credit agreement that will mature in April 2024. 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 both
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 two facilities is diversified among 21 large commercial banks, all of which had an A- equivalent or higher rating by at
least one Nationally Recognized Statistical Rating Organization ("NRSRO") as of December 31, 2023. 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 in April 2027; a
$1.0 billion three-year revolving credit agreement maturing in April 2025; and a $1.0 billion 364-day revolving credit agreement
maturing in April 2023.
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. The weighted average interest rate of our commercial paper was 5.63% at
December 31, 2023.
Long-term debt
Debt Issuance and Debt Tender Offers. On February 5, 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt
were used to pay the consideration for the cash tender offers as described below. We intend to use the remaining net proceeds to fund
the repayment of our senior notes maturing in March 2024 and for general corporate purposes, which may include repayment of
indebtedness and repurchases of shares of our common stock.
Concurrent with the debt issuance, we commenced tender offers to purchase for cash up to $2.25 billion in aggregate principal amount
of outstanding notes, which included any and all of the $1.0 billion senior notes due June 2024. Following the early tender results, we
increased the tender offers to up to $2.55 billion aggregate principal amount. On February 22, 2024, we purchased $1.8 billion
principal amount of notes at early settlement of the tender offers. The tender offers will expire on March 5, 2024.
On March 7, 2023, the Company issued $1.5 billion of new senior notes. The proceeds of this issuance were used for general
corporate purposes, and included repayment of outstanding debt securities. Interest on this debt is paid semi-annually.
Principal
$700 million (1)
$800 million (2)
Maturity Date
March 15, 2026
March 15, 2033
Interest Rate
5.685%
5.400%
Net Proceeds
$698 million
$796 million
(1) Redeemable at any time discounted at the U.S. Treasury rate plus 20 basis points. Redeemable at par on or after March 15, 2024.
(2) Redeemable at any time discounted at the U.S. Treasury rate plus 25 basis points. Redeemable at par on or after December 15, 2032.
92
Debt Maturities. Maturities of outstanding long-term debt as of December 31, 2023 are as follows and exclude the impact of the 2024
debt issuance and debt tender offers described above:
(In millions)
2024
2025
2026
2027
2028
Scheduled
Maturities (1)
$
$
$
$
$
1,500
3,100
3,000
2,359
3,800
Maturities after 2028
(1) Long-term debt maturity amounts include current maturities of long-term debt. Finance leases are excluded from this table. See Note 21 - Leases for finance lease
$
16,122
maturity amounts.
Interest Expense
Interest expense on long-term and short-term debt was $1.4 billion in 2023 and $1.3 billion in both 2022 and 2021.
Debt Covenants
The Company was in compliance with its debt covenants as of December 31, 2023.
Note 9 – 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, 2023, 2022 or 2021.
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,
2023
2022
2021
298,676
1,619
(7,791)
292,504
107,390
399,894
322,948
3,173
(27,445)
298,676
99,143
397,819
354,771
3,375
(35,198)
322,948
71,246
394,194
During 2023, 2022 and 2021, The Cigna Group declared quarterly cash dividends of $1.23, $1.12 and $1.00 per share of the
Company's common stock, respectively.
93
The following table provides details of the Company's dividend payments:
Record Date
Payment Date
Amount per Share
Total Amount Paid (in millions)
2023
March 8, 2023
June 7, 2023
September 6, 2023
December 6, 2023
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
March 23, 2023
June 22, 2023
September 21, 2023
December 21, 2023
March 24, 2022
June 23, 2022
September 22, 2022
December 21, 2022
March 25, 2021
June 23, 2021
September 23, 2021
December 22, 2021
$1.23
$1.23
$1.23
$1.23
$1.12
$1.12
$1.12
$1.12
$1.00
$1.00
$1.00
$1.00
$368
$362
$362
$358
$357
$352
$341
$334
$345
$342
$330
$324
On February 2, 2024, the Board of Directors declared the first quarter cash dividend of $1.40 per share of The Cigna Group common
stock to be paid on March 21, 2024 to shareholders of record on March 6, 2024. 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
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 February 2024, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements
("2024 ASR agreements") with Deutsche Bank AG and Bank of America, N.A. (collectively, the "2024 Counterparties") to repurchase
$3.2 billion of common stock in aggregate. We remitted $3.2 billion to the 2024 Counterparties and received an initial delivery of
approximately 7.6 million shares of our common stock on February 15, 2024 representing $2.6 billion of the total remitted. The final
number of shares to be received under the ASR agreements will be determined based on the daily volume-weighted average share
price of our common stock over the term of the agreements, less a discount and subject to adjustments pursuant to the terms and
conditions of the ASR agreements. We expect final settlement under the ASR agreements to occur in the second quarter of 2024. At
final settlement, we may be entitled to receive additional shares of our common stock from the Counterparties or we may be required
to make a payment. If we are obligated to make a payment, we may elect to satisfy such obligation in cash or shares of our common
stock.
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 of our common stock over the term of the agreements,
less a discount, of $285.10 per share.
94
Note 10 – 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)
Unpaid claims and claim expenses
Cigna Healthcare
Other Operations
Future policy benefits
Cigna Healthcare
Other Operations
Contractholder deposit funds
Cigna Healthcare
Other Operations
Market risk benefits
Unearned premiums
Total
Insurance and contractholder liabilities classified as
liabilities of businesses held for sale (1)
December 31, 2023
December 31, 2022
Current
Non-current
Total
Current
Non-current
Total
$
5,017 $
75 $
5,092 $
4,117 $
99
97
163
12
362
37
846
154
253
518
3,375
133
6,178
966
22
615
3,538
145
6,540
1,003
868
6,633
11,421
18,054
(1,119)
(517)
(1,636)
107
43
150
14
351
51
576
59 $
177
544
3,442
157
6,358
1,217
22
4,176
284
587
3,592
171
6,709
1,268
598
Total insurance and contractholder liabilities
17,385
(1) Amounts classified as liabilities of businesses held for sale include $823 million of Unpaid claims, $429 million of Future policy benefits, $261 million of Unearned
11,976 $
16,418 $
10,904 $
5,409 $
5,514 $
$
premiums and $123 million of Contractholder deposit funds as of December 31, 2023.
Insurance and contractholder liabilities expected to be paid within one year are classified as current. The Company adopted amended
accounting guidance for long-duration insurance contracts on January 1, 2023, discussed further in Note 2 to the Consolidated
Financial Statements, which resulted in restatement of prior period amounts. Additionally, see below updated accounting policies and
incremental disclosures associated with future policy benefits (Note 10C), contractholder deposit funds (Note 10D), and market risk
benefits (Note 10E).
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).
The Company evaluates certain insurance contracts subject to premium deficiency testing and recognizes a premium deficiency loss
and corresponding reserve when expected claims costs, claims adjustment expenses, maintenance costs, and unamortized acquisition
costs exceed unearned premium. Anticipated investment income is considered in the calculation of premium deficiency.
B. Unpaid Claims and Claim Expenses – Cigna Healthcare
This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, expected development on
reported claims, claims that have been reported but not yet paid (reported claims in process) and other medical care expenses and
services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and
facilities.
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
95
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 and reported claims in process was $4.8
billion at December 31, 2023 and $3.9 billion at December 31, 2022.
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 (1)
(1) Includes $823 million classified as liabilities of businesses held for sale as of December 31, 2023.
For the Years Ended December 31,
2023
2022
2021
$
4,176 $
4,261 $
221
3,955
35,953
(279)
35,674
31,322
3,451
34,773
4,856
236
261
4,000
31,342
(259)
31,083
27,583
3,545
31,128
3,955
221
$
5,092 $
4,176 $
3,695
237
3,458
31,755
(219)
31,536
27,929
3,065
30,994
4,000
261
4,261
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 11
to the Consolidated Financial Statements for additional information on reinsurance.
Variances in incurred costs related to prior years' unpaid claims and claim expenses that resulted from the differences between actual
experience and the Company's key assumptions were as follows:
(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, 2022.
(2) Percentage of current year incurred costs as reported for the year ended December 31, 2021.
$
For the Years Ended December 31,
2023
2022
% (1)
$
% (2)
70
209
279
0.2 % $
0.7
0.9 % $
62
197
259
0.2 %
0.6
0.8 %
Favorable prior year development in both years reflects lower than expected utilization of medical services as compared to our
assumptions.
96
The following table depicts the incurred and paid claims development and unpaid claims liability as of December 31, 2023 (net of
reinsurance) reported in the Cigna Healthcare segment. The information about incurred and paid claims development for the year
ended December 31, 2022 is presented as supplementary information and is unaudited.
Incurral Year
(In millions)
2022
2023
Cumulative incurred costs for the periods presented
Incurral Year
(In millions)
2022
2023
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
2022
(Unaudited)
2023
Unpaid Claims &
Claim Expenses
$
30,309 $
$
30,050
34,878
64,928
209
4,498
Cumulative Costs Paid
2022
(Unaudited)
2023
$
26,687 $
$
$
$
29,841
30,380
60,221
4,707
149
4,856
236
5,092
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 2023 and 2022 was approximately 5.5 million and 5.0 million, respectively.
C. Future Policy Benefits
Accounting Policy. Future policy benefits represent the present value of estimated future obligations, estimated using actuarial
methods, for long-duration insurance policies and annuity products currently in force, consisting primarily of reserves for annuity
contracts, life insurance benefits, and certain supplemental health products that are guaranteed renewable beyond one year.
Contracts are grouped at a level no higher than issue year, based on the original contract issue date, and at lower levels of
disaggregation within each issue year for certain businesses to reflect factors including product type, plan type and currency.
Management estimates these obligations based on assumptions for premiums, interest rates, mortality or morbidity, future claim
adjudication expenses and surrenders. Mortality, morbidity and surrender assumptions are based on the Company's own experience
and published actuarial tables, and are updated at least annually, to the extent changes in circumstances require. Interest rate
assumptions are based on market-level yields for low credit risk fixed income instruments ("upper-medium grade fixed income
instrument"). For interest accretion purposes, interest rates are fixed at the year of the cohort's inception, however for purposes of
liability measurement, are updated to the current rate quarterly, with all changes in the interest rate from inception to current period
reported through Accumulated other comprehensive loss. For contracts issued domestically, we use observable inputs from a
published spot rate curve for terms up to 30 years and extrapolate for longer terms using a constant forward rate approach. For
contracts issued by foreign operating entities with functional currencies other than the U.S. dollar, we use observable inputs to
approximate a risk free rate and add a credit spread adjustment to align with a low-credit risk fixed income instrument. For terms
beyond the last observable risk free rates, which vary by international market, we extrapolate to the ultimate forward rate assuming a
constant credit spread.
For the annuity business, the premium paying period is shorter than the benefit coverage period, and a deferred profit liability is
reported in future policy benefits representing gross premium received in excess of net premiums. Deferred profit liability is amortized
based on expected future benefit payments.
97
As of December 31, 2023, approximately 34% of the liability for future policy benefits, excluding amounts held for sale, was
supported by assets in trust for the benefit of the ceding company under reinsurance agreements.
Cigna Healthcare
The weighted average interest rates applied and duration for future policy benefits in the Cigna Healthcare segment, consisting
primarily of supplemental health products including individual Medicare supplement, limited benefit health products and individual
private medical insurance, were as follows:
Interest accretion rate
Current discount rate
Weighted average duration
As of
December 31,
2023
December 31,
2022
2.54 %
4.92 %
2.58 %
5.57 %
7.9 years
7.7 years
98
The net liability for future policy benefits for the segment's supplemental health products represents the present value of benefits
expected to be paid to policyholders, net of the present value of expected net premiums, which is the portion of expected future gross
premium expected to be collected from policyholders that is required to provide for all expected future benefits and expenses. The
present values of expected net premiums and expected future policy benefits for the Cigna Healthcare segment are as follows:
(In millions)
Present value of expected net premiums
Beginning balance
Reversal of effect of beginning of period discount rate assumptions
Effect of assumption changes and actual variances from expected experience (1)
Issuances and lapses
Net premiums collected
Interest and other (2)
Ending balance at original discount rate
Effect of end of period discount rate assumptions
Ending balance (3)
Present value of expected policy benefits
Beginning balance
Reversal of effect of discount rate assumptions
Effect of assumption changes and actual variances from expected experience (1)
Issuances and lapses
Benefit payments
Interest and other (2)
Ending balance at original discount rate
Effect of discount rate assumptions
Ending balance (4)
Liability for future policy benefits
Other (5)
Total liability for future policy benefits (6)(7)
For the Years Ended December 31,
2023
2022
$
8,557 $
1,537
314
1,255
(1,370)
94
10,387
(1,154)
9,233 $
8,945 $
1,611
112
1,309
(1,374)
250
10,853
(1,220)
9,633 $
400 $
215
615 $
$
$
$
$
$
9,314
(367)
1,286
1,067
(1,280)
74
10,094
(1,537)
8,557
9,794
(379)
1,148
1,176
(1,401)
218
10,556
(1,611)
8,945
388
199
587
(1) Includes the effect of actual variances from expectations, which (decreased)/increased the total liability for future policy benefits by $(12) million and $46 million,
respectively, for the years ended December 31, 2023 and December 31, 2022.
(2) Includes the foreign exchange rate impact of translating from transactional and functional currency to United States dollar and the impact of flooring the liability at
zero. The flooring impact is calculated at the cohort level after discounting the reserves at the current discount rate.
(3) As of December 31, 2023 and December 31, 2022 undiscounted expected future gross premiums were $18.7 billion and $17.5 billion, respectively. As of
December 31, 2023 and December 31, 2022 discounted expected future gross premiums were $13.5 billion and $12.2 billion, respectively.
(4) As of December 31, 2023 and December 31, 2022, undiscounted expected future policy benefits were $13.3 billion and $12.7 billion, respectively.
(5) The liability for future policyholder benefits includes immaterial businesses shown as reconciling items above, most of which are in run-off.
(6) $72 million and $155 million reported in Reinsurance recoverables in the Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022,
respectively, relate to the liability for future policy benefits. Additionally, $79 million of reinsurance recoverables are reported in assets of businesses held for sale in
the Consolidated Balance Sheets as of December 31, 2023.
(7) Includes $429 million of future policy benefits classified as liabilities of businesses held for sale in the Consolidated Balance Sheets as of December 31, 2023.
Other Operations
The weighted average interest rates applied and duration for future policy benefits in Other Operations, consisting of annuity and life
insurance products, were as follows:
Interest accretion rate
Current discount rate
Weighted average duration
As of
December 31,
2023
December 31,
2022
5.64 %
4.87 %
5.64 %
5.19 %
11.4 years
11.5 years
Obligations for annuities represent discounted periodic benefits to be paid to an individual or groups of individuals over their
remaining lives. Other Operations' traditional insurance contracts, which are in run-off, have no premium remaining to be collected;
99
therefore, future policy benefit reserves represent the present value of expected future policy benefits, discounted using the current
discount rate, and the remaining amortizable deferred profit liability.
Future policy benefits for Other Operations includes deferred profit liability of $384 million and $390 million as of December 31,
2023 and December 31, 2022, respectively. Future policy benefits excluding deferred profit liability were $3.2 billion as of both
December 31, 2023 and December 31, 2022, and $4.3 billion as of December 31, 2021. These balances exclude amounts classified as
liabilities of businesses held for sale of $3.8 billion as of December 31, 2021. The change in future policy benefits reserves year-to-
date was primarily driven by changes in the current discount rate.
Undiscounted expected future policy benefits were $4.5 billion as of December 31, 2023 and $4.6 billion as of December 31, 2022. As
of December 31, 2023 and December 31, 2022, $1.0 billion and $1.1 billion, respectively, of the future policy benefit reserve was
recoverable through treaties with external reinsurers.
D. Contractholder Deposit Funds
Accounting Policy. Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-
related and universal life products as well as investment earnings on their fund balances in Other Operations. These liabilities are
adjusted to reflect administrative charges and, for universal life fund balances, mortality charges. Interest credited on these funds is
accrued ratably over the contract period.
Contractholder deposit fund liabilities within Other Operations were $6.5 billion, $6.7 billion and $6.9 billion as of December 31,
2023, December 31, 2022 and December 31, 2021, respectively. Approximately 39% of the balance is reinsured externally as of both
December 31, 2023 and December 31, 2022. Activity in these liabilities is presented net of reinsurance in the Consolidated Statements
of Cash Flows. The net year-to-date decrease in contractholder deposit fund liabilities generally relates to withdrawals and benefit
payments from contractholder deposit funds, partially offset by deposits and interest credited to contractholder deposit funds.
As of December 31, 2023, the weighted average crediting rate, net amount at risk and cash surrender value for contractholder deposit
fund liabilities not effectively exited through reinsurance were 3.31%, $3.0 billion and $2.8 billion, respectively. The comparative
amounts as of December 31, 2022 were 3.08%, $3.0 billion and $2.4 billion, respectively. More than 99% of the $4.0 billion liability
as of December 31, 2023 and the $4.1 billion liability as of December 31, 2022 not reinsured externally is for contracts with
guaranteed interest rates of 3% - 4%, and approximately $1.2 billion represented contracts with policies at the guarantee. At both of
these same period ends, $1.2 billion was 50-150 basis points ("bps") above the guarantee and the remaining $1.6 billion as of
December 31, 2023 and $1.7 billion as of December 31, 2022 represented contracts above the guarantee that pay the policyholder
based on the greater of a guaranteed minimum cash value or the actual cash value. More than 90% of these contracts have actual cash
values of at least 110% of the guaranteed cash value.
E. Market Risk Benefits
Liabilities for market risk benefits consist of variable annuity reinsurance contracts (formerly referred to as GMDB and GMIB
contracts) in Other Operations. These liabilities arise under annuities and riders to annuities written by ceding companies that
guarantee the benefit received at death and, for a subset of policies, also provide contractholders the option, within 30 days of a policy
anniversary after the appropriate waiting period, to elect minimum income payments. The Company's capital market risk exposure on
variable annuity reinsurance contracts arises when the reinsured guaranteed minimum benefit exceeds the contractholder's account
value in the related underlying mutual funds at the time the insurance benefit is payable under the respective contract. The Company
receives and pays premium periodically based on the terms of the reinsurance agreements.
Accounting Policy. Variable annuity reinsurance liabilities are measured as MRBs at fair value, net of nonperformance risk, with
fluctuations in value gross of reinsurer nonperformance risk reported in benefit expenses, while fluctuations in the Company's own
nonperformance risk (own credit risk) are reported in Accumulated other comprehensive loss. Nonperformance risk reflects risk that a
party might default and therefore not fulfill its obligations (i.e. nonpayment risk). The nonperformance 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
variable annuity reinsurance liabilities to be paid by the Company and (b) the variable annuity reinsurance assets to be paid by the
reinsurers, after considering collateral. The Company classifies variable annuity assets and liabilities in Level 3 of the fair value
hierarchy described in Note 13 to the Consolidated Financial Statements because assumptions related to future annuitant behavior are
largely unobservable. As discussed further in Note 11 to the Consolidated Financial Statements, due to the reinsurance agreements
covering these liabilities, the liabilities do not generally impact net income except for the change in nonperformance risk on the
reinsurance recoverable, which is reported in benefit expenses and does not offset the nonperformance risk valuation on the liability.
Variable annuity liabilities are established using capital market assumptions and assumptions related to future annuitant behavior
(including mortality, lapse and annuity election rates).
100
Market risk benefits activity was as follows:
(Dollars in millions)
Balance, beginning of year
Balance, beginning of year, before the effect of nonperformance risk (own credit risk)
Changes due to expected run-off
Changes due to capital markets versus expected
Changes due to policyholder behavior versus expected
Assumption changes
Balance, end of period, before the effect of changes in nonperformance risk (own credit risk)
Nonperformance risk (own credit risk), end of period
Balance, end of period
Reinsured market risk benefit, end of period
For the Years Ended December 31,
2023
2022
$
$
$
1,268 $
1,379
(19)
(254)
(5)
(16)
1,085
(82)
1,003 $
1,081 $
1,824
1,949
(54)
(567)
(14)
65
1,379
(111)
1,268
1,374
The following table presents the account value, net amount at risk, average attained age of contractholders (weighted by exposure) and
the number of contractholders for guarantees assumed by the Company. The net amount at risk is the amount that the Company would
have to pay to contractholders if all deaths or annuitizations occurred as of the earliest possible date in accordance with the insurance
contract. As of December 31, 2023, the account value increased primarily due to favorable equity market performance, which resulted
in an decrease 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)
Note 11 – Reinsurance
December 31,
2023
December 31,
2022
$
$
7,736 $
1,609 $
7,436
2,494
77.3 years
74.7 years
140,000
150,000
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.
101
The Company's reinsurance recoverables as of December 31, 2023 are presented at amount due by range of external credit rating and
collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value:
(In millions)
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
Acquisition, disposition or run-off activities
BBB+ equivalent and higher current ratings (1)
Lincoln National Life and Lincoln Life & Annuity of New York
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 (2)
No collateral
Total
$
— $
— $
90 $
—
151
151
—
—
341
—
166
—
507
—
5
5
2,656
—
—
356
19
7
59
182
331
—
130
—
—
14
4
3,038
3,043 $
148
479 $
90
59
338
487
2,656
130
341
356
199
11
3,693
4,180
Total reinsurance recoverables before market risk benefits
$
658 $
Allowance for uncollectible reinsurance
Market risk benefits (3)
Total reinsurance recoverables (4)
(1) Certified by a NRSRO.
(2) Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.
(3) Prior to the adoption of LDTI, "acquisition, disposition or run-off activities" in the table above included Berkshire and certain Other recoverables that are related to
5,226
1,081
$
(35)
the Company's variable annuity reinsurance products discussed in section B below. These amounts are now reported at fair market value as MRBs, as further
discussed in Note 10 to the Consolidated Financial Statements. At December 31, 2022, we reported $711 million of recoverables related to the GMDB variable
annuity reinsurance product. The restated December 31, 2022 variable annuity reinsurance recoverable balance is $1.4 billion, which also includes the GMIB
variable annuity reinsurance product that was classified in Other assets prior to the adoption of LDTI.
(4) Includes $183 million of current reinsurance recoverables that are reported in Other current assets and $208 million of reinsurance recoverables classified as assets
of businesses held for sale.
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. Effective Exit of Variable Annuity Reinsurance Business
The Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance
transaction in 2013. Variable annuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk
benefits as discussed in Note 10 to the Consolidated Financial Statements. Berkshire reinsured 100% of the Company's future cash
flows in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall
limit with approximately $3.1 billion remaining at December 31, 2023. As a result of the reinsurance transaction, amounts payable are
offset by a corresponding reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit.
(In millions)
Reinsurer (1)
Berkshire
Sun Life Assurance Company of Canada
Liberty Re (Bermuda) Ltd.
December 31,
2023
December 31,
2022
Collateral and Other Terms
at December 31, 2023
$
873 $
1,116 95% were secured by assets in a trust.
92
104
115
128 100% were secured by assets in a trust.
SCOR SE
Market risk benefits (2)
(1) All reinsurers are rated A- equivalent and higher by an NRSRO.
(2) Includes IBNR and outstanding claims of $19 million. These amounts are excluded from market risk benefits at December 31, 2023 in Note 10 and Note 11A to the
Consolidated Financial Statements. At December 31, 2022, IBNR and outstanding claims of $27 million offset by premium due of $3 million were excluded from the
market risk benefits as restated due to the adoption of LDTI.
39 80% were secured by a letter of credit.
1,100 $
1,398
$
31
The impact of nonperformance risk (i.e., the risk that a counterparty might default) on the variable annuity reinsurance asset was
immaterial for the years ended 2023, 2022 and 2021.
C. Effects of Reinsurance
The following table presents direct, assumed and ceded earned 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(1)
Long-duration contracts
Direct
Assumed
Ceded
Total long-duration contract premiums
Total premiums
For the Years Ended December 31,
2023
2022
2021
$
42,266 $
36,747 $
36,513
303
(277)
416
(265)
335
(148)
42,292
36,898
36,700
2,084
72
(211)
1,945
3,219
85
(286)
3,018
$
44,237 $
39,916 $
4,753
99
(398)
4,454
41,154
552
Total reinsurance recoveries
(1) Total short-duration contracts written premiums were $41.1 billion, $35.0 billion and $35.6 billion for 2023, 2022 and 2021, respectively.
456 $
$
702 $
103
Note 12 – Investments
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 13 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.
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
December 31, 2023
December 31, 2022
Current
Long-term
Total
Current
Long-term
Total
$
590 $
9,265 $
9,855 $
654 $
9,218 $
31
182
—
—
206
3,331
1,351
1,211
4,181
—
3,362
1,533
1,211
4,181
206
45
67
—
—
139
577
1,547
1,218
3,728
—
9,872
622
1,614
1,218
3,728
139
Total
Investments classified as assets of businesses held for sale (1)
$
1,009 $
19,339 $
20,348
(84)
(1,354)
(1,438)
Investments per Consolidated Balance Sheets
(1) Investments related to the HCSC transaction that were held for sale as of December 31, 2023. These investments were primarily comprised of debt securities and
16,288 $
18,910 $
17,985 $
905 $
925 $
$
17,193
commercial mortgage loans, and to a lesser extent, other long term investments.
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. Prior to the adoption of LDTI on January 1, 2023, net unrealized appreciation on debt securities supporting
the Company's run-off settlement annuity business was reported in Non-current insurance and contractholder liabilities rather than
Accumulated other comprehensive loss. See Note 16 for impact to 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 14 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.
104
The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of December 31, 2023:
(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
Amortized
Cost
Fair
Value
$
622 $
3,914
3,194
2,251
398
$
10,379 $
605
3,761
3,005
2,119
365
9,855
Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the
right to call or prepay obligations, with or without penalties.
Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below:
(In millions)
December 31, 2023
Federal government and agency
State and local government
Foreign government
Corporate
Mortgage and other asset-backed
Total
December 31, 2022
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
$
251 $
— $
24 $
(8) $
37
355
9,338
398
—
—
(33)
—
2
10
158
1
(1)
(13)
(630)
(34)
$
10,379 $
(33) $
195 $
(686) $
$
292 $
— $
32 $
(12) $
43
375
9,742
390
—
—
(44)
—
—
11
89
1
(2)
(21)
(981)
(43)
$
10,842 $
(44) $
133 $
(1,059) $
267
38
352
8,833
365
9,855
312
41
365
8,806
348
9,872
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, 2023
December 31, 2022
Fair
Value
Amortized
Cost
Unrealized
Depreciation
Number
of Issues
Fair
Value
Amortized
Cost
Unrealized
Depreciation
Number
of Issues
Investment grade
$
Below investment grade
330 $
161
338 $
170
More than one year
Investment grade
Below investment grade
5,441
701
6,036
775
Total
$
6,633 $
7,319 $
(8)
(9)
(595)
(74)
(686)
142
135
1,590
486
$
5,533 $
6,127 $
887
964
1,151
330
1,487
382
(594)
(77)
(336)
(52)
2,353 $
7,901 $
8,960 $
(1,059)
1,659
1,287
462
369
3,777
105
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.
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, 2023 or 2022.
(In millions)
Equity securities with readily determinable fair values
Equity securities with no readily determinable fair value
Total
December 31, 2023
December 31, 2022
Cost
Carrying
Value
Cost
Carrying
Value
$
$
656 $
51 $
3,248
3,311
673 $
380
3,904 $
3,362 $
1,053 $
138
484
622
In 2023, we became a minority owner in VillageMD by investing $2.7 billion in VillageMD preferred equity. VillageMD is a provider
of primary, multi-specialty and urgent care services that is majority-owned by Walgreens Boots Alliance, Inc. These securities are
included in Equity securities with no readily determinable fair value in the above table. A compounding dividend of 5.5% accrues
annually on $2.2 billion of our cost basis in these shares. Consistent with our strategy to invest in targeted startup and growth-stage
companies in the health care industry, approximately 95% of our investments in equity securities are in the health care sector.
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.
106
The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio:
(Dollars in millions)
December 31, 2023
December 31, 2022
Loan-to-Value Ratio
Below 60%
60% to 79%
80% to 100%
Total
Policy Loans
Carrying
Value
Average Debt
Service
Coverage Ratio
Average
Loan-to-
Value Ratio
Carrying
Value
Average Debt
Service
Coverage Ratio
Average
Loan-to-
Value Ratio
$
$
802
574
157
1,533
2.13
1.77
0.65
1.82
$
901
564
149
64 % $
1,614
2.12
1.73
1.17
1.89
60 %
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, 2023 and 2022 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 and certain 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 14 for additional information). The following table
provides unfunded commitment and carrying value information for these investments. The Company expects to disburse
approximately 25% of the committed amounts in 2024.
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 $253 million in 2023, $487 million in
2022 and $568 million in 2021.
(In millions)
Real estate investments
Securities partnerships
Other
Total
Carrying Value as of December 31,
Unfunded
Commitments as of
2023
2022
December 31, 2023
$
$
1,606 $
1,319 $
2,400
175
2,166
243
4,181 $
3,728 $
712
2,085
—
2,797
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.
107
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.
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
13. 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
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 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 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, 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.
The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated
Financial Statements as of December 31, 2023 and December 31, 2022. The gross fair values of our derivative financial instruments
are presented in Note 13 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,
2023
December 31,
2022
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
$
1,026 $
1,083
Interest rate swap contracts
$
1,500 $
1,500
Foreign currency swap contracts
$
415 $
460
108
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, 2023 or 2022.
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,
2023
2022
2021
$
500 $
572 $
123
65
60
123
339
1,210
44
14
59
59
390
115
1,209
54
$
1,166 $
1,155 $
689
12
60
63
758
26
1,608
59
1,549
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. With the adoption of amended accounting guidance for long-duration
insurance contracts on January 1, 2023 (discussed in Note 2 to the Consolidated Financial Statements), realized investment gains and
losses no longer exclude amounts that were previously required to adjust future policy benefits for the run-off settlement annuity
business. Prior period net realized investment losses have been updated to reflect the impact of adopting LDTI.
The following realized gains and losses on investments exclude 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) / recovery and other investment write-down (losses)
Net realized investment (losses) gains, before income taxes
For the Years Ended December 31,
2023
2022
2021
$
$
(68) $
(10)
(78) $
(451) $
(36)
(487) $
196
2
198
Net realized investment losses for the years ended December 31, 2023 and December 31, 2022 were primarily due to mark-to-market
losses on a strategic health care equity securities investment.
Note 13 – 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.
109
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
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. Further information
regarding insurance assets and liabilities carried at fair value is provided in Note 10E to the Consolidated Financial Statements.
Separate account assets are also recorded at fair value on the Company's Consolidated Balance Sheets and are reported separately in
the Separate Accounts section below as gains and losses related to these assets generally accrue directly to contractholders:
(In millions)
Quoted Prices in Active
Markets for Identical Assets
(Level 1)
Significant Other Observable
Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Total
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
December 31,
2023
December 31,
2022
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
$
130 $
147 $
137 $
165 $
— $
— $
267 $
—
—
—
—
130
4
—
—
—
—
—
—
147
6
—
—
38
352
8,432
319
9,278
47
206
131
41
365
8,394
313
9,278
132
139
230
—
—
401
46
447
—
—
1
—
—
412
35
447
—
—
1
38
352
8,833
365
9,855
51
206
132
312
41
365
8,806
348
9,872
138
139
231
Derivative liabilities
(1) Excludes certain equity securities that have no readily determinable fair value.
— $
— $
$
4 $
— $
— $
— $
4 $
—
110
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.
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, 2023 or December 31, 2022.
The nature and use of these derivative financial instruments are described in Note 12.
Level 3 Financial Assets and Financial Liabilities
Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their
resulting fair value measurement. Unobservable inputs reflect the Company's best estimate of what hypothetical market participants
would use to determine a transaction price for the asset or liability at the reporting date. Additionally, as discussed in Note 10E to the
Consolidated Financial Statements, the Company classifies variable annuity assets and liabilities in Level 3 of the fair value hierarchy.
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.
111
Quantitative Information about Unobservable Inputs
The significant unobservable input used to value our corporate and government debt securities and mortgage and other asset-backed
securities is an adjustment for liquidity. This adjustment is needed to reflect current market conditions and issuer circumstances when
there is limited trading activity for the security.
The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and
used in pricing these debt securities. The range and weighted average basis point amounts for liquidity reflect the Company's best
estimates of the unobservable adjustments a market participant would make to calculate these fair values.
(Fair value in millions)
Debt securities
Corporate
Mortgage and other asset-backed securities
Total Level 3 debt securities
Fair Value as of
Unobservable Adjustment Range
(Weighted Average by Quantity) as of
December 31,
2023
December 31,
2022
Unobservable Input
December 31, 2023
December 31,
2023
December 31,
2022
$
$
401 $
46
447 $
412
35
447
Liquidity
Liquidity
70 - 1235 (310) bps
60 - 1060 (270) bps
95 - 640 (310) bps
105 - 520 (310) bps
An increase in liquidity spread adjustments would result in a lower fair value measurement, while a decrease would result in a higher
fair value measurement.
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
(Losses) gains included in Shareholders' net income
Gains (losses) included in Other comprehensive loss
Purchases, sales and settlements
Purchases
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 for assets held at the end of the reporting period
For the Years Ended
December 31,
2023
2022
$
447 $
(2)
8
10
(52)
(42)
95
(59)
36
$
$
$
447 $
(2) $
3 $
796
11
(59)
158
(207)
(49)
124
(376)
(252)
447
(2)
(60)
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, net of tax in the tables above are reflected in Net unrealized appreciation
(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
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 2023 and 2022
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.
112
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. The separate account activity for the year ended December 31, 2023 and 2022 was
primarily driven by changes in the market values of the underlying separate account investments.
Fair values of Separate account assets were as follows:
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Total
December
31, 2023
December
31, 2022
December
31, 2023
December
31, 2022
December
31, 2023
December
31, 2022
December
31, 2023
December
31, 2022
(In millions)
Guaranteed separate accounts (See
Note 24)
Non-guaranteed separate accounts (1)
Subtotal
Non-guaranteed separate accounts
priced at NAV as a practical
expedient (1)
$
$
226 $
203 $
352 $
382 $
— $
— $
578 $
158
211
5,797
5,522
217
384 $
414 $
6,149 $
5,904 $
217 $
203
203
6,172
6,750
680
585
5,936
6,521
757
7,278
Total
(1) Non-guaranteed separate accounts include $4.0 billion as of December 31, 2023 and December 31, 2022 in assets supporting the Company's pension plans,
7,430 $
$
including $0.2 billion classified in Level 3 as of December 31, 2023 and December 31, 2022.
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.
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, 2023 or 2022.
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,
2023
December 31,
2022
Unfunded
Commitment as of
December 31, 2023
Redemption Frequency
(if currently eligible)
Redemption Notice
Period
$
$
419 $
451 $
258
3
302
4
254
—
Not applicable
Quarterly
— Up to annually, varying by fund
Not applicable
30 - 90 days
30 - 90 days
680 $
757 $
254
As of December 31, 2023, 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.
113
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, 2023 and 2022, realized investment gains and losses, including those from impairments recognized
and observable price changes, 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 14 – Variable Interest Entities
Classification in
Fair Value
Hierarchy
December 31, 2023
December 31, 2022
Fair Value
Carrying
Value
Fair Value
Carrying
Value
Level 3
Level 2
$
$
1,430 $
1,533 $
1,491 $
28,033 $
29,585 $
28,653 $
1,614
30,994
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, 2023 or 2022.
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 190 limited partnerships that have a carrying value of $2.9 billion as
of December 31, 2023 reported in other long-term investments. As of December 31, 2023, we have commitments to contribute an
additional $2.6 billion to these entities and the Company's maximum exposure to loss from these investments is $5.5 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 8% of the partnership ownership interests. See Note 12 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 $488 million as of December 31, 2023.
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. As of December 31, 2023,
the Company's maximum exposure to loss is $0.5 billion from certain asset-backed and corporate securities and $0.9 billion from real
estate joint ventures, which represents the sum of our carrying value and the additional funding commitments for these entities. The
114
carrying values and maximum exposures for the remaining unconsolidated variable interest entities were not material as of
December 31, 2023.
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.
Note 15 – 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 12), 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 $911 million as of December 31,
2023 and $734 million as of December 31, 2022, of which $214 million as of December 31, 2023 and $602 million as of
December 31, 2022 related to our joint venture in China. Total Accumulated Other Comprehensive Income ("AOCI") includes losses
of $510 million as of December 31, 2023 and $88 million as of December 31, 2022 related to the Company's share from
unconsolidated entities reported on the equity method primarily driven by the requirement to update discount rate assumptions for
certain long-duration liabilities following the adoption of LDTI (discussed in Note 2 to the Consolidated Financial Statements).
For the years ended December 31, 2023, 2022 and 2021, 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. Prior period operating joint venture amounts have been retrospectively restated to reflect
the adoption of amended accounting guidance for long-duration insurance contracts, as discussed in Note 2 to the Consolidated
Financial Statements.
(In millions)
Revenues
Net income (loss)
(In millions)
Total assets
Total liabilities
For the Years Ended December 31,
2023
2022
2021
$
$
5,962 $
98 $
4,665 $
(12) $
3,750
180
December 31,
2023
December 31,
2022
$
$
26,681 $
25,534 $
21,026
19,462
Note 16 – Accumulated Other Comprehensive Income (Loss)
AOCI includes net unrealized (depreciation) appreciation on securities and derivatives, change in discount rate and instrument specific
credit risk for certain long-duration insurance contractholder liabilities (Note 10 to the Consolidated Financial Statements), foreign
currency translation and the net postretirement benefits liability adjustment. AOCI includes the Company's share from unconsolidated
entities reported on the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified
to Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized.
Shareholders' other comprehensive (loss), net of tax, for the years ended 2023, 2022 and 2021, is primarily driven by the change in
discount rates for certain long-duration liabilities, unrealized changes in the market values of securities and derivatives and changes in
postretirement benefits liabilities, including the impacts from unconsolidated entities reported on the equity method.
115
Changes in the components of AOCI, including the restatement for amended accounting guidance for long-duration insurance
contracts (discussed in Note 2 to the Consolidated Financial Statements), are as follows:
(In millions)
Securities and Derivatives
Beginning balance, as previously disclosed
Cumulative effect of accounting for Long-duration Insurance Contracts guidance (ASU 2018-12)
Beginning balance, as retrospectively restated
Unrealized appreciation (depreciation) on securities and derivatives
Tax (expense) benefit
Net unrealized appreciation (depreciation) on securities and derivatives
Reclassification adjustment for losses included in Shareholders' net income ((Loss) gain on sale of businesses)
Reclassification adjustment for losses (gains) included in Shareholders' net income (Net realized investment
(losses) gains)
Reclassification adjustment for (gains) included in Shareholders' net income (Selling, general and administrative
expenses)
Reclassification adjustment for tax (benefit) expense included in Shareholders' net income
Net losses (gains) reclassified from AOCI to Shareholders' net income
Other comprehensive income (loss), net of tax
Ending balance
(In millions)
Net long-duration insurance and contractholder liabilities measurement adjustments (1)
Beginning balance, as previously disclosed
Cumulative effect of accounting for Long-duration Insurance Contracts guidance (ASU 2018-12)
For the Years Ended December 31,
2023
2022
2021
$
(332) $
620
(146)
474
—
38
(1)
(8)
29
503
$
1,266
(2,274)
467
(1,807)
172
47
—
(10)
209
(1,598)
900
668
1,568
(335)
52
(283)
—
(24)
—
5
(19)
(302)
$
171 $
(332) $
1,266
For the Years Ended December 31,
2023
2022
2021
$
(765)
642
(122)
520
(14)
3
(11)
509
Beginning balance, as retrospectively restated
$
(256) $
Current period change in discount rate for certain long-duration liabilities
Tax benefit (expense)
Net current period change in discount rate for certain long-duration liabilities
Current period change in instrument-specific credit risk for market risk benefits
Tax benefit (expense)
Net current period change in instrument-specific credit risk for market risk benefits
Other comprehensive (loss) income, net of tax
(913)
222
(691)
(29)
5
(24)
(715)
Ending balance
(1) Established upon the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 2 to the Consolidated Financial
(971) $
(256) $
$
Statements for further information.
(In millions)
Translation of foreign currencies
Beginning balance, as retrospectively restated
Translation of foreign currencies
Tax benefit (expense)
Net translation of foreign currencies
Reclassification adjustment for losses included in Net income ((Loss) gain on sale of businesses)
Reclassification adjustment for tax expense included in Net income
Net translation losses reclassified from AOCI to Net income
Translation of foreign currencies
Tax benefit (expense)
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
For the Years Ended December 31,
2023
2022
2021
$
(154) $
(233) $
—
5
5
—
—
—
—
5
5
—
5
(277)
(33)
(310)
358
29
387
81
(4)
77
(2)
79
Ending balance
$
(149) $
(154) $
116
—
(832)
(832)
59
(3)
56
13
(2)
11
67
(765)
(15)
(213)
(19)
(232)
—
—
—
(213)
(19)
(232)
(14)
(218)
(233)
(In millions)
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 ((Loss) 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 benefit (expense)
Net change due to valuation update
Other comprehensive income, net of tax
Ending balance
(In millions)
Total Accumulated other comprehensive loss
Beginning balance, as previously disclosed
Cumulative effect of accounting for Long-duration Insurance Contracts guidance (ASU 2018-12)
Beginning balance, as retrospectively restated
Shareholders' other comprehensive (loss), net of tax
Ending balance
Note 17 – Organizational Efficiency Plan
For the Years Ended December 31,
2023
2022
2021
$
(916) $
(1,336) $
(1,746)
46
—
—
(11)
35
(46)
12
(34)
1
65
(1)
—
(16)
48
487
(115)
372
420
85
—
4
(21)
68
448
(106)
342
410
$
(915) $
(916) $
(1,336)
For the Years Ended December 31,
2023
2022
2021
(1,658) $
(1,068)
(206)
(590)
$
(861)
(164)
(1,025)
(43)
(1,864) $
(1,658) $
(1,068)
$
$
During the fourth quarter of 2023, the Company approved a strategic realignment to drive greater operating effectiveness and
efficiency. This plan positions us to be more efficient and focused to deliver differentiated value and services to our clients and
customers.
We recognized a charge in Selling, general and administrative expenses of $252 million, pre-tax ($193 million, after-tax). This charge
included $232 million of accrued expenses primarily for severance costs related to headcount reductions, as well as, $20 million of
one-time expenses related to abandonment of leased assets and impairment of property and equipment. We expect substantially all of
the accrued liability to be paid by the end of 2024.
The following table summarizes a roll forward of the accrued liability recorded in Accrued expenses and other liabilities:
(In millions)
Balance, December 31, 2022
Fourth quarter 2023 charge
2023 payments
Balance, December 31, 2023
Note 18 – Pension
A. About Our Plans
$
$
—
232
(30)
202
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
117
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 $4.0 billion, compared with a fair value of approximately $4.1 billion at December 31, 2023.
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 losses (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
(1) 2023 losses reflect a decrease in the discount rate while 2022 gains reflect an increase in the discount rate.
For the Years Ended
December 31,
2023
2022
$
3,948 $
5,223
1
204
93
(294)
(18)
3,934
4,186
246
(294)
—
4,138
204 $
2
140
(1,094)
(296)
(27)
3,948
4,846
(366)
(296)
2
4,186
238
204 $
238
$
$
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 2023. For
2024, contributions to the qualified pension plans are expected to be immaterial. Future years' contributions will ultimately be based
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.
118
Benefit payments. The following benefit payments are expected to be paid in:
(In millions)
2024
2025
2026
2027
2028
2029 - 2033
$
$
$
$
$
$
319
316
317
314
311
1,484
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,
2023
December 31,
2022
$
$
(1,207) $
(1,208)
(4)
(5)
(1,211) $
(1,213)
For the Years Ended December 31,
2023
2022
2021
$
1 $
2 $
204
(204)
52
—
140
(272)
89
—
$
53 $
(41) $
2
132
(269)
78
4
(53)
For the Years Ended December 31,
2023
5.10%
5.43%
6.50%
2022
5.43%
2.82%
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.
E. Pension Plan Assets
As of December 31, 2023, 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 $0.1 billion invested in funds of unaffiliated investment managers.
119
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
Guaranteed deposit account contract
Cash equivalents and other current assets, net
December 31,
2023
December 31,
2022
$
12 $
2,780
121
278
3,191
27
6
33
419
270
46
48
131
11
2,349
109
478
2,947
89
35
124
452
315
63
50
235
4,186
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.
$
4,138 $
The Company's current target investment allocation percentages are 90% fixed income and 10% 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. The Company will
evaluate further allocation changes to equity securities, other investments and fixed income securities as funding levels change.
See Note 13 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. All domestic equity securities and international equity funds within pension assets are classified as 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 13 for additional disclosures related to these assets invested in the separate accounts of the Company's
subsidiary. Certain securities as described in Note 13, 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
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 19 – Employee Incentive Plans
A. About Our Plans
For the Years Ended December 31,
2023
2022
2021
$
296 $
274 $
268
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.
120
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,
2023
December 31,
2022
December 31,
2021
14.4
16.6
19.1
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
2023
2022
2021
1.58 %
30.0 %
3.6 %
1.98 %
30.0 %
1.6 %
1.85 %
30.0 %
0.5 %
4.7 years
4.5 years
4.5 years
$
79.66
$
50.61
$
44.84
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.
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,
2023
2022
2021
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
6,992 $
915 $
(1,080) $
(131) $
6,696 $
4,616 $
186.54
294.37
174.66
246.95
202.02
179.28
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
Compensation expense of $67 million related to unvested stock options at December 31, 2023 will be recognized over the next two
years (weighted average period).
121
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,
2023
2022
2021
$
$
$
126 $
187 $
17 $
313 $
389 $
47 $
268
326
50
December 31, 2023
Options
Outstanding
Options
Exercisable
$
$
6,696
652 $
4,616
555
202.02 $
179.28
5.9 years
4.7 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.
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,
2023
2022
2021
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
1,535 $
700 $
(759) $
(72) $
1,404 $
219.25
294.60
214.70
256.24
257.38
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
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,
2023
2022
2021
$
220 $
167 $
183
Approximately 8,900 employees held 1.4 million restricted stock awards at the end of 2023 with $196 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.
122
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,
2023
2022
2021
Weighted
Average Fair
Value at
Award Date
Shares
Weighted
Average Fair
Value at
Award Date
Shares
Weighted
Average Fair
Value at
Award Date
Shares
780 $
219 $
(250) $
(63) $
686 $
212.68
293.85
191.78
237.50
243.90
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
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, 2023, 2022 and 2021 was $329.11, $258.37 and $239.57, respectively.
The fair value of vested SPSs at the vesting date was as follows:
For the Years Ended December 31,
2023
2022
2021
(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
257 $
76
137 $
31
243 $
51
Approximately 600 employees held 686,000 SPSs at the end of 2023 and $61 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 2024 and 2025.
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 income
tax expense 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 20 – Goodwill, Other Intangibles and Property and Equipment
A. Goodwill
For the Years Ended December 31,
2023
2022
2021
$
$
286 $
92 $
264 $
80 $
268
73
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. Following a change in reporting units or held for sale determination, goodwill is allocated using
relative fair value. 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
123
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.
Goodwill activity. Goodwill activity was as follows:
(In millions)
Balance at January 1, 2022 (1)
Goodwill disposed
Impact of foreign currency translation and other adjustments
Goodwill at December 31, 2022
Goodwill transferred to assets of businesses held for sale
Impact of foreign currency translation and other adjustments
Evernorth
Health Services
Cigna
Healthcare
Other
Operations
Total
$
35,128 $
10,683 $
234 $
46,045
—
2
35,130
—
—
—
(2)
10,681
(1,553)
1
(234)
—
—
—
—
(234)
—
45,811
(1,553)
1
Goodwill at December 31, 2023
$
35,130 $
9,129 $
— $
44,259
(1) Includes $234 million classified as assets of businesses held for sale, all reported within Other Operations.
B. Other Intangible Assets
Accounting policy. The Company's Other intangible assets primarily include purchased customer and producer relationships,
trademarks and provider networks. 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.
Components of other assets, including other intangibles. Other intangible assets were comprised of the following:
(In millions)
December 31, 2023
Customer relationships
Trade Name - Express Scripts
Other
Other intangible assets
Value of business acquired ("VOBA" reported in Other assets)
Total (1)
December 31, 2022
Customer relationships
Trade Name - Express Scripts
Other
Other intangible assets
Value of business acquired (reported in Other assets)
Total
Cost
Accumulated
Amortization
Net Carrying
Value
$
29,978 $
7,645 $
22,333
$
$
8,400
317
38,695
211
110
7,755
142
8,400
207
30,940
69
38,906 $
7,897 $
31,009
29,974 $
6,099 $
23,875
8,400
348
38,722
210
131
6,230
133
8,400
217
32,492
77
$
38,932 $
6,363 $
32,569
(1) Includes $69 million of VOBA and $77 million of Other intangible assets classified as assets of businesses held for sale.
The Company has indefinite-lived intangible assets totaling $8.5 billion at December 31, 2023 and December 31, 2022, largely
consisting of the Express Scripts trade name.
124
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
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 and internally developed software, three to
five 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, 2023
Internal-use software
Other property and equipment
Total property and equipment (1)
December 31, 2022
Internal-use software
Other property and equipment
$
$
$
Total property and equipment
$
(1) Includes $176 million of Property and equipment net carrying value classified as assets of businesses held for sale.
Cost
Accumulated
Amortization
Net Carrying
Value
10,155 $
7,161 $
2,282
1,405
12,437 $
8,566 $
8,948 $
6,100 $
2,256
1,330
11,204 $
7,430 $
2,994
877
3,871
2,848
926
3,774
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,
2023
2022
2021
$
1,216 $
1,068 $
1,097
260
7
1,552
251
12
1,606
$
3,035 $
2,937 $
253
25
1,548
2,923
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)
2024
2025
2026
2027
2028
Pre-tax
Amortization
$
$
$
$
$
2,892
2,357
1,803
1,559
1,484
125
Note 21 – Leases
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
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,
2023
2022
2021
$
115 $
124 $
41
4
45
38
33
2
35
41
$
198 $
200 $
For the Years Ended December 31,
2023
2022
2021
$
$
$
$
$
132 $
4 $
39 $
103 $
48 $
148 $
2 $
33 $
43 $
84 $
170
22
2
24
39
233
167
2
22
122
20
126
Operating and finance lease ROU assets and lease liabilities were as follows:
(In millions)
Operating leases:
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
Total finance lease liabilities
December 31,
2023
December 31,
2022
$
$
$
$
$
$
$
370 $
105 $
340
445 $
177 $
(73)
104 $
42 $
66
108 $
375
114
346
460
145
(48)
97
33
66
99
As of December 31, 2023, the weighted average remaining lease term was 6 years for operating leases and 3 years for finance leases,
and the weighted average discount rate was 3.45% for operating leases and 4.29% for finance leases.
Maturities of lease liabilities are as follows:
(In millions)
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total
Operating
Leases
Finance
Leases
$
110 $
102
83
63
41
98
497
52
$
445 $
46
38
19
6
6
—
115
7
108
Note 22 – 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
2023
2022
2021
$
$
5.3 $
14.9 $
5.7 $
16.4 $
3.4
13.3
127
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 2024 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,
2023
$
$
$
$
$
4.8
0.3
2.1
1.4
12.3
Permitted practices used by the Company's insurance subsidiaries in 2023 that differed from prescribed regulatory accounting had an
immaterial impact on statutory surplus.
Undistributed earnings for equity method investments are $1.0 billion as of December 31, 2023.
Note 23 – 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
For the Years Ended December 31,
2023
2022
2021
$
1,459 $
1,679 $
1,267
161
180
1,800
(533)
(1,046)
(80)
(1,659)
219
189
2,087
(275)
(28)
(169)
(472)
207
112
1,586
(163)
69
(122)
(216)
$
141 $
1,615 $
1,370
128
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
Impact of businesses held for sale
Effect of foreign earnings
State income tax (benefit), net of federal income tax benefit
Swiss tax attributes
Other foreign tax attributes
Change in valuation allowance
Other
Total income taxes
For the Years Ended December 31,
2023
2022
2021
$
%
$
%
$
%
$
1,158
21.0 % $
1,763
21.0 % $
1,426
21.0 %
—
(213)
(173)
(39)
(1,674)
(153)
1,290
(55)
141
$
—
(3.9)
(3.1)
(0.7)
(30.4)
(2.8)
23.4
(0.9)
(37)
—
(96)
16
—
—
—
(0.4)
—
(1.2)
0.2
—
—
—
(31)
(0.4)
—
—
(33)
(9)
—
—
—
(14)
2.6 % $
1,615
19.2 % $
1,370
—
—
(0.5)
(0.1)
—
—
—
(0.2)
20.2 %
Consolidated pre-tax income from the Company's foreign operations was approximately 48% of the Company's pre-tax income in
2023, 46% in 2022 and 26% in 2021. The increase over 2022 is primarily driven by an increase to the Company's international
pharmaceutical operations, partially offset by a reduction in earnings from the sold entities.
Foreign Jurisdiction Tax Attributes. Impacting the effective tax rate for the year ended December 31, 2023 was the recording of the
Company's net deferred tax asset associated with foreign tax law changes and agreements in certain tax jurisdictions. The Company
established deferred tax assets of approximately $1.8 billion associated with the foreign tax attributes and a related $772 million
valuation allowance against these deferred tax assets based on projections of future earnings and requirements to utilize the assets
within certain time periods. It is possible in future periods that the Company may revalue these net deferred tax assets due to
modifications in certain assumptions such as forecasted future earnings.
Sale of Medicare Advantage and Related Businesses. The Company recorded $584 million of deferred tax benefits and an equal
amount of valuation allowance in connection with the HCSC transaction. The valuation allowance has been recorded due to the
uncertainty relative to the recovery of the deferred tax benefits as the Company does not currently have capital gain capacity to offset
these capital losses.
129
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
Deferred loss - sale of business
Other accrued liabilities
Policy acquisition expenses
Unrealized depreciation on investments and foreign currency translation
Foreign tax attributes
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
Other
December 31,
2023
December 31,
2022
$
217 $
353
200
584
244
39
81
1,827
242
3,787
(1,498)
2,289
371
8,105
—
189
278
205
—
265
36
159
—
190
1,322
(208)
1,114
512
8,347
41
Total deferred tax liabilities
Net deferred income tax liabilities(1)
(7,786)
(1) Deferred tax liabilities, net in the Consolidated Balance Sheets as of December 31, 2023, excludes $1,055 million reported in Other assets and $69 million reported
(6,187) $
8,900
8,476
$
in liabilities of businesses held for sale.
Management believes that future results will be sufficient to realize a majority of the Company's gross deferred tax assets. As of
December 31, 2023, we had approximately $218 million in deferred tax assets ("DTAs") associated with unrealized investment losses
that are partially 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 carry back losses and our ability and intent to hold certain securities
until recovery. We continue to monitor and evaluate the need for any valuation allowance in the future. As of December 31, 2023, we
had approximately $1.8 billion in DTAs associated with the foreign tax attributes as discussed above. We have determined that
approximately $772 million valuation allowance against these DTAs is required based on the Company's taxable income projections
and the requirement to utilize the assets within certain time periods. Additionally, the Company has $584 million of deferred tax assets
and a full valuation allowance associated with the HCSC transaction, as discussed above. 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.
C. Uncertain Tax Positions
Reconciliations of unrecognized tax benefits were as follows:
(In millions)
Balance at January 1,
(Decrease) / 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,
2023
2022
2021
$
1,343 $
1,230 $
1,210
(26)
107
(13)
(12)
8
137
(4)
(28)
21
31
(15)
(17)
$
1,399 $
1,343 $
1,230
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
130
expense on uncertain tax positions was approximately $220 million as of December 31, 2023, $176 million as of December 31, 2022
and $148 million as of December 31, 2021.
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 2014 for The Cigna Group's
entities and 2010 for Express Scripts' entities.
Pillar Two. On December 15, 2022, the European Union ("EU") Member States formally adopted the EU's Pillar Two Directive,
which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and
Development ("OECD") Pillar Two Framework that was supported by over 130 countries worldwide. The EU effective dates are
January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are also
implementing similar legislation, and the OECD continues to release additional guidance on these rules. The Company is within the
scope of the OECD Pillar Two model rules and continues to evaluate the potential impact on future periods of the Pillar Two
Framework, pending legislative adoption by additional individual countries but expects the impact to not materially change its results
from operations.
Note 24 – 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, 2023, 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, 2023. 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, 2023 in connection with acquisition and disposition transactions.
These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as
representations for the presentation of financial statements, filing of tax returns, compliance with laws or regulations or identification
of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of
law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a
stated dollar amount or a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable.
The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not
all amounts due under these indemnification obligations are subject to limitation. There were no liabilities for these indemnification
obligations as of December 31, 2023.
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.
131
There were no material charges or credits resulting from existing or new guaranty fund assessments for the year ended December 31,
2023.
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 23.
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 accrual for the matter discussed below under "Litigation Matters" is not material. Due to
numerous uncertain factors presented in this case, it is not possible to estimate an aggregate range of loss (if any) for this matter at this
time. In light of the uncertainties involved in this matter, there is no assurance that its ultimate resolution will not exceed the amount
currently accrued by the Company. An adverse outcome in this matter 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 this ongoing litigation matter 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, with alleged damages over $100 million. On November 1, 2023, the parties signed a settlement agreement pursuant to
which Express Scripts agreed to resolve the service-related claims. The settlement agreement is not an admission of liability or fault
by Express Scripts, the Company or its subsidiaries. Following the settlement, Elevance retains the right to appeal the pricing-related
claims that were previously dismissed by the court and Express Scripts retains the ability to reassert its own pricing-related claims in
the event any appeal by Elevance is successful. Elevance filed its Notice of Appeal of its pricing-related claims on December 12,
2023. Elevance’s opening appellate brief is due March 25, 2024.
Note 25 – Segment Information
See Note 1 to the Consolidated Financial Statements for a description of our segments. A description of our basis for reporting
segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy and care services transactions between
the Evernorth Health Services and Cigna Healthcare segments.
The 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
132
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)
Loss (gain) on sale of businesses
Charge for organizational efficiency plan
(Selling, general and administrative expenses)
Charges (benefits) associated with litigation matters
(Selling, general and administrative expenses)
Integration and transaction-related costs
(Selling, general and administrative expenses)
Deferred tax (benefits), net
(Income taxes, less amount attributable to noncontrolling interests)
Debt extinguishment costs
For the Years Ended December 31,
2023
2022
2021
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
$
1,499 $
1,429 $
(1,662) $
(1,332) $
— $
—
252
201
45
—
—
193
171
35
(1,071)
—
22
(28)
135
—
—
17
(20)
103
—
—
168
(27)
169
—
141
119
(21)
71
—
110
Total impact from special items
$
1,997 $
757 $
(1,533) $
(1,232) $
451 $
279
133
Effective January 1, 2023, we adopted amended accounting guidance for long-duration insurance contracts. See Note 2 to the
Consolidated Financial Statements for further information. Prior period summarized segment information has been retrospectively
adjusted to conform to this new basis of accounting. Summarized segment financial information was as follows:
(In millions)
2023
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
Loss on sale of businesses
Charge for organizational efficiency plan
Charges associated with litigation matters
Integration and transaction-related costs
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
$
147,588 $
46,219 $
291 $
1 $
194,099
5,670
241
153,499
—
4,332
597
51,148
57
—
305
596
—
(10,002)
23
1,166
(9,978)
195,265
—
57
$
$
$
153,499 $
51,205 $
596 $
(9,978) $
195,322
2,438 $
4,768 $
569 $
2,664 $
3 $
76 $
25 $
(1,995) $
3,035
5,513
(144)
—
1,774
—
—
44
—
(2)
133
45
1,481
—
157
—
—
2
—
18
—
—
—
—
—
—
—
252
—
45
(146)
135
1,819
1,499
252
201
45
Pre-tax adjusted income (loss) from operations
$
6,442 $
4,478 $
96 $
(1,698) $
9,318
(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
(Gain) on sale of businesses
Charge for organizational efficiency plan
(Benefits) associated with litigation matters
Integration and transaction-related costs
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
$
135,786 $
41,738 $
1,839 $
— $
179,363
4,463
86
140,335
—
2,535
638
44,911
126
—
424
2,263
—
(6,998)
7
1,155
(6,991)
180,518
—
126
140,335 $
45,037 $
2,263 $
(6,991) $
180,644
2,283 $
4,421 $
638 $
6 $
10 $
3,470 $
2,101 $
(1,595) $
(66)
—
1,772
—
—
—
—
(4)
530
103
—
—
—
—
(14)
83
1
(1,662)
—
—
—
—
—
—
—
22
(28)
135
2,937
8,397
(84)
613
1,876
(1,662)
22
(28)
135
9,269
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
(1,466) $
4,099 $
6,127 $
509 $
$
accounting.
134
(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
Charge for organizational efficiency plan
(Benefits) associated with litigation matters
Integration and transaction-related costs
Debt extinguishment costs
Evernorth
Health
Services
Cigna
Healthcare
Other
Operations
Corporate
and
Eliminations
Total
$
127,692 $
41,369 $
3,459 $
— $
172,520
4,203
17
131,912
—
2,271
1,003
44,643
—
—
530
3,989
—
(6,474)
(1)
(6,475)
—
1,549
174,069
—
131,912 $
44,643 $
3,989 $
(6,475) $
174,069
2,316 $
3,908 $
551 $
3,804 $
52 $
868 $
4 $
(1,790) $
(31)
4
1,937
—
—
—
—
(3)
(247)
47
—
—
—
—
(24)
45
14
—
—
—
—
—
—
—
168
(27)
169
141
2,923
6,790
(58)
(198)
1,998
168
(27)
169
141
8,983
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
(1,339) $
3,601 $
5,818 $
903 $
accounting.
135
Revenue from external customers includes Pharmacy revenues, Premiums and Fees and other revenues. Prior period amounts have
been retrospectively adjusted to reflect adoption of amended accounting guidance for long-duration insurance contracts (as discussed
in Note 2 to the Consolidated Financial Statements) and to reflect the merger of the U.S. Commercial and U.S. Government operating
segments into the U.S. Healthcare operating segment (as discussed in Note 1 to the Consolidated Financial Statements). 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. Healthcare
Employer insured
Medicare Advantage
Stop loss
Individual and Family Plans
Other
U.S. Healthcare
International Health
Total Cigna Healthcare
Divested International businesses
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,
2023
2022
2021
$
67,514 $
64,946 $
65,732
9,047
(5,050)
137,243
61,283
6,753
(4,416)
128,566
64,992
54,391
6,428
(4,398)
121,413
16,490
8,771
6,143
5,088
4,095
40,587
3,295
43,882
—
281
74
15,199
14,315
7,896
5,461
2,636
3,996
35,188
2,906
38,094
1,596
225
1
8,362
4,868
2,528
5,076
35,149
2,588
37,737
3,205
221
(9)
44,237
39,916
41,154
10,866
6,566
3
210
(5,026)
12,619
7,234
6,053
9
168
(2,583)
10,881
6,070
5,743
19
188
(2,067)
9,953
$
194,099 $
179,363 $
172,520
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,
2023
2022
2021
$
189,840 $
174,540 $
166,626
4,259
4,823
5,894
Total revenues from external customers
194,099 $
(1) The divested International businesses as described in Note 5 comprised of $1.6 billion and $3.2 billion in 2022 and 2021, respectively.
$
179,363 $
172,520
Revenues from U.S. Federal Government agencies, under a number of contracts, were 15% of consolidated revenues in 2023 and 14%
in both 2022 and 2021. These amounts were reported in the Evernorth Health Services and Cigna Healthcare segments.
136
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, 2023. 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, 2023.
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, 2023 that have
materially affected, or are reasonably likely to materially affect, The Cigna Group's internal control over financial reporting.
Item 9B. OTHER INFORMATION
Rule 10b5-1 Plan Elections
During the three months ended December 31, 2023, no director or officer of the Company adopted, modified or terminated a “Rule
10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
137
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 2024 annual meeting of shareholders ("the 2024 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 2024 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 2024 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 Insider Participation," "Compensation Matters – Compensation Discussion and Analysis,"
"Compensation Matters – Report of the People Resources Committee" and "Compensation Matters – Executive Compensation Tables"
in the 2024 Proxy Statement is incorporated herein by reference.
138
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, 2023:
(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))
8,161,152 $
—
8,161,152 $
202.02
—
202.02
14,371,589
—
14,371,589
(1)
Includes, in addition to outstanding stock options:
(i) 57,961 restricted stock units, 34,015 deferred shares and 1,372,834 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) 235,858 shares of common stock underlying stock option awards granted under the Express Scripts Holding Company 2016 Long-Term Incentive Plan, 390,212
shares of common stock underlying stock option awards granted under the Express Scripts, Inc. 2011 Long-Term Incentive Plan, and 182,865 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 $154.55. Excluding the assumed options from this acquisition results in a weighted-
average exercise price of $208.54.
(3) Represents 14,371,589 shares of common stock available as of the close of business December 31, 2023 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 2024
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
2024 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 2024 Proxy Statement is incorporated herein by reference.
139
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, 2023, 2022 and 2021.
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021.
Consolidated Balance Sheets as of December 31, 2023 and 2022.
Consolidated Statements of Changes in Total Equity for the years ended December 31, 2023, 2022 and 2021.
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021.
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.
140
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)
4.1 (g)
4.2
4.3(a)
4.3(b)
4.3(c)
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
April 26, 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 3.1 to the
Quarterly Report on Form 10-Q for the period
ended March 31, 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
Sixth Supplemental Indenture, dated as of March 7, 2023, 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
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 4.1 to the
Current Report on Form 8-K on March 7,
2023 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.
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.
141
4.3(d)
4.3(e)
4.3(f)
4.3(g)
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)
4.6(f)
4.6(g)
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.
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.
142
4.6(h)
4.6(i)
4.6(j)
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 herewith.
Exhibits 10.1 through 10.26 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")
Amendment No.1 to the Cigna Long-Term Incentive Plan effective
December 1, 2022
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 the registrant as Exhibit 10.1 to the
Current Report on Form 8-K on May 3, 2021
and incorporated herein by reference.
Filed by the registrant as Exhibit 10.1(b) to
the Annual Report on Form 10-K for the year
ended December 31, 2022 and incorporated
herein by reference.
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
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
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.
143
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 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)
10.5(c)
10.6
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
Form of Stock Option Grant Notice used with respect to grants of
stock options by Express Scripts Holding Company under the ESI
LTIP
Medco Health Solutions, Inc. 2002 Stock Incentive Plan (as
amended and restated effective April 2, 2012)
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.
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.
144
10.7
10.8
10.9
10.10
10.11(a)
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
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.
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)
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.
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 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)
Amendment No. 1 to the Cigna Supplemental Pension Plan of 2005 Filed by CHC as Exhibit 10.1 to the Quarterly
10.14(a)
Cigna Supplemental 401(k) Plan effective January 1, 2010
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
145
Report on Form 10-Q for the 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.
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.
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
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 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.
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
10.22
Description of Cigna Corporation Financial Services Program
10.23
Offer Letter for Eric P. Palmer dated January 16, 2024
Filed herewith.
10.24
Offer Letter for Nicole S. Jones dated September 14, 2023
10.25
Offer Letter for Noelle K. Eder dated September 14, 2023
Filed by the registrant as Exhibit 10.2 to the
Quarterly Report on Form 10-Q for the period
ended September 30, 2023 and incorporated
herein by reference.
Filed by the registrant as Exhibit 10.1 to the
Quarterly Report on Form 10-Q for the period
ended September 30, 2023 and incorporated
herein by reference.
10.26
Offer letter for Brian Evanko dated January 16, 2024
Filed herewith.
10.27
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
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.
146
10.28
21
23
31.1
31.2
32.1
32.2
97.1
101
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
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.
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
Furnished herewith.
Furnished herewith.
Incentive Compensation Clawback Policy
Filed herewith.
The following materials from The Cigna Group's Annual Report on
Form 10-K for the year ended December 31, 2023, 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 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.
Item 16. FORM 10-K SUMMARY
None.
147
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 29, 2024
SIGNATURES
THE CIGNA GROUP
/s/ Brian C. Evanko
By:
Brian C. Evanko
Executive Vice President, Chief Financial Officer, The Cigna Group, and
President and Chief Executive Officer, Cigna Healthcare
(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 29, 2024.
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, Chief Financial Officer, The Cigna Group,
and President and Chief Executive Officer, Cigna Healthcare
(Principal Financial Officer)
Senior Vice President, Tax and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
148
/s/ George Kurian
George Kurian
/s/ Kathleen M. Mazzarella
Kathleen M. Mazzarella
/s/ Mark B. McClellan, M.D.
Mark B. McClellan, M.D.
/s/ Philip O. Ozuah, M.D., Ph.D.
Philip O. Ozuah
/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
Director
Lead Independent Director
Director
149
[This Page Intentionally Left Blank]
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, 2023, 2022 and 2021 ..............................................
Balance Sheets as of December 31, 2023 and 2022 ...........................................................................................
Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 .......................................
Notes to Condensed Financial Statements .........................................................................................................
Valuation and Qualifying Accounts and Reserves for the Years Ended December 31, 2023, 2022 and 2021 ....
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 appreciation (depreciation) on securities and derivatives
Net long-duration insurance and contractholder liabilities measurement adjustments
Net translation gains (losses) of foreign currencies
Postretirement benefits liability adjustment
Shareholders' other comprehensive loss, net of tax
For the Years Ended December 31,
2023
2022 (1)
2021 (1)
$
22 $
5 $
516
538
2
2
536
(1,332)
(118)
—
(914)
(192)
(722)
5,886
5,164
503
(715)
5
1
(206)
478
483
2
2
481
(1,215)
(147)
—
(881)
(183)
(698)
7,402
6,704
(1,598)
509
79
420
(590)
—
471
471
8
8
463
(1,197)
(13)
(131)
(878)
(180)
(698)
6,068
5,370
(302)
67
(218)
410
(43)
Shareholders' comprehensive income
5,327
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 1 to Schedule 1 for
6,114 $
4,958 $
$
further information.
See Notes to Financial Statements on the following pages.
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
Other current assets
Total current assets
Investments in subsidiaries
Intercompany receivable
Other non-current assets
TOTAL ASSETS
Liabilities
Short-term debt
Other current liabilities
Total current liabilities
Long-term debt
Intercompany payable
Other non-current liabilities
TOTAL LIABILITIES
Shareholders' Equity
Common stock (shares issued, 400 and 398; authorized, 600)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Less treasury stock, at cost
TOTAL SHAREHOLDERS' EQUITY
As of December 31,
2023
2022 (1)
$
303 $
6
309
69,703
11,475
77
115
6
121
70,679
10,366
99
$
$
81,564 $
81,265
2,448 $
1,854
4,302
27,151
3,874
14
35,341
4
30,669
(1,864)
41,652
(24,238)
46,223
2,749
1,295
4,044
26,815
5,705
26
36,590
4
30,233
(1,658)
37,940
(21,844)
44,675
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
81,265
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 1 to Schedule 1 for
81,564 $
$
further information.
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 amounts due from affiliates
Net proceeds from short-term investments sold (purchased)
NET CASH PROVIDED BY (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, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year (2)
Noncash Investing and Financing Activities:
For the Years Ended December 31,
2022 (1)
2021 (1)
2023
$
5,164 $
6,704 $
5,370
(5,886)
(7,402)
(6,068)
—
1,381
540
640
1,839
622
—
622
1,473
1,237
—
(2,822)
1,491
187
(1,450)
(2,284)
(110)
(2,278)
183
152
—
2,056
5
298
1,661
(901)
99
(802)
10,392
(2,027)
—
(430)
—
389
(1,384)
(7,607)
(73)
(740)
119
33
$
335 $
152 $
131
2,726
184
439
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
33
Net amounts due to/(from) affiliates settled through capital transactions
(5,221)
(5,037)
(8,429)
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023. See Note 1 to Schedule 1 for
further information.
(2) Includes restricted cash reported in Other non-current assets as of December 31, 2023 and December 31, 2022.
See Notes to Financial Statements on the following pages.
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. On January 1, 2023, The Cigna Group and its subsidiaries
adopted Targeted Improvements to the Accounting for Long-Duration Contracts, Accounting Standards Update ("ASU") 2018-12 and
related amendments. See Note 2 - Summary of significant accounting policies included in Part II, Item 8 of this Form 10-K for a
description of the key provisions and impacts.
The Cigna Group, through its predecessor companies, was incorporated in Delaware in 1981. Cigna Corporation was renamed The
Cigna Group in February 2023.
Note 2 - See Note 8 – 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, 2023, there were no outstanding balances under these revolving credit agreements.
In April 2023, The Cigna Group entered into the following revolving credit agreements (the "Credit Agreements"):
•
•
a $4.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2028 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 $4.0 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 364-day revolving credit agreement that will mature in April 2024. 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 both
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 two facilities is diversified among 21 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 2027, a
$1.0 billion three-year revolving credit agreement maturing on April 2025 and a $1.0 billion 364-day revolving credit agreement
maturing in April 2023.
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. The commercial paper program had approximately
$1.2 billion outstanding at December 31, 2023 and an average interest rate of 5.63%.
FS-5
Long-Term Debt
Debt Issuance and Debt Tender Offers. On February 5, 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt
were used to pay the consideration for the cash tender offers as described below. We intend to use the remaining net proceeds to fund
the repayment of our senior notes maturing in March 2024 and for general corporate purposes, which may include repayment of
indebtedness and repurchases of shares of our common stock.
Concurrent with the debt issuance, The Company and its subsidiaries commenced tender offers to purchase for cash up to $2.25 billion
in aggregate principal amount of outstanding notes, which included any and all of the $1.0 billion senior notes due June 2024.
Following the early tender results, we increased the tender offers to up to $2.55 billion. On February 22, 2024, we purchased $1.8
billion principal amount of notes at early settlement of the tender offers. The tender offers will expire on March 5, 2024.
On March 7, 2023, the Company issued $1.5 billion of new senior notes. The proceeds of this issuance were used for general
corporate purposes, and included repayment of outstanding debt securities. Interest on this debt is paid semi-annually.
Principal
$700 million (1)
$800 million (2)
Maturity Date
March 15, 2026
March 15, 2033
Interest Rate
5.685%
5.400%
Net Proceeds
$698 million
$796 million
(1) Redeemable at any time discounted at the U.S. Treasury rate plus 20 basis points. Redeemable at par on or after March 15, 2024.
(2) Redeemable at any time discounted at the U.S. Treasury rate plus 25 basis points. Redeemable at par on or after December 15, 2032.
Debt Maturities. Maturities of the Company's long-term debt are as follows and exclude the impacts of the 2024 debt issuance and
debt tender offers discussed above.
(In millions)
2024
2025
2026
2027
2028
Maturities after 2028
$
$
$
$
$
$
1,214
2,957
2,734
2,056
3,800
15,091
Debt Covenants. The Company was in compliance with its debt covenants as of December 31, 2023.
Note 3 - The Company's intercompany receivables consist primarily of net intercompany loan amounts due from Evernorth Health,
Inc. of $8.5 billion as of December 31, 2023 and $8.3 billion as of December 31, 2022. Interest income on the loan receivable was
accrued at an average rate of 5.21% in 2023.
The Company's intercompany payables primarily reflect intercompany balances related to cash pooling arrangements as well as net
intercompany loan borrowing from three indirect wholly-owned subsidiaries as of December 31, 2023. Interest expense on the loan
payable was accrued at an average rate of 3.65% in 2023.
Note 4 - The Company guaranteed approximately $2.9 billion primarily related to intercompany indebtedness and financial
obligations of certain direct and indirect wholly-owned subsidiaries. There were immaterial liabilities required for these guarantees as
of December 31, 2023. Effective January 2024, the amount of such guarantees increased to $6.4 billion.
Note 5 - In February 2024, as part of our existing share repurchase program, we entered into separate ASR agreements ("2024 ASR
agreements") with Deutsche Bank AG and Bank of America, N.A. (collectively, the "2024 Counterparties") to repurchase $3.2 billion
of common stock in aggregate. We remitted $3.2 billion to the 2024 Counterparties and received an initial delivery of approximately
7.6 million shares of our common stock on February 15, 2024 representing $2.6 billion of the total remitted. We expect final
settlement under the 2024 ASR agreements to occur in the second quarter of 2024.
FS-6
THE CIGNA GROUP AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)
Description
2023
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans
Accounts receivable, net
Deferred tax asset valuation allowance
Reinsurance recoverables
2022
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans
Accounts receivable, net
Deferred tax asset valuation allowance
Reinsurance recoverables (1)
2021
Investment asset valuation reserves
Available-for-sale debt securities
Commercial mortgage loans
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
$
$
$
$
$
$
$
$
$
$
$
$
$
44 $
21 $
160 $
208 $
35 $
23 $
6 $
126 $
246 $
28 $
26 $
6 $
156 $
11 $
10 $
90 $
1,286 $
— $
43 $
15 $
99 $
(13) $
7 $
29 $
— $
54 $
— $
— $
1 $
4 $
— $
— $
— $
— $
(25) $
— $
— $
— $
— $
(22) $
— $
(88) $
— $
— $
(22) $
— $
(65) $
— $
— $
(32) $
— $
(84) $
33
31
163
1,498
35
44
21
160
208
35
23
6
126
Deferred tax asset valuation allowance
Reinsurance recoverables (1)
(1) Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts ("LDTI") in 2023. See Note 2 to the
207 $
— $
— $
16 $
— $
23 $
30 $
(2) $
$
$
246
28
Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
FS-7
Exhibit 21 – Subsidiaries of the Registrant
Listed below are subsidiaries of The Cigna Group as of December 31, 2023 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.
Exhibit 21
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 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-Evernorth Enterprise Services, Inc.
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
Kansas
Kentucky
Maryland
Missouri
New Jersey
North Carolina
Ohio
Pennsylvania
Texas
Virginia
Arizona
Belgium
Delaware
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 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 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 Spruce Holdings GmBH
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 Accountable Care, LLC
Evernorth Health, Inc.
Evernorth-VillageMD Care Alliance of NJ, LLC (F/K/A "ENAC of NJ, LLC")
Evernorth Wholesale Distribution, 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
Florida
Georgia
Illinois
Indiana
Massachusetts
New Hampshire
New Jersey
North Carolina
Pennsylvania
South Carolina
Missouri
Tennessee
Texas
Delaware
Delaware
Ohio
Lebanon
Canada
Belgium
Ohio
Dubai
Switzerland
Hong Kong
Delaware
Connecticut
Connecticut
Delaware
Delaware
Delaware
Delaware
New Jersey
Delaware
Tennessee
Missouri
Delaware
Delaware
Delaware
New Jersey
Delaware
Delaware
Texas
Florida
Delaware
Loyal American Life Insurance Company
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
Ohio
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 (No. 333-268633) and S-8 (Nos.
333-228930, 333-228931 and 333-258507) of The Cigna Group of our report dated February 29, 2024 relating to the financial
statements and 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 29, 2024
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;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
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
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that
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 29, 2024
/s/ David M. Cordani
Chairman and 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;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
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
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that
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 29, 2024
/s/ Brian C. Evanko
Executive Vice President, Chief Financial Officer, The Cigna
Group, and President and Chief Executive Officer, Cigna
Healthcare
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, 2023 (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
Chairman and Chief Executive Officer
February 29, 2024
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, 2023 (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
Executive Vice President, Chief Financial Officer, The Cigna
Group, and President and Chief Executive Officer, Cigna
Healthcare
February 29, 2024
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1. The Cigna Group Newsroom, Vitality 2023: Americans are optimistic despite facing physical, mental, and financial health challenges, October 25, 2023.2. The Cigna Group Newsroom, The Cigna Group Reports Strong Fourth Quarter and Full Year 2023 Results, Raises 2024 Adjusted EPS Outlook, and Increases Dividend, February 2, 2024. Q4 Presentation; Q4 Financial Supplement. 3. 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 U.S. (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.4. The Cigna Group Newsroom, The Cigna Group Announces Significant Increase to Share Repurchase Program of $10 Billion, December 10, 2023.5. The Cigna Group internal analysis as of December 2023.6. Evernorth Health Services, Evernorth EncircleRx, evernorth.com/our-solutions/cardiovascular-disease-diabetes-obesity.7. Evernorth Health Services Newsroom, Express Scripts Announces Strategic Partnership with Centene to Unlock Greater Prescription Drug Savings, October 25, 2022.8. The Cigna Group Newsroom, Express Scripts Further Advances Transparency and Affordability for Consumers and Clients, April 13, 2023.9. Evernorth Health Services Newsroom, Express Scripts Introduces New Option to Give Clients Maximum Simplicity in Drug Pricing, November 13, 2023.10. Evernorth Health Services Newsroom, Express Scripts Launches New Initiative to Expand Rural Health Care Access Through Partnerships with Independent Pharmacies, April 20, 2023.11. Evernorth Health Services Newsroom, Evernorth Introduces Innovative Behavioral Health Measurement-Based Care Program, October 5, 2023.12. Cigna Healthcare Newsroom, Cigna Worldwide Insurance Company Receives Branch License in Saudi Arabia, Plans Growth in the Kingdom, February 6, 2023.13. The Cigna Group Newsroom, The Cigna Group to Sell Medicare Businesses and CareAllies to Health Care Services Corporation (HCSC), January 31, 2024.14. The Cigna Group Newsroom, The Cigna Group Recognized as Corporate Sustainability Industry Leader by Dow Jones Sustainability Indices for 7th Consecutive Year, December 12, 2023.15. The Cigna Group Newsroom, The Cigna Group Named No. 6 Among Best Corporate Citizens by JUST Capital and CNBC, February 5, 2024.16. Fair360, 2023 Top 50 Companies for Diversity, fair360.com/top-50-list/2023/.17. National LGBT Chamber of Commerce, 2023 NBIC Corporations for Inclusion Named by NGLCC and Partners in the National Business Inclusion Consortium (NBIC), nglcc.org/news/6837/.18. The Cigna Group internal analysis of existing arrangements as of December 2023. Includes The Cigna Group Foundation grants for 2023, employee volunteerism and giving, The Cigna Group charitable giving, and undertaking payments to nonprofits in California and New York, which were precipitated by The Cigna Group combining with Express Scripts in late 2018.19. The Cigna Group internal analysis of existing arrangements as of December 2023. 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 $31.80 and a skills-based, mentoring, pro bono volunteer hour of $195, taprootfoundation.org/taproot-foundation-announces-that-the-average-hourly-value-of-pro-bono-service-is-now-195/.20. The Cigna Group 2022 Diversity Scorecard Report, thecignagroup.com/static/www-thecignagroup-com/docs/cigna-diversity-equity-and-inclusion-scorecard-report.pdf.21. The Cigna Group Newsroom, The Cigna Group Announces Appointment of Dr. Philip Ozuah to Board of Directors, May 1, 2023.22. The Cigna Group 2022 ESG Report, thecignagroup.com/static/www-thecignagroup-com/docs/2022-esg-report.pdf.23. Evernorth Health Services Newsroom, Evernorth Partners with CarepathRx Health System Solutions to Enhance Specialty Care for Patients and Drive Physician Performance, May 31, 2023. 24. Monogram Health, Monogram Health’s In-Home Services Now Available to More Older Adults Living with Chronic Kidney Conditions, February 7, 2023, monogramhealth.com/press/monogram-healths-in-home-services-now- available-to-more-older-adults-living-with-chronic-kidney-conditions.25. The Cigna Group Newsroom, Cigna Healthcare Removes 25 Percent of Medical Services from Prior Authorization, Simplifying the Care Experience for Customers and Clinicians, August 24, 2023. 26. Evernorth Health Services Newsroom, Evernorth Acquires Bright.md Technology Platform, Enhances MDLIVE’s Virtual Care Experience for Patients and Clinicians, September 27, 2023.27. Evernorth Health Services Newsroom, Improving Access to Care for Rural Americans by Supporting and Empowering Independent Pharmacies, August 18, 2023. 28. PR Newswire, Octave Raises $52M in Series C Funding to Expand In-Network Mental Health, June 15, 2023, prnewswire.com/news-releases/octave-raises- 52m-in-series-c-funding-to-expand-in-network-mental-health-301851235.html.29. Business Wire, NOCD Completes Additional Funding in its Quest to End the OCD Crisis, January 31, 2023, businesswire.com/news/home/20230131005743/en/NOCD-Completes-Additional-Funding-in-its-Quest-to-End-the-OCD-Crisis.30. Evernorth Health Services Newsroom, The University of Texas at Austin’s Institute for Public School Initiatives, MDLIVE Expand Access to Mental Health Care for Texas Youth, May 11, 2023. 31. Harris Health System Newsroom, Harris Health Awarded $500,000 Sponsorship from Cigna Healthcare to Address Chronic Diabetes, Food Insecurity through Expansion of the Food Rx Program, October 16, 2023, harrishealth.org/about-us-hh/news/Pages/harris-health-awarded-$500,000-sponsorship-from-cigna-healthcare.aspx.32. The Cigna Group Newsroom, Cigna Healthcare Takes Action to Fight Food Insecurity Among Seniors, September 25, 2023. 33. The Cigna Group Newsroom, The Cigna Group Earns 11th Consecutive Perfect Score for LGBTQ+ Workplace Inclusion, December 20, 2023.34. The Cigna Group internal analysis of existing arrangements and MDLIVE treatments as of December 2023. Calculated using publicly available travel behavior information from the Federal Highway Administration’s National Household Travel Survey (NHTS), as well as emissions factors from the EPA.35. The Cigna Group CDP Water Security 2023, thecignagroup.com/static/www-thecignagroup-com/docs/cigna-cdp-water-security-questionnaire.pdf. 36. Cigna Healthcare, Member Guide, cigna.com/individuals-families/member-guide/.37. MSCI ESG Ratings & Climate Search Tool, Page Last Accessed February 14, 2024, msci.com/our-solutions/esg-investing/esg-ratings-climate-search-tool/issuer/cignacorporation/IID000000002920541.38. Sustainalytics, Company ESG Risk Ratings, Page Last Accessed February 14, 2024, sustainalytics.com/esg-rating/the-cigna-group/2006080571.39. ISS Corporate, ESG Gateway, Page last accessed February 14, 2024, iss-corporate.com/solutions/esg-solutions/iss-esg-gateway/.40. The Cigna Group internal analysis of existing arrangements as of December 2023. Refers to 2023 procurement spend and data received from Tier 1 suppliers.41. The Cigna Group internal analysis of existing arrangements as of December 2023. Refers to U.S. Employer and Medicare provider population.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. 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