(1)Par value per share, $0.01; shares issued, 402 million as of September 30, 2024 and 400 million as of December 31, 2023; authorized shares, 600 million.
The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
5
The Cigna Group
Consolidated Statements of Changes in Total Equity
Unaudited
Three Months Ended September 30, 2024
(In millions)
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss)
Retained Earnings
Treasury Stock
Shareholders' Equity
Other Non- controlling Interests
Total Equity
Redeemable Noncontrolling Interests
Balance at June 30, 2024
$
4
$
31,048
$
(2,442)
$
42,132
$
(29,410)
$
41,332
$
195
$
41,527
$
—
Effects of issuing stock for employee benefit plans
138
(2)
136
136
Other comprehensive income
279
279
279
—
Net income
739
739
86
825
—
Common dividends declared (per share: $1.40)
(391)
(391)
(391)
Repurchase of common stock
—
—
—
—
Other transactions impacting noncontrolling interests
—
—
(78)
(78)
—
Balance at September 30, 2024
$
4
$
31,186
$
(2,163)
$
42,480
$
(29,412)
$
42,095
$
203
$
42,298
$
—
Three Months Ended September 30, 2023
(In millions)
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss)
Retained Earnings
Treasury Stock
Shareholders' Equity
Other Non- controlling Interests
Total Equity
Redeemable Noncontrolling Interests
Balance at June 30, 2023
$
4
$
30,436
$
(1,878)
$
39,936
$
(23,053)
$
45,445
$
19
$
45,464
$
62
Effect of issuing stock for employee benefit plans
127
(5)
122
122
Other comprehensive loss
(241)
(241)
(241)
—
Net income
1,408
1,408
4
1,412
37
Common dividends declared (per share: $1.23)
(362)
(362)
(362)
Repurchase of common stock
—
(681)
(681)
(681)
Other transactions impacting noncontrolling interests
—
—
(12)
(12)
(35)
Balance at September 30, 2023
$
4
$
30,563
$
(2,119)
$
40,982
$
(23,739)
$
45,691
$
11
$
45,702
$
64
The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
6
The Cigna Group
Consolidated Statements of Changes in Total Equity
Unaudited
Nine Months Ended September 30, 2024
(In millions)
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss)
Retained Earnings
Treasury Stock
Shareholders' Equity
Other Non- controlling Interests
Total Equity
Redeemable Noncontrolling Interests
Balance at December 31, 2023
$
4
$
30,669
$
(1,864)
$
41,652
$
(24,238)
$
46,223
$
21
$
46,244
$
107
Effect of issuing stock for employee benefit plans
517
(117)
400
400
Other comprehensive loss
(299)
(299)
(299)
—
Net income
2,010
2,010
232
2,242
—
Common dividends declared (per share: $4.20)
(1,182)
(1,182)
(1,182)
Repurchase of common stock
—
(5,057)
(5,057)
(5,057)
Other transactions impacting noncontrolling interests
—
—
(50)
(50)
(107)
Balance at September 30, 2024
$
4
$
31,186
$
(2,163)
$
42,480
$
(29,412)
$
42,095
$
203
$
42,298
$
—
Nine Months Ended September 30, 2023
(In millions)
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss)
Retained Earnings
Treasury Stock
Shareholders' Equity
Other Non- controlling Interests
Total Equity
Redeemable Noncontrolling Interests
Balance at December 31, 2022
$
4
$
30,233
$
(1,658)
$
37,940
$
(21,844)
$
44,675
$
13
$
44,688
$
66
Effect of issuing stock for employee benefit plans
332
(110)
222
222
Other comprehensive loss
(461)
(461)
(461)
—
Net income
4,135
4,135
14
4,149
116
Common dividends declared (per share: $3.69)
(1,093)
(1,093)
(1,093)
Repurchase of common stock
—
(1,785)
(1,785)
(1,785)
Other transactions impacting noncontrolling interests
(2)
(2)
(16)
(18)
(118)
Balance at September 30, 2023
$
4
$
30,563
$
(2,119)
$
40,982
$
(23,739)
$
45,691
$
11
$
45,702
$
64
The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
7
The Cigna Group
Consolidated Statements of Cash Flows
Unaudited
Nine Months Ended September 30,
(In millions)
2024
2023
Cash Flows from Operating Activities
Net income
$
2,242
$
4,265
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
2,129
2,270
Realized investment losses, net
2,805
44
Deferred income tax benefit
(351)
(303)
Loss on sale of businesses
106
21
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable, net
(10,600)
(1,916)
Inventories
577
360
Reinsurance recoverable and Other assets
(358)
281
Insurance liabilities
(214)
1,482
Pharmacy and other service costs payable
8,979
2,250
Accounts payable and Accrued expenses and other liabilities
(819)
1,337
Other, net
655
255
NET CASH PROVIDED BY OPERATING ACTIVITIES
5,151
10,346
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities
569
757
Investment maturities and repayments:
Debt securities and equity securities
585
715
Commercial mortgage loans
79
86
Other sales, maturities and repayments (primarily short-term and other long-term investments)
567
453
Investments purchased or originated:
Debt securities and equity securities
(943)
(4,005)
Commercial mortgage loans
(54)
(94)
Other (primarily short-term and other long-term investments)
(1,028)
(891)
Property and equipment purchases, net
(1,069)
(1,208)
Acquisitions, net of cash acquired
(132)
(443)
Divestitures, net of cash sold
—
13
Other, net
(485)
(117)
NET CASH USED IN INVESTING ACTIVITIES
(1,911)
(4,734)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds
120
127
Withdrawals and benefit payments from contractholder deposit funds
(180)
(139)
Net change in short-term debt
366
1,484
Repayment of long-term debt
(3,000)
(2,967)
Net proceeds on issuance of long-term debt
4,462
1,491
Repurchase of common stock
(5,012)
(1,740)
Issuance of common stock
283
113
Common stock dividend paid
(1,183)
(1,092)
Other, net
(255)
(321)
NET CASH USED IN FINANCING ACTIVITIES
(4,399)
(3,044)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash
6
2
Net (decrease) increase in cash, cash equivalents and restricted cash
(1,153)
2,570
Cash, cash equivalents and restricted cash January 1, (1)
8,337
5,976
Cash, cash equivalents and restricted cash, September 30, (2)
7,184
8,546
Cash and cash equivalents reclassified to assets of businesses held for sale
(1,249)
—
Cash, cash equivalents and restricted cash September 30, per Consolidated Balance Sheets (2)
$
5,935
$
8,546
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds
$
839
$
1,380
Interest paid
$
1,037
$
1,019
(1)Includes $467 million reported in Assets of businesses held for sale as of January 1, 2024.
(2)Restricted cash and cash equivalents were reported in other long-term investments.
The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
8
THE CIGNA GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our"), is a global health company committed to creating a better future for every individual and every community. We relentlessly challenge ourselves to partner and innovate solutions for better health. Powered by our people and our brands, we advance our mission to improve the health and vitality of those we serve.
Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental and related products and services. The majority of these products and services are offered through employers and other entities such as governmental and non-governmental organizations, unions and associations. Cigna Healthcare also offers health and dental insurance products to individuals in the United States and select international markets. In addition to these operations, The Cigna Group also has certain run-off operations.
A full description of our segments follows:
The Evernorth Health Services reportable segment includes the Pharmacy Benefit Services and the Specialty and Care Services operating segments, which partner 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.
Pharmacy Benefit Services drives high-quality, cost-effective pharmacy care through various services such as drug claim adjudication, retail pharmacy network administration, benefit design consultation, drug utilization review, drug formulary management and access to our home delivery pharmacy. Specialty and Care Services provides specialty drugs for the treatment of complex and rare diseases, specialty distribution of pharmaceuticals and medical supplies, as well as clinical programs to help our clients drive better whole-person health outcomes through Care Delivery and Management Solutions. The Company's reporting units remain aligned with its operating segments and Evernorth Health Services' goodwill was allocated on a relative fair value basis during the three months ended March 31, 2024.
The Cigna Healthcare reportable segment includes the U.S. Healthcare and International Health operating segments, which provide comprehensive medical and coordinated solutions to clients and customers. U.S. Healthcare provides medical plans and specialty benefits and solutions for insured and self-insured clients, Medicare Advantage, Medicare Supplement and Medicare Stand-Alone Prescription Drug 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 approximately $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions, including adjustments to align with the final balance sheet of the divested businesses (the "HCSC transaction"). See Note 5 to the Consolidated Financial Statements for further information.
Other Operations comprises the remainder of our business operations, which includes our continuing business (corporate-owned life insurance ("COLI")) and our run-off and other non-strategic businesses. Our run-off businesses include (i) variable annuity reinsurance business that was effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska ("Berkshire") in 2013, (ii) settlement annuity business, and (iii) individual life insurance and annuity and retirement benefits businesses which were sold through reinsurance agreements.
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and eliminations for products and services sold between segments.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").
Amounts recorded in the Consolidated Financial Statements necessarily reflect management's estimates and assumptions about medical costs, investment, tax and receivable valuations, interest rates and other factors. Significant estimates are discussed throughout
10
these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment.
These interim Consolidated Financial Statements are unaudited but include all adjustments (including normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the periods reported. The interim Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes included in the 2023 Annual Report on Form 10-K ("2023 Form 10-K"). The preparation of interim Consolidated Financial Statements necessarily relies heavily on estimates. This and other factors, including the seasonal nature of portions of the health care and related benefits business, as well as competitive and other market conditions, call for caution in estimating full-year results based on interim results of operations.
Recent Accounting Pronouncements
The Company's 2023 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financial statements in the future. There are no updates on significant accounting pronouncements recently adopted or recently issued and not yet adopted that have occurred since the Company filed its 2023 Form 10-K.
Note 3 – Accounts Receivable, Net
The following amounts were included within Accounts receivable, net:
(In millions)
September 30, 2024
December 31, 2023
Pharmaceutical manufacturers receivables
$
13,708
$
8,169
Noninsurance customer receivables
12,615
8,044
Insurance customer receivables
2,732
2,359
Other receivables
323
272
Total
$
29,378
$
18,844
Accounts receivable, net classified as assets of businesses held for sale
(1,532)
(1,122)
Total
$
27,846
$
17,722
These accounts receivable are reported net of our allowances of $4.6 billion as of September 30, 2024 and $3.7 billion as of December 31, 2023. These allowances include contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain accounts receivable from third-party payors, discounts and claims adjustments issued to customers in the form of client credits, an allowance for current expected credit losses and other non-credit adjustments.
The Company's allowance for current expected credit losses was $88 million as of September 30, 2024 and $90 million as of December 31, 2023.
Accounts Receivable Factoring Facility
The Company maintains an uncommitted factoring facility (the "Facility") under which certain accounts receivable may be sold on a non-recourse basis to a financial institution. The Facility began in July 2023 with an initial term of two years, followed by automatic one year renewal terms unless terminated by either party. The Facility's total capacity at inception was $1.0 billion and was amended to $1.5 billion during the three months ended June 30, 2024. Further information regarding the accounting policy for the Facility can be found in Note 3 in the Company's 2023 Form 10-K.
We sold accounts receivable under the Facility of $1.3 billion and $1.0 billion for the three months ended September 30, 2024 and 2023, respectively, and $4.5 billion and $1.0 billion for the nine months ended September 30, 2024 and 2023, respectively. For the three and nine months ended September 30, 2024 and 2023, factoring fees paid were not material. As of September 30, 2024, there were $258 million of sold accounts receivable that have not been collected from pharmaceutical manufacturers and have been removed from the Company's Consolidated Balance Sheets. At December 31, 2023, all sold accounts receivable had been collected from pharmaceutical manufacturers. As of September 30, 2024 and December 31, 2023, there were $1.1 billion and $515 million, respectively, of collections from pharmaceutical manufacturers that have not been remitted to the financial institution. Such amounts are recorded within Accrued expenses and other liabilities in the Consolidated Balance Sheets.
11
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. Further information regarding the Program's terms can be found in Note 4 in the Company's 2023 Form 10-K.
As of September 30, 2024 and December 31, 2023, $1.6 billion and $1.5 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 September 30, 2024, we have been informed by the financial institution that $534 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 – Assets and Liabilities of Businesses Held for Sale
In January 2024, the Company entered into the HCSC transaction for a purchase price of approximately $3.3 billion cash, subject to applicable regulatory approvals and other customary closing conditions, including adjustments to align with the final balance sheet of the divested businesses. The transaction is expected to close in the first quarter of 2025.
The assets and liabilities of businesses held for sale were as follows:
(In millions)
September 30, 2024
December 31, 2023
Cash and cash equivalents
$
1,249
$
467
Investments
1,614
1,438
Accounts receivable, net
1,532
1,122
Other assets, including Goodwill (1)
2,479
2,963
Total assets of businesses held for sale
6,874
5,990
Insurance and contractholder liabilities
1,568
1,636
All other liabilities
1,207
1,059
Total liabilities of businesses held for sale
$
2,775
$
2,695
(1) Includes Goodwill of $396 million as of September 30, 2024 and December 31, 2023.
Integration and Transaction-related Costs
In 2024 and 2023, the Company incurred transaction-related costs associated with the HCSC transaction. In 2023, the Company also incurred net costs mainly related to the sale of our international life, accident and supplemental benefits businesses ("Chubb transaction"). These costs incurred in both 2024 and 2023 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. These costs were $77 million pre-tax ($59 million after-tax) for the three months ended and $177 million pre-tax ($135 million after-tax) for the nine months ended September 30, 2024, compared with $13 million pre-tax ($9 million after-tax) for the three months ended and $20 million pre-tax ($15 million after-tax) for the nine months ended September 30, 2023.
Note 6 – Earnings Per Share
Basic and diluted earnings per share were computed as follows:
Three Months Ended
September 30, 2024
September 30, 2023
(Shares in thousands, dollars in millions, except per share amounts)
Basic
Effect of Dilution
Diluted
Basic
Effect of Dilution
Diluted
Shareholders' net income
$
739
$
739
$
1,408
$
1,408
Shares:
Weighted average
278,457
278,457
294,058
294,058
Common stock equivalents
2,939
2,939
3,073
3,073
Total shares
278,457
2,939
281,396
294,058
3,073
297,131
Earnings per share
$
2.65
$
(0.02)
$
2.63
$
4.79
$
(0.05)
$
4.74
12
Nine Months Ended
September 30, 2024
September 30, 2023
(Shares in thousands, dollars in millions, except per share amounts)
Basic
Effect of Dilution
Diluted
Basic
Effect of Dilution
Diluted
Shareholders' net income
$
2,010
$
2,010
$
4,135
$
4,135
Shares:
Weighted average
282,005
282,005
294,752
294,752
Common stock equivalents
3,037
3,037
2,911
2,911
Total shares
282,005
3,037
285,042
294,752
2,911
297,663
Earnings per share
$
7.13
$
(0.08)
$
7.05
$
14.03
$
(0.14)
$
13.89
The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive:
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Anti-dilutive options
0.8
0.9
1.0
0.9
The Company held approximately 122.5 million shares of common stock in treasury at September 30, 2024, 107.4 million shares as of December 31, 2023 and 105.7 million shares as of September 30, 2023.
The increase in Treasury stock as of September 30, 2024 and the reduction in weighted average shares outstanding for the three and nine months ended September 30, 2024 was driven in part by 9.3 million shares of our common stock repurchased under the accelerated share repurchase agreements (the "ASR agreements"). See Note 8 for additional information.
13
Note 7 – Debt
The outstanding amounts of debt (net of issuance costs, discounts or premiums) and finance leases were as follows:
(In millions)
September 30, 2024
December 31, 2023
Short-term debt
Commercial paper
$
1,635
$
1,237
$500 million, 0.613% Notes due March 2024
—
500
$790 million, 3.500% Notes due June 2024 (1)
—
996
$900 million, 3.250% Notes due April 2025 (2)
893
—
Other, including finance leases
44
42
Total short-term debt
$
2,572
$
2,775
Long-term debt
$900 million, 3.250% Notes due April 2025 (2)
—
882
$1,216 million, 4.125% Notes due November 2025 (1)
1,215
2,197
$1,284 million, 4.500% Notes due February 2026 (1)
1,285
1,502
$550 million, 1.250% Notes due March 2026 (1)
549
798
$700 million, 5.685% Notes due March 2026
698
698
$1,500 million, 3.400% Notes due March 2027
1,462
1,450
$259 million, 7.875% Debentures due May 2027
259
259
$600 million, 3.050% Notes due October 2027
598
597
$3,800 million, 4.375% Notes due October 2028
3,789
3,787
$1,000 million, 5.000% Notes due May 2029
994
—
$1,400 million, 2.400% Notes due March 2030 (1) (2)
1,405
1,493
$1,500 million, 2.375% Notes due March 2031 (2)
1,411
1,397
$750 million, 5.125% Notes due May 2031
745
—
$45 million, 8.080% Step Down Notes due January 2033
45
45
$800 million, 5.400% Notes due March 2033
795
794
$1,250 million, 5.250% Notes due February 2034 (2)
1,256
—
$190 million, 6.150% Notes due November 2036
190
190
$2,200 million, 4.800% Notes due August 2038
2,193
2,193
$750 million, 3.200% Notes due March 2040
744
744
$121 million, 5.875% Notes due March 2041
119
119
$448 million, 6.125% Notes due November 2041
486
487
$317 million, 5.375% Notes due February 2042
315
315
$1,500 million, 4.800% Notes due July 2046
1,468
1,467
$1,000 million, 3.875% Notes due October 2047
990
989
$3,000 million, 4.900% Notes due December 2048
2,971
2,970
$1,250 million, 3.400% Notes due March 2050
1,237
1,237
$1,500 million, 3.400% Notes due March 2051
1,479
1,479
$1,500 million, 5.600% Notes due February 2054
1,482
—
Other, including finance leases
50
66
Total long-term debt
$
30,230
$
28,155
(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 11 to the Consolidated Financial Statements for further information about the Company's interest rate risk management and these derivative instruments.
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 September 30, 2024, there were no outstanding balances under these revolving credit agreements.
14
In April 2024, The Cigna Group replaced its previous revolving credit agreements and entered into the following (the "Credit Agreements"):
•a $5.0 billion five-year revolving credit and letter of credit agreement that will mature in April 2029 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 $5.0 billion under the credit agreement for general corporate purposes, with up to $500 million available for issuance of letters of credit.
•a $1.5 billion 364-day revolving credit agreement that will mature in April 2025. The Company can borrow up to $1.5 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 $8.0 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 22 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 September 30, 2024. 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.
Commercial Paper. Under our commercial paper program, we may issue short-term, unsecured commercial paper notes privately placed on a discounted basis through certain broker-dealers at any time not to exceed an aggregate amount of $6.5 billion. Our commercial paper program size was increased from $5.0 billion to $6.5 billion during the third quarter 2024. 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 5.33% at September 30, 2024.
Long-term debt
Debt Issuance and Debt Tender Offers. In February 2024, we issued $4.5 billion of new senior notes, as detailed in the table below. The proceeds from this debt were used to pay the consideration for the cash tender offers as described below. We used the remaining net proceeds to fund the repayment of our senior notes that matured in March 2024 and for general corporate purposes, including repayment of indebtedness and repurchases of shares of our common stock. Interest on this debt is paid semi-annually.
Principal
Maturity Date
Interest Rate
Net Proceeds
Redeemable Date(1)
"Make whole" premium basis points over U.S. Treasury rate(2)
$1,000 million
May 15, 2029
5.000%
$995 million
April 15, 2029
15
$750 million
May 15, 2031
5.125%
$746 million
March 15, 2031
15
$1,250 million
February 15, 2034
5.250%
$1,244 million
November 15, 2033
20
$1,500 million
February 15, 2054
5.600%
$1,485 million
August 15, 2053
20
(1) Redeemable at any time prior to this date at a "make whole" premium, defined below. Redeemable at par on or after this date.
(2) "Make whole" premium calculated using the most directly comparable U.S. Treasury rate plus the amount of basis points set forth in this column.
In the first quarter of 2024, the Company completed the repurchase of a total of $1.8 billion in aggregate principal amount of existing senior notes that were tendered to the Company pursuant to cash tender offers.
Interest Expense
Interest expense on corporate financing was $380 million for the three months ended and $1.1 billion for the nine months ended September 30, 2024, compared with $353 million for the three months ended and $1.0 billion for the nine months ended September 30, 2023.
Debt Covenants
The Company was in compliance with its debt covenants as of September 30, 2024.
15
Note 8 – Common and Preferred Stock
Dividends
The following table provides details of the Company's dividend payments:
Record Date
Payment Date
Amount per Share
Total Amount Paid (in millions)
2024
March 6, 2024
March 21, 2024
$1.40
$401
June 4, 2024
June 20, 2024
$1.40
$392
September 4, 2024
September 19, 2024
$1.40
$390
2023
March 8, 2023
March 23, 2023
$1.23
$368
June 7, 2023
June 22, 2023
$1.23
$362
September 6, 2023
September 21, 2023
$1.23
$362
On October 23, 2024, the Board of Directors declared the fourth quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on December 19, 2024 to shareholders of record on December 4, 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 share repurchase program, we entered into separate accelerated share repurchase agreements with Deutsche Bank AG and Bank of America, N.A. (collectively, the "Counterparties") to repurchase $3.2 billion of common stock in aggregate. The total number of shares of our common stock repurchased under the agreements was approximately 9.3 million, at $344.98 per share. The per share amount was calculated based on the daily volume-weighted average share price of our common stock over the term of the agreements, less a discount.
16
Note 9 – Insurance and Contractholder Liabilities
A.Account Balances – Insurance and Contractholder Liabilities
The Company's insurance and contractholder liabilities were comprised of the following:
September 30, 2024
December 31, 2023
September 30, 2023
(In millions)
Current
Non-current
Total
Current
Non-current
Total
Total
Unpaid claims and claim expenses
Cigna Healthcare
$
5,006
$
82
$
5,088
$
5,017
$
75
$
5,092
$
5,317
Other Operations
162
150
312
99
154
253
274
Future policy benefits
Cigna Healthcare
89
510
599
97
518
615
590
Other Operations
157
3,301
3,458
163
3,375
3,538
3,380
Contractholder deposit funds
Cigna Healthcare
10
120
130
12
133
145
151
Other Operations
364
5,982
6,346
362
6,178
6,540
6,607
Market risk benefits
30
914
944
37
966
1,003
934
Unearned premiums
710
31
741
846
22
868
1,385
Total
6,528
11,090
17,618
6,633
11,421
18,054
Insurance and contractholder liabilities classified as liabilities of businesses held for sale (1)
(1,051)
(517)
(1,568)
(1,119)
(517)
(1,636)
Total insurance and contractholder liabilities
$
5,477
$
10,573
$
16,050
$
5,514
$
10,904
$
16,418
$
18,638
(1) Amounts classified as liabilities of businesses held for sale include $937 million of Unpaid claims, $422 million of Future policy benefits, $98 million of Unearned premiums and $111 million of Contractholder deposit funds as of September 30, 2024 and $823 millionof Unpaid claims, $429 million of Future policy benefits, $261 million of Unearned 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.
B.Unpaid Claims and Claim Expenses – Cigna Healthcare
This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, expected development on reported claims, claims that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities.
The total of incurred but not reported liabilities plus expected development on reported claims and reported claims in process was $4.7 billion at September 30, 2024 and $5.0 billion at September 30, 2023.
17
Activity, net of intercompany transactions, in the unpaid claims liability for the Cigna Healthcare segment was as follows:
Nine Months Ended September 30,
(In millions)
2024 (1)
2023
Beginning balance
$
5,092
$
4,176
Less: Reinsurance and other amounts recoverable
236
221
Beginning balance, net
4,856
3,955
Incurred costs related to:
Current year
28,314
26,788
Prior years
(422)
(237)
Total incurred
27,892
26,551
Paid costs related to:
Current year
23,761
22,053
Prior years
4,059
3,362
Total paid
27,820
25,415
Ending balance, net
4,928
5,091
Add: Reinsurance and other amounts recoverable
160
226
Ending balance
$
5,088
$
5,317
(1) Includes unpaid claims amounts classified as liabilities of businesses held for sale. As of September 30, 2024and December 31, 2023, $937 million and $823 million classified as liabilities of businesses held for sale, respectively.
Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certain business for which the Company administers the plan benefits without any right of offset. See Note 10 to the Consolidated Financial Statements for additional information on reinsurance.
Variances in incurred costs related to prior years' unpaid claims and claim expenses that resulted from the differences between actual experience and the Company's key assumptions were as follows:
Nine Months Ended September 30,
2024
2023
(Dollars in millions)
$
% (1)
$
% (2)
Actual completion factors and other
$
212
0.6
%
$
45
0.2
%
Medical cost trend
210
0.6
192
0.6
Total favorable variance
$
422
1.2
%
$
237
0.8
%
(1)Percentage of current year incurred costs as reported for the year ended December 31, 2023.
(2)Percentage of current year incurred costs as reported for the year ended December 31, 2022.
Favorable prior year development in both years primarily reflects lower than expected utilization of medical services as compared to our assumptions.
C.Future Policy Benefits
Cigna Healthcare
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:
As of
September 30, 2024
September 30, 2023
Interest accretion rate
2.83
%
2.85
%
Current discount rate
4.50
%
6.03
%
Weighted average duration
9.0 years
7.0 years
18
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 were as follows:
Nine Months Ended September 30,
(In millions)
2024 (1)
2023
Present value of expected net premiums
Beginning balance
$
9,233
$
8,557
Reversal of effect of beginning of period discount rate assumptions
1,154
1,537
Effect of assumption changes and actual variances from expected experience (2)
3
314
Issuances and lapses
1,392
822
Net premiums collected
(1,065)
(1,019)
Interest and other (3)
680
58
Ending balance at original discount rate
11,397
10,269
Effect of end of period discount rate assumptions
(865)
(1,681)
Ending balance (4)
$
10,532
$
8,588
Present value of expected policy benefits
Beginning balance
$
9,633
$
8,945
Reversal of effect of discount rate assumptions
1,220
1,611
Effect of assumption changes and actual variances from expected experience (2)
203
112
Issuances and lapses
1,316
902
Benefit payments
(1,096)
(1,017)
Interest and other (3)
580
184
Ending balance at original discount rate
11,856
10,737
Effect of discount rate assumptions
(926)
(1,765)
Ending balance (5)
$
10,930
$
8,972
Liability for future policy benefits
$
398
$
384
Other (6)
201
206
Total liability for future policy benefits (1)(7)
$
599
$
590
(1)Includes $422 million and $429 millionof future policy benefits classified as liabilities of businesses held for sale in the Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, respectively.
(2)Includes the effect of actual variances from expectations, which decreased the total liability for future policy benefits by $(43) million and $(12) million, respectively, for the nine months ended September 30, 2024 and September 30, 2023.
(3)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.
(4)As of September 30, 2024 and September 30, 2023, undiscounted expected future gross premiums were $20.7 billion and $18.5 billion, respectively. As of September 30, 2024 and September 30, 2023, discounted expected future gross premiums were $14.4 billion and $12.5 billion, respectively.
(5)As of September 30, 2024 and September 30, 2023, undiscounted expected future policy benefits were $15.6 billion and $13.1 billion, respectively.
(6)The liability for future policyholder benefits includes immaterial businesses shown as reconciling items above, most of which are in run-off.
(7)$73 million and $154 million reported in Reinsurance recoverables in the Consolidated Balance Sheets as of September 30, 2024 and September 30, 2023, respectively, relate to the liability for future policy benefits. Additionally, $78 million of reinsurance recoverables are reported in assets of businesses held for sale in the Consolidated Balance Sheets as of September 30, 2024.
Other Operations
The weighted average interest rates applied and duration for future policy benefits in Other Operations, consisting of annuity and life insurance products, were as follows:
As of
September 30, 2024
September 30, 2023
Interest accretion rate
5.64
%
5.64
%
Current discount rate
4.81
%
5.73
%
Weighted average duration
11.3 years
10.9 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;
19
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 $0.4 billion as of both September 30, 2024 and September 30, 2023. Future policy benefits excluding deferred profit liability were $3.1 billion as of September 30, 2024, $3.0 billion as of September 30, 2023, and $3.2 billion as of both December 31, 2023, and December 31, 2022. The decrease in future policy benefit reserve as of both September 30, 2024 and September 30, 2023 was primarily driven by benefit payments and for the nine months ended September 30, 2023 current discount rate increases were an additional factor contributing to the decrease in future policy benefit reserve. For both periods, the decreases were partially offset by interest accretion. Undiscounted expected future policy benefits were $4.3 billion as of September 30, 2024 and $4.5 billion as of September 30, 2023. As of September 30, 2024 and September 30, 2023, $0.9 billion and $1.0 billion, respectively, of the future policy benefit reserve was recoverable through treaties with external reinsurers.
D.Contractholder Deposit Funds
Contractholder deposit fund liabilities within Other Operations were $6.3 billion as of September 30, 2024, $6.5 billion as of December 31, 2023, $6.6 billion as of September 30, 2023 and $6.7 billion as of December 31, 2022. Approximately 38% of the balance is reinsured externally. 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 September 30, 2024, the weighted average crediting rate, net amount at risk and cash surrender value for contractholder deposit fund liabilities not effectively exited through reinsurance were 3.33%, $2.9 billion and $2.8 billion, respectively. The comparative amounts as of September 30, 2023 were 3.27%, $3.1 billion and $2.8 billion, respectively. More than 99% of the $4.0 billion liability as of September 30, 2024 and the $4.1 billion liability as of September 30, 2023 not reinsured externally is for contracts with guaranteed interest rates of 3% - 4%, and approximately $1.1 billion and $1.2 billion, as of September 30, 2024 and September 30, 2023, respectively, represented contracts with policies at the guarantee. As of both September 30, 2024 and September 30, 2023, $1.2 billion was 50-150 basis points ("bps") above the guarantee and the remaining $1.7 billion represented contracts above the guarantee that pay the policyholder based on the greater of a guaranteed minimum cash value or the actual cash value. As of both September 30, 2024 and September 30, 2023, 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 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.
Market risk benefits activity was as follows:
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
Balance, beginning of year
$
1,003
$
1,268
Balance, beginning of year, before the effect of nonperformance risk (own credit risk)
1,085
1,379
Changes due to expected run-off
(7)
(15)
Changes due to capital markets versus expected
(78)
(352)
Changes due to policyholder behavior versus expected
(26)
(1)
Assumption changes
37
(16)
Balance, end of period, before the effect of changes in nonperformance risk (own credit risk)
1,011
995
Nonperformance risk (own credit risk), end of period
(67)
(61)
Balance, end of period
$
944
$
934
Reinsured market risk benefit, end of period
$
1,008
$
993
20
The following table presents the net amount at risk and the average attained age of contractholders (weighted by exposure) for contracts assumed by the Company. The net amount at risk is the amount the Company would have to pay to contractholders if all deaths or annuitizations occurred as of the earliest possible date in accordance with the insurance contract. The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded, as discussed further in Note 10 to the Consolidated Financial Statements.
(Dollars in millions, excludes impact of reinsurance ceded)
September 30, 2024
September 30, 2023
Net amount at risk
$
1,361
$
1,986
Average attained age of contractholders (weighted by exposure)
77.6 years
75.9 years
Note 10 – Reinsurance
The Company's insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and to permit recovery of a portion of incurred losses. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.
A.Reinsurance Recoverables
The majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables primarily for expected credit losses.
The Company's reinsurance recoverables as of September 30, 2024 are presented at amount due by range of external credit rating and collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value:
(In millions)
Fair value of collateral contractually required to meet or exceed carrying value of recoverable
Collateral provisions exist that may mitigate risk of credit loss (1)
No collateral
Total
Ongoing Operations
A- equivalent and higher current ratings (2)
$
—
$
7
$
235
$
242
BBB- to BBB+ equivalent current credit ratings (2)
—
—
62
62
Not rated
143
11
3
157
Total recoverables related to ongoing operations
143
18
300
461
Acquisition, disposition or run-off activities
BBB+ equivalent and higher current ratings (2)
Lincoln National Life and Lincoln Life & Annuity of New York
—
2,548
—
2,548
Empower Annuity Insurance Company
—
—
123
123
Prudential Insurance Company of America
320
—
—
320
Life Insurance Company of North America
—
311
—
311
Other
155
19
14
188
Not rated
—
6
4
10
Total recoverables related to acquisition, disposition or run-off activities
475
2,884
141
3,500
Total reinsurance recoverables before market risk benefits
$
618
$
2,902
$
441
$
3,961
Allowance for uncollectible reinsurance
(30)
Market risk benefits
1,008
Total reinsurance recoverables (3)
$
4,939
(1)Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.
(2)Certified by an NRSRO.
(3)Includes $188 million of current reinsurance recoverables that are reported in Other current assets and $194 million of reinsurance recoverables classified as assets of businesses held for sale.
21
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.
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 9 to the Consolidated Financial Statements. Berkshire reinsured 100% of the Company's future cash flows in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.0 billion remaining at September 30, 2024. 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)
September 30, 2024
December 31, 2023
Collateral and Other Terms
at September 30, 2024
Berkshire
$
836
$
873
80% were secured by assets in a trust.
Sun Life Assurance Company of Canada
75
92
Liberty Re (Bermuda) Ltd.
87
104
100% were secured by assets in a trust.
SCOR SE
29
31
65% were secured by a letter of credit.
Market risk benefits (2)
$
1,027
$
1,100
(1)All reinsurers are rated A- equivalent and higher by an NRSRO.
(2)Includes incurred but not reported ("IBNR") and outstanding claims of $19 million as of September 30, 2024 and $19 million as of December 31, 2023. These amounts are excluded from market risk benefits as of September 30, 2024 in Note 9 and Note 10A to the Consolidated Financial Statements.
The impact of nonperformance risk (i.e., the risk that a counterparty might default) on the variable annuity reinsurance asset was immaterial for the three and nine months ended September 30, 2024 and September 30, 2023.
Note 11 – 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 12 to the Consolidated Financial Statements for information about the valuation of the Company's investment portfolio. Further information about our accounting policies for investment assets can be found in Note 12 in the Company's 2023 Form 10-K.
The following table summarizes the Company's investments by category and current or long-term classification:
September 30, 2024
December 31, 2023
(In millions)
Current
Long-term
Total
Current
Long-term
Total
Debt securities
$
596
$
9,285
$
9,881
$
590
$
9,265
$
9,855
Equity securities
29
488
517
31
3,331
3,362
Commercial mortgage loans
165
1,295
1,460
182
1,351
1,533
Policy loans
—
1,163
1,163
—
1,211
1,211
Other long-term investments
—
4,545
4,545
—
4,181
4,181
Short-term investments
182
—
182
206
—
206
Total
$
972
$
16,776
$
17,748
$
1,009
$
19,339
$
20,348
Investments classified as assets of businesses held for sale (1)
(108)
(1,506)
(1,614)
(84)
(1,354)
(1,438)
Investments per Consolidated Balance Sheets
$
864
$
15,270
$
16,134
$
925
$
17,985
$
18,910
(1) Investments related to the HCSC transaction that were held for sale as of September 30, 2024. These investments were primarily comprised of debt securities and commercial mortgage loans, and to a lesser extent, other long-term investments.
22
A.Investment Portfolio
Debt Securities
The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of September 30, 2024:
(In millions)
Amortized Cost
Fair Value
Due in one year or less
$
784
$
695
Due after one year through five years
3,897
3,806
Due after five years through ten years
3,117
3,033
Due after ten years
2,097
1,994
Mortgage and other asset-backed securities
378
353
Total
$
10,273
$
9,881
Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepay obligations, with or without penalties.
Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below:
(In millions)
Amortized Cost
Allowance for Credit Loss
Unrealized Appreciation
Unrealized Depreciation
Fair Value
September 30, 2024
Federal government and agency
$
273
$
—
$
21
$
(5)
$
289
State and local government
37
—
2
(1)
38
Foreign government
373
—
12
(9)
376
Corporate
9,212
(104)
204
(487)
8,825
Mortgage and other asset-backed
378
—
3
(28)
353
Total
$
10,273
$
(104)
$
242
$
(530)
$
9,881
December 31, 2023
Federal government and agency
$
251
$
—
$
24
$
(8)
$
267
State and local government
37
—
2
(1)
38
Foreign government
355
—
10
(13)
352
Corporate
9,338
(33)
158
(630)
8,833
Mortgage and other asset-backed
398
—
1
(34)
365
Total
$
10,379
$
(33)
$
195
$
(686)
$
9,855
Review of declines in fair value. Management reviews debt securities in an unrealized loss position to determine whether a credit loss allowance is needed based on criteria that include:
•severity of decline;
•financial health and specific prospects of the issuer; and
•changes in the regulatory, economic or general market environment of the issuer's industry or geographic region.
23
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.
September 30, 2024
December 31, 2023
(Dollars in millions)
Fair Value
Amortized Cost
Unrealized Depreciation
Number of Issues
Fair Value
Amortized Cost
Unrealized Depreciation
Number of Issues
One year or less
Investment grade
$
202
$
205
$
(3)
112
$
330
$
338
$
(8)
142
Below investment grade
91
100
(9)
155
161
170
(9)
135
More than one year
Investment grade
5,076
5,543
(467)
1,382
5,441
6,036
(595)
1,590
Below investment grade
487
538
(51)
278
701
775
(74)
486
Total
$
5,856
$
6,386
$
(530)
1,927
$
6,633
$
7,319
$
(686)
2,353
Equity Securities
The following table provides the values of the Company's equity security investments:
September 30, 2024
December 31, 2023
(In millions)
Cost
Carrying Value
Cost
Carrying Value
Equity securities with readily determinable fair values
$
657
$
49
$
656
$
51
Equity securities with no readily determinable fair value
3,117
468
3,248
3,311
Total
$
3,774
$
517
$
3,904
$
3,362
We are a minority owner in VillageMD, 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. We determined our investment in VillageMD was fully impaired and recorded a $2.7 billion loss in Net realized investment losses in the Company's Consolidated Statements of Income.
Commercial Mortgage Loans
Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are generally issued at fixed rates of interest and are secured by high quality, primarily completed and substantially leased operating properties.
The Company regularly evaluates and monitors credit risk from the initial mortgage loan underwriting and throughout the investment holding period. The annual portfolio review performed in the second quarter of 2024 confirmed ongoing strong overall credit quality in line with the previous year's results. For more information on the Company's accounting policies and methodologies regarding these investments, see Note 12 in the Company's 2023 Form 10-K.
The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio:
(Dollars in millions)
September 30, 2024
December 31, 2023
Loan-to-Value Ratio
Carrying Value
Average Debt Service Coverage Ratio
Average Loan-to-Value Ratio
Carrying Value
Average Debt Service Coverage Ratio
Average Loan-to-Value Ratio
Below 60%
$
645
2.15
$
802
2.13
60% to 79%
574
1.85
574
1.77
80% to 100%
241
0.92
157
0.65
Total
$
1,460
1.81
67
%
$
1,533
1.82
64
%
Other Long-Term Investments
Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value.
24
Income or loss from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.
Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flow estimates indicate that the carrying value may not be recoverable. Additionally, statutory and other restricted deposits and foreign currency swaps carried at fair value are reported in the table below as Other. The following table provides the carrying value information for these investments:
Carrying Value as of
(In millions)
September 30, 2024
December 31, 2023
Real estate investments
$
1,760
$
1,606
Securities partnerships
2,578
2,400
Other
207
175
Total
$
4,545
$
4,181
B.Derivative Financial Instruments
The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities. The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.
As of September 30, 2024, the notional value of interest rate swap contracts increased to $2.1 billion compared to $1.5 billion as of December 31, 2023. There have been no other material changes to the Company's derivative financial instruments during the nine months ended September 30, 2024. Please refer to the Company's 2023 Form 10-K for further discussion of the types of derivative financial instruments and associated accounting policies. The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated Financial Statements as of September 30, 2024 and December 31, 2023. The gross fair values of our derivative financial instruments are presented in Note 12 to the Consolidated Financial Statements.
C.Realized Investment Gains and Losses
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:
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Net realized investment gains (losses), excluding credit (loss)/recovery and other investment write-downs
$
25
$
(9)
$
32
$
(29)
Credit (loss)/recovery and other investment write-downs
(946)
(5)
(2,837)
(15)
Net realized investment (losses), before income taxes
$
(921)
$
(14)
$
(2,805)
$
(44)
Net realized investment losses for the three and nine months ended September 30, 2024 were primarily driven by the impairment of equity securities, as described above.
Note 12 – Fair Value Measurements
The Company carries certain financial instruments at fair value in the financial statements including debt securities, certain equity securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions, such as when impaired or when there are observable price changes for equity securities with no readily determinable fair value.
Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor.
The Company's financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset's or a liability's classification is based on the lowest level of input that is significant to its measurement. For example, a
25
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).
For a description of the policies, methods and assumptions that are used to estimate fair value and determine the fair value hierarchy for each class of financial instruments, see Note 13 in the Company's 2023 Form 10-K.
A.Financial Assets and Financial Liabilities Carried at Fair Value
The following table provides information about the Company's financial assets and liabilities carried at fair value. Further information regarding insurance assets and liabilities carried at fair value is provided in Note 9E to the Consolidated Financial Statements. Separate account assets are also recorded at fair value on the Company's Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generally accrue directly to contractholders:
(In millions)
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
Financial assets at fair value
Debt securities
Federal government and agency
$
168
$
130
$
121
$
137
$
—
$
—
$
289
$
267
State and local government
—
—
38
38
—
—
38
38
Foreign government
—
—
376
352
—
—
376
352
Corporate
—
—
8,448
8,432
377
401
8,825
8,833
Mortgage and other asset-backed
—
—
307
319
46
46
353
365
Total debt securities
168
130
9,290
9,278
423
447
9,881
9,855
Equity securities (1)
1
4
48
47
—
—
49
51
Short-term investments
—
—
182
206
—
—
182
206
Derivative assets
—
—
129
131
—
1
129
132
Financial liabilities at fair value
Derivative liabilities
$
—
$
—
$
5
$
4
$
—
$
—
$
5
$
4
(1)Excludes certain equity securities that have no readily determinable fair value.
Level 3 Financial Assets and Financial Liabilities
Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement. Unobservable inputs reflect the Company's best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. Additionally, as discussed in Note 9E to the Consolidated Financial Statements, the Company classifies variable annuity assets and liabilities in Level 3 of the fair value hierarchy.
26
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 as of
Unobservable Adjustment Range (Weighted Average by Quantity) as of
(Fair value in millions)
September 30, 2024
December 31, 2023
Unobservable Input September 30, 2024
September 30, 2024
December 31, 2023
Debt securities
Corporate
$
377
$
401
Liquidity
60 - 1495 (380)
bps
70 - 1235 (310)
bps
Mortgage and other asset-backed securities
46
46
Liquidity
100 - 635 (320)
bps
95 - 640 (310)
bps
Total Level 3 debt securities
$
423
$
447
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.
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Debt and Equity Securities
Beginning balance
$
397
$
454
$
447
$
447
Losses included in Shareholders' net income
(10)
(1)
(71)
(1)
Gains (losses) included in Other comprehensive income (loss)
8
(5)
3
(5)
Purchases, sales and settlements
Purchases
4
6
15
10
Sales
(2)
—
(2)
—
Settlements
(4)
(5)
(19)
(32)
Total purchases, sales and settlements
(2)
1
(6)
(22)
Transfers into / (out of) Level 3
Transfers into Level 3
32
—
63
71
Transfers out of Level 3
(2)
(13)
(13)
(54)
Total transfers into / (out of) Level 3
30
(13)
50
17
Ending balance
$
423
$
436
$
423
$
436
Total losses included in Shareholders' net income attributable to instruments held at the reporting date
$
(9)
$
(1)
$
(71)
$
(1)
Change in unrealized gain or (loss) included in Other comprehensive income (loss) for assets held at the end of the reporting period
$
8
$
(4)
$
3
$
(9)
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 and Net investment income.
Gains and losses included in Other comprehensive income (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
27
and is typically observed through the widening of liquidity spreads. Transfers between Level 2 and Level 3 during 2024 and 2023 primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors. See discussion under Quantitative Information about Unobservable Inputs above for more information.
Separate Accounts
The investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company's Consolidated Statements of Income and Cash Flows. The separate account activity for the nine months ended September 30, 2024 and 2023 was primarily driven by changes in the market values of the underlying separate account investments.
Fair values of Separate account assets were as follows:
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)
Total
(In millions)
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
Guaranteed separate accounts (See Note 16)
$
247
$
226
$
353
$
352
$
—
$
—
$
600
$
578
Non-guaranteed separate accounts (1)
166
158
6,007
5,797
227
217
6,400
6,172
Subtotal
$
413
$
384
$
6,360
$
6,149
$
227
$
217
7,000
6,750
Non-guaranteed separate accounts priced at net asset value ("NAV") as a practical expedient (1)
651
680
Total
$
7,651
$
7,430
(1)Non-guaranteed separate accounts include $4.0 billion as of both September 30, 2024 and December 31, 2023 in assets supporting the Company's pension plans, including $0.2 billion classified in Level 3 as of both September 30, 2024 and December 31, 2023.
Separate account assets classified in Level 3 primarily support the Company's pension plans and include certain newly-issued, privately-placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans. Activity, including transfers into and out of Level 3, was not material for the three and nine months ended September 30, 2024 or 2023.
Separate account investments in securities partnerships, real estate, real estate funds 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:
Fair Value as of
Unfunded Commitment as of September 30, 2024
Redemption Frequency (if currently eligible)
Redemption Notice Period
(In millions)
September 30, 2024
December 31, 2023
Securities partnerships
$
413
$
419
$
224
Not applicable
Not applicable
Real estate and real estate funds
237
258
3
Quarterly
30 - 90 days
Hedge funds
1
3
—
Up to annually, varying by fund
30 - 90 days
Total
$
651
$
680
$
227
As of September 30, 2024, the Company does not have plans to sell any of these assets at less than fair value. These investments are structured to satisfy longer-term investment objectives. Securities partnerships are contractually non-redeemable and the underlying investment assets are expected to be liquidated by the fund managers within ten years after inception.
B.Assets and Liabilities Measured at Fair Value under Certain Conditions
Some financial assets and liabilities are not carried at fair value, such as commercial mortgage loans that are carried at unpaid principal, investment real estate that is carried at depreciated cost and equity securities with no readily determinable fair value when there are no observable market transactions. However, these financial assets and liabilities may be measured using fair value under certain conditions, such as when investments become impaired and are written down to their fair value, or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.
For the nine months ended September 30, 2024, we determined our investment in VillageMD was fully impaired and recorded a $2.7 billion loss in Net realized investment losses in the Company's Consolidated Statements of Income. For the nine months ended
28
September 30, 2023, impairments recognized requiring the assets and liabilities described above to be measured at fair value were not material. Observable price changes for equity securities with no readily determinable fair value were not material for the nine months ended September 30, 2024 and September 30, 2023.
C.Fair Value Disclosures for Financial Instruments Not Carried at Fair Value
The following table includes the Company's financial instruments not recorded at fair value but for which fair value disclosure is required. In addition to universal life products and finance leases, financial instruments that are carried in the Company's Consolidated Balance Sheets at amounts that approximate fair value are excluded from the following table:
Classification in Fair Value Hierarchy
September 30, 2024
December 31, 2023
(In millions)
Fair Value
Carrying Value
Fair Value
Carrying Value
Commercial mortgage loans
Level 3
$
1,394
$
1,460
$
1,430
$
1,533
Long-term debt, including current maturities, excluding finance leases
Level 2
$
29,854
$
31,073
$
28,033
$
29,585
Note 13 – Variable Interest Entities
We perform ongoing qualitative analyses of our involvement with variable interest entities to determine if consolidation is required. The Company determined that it was not a primary beneficiary in any material variable interest entity as of September 30, 2024 or December 31, 2023. The Company's involvement with variable interest entities for which it is not the primary beneficiary has not materially changed from December 31, 2023. For details of our accounting policy for variable interest entities and the composition of variable interest entities with which the Company is involved, refer to Note 14 in the Company's 2023 Form 10-K. The Company has not provided, and does not intend to provide, financial support to any of these variable interest entities in excess of its maximum exposure.
Note 14 – Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) ("AOCI") includes net unrealized appreciation (depreciation) on securities and derivatives, change in discount rate and instrument-specific credit risk for certain long-duration insurance contractholder liabilities (Note 9 to the Consolidated Financial Statements), foreign currency translation and the net postretirement benefits liability adjustment. AOCI includes the Company's share from unconsolidated entities reported on the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized.
Shareholders' other comprehensive loss, net of tax, for the three and nine months ended September 30, 2024 and September 30, 2023, is primarily attributable to the change in discount rates for certain long-duration liabilities (following the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023) and unrealized changes in the market values of securities and derivatives, including the impacts from unconsolidated entities reported on the equity method.
Changes in the components of AOCI were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Securities and Derivatives
Beginning balance
$
400
$
(118)
$
171
$
(332)
Unrealized appreciation (depreciation) on securities and derivatives
319
(257)
568
2
Tax (expense) benefit
(65)
57
(133)
(9)
Net unrealized appreciation (depreciation) on securities and derivatives
254
(200)
435
(7)
Reclassification adjustment for losses included in Shareholders' net income (Net realized investment losses)
12
12
73
38
Reclassification adjustment for (gains) included in Shareholders' net income (Selling, general and administrative expenses)
—
(1)
—
(1)
Reclassification adjustment for tax (benefit) included in Shareholders' net income
(2)
(3)
(15)
(8)
Net losses reclassified from AOCI to Shareholders' net income
10
8
58
29
Other comprehensive income (loss), net of tax
264
(192)
493
22
Ending balance
$
664
$
(310)
$
664
$
(310)
29
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Net long-duration insurance and contractholder liabilities measurement adjustments
Beginning balance
$
(1,743)
$
(704)
$
(971)
$
(256)
Current period change in discount rate for certain long-duration liabilities
(34)
(27)
(1,054)
(585)
Tax benefit
3
12
265
149
Net current period change in discount rate for certain long-duration liabilities
(31)
(15)
(789)
(436)
Current period change in instrument-specific credit risk for market risk benefits
3
(17)
(15)
(50)
Tax benefit
—
4
4
10
Net current period change in instrument-specific credit risk for market risk benefits
3
(13)
(11)
(40)
Other comprehensive (loss), net of tax
(28)
(28)
(800)
(476)
Ending balance
$
(1,771)
$
(732)
$
(1,771)
$
(732)
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Translation of foreign currencies
Beginning balance
$
(180)
$
(157)
$
(149)
$
(154)
Translation of foreign currencies
41
(31)
13
(36)
Tax (expense) benefit
(2)
2
(5)
4
Other comprehensive income (loss), net of tax
39
(29)
8
(32)
Ending balance
$
(141)
$
(186)
$
(141)
$
(186)
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Postretirement benefits liability
Beginning balance
$
(919)
$
(899)
$
(915)
$
(916)
Reclassification adjustment for amortization of net prior actuarial losses and prior service costs (Interest expense and other)
9
11
24
35
Reclassification adjustment for tax (benefit) included in Shareholders' net income
(5)
(3)
(8)
(9)
Net adjustments reclassified from AOCI to Shareholders' net income
4
8
16
26
Valuation update
(1)
—
(21)
(2)
Tax benefit
1
—
5
1
Net change due to valuation update
—
—
(16)
(1)
Other comprehensive income, net of tax
4
8
—
25
Ending balance
$
(915)
$
(891)
$
(915)
$
(891)
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Total Accumulated other comprehensive loss
Beginning balance
$
(2,442)
$
(1,878)
$
(1,864)
$
(1,658)
Shareholders' other comprehensive income (loss), net of tax
279
(241)
(299)
(461)
Ending balance
$
(2,163)
$
(2,119)
$
(2,163)
$
(2,119)
Note 15 – Income Taxes
Income Tax Expense
The 30.8% and 31.2% effective tax rates for the three and nine months ended September 30, 2024, respectively, were higher than the 21.3% and 19.9% rates for the three and nine months ended September 30, 2023, respectively. These increases were primarily driven by the establishment of a valuation allowance on the tax benefit related to the impairment of equity securities.
30
As of September 30, 2024, we had approximately $836 million in deferred tax assets ("DTAs") associated with the impairment of equity securities as well as unrealized investment losses which are partially recorded in Accumulated other comprehensive loss. A valuation allowance of $635 million, established in the nine months ended September 30, 2024, drove the higher effective tax rate and was almost entirely related to the impairment of equity securities discussed in Note 11 to the Consolidated Financial Statements. For the remainder of the DTAs, we have determined that a valuation allowance is not currently required based on the Company's ability to carry back losses and ability and intent to hold certain securities until recovery. We continue to monitor and evaluate the need for any additional valuation allowance.
Note 16 – Contingencies and Other Matters
The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.
A.Financial Guarantees: Retiree and Life Insurance Benefits
The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business has the right to redirect the management of the related assets to provide for benefit payments. As of September 30, 2024, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately $410 million. An additional liability is established if management believes that the Company will be required to make payments under the guarantees; there were no additional liabilities required for these guarantees, net of reinsurance, as of September 30, 2024. 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 September 30, 2024 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, filing of tax returns, compliance with laws or regulations or identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a stated dollar amount or a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were no recorded liabilities for these indemnification obligations as of September 30, 2024.
C.Guaranty Fund Assessments
The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws. The Company's exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.
There were no material charges or credits resulting from existing or new guaranty fund assessments for the nine months ended September 30, 2024.
D.Legal and Regulatory Matters
The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator's filing of a complaint under court seal, and other legal matters arising, for the most part, in the ordinary course of managing a global health services business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions.
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
31
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 retained the right to appeal the pricing-related claims that were previously dismissed by the court and Express Scripts retained 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 filed its opening appellate brief on April 24, 2024. Express Scripts filed its answering appellate brief on July 24, 2024. Oral arguments before the Second Circuit were held on October 22, 2024.
Note 17 – Segment Information
See Note 1 to the Consolidated Financial Statements for a description of our segments. A description of our basis for reporting segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy and care services transactions between the Evernorth Health Services and Cigna Healthcare segments.
The 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 reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. We define pre-tax adjusted income (loss) from operations as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results, amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.
The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.
The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance.
32
The following table presents the special items charges (benefits) recorded by the Company, as well as the respective financial statement line items impacted:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Impairment of dividend receivable (Net investment income)
$
182
$
138
$
—
$
—
$
182
$
138
$
—
$
—
Integration and transaction-related costs (Selling, general and administrative expenses)
77
59
13
9
177
135
20
15
Loss on sale of businesses
87
62
21
19
106
19
21
19
Deferred tax expenses, net (Income taxes, less amount attributable to noncontrolling interests)
—
41
—
—
—
75
—
—
Charges associated with litigation matters (Selling, general and administrative expenses)
—
—
201
171
—
—
201
171
Total impact from special items
$
346
$
300
$
235
$
199
$
465
$
367
$
242
$
205
33
Summarized segment financial information was as follows:
(In millions)
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate and Eliminations
Total
Three months ended September 30, 2024
Revenues from external customers
$
51,552
$
11,919
$
137
$
1
$
63,609
Intersegment revenues
1,045
1,279
18
(2,342)
Net investment (loss) income
(142)
142
79
6
85
Total revenues
52,455
13,340
234
(2,335)
63,694
Net realized investment results from certain equity method investments
—
(177)
—
—
(177)
Special item related to impairment of dividend receivable
182
—
—
—
182
Adjusted revenues
$
52,637
$
13,163
$
234
$
(2,335)
$
63,699
Income (loss) before income taxes
$
631
$
1,073
$
(10)
$
(502)
$
1,192
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
(99)
—
—
—
(99)
Net realized investment losses (gains) (1)
748
(8)
4
—
744
Amortization of acquired intangible assets
414
22
—
—
436
Special items
Impairment of dividend receivable
182
—
—
—
182
Integration and transaction-related costs
—
—
—
77
77
Loss on sale of businesses
—
87
—
—
87
Pre-tax adjusted income (loss) from operations
$
1,876
$
1,174
$
(6)
$
(425)
$
2,619
(In millions)
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate and Eliminations
Total
Three months ended September 30, 2023
Revenues from external customers
$
37,230
$
11,426
$
71
$
—
$
48,727
Intersegment revenues
1,303
1,136
—
(2,439)
Net investment income
63
176
76
6
321
Total revenues
38,596
12,738
147
(2,433)
49,048
Net realized investment results from certain equity method investments
—
30
—
—
30
Adjusted revenues
$
38,596
$
12,768
$
147
$
(2,433)
$
49,078
Income (loss) before income taxes
$
1,272
$
1,019
$
(3)
$
(448)
$
1,840
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
(44)
—
—
—
(44)
Net realized investment losses (1)
1
35
8
—
44
Amortization of acquired intangible assets
443
11
—
—
454
Special items
Integration and transaction-related costs
—
—
—
13
13
Loss on sale of businesses
—
—
21
—
21
Charges associated with litigation matters
44
157
—
—
201
Pre-tax adjusted income (loss) from operations
$
1,716
$
1,222
$
26
$
(435)
$
2,529
(1) Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
34
(In millions)
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate and Eliminations
Total
Nine months ended September 30, 2024
Revenues from external customers
$
144,689
$
35,752
$
333
$
2
$
180,776
Intersegment revenues
3,558
3,606
63
(7,227)
Net investment (loss) income
(18)
463
231
20
696
Total revenues
148,229
39,821
627
(7,205)
181,472
Net realized investment results from certain equity method investments
—
(238)
—
—
(238)
Special item related to impairment of dividend receivable
182
—
—
—
182
Adjusted revenues
$
148,411
$
39,583
$
627
$
(7,205)
$
181,416
Income (loss) before income taxes
$
1,494
$
3,221
$
(9)
$
(1,446)
$
3,260
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
(271)
—
—
—
(271)
Net realized investment losses (1)
2,203
359
5
—
2,567
Amortization of acquired intangible assets
1,247
32
—
—
1,279
Special items
Impairment of dividend receivable
182
—
—
—
182
Integration and transaction-related costs
—
—
—
177
177
Loss on sale of businesses
—
106
—
—
106
Pre-tax adjusted income (loss) from operations
$
4,855
$
3,718
$
(4)
$
(1,269)
$
7,300
(In millions)
Evernorth Health Services
Cigna Healthcare
Other Operations
Corporate and Eliminations
Total
Nine months ended September 30, 2023
Revenues from external customers
$
108,462
$
34,581
$
232
$
—
$
143,275
Intersegment revenues
4,343
3,143
—
(7,486)
Net investment income
175
454
230
17
876
Total revenues
112,980
38,178
462
(7,469)
144,151
Net realized investment results from certain equity method investments
—
22
—
—
22
Adjusted revenues
$
112,980
$
38,200
$
462
$
(7,469)
$
144,173
Income (loss) before income taxes
$
3,318
$
3,252
$
47
$
(1,292)
$
5,325
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests
(140)
(2)
—
—
(142)
Net realized investment losses (1)
—
64
2
—
66
Amortization of acquired intangible assets
1,330
38
—
—
1,368
Special items
Integration and transaction-related costs
—
—
—
20
20
Loss on sale of businesses
—
—
21
—
21
Charges associated with litigation matters
44
157
—
—
201
Pre-tax adjusted income (loss) from operations
$
4,552
$
3,509
$
70
$
(1,272)
$
6,859
(1)Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
35
Revenue from external customers includes Pharmacy revenues, Premiums and Fees and other revenues. The following table presents these revenues by product, premium and service type:
Three Months Ended September 30,
Nine Months Ended September 30,
(In millions)
2024
2023
2024
2023
Products (Pharmacy revenues) (ASC 606)
Network revenues
$
27,353
$
16,926
$
76,795
$
49,080
Home delivery and specialty revenues
18,909
16,324
53,384
48,943
Other revenues
2,990
2,390
8,433
6,506
Total Evernorth Health Services
49,252
35,640
138,612
104,529
Total Other Operations
14
—
47
—
Intercompany eliminations
(982)
(1,109)
(3,238)
(3,890)
Total Pharmacy revenues
48,284
34,531
135,421
100,639
Insurance premiums (ASC 944)
Cigna Healthcare (1)
U.S. Healthcare
Employer insured
4,382
4,144
13,125
12,315
Medicare Advantage
2,110
2,189
6,604
6,605
Stop loss
1,689
1,548
5,022
4,565
Individual and Family Plans
1,001
1,269
3,016
3,770
Other
1,203
927
3,681
3,091
U.S. Healthcare
10,385
10,077
31,448
30,346
International Health
911
834
2,687
2,440
Total Cigna Healthcare
11,296
10,911
34,135
32,786
Other
122
70
285
225
Intercompany eliminations
18
17
73
51
Total Premiums
11,436
10,998
34,493
33,062
Services (Fees) (ASC 606)
Evernorth Health Services
3,314
2,862
9,508
8,199
Cigna Healthcare
1,671
1,639
4,850
4,847
Other Operations
15
1
57
3
Other revenues
267
43
509
172
Intercompany eliminations
(1,378)
(1,347)
(4,062)
(3,647)
Total Fees and other revenues
3,889
3,198
10,862
9,574
Total revenues from external customers
$
63,609
$
48,727
$
180,776
$
143,275
(1)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. Information presented for the three and nine months ended September 30, 2023 has been restated to conform to the new operating segment presentation.
Financial and performance guarantees. Evernorth Health Services may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive compensation if we fail to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue for any estimated payouts within Accrued expenses and other liabilities (current). These estimates are adjusted and paid following the end of the annual guarantee period. Historically, adjustments to original estimates have not been material. This guarantee liability was $2.0 billion as of September 30, 2024 and $1.6 billion as of December 31, 2023.
Major customers. Revenues from a single pharmacy benefit client were approximately 16% of consolidated revenues for the three and nine months endedSeptember 30, 2024. These amounts were reported in the Evernorth Health Services segment.
Additionally, revenues from U.S. Federal Government agencies, under a number of contracts, were approximately 10% and 11% of consolidated revenues for the three and nine months endedSeptember 30, 2024, respectively. These amounts were reported in the Evernorth Health Services and Cigna Healthcare segments. See Note 25 in the Company's 2023 Form 10-K for prior year revenue concentration information.
36
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 our financial condition as of September 30, 2024, compared with December 31, 2023 and our results of operations for the three and nine months ended September 30, 2024, compared with the same periods last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A of our 2023 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 our 2023 Form 10-K for additional information regarding the Company's significant accounting policies and see Note 2 to the Consolidated Financial Statements in this Form 10-Q for updates to those policies resulting from adopting new accounting guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors call for caution in estimating full-year results based on interim results of operations. 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 reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. We define adjusted income (loss) from operations as shareholders' net income (or income (loss) 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.
This report 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; 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 incidents; risks related to our use of artificial intelligence and machine learning; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations, including currency exchange rates; risks related to an impairment of goodwill, intangible assets and/or investments (including as a result of the failure to realize the expected benefits of strategic transactions, as well as integration or separation difficulties or underperformance of such transactions 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 in our 2023 Form 10-K, Part II, Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K, and as described from time to time in our future reports filed with the Securities and Exchange Commission.
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.
38
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 our 2023 Form 10-K.
Financial Highlights
See Note 1 to the Consolidated Financial Statements for a description of our segments.
Summarized below are certain key measures of our performance by segment:
Financial highlights by segment
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions, except per share amounts)
2024
2023
Change
2024
2023
Change
Revenues
Adjusted revenues by segment
Evernorth Health Services
$
52,637
$
38,596
36
%
$
148,411
$
112,980
31
%
Cigna Healthcare
13,163
12,768
3
39,583
38,200
4
Other Operations
234
147
59
627
462
36
Corporate, net of eliminations
(2,335)
(2,433)
(4)
(7,205)
(7,469)
(4)
Adjusted revenues
63,699
49,078
30
181,416
144,173
26
Net realized investment results from certain equity method investments
177
(30)
N/M
238
(22)
N/M
Special item related to impairment of dividend receivable
(182)
—
N/M
(182)
—
N/M
Total revenues
$
63,694
$
49,048
30
%
$
181,472
$
144,151
26
%
Shareholders' net income
$
739
$
1,408
(48)
%
$
2,010
$
4,135
(51)
%
Adjusted income from operations
$
2,112
$
2,011
5
%
$
5,896
$
5,449
8
%
Earnings per share (diluted)
Shareholders' net income
$
2.63
$
4.74
(45)
%
$
7.05
$
13.89
(49)
%
Adjusted income from operations
$
7.51
$
6.77
11
%
$
20.68
$
18.31
13
%
Pre-tax adjusted income (loss) from operations by segment
Evernorth Health Services
$
1,876
$
1,716
9
%
$
4,855
$
4,552
7
%
Cigna Healthcare
1,174
1,222
(4)
3,718
3,509
6
Other Operations
(6)
26
N/M
(4)
70
N/M
Corporate, net of eliminations
(425)
(435)
(2)
(1,269)
(1,272)
—
Consolidated pre-tax adjusted income from operations
2,619
2,529
4
7,300
6,859
6
Income attributable to noncontrolling interests
99
44
125
271
142
91
Net realized investment (losses) (1)
(744)
(44)
N/M
(2,567)
(66)
N/M
Amortization of acquired intangible assets
(436)
(454)
(4)
(1,279)
(1,368)
(7)
Special items
(346)
(235)
47
(465)
(242)
92
Income before income taxes
$
1,192
$
1,840
(35)
%
$
3,260
$
5,325
(39)
%
(1)Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
For further analysis and explanation of each segment's results, see the "Segment Reporting" section of this MD&A.
39
Consolidated Results of Operations (GAAP basis)
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
Change
2024
2023
Change
Pharmacy revenues
$
48,284
$
34,531
40
%
$
135,421
$
100,639
35
%
Premiums
11,436
10,998
4
34,493
33,062
4
Fees and other revenues
3,889
3,198
22
10,862
9,574
13
Net investment income
85
321
(74)
696
876
(21)
Total revenues
63,694
49,048
30
181,472
144,151
26
Pharmacy and other service costs
47,565
33,639
41
133,488
98,540
35
Medical costs and other benefit expenses
9,527
8,927
7
28,482
27,007
5
Selling, general and administrative expenses
3,590
3,788
(5)
10,979
10,760
2
Amortization of acquired intangible assets
436
454
(4)
1,279
1,368
(7)
Total benefits and expenses
61,118
46,808
31
174,228
137,675
27
Income from operations
2,576
2,240
15
7,244
6,476
12
Interest expense and other
(376)
(365)
3
(1,073)
(1,086)
(1)
Loss on sale of businesses
(87)
(21)
N/M
(106)
(21)
N/M
Net realized investment losses
(921)
(14)
N/M
(2,805)
(44)
N/M
Income before income taxes
1,192
1,840
(35)
3,260
5,325
(39)
Total income taxes
367
391
(6)
1,018
1,060
(4)
Net income
825
1,449
(43)
2,242
4,265
(47)
Less: Net income attributable to noncontrolling interests
86
41
110
232
130
78
Shareholders' net income
$
739
$
1,408
(48)
%
$
2,010
$
4,135
(51)
%
Consolidated effective tax rate
30.8
%
21.3
%
950
bps
31.2
%
19.9
%
1,130
bps
Medical customers (in thousands)
19,048
19,607
(3)
%
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Shareholders' net income
$
739
$
1,408
$
2,010
$
4,135
Adjustments to reconcile to adjusted income from operations
Net realized investment losses (1)
$
744
740
$
44
41
$
2,567
2,547
$
66
56
Amortization of acquired intangible assets
436
333
454
363
1,279
972
1,368
1,053
Special items
Impairment of dividend receivable
182
138
—
—
182
138
—
—
Integration and transaction-related costs
77
59
13
9
177
135
20
15
Loss on sale of businesses
87
62
21
19
106
19
21
19
Deferred tax expenses, net (2)
—
41
—
—
—
75
—
—
Charges associated with litigation matters
—
—
201
171
—
—
201
171
Total special items
$
346
300
$
235
199
$
465
367
$
242
205
Adjusted income from operations
$
2,112
$
2,011
$
5,896
$
5,449
(1)Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
(2)Represents amortization of a foreign tax attribute. See Note 23 to the Consolidated Financial Statements in our 2023 Form 10-K for additional details.
40
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(Diluted Earnings Per Share)
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Pre-tax
After-tax
Shareholders' net income
$
2.63
$
4.74
$
7.05
$
13.89
Adjustments to reconcile to adjusted income from operations
Net realized investment losses (1)
$
2.64
2.63
$
0.15
0.14
$
9.00
8.93
$
0.22
0.19
Amortization of acquired intangible assets
1.55
1.18
1.53
1.22
4.49
3.41
4.60
3.54
Special items
Impairment of dividend receivable
0.65
0.49
—
—
0.64
0.48
—
—
Integration and transaction-related costs
0.27
0.21
0.04
0.03
0.62
0.48
0.07
0.05
Loss on sale of businesses
0.31
0.22
0.07
0.06
0.37
0.07
0.07
0.06
Deferred tax expenses, net (2)
—
0.15
—
—
—
0.26
—
—
Charges associated with litigation matters
—
—
0.68
0.58
—
—
0.67
0.58
Total special items
$
1.23
1.07
$
0.79
0.67
$
1.63
1.29
$
0.81
0.69
Adjusted income from operations
$
7.51
$
6.77
$
20.68
$
18.31
(1)Includes Net realized investment losses/gains as presented in our Consolidated Statements of Income, as well as the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
(2)Represents amortization of a foreign tax attribute. See Note 23 to the Consolidated Financial Statements in our 2023 Form 10-K for additional details.
Commentary: Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023
The commentary presented below, and the segment discussions that follow, compare results for the three and nine months ended September 30, 2024 with results for the three and nine months ended September 30, 2023. Unless specified otherwise, commentary applies to both the three and nine month periods. In addition to the below, see the "Segment Reporting" section of this MD&A for further commentary.
Shareholders' net income decreased 48% and 51%, as higher earnings in Evernorth Health Services in both periods, as well as higher earnings in Cigna Healthcare for the nine months ended were more than offset by the impairment of VillageMD equity securities. See Note 11 to the Consolidated Financial Statements for further discussion of the impairment of VillageMD equity securities.
Adjusted income from operations increased 5% and 8%, reflecting higher earnings in Evernorth Health Services in both periods, as well as higher earnings in Cigna Healthcare for the nine months ended.
Medical customers decreased 3%, primarily reflecting a decrease in Individual and Family Plans customers.
Pharmacy revenues increased 40% and 35%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.
Premiums increased 4% in both periods, primarily reflecting higher premiums in our U.S. Healthcare operating segment to cover expected increases in underlying medical costs.
Fees and other revenues increased 22% and 13%, primarily reflecting growth in affordability services within our Pharmacy Benefit Services operating segment.
Net investment income decreased 74% and 21%, primarily due to establishing a $182 million impairment of dividend receivable in the third quarter of 2024 related to VillageMD accrued dividends.
Pharmacy and other service costs increased 41% and 35%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.
Medical costs and other benefit expenses increased 7% and 5%, primarily reflecting higher medical costs in our U.S. Healthcare operating segment.
Selling, general and administrative expenses decreased 5% for the three months ended September 30, 2024, primarily driven by the absence of litigation settlements that occurred during the three months ended September 30, 2023 and increased 2% for the nine
41
months ended September 30, 2024, primarily driven by strategic investments to support both business growth and continued advancement of our digital capabilities and solutions.
Realized investment results for the three months and nine months ended September 30, 2024 primarily reflect the impairment of VillageMD equity securities. See Note 11 to the Consolidated Financial Statements for further discussion of the impairment of VillageMD equity securities.
The effective tax rate increased for the three and nine months ended September 30, 2024, primarily driven by a valuation allowance related to the impairment of VillageMD equity securities.
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"), 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 $3.7 billion in transaction value, which consists primarily of the purchase price cash subject to adjustments to align with the final balance sheet of the divested businesses. See Note 5 to the Consolidated Financial Statements for further information.
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 10, 2024, CMS announced Medicare Star Ratings for bonus payments to be received in 2026. We estimate 69% of our MA customers to be in four star or greater plans for bonus payments to be received in 2025 and 2026. See Part I, Item I. "Business - Regulation" section of our 2023 Form 10-K for further discussion of Star Ratings.
Medicare Advantage Rates
On April 1, 2024, CMS released the final Calendar Year 2025 Medicare Advantage Program and Part D Payment Policies (the "2025 Final Notice"). The Final Notice reflects no change from the January 31, 2024 advance notice. We do not expect the final rates to have a material impact on our consolidated results of operations in 2025.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We maintain liquidity at two levels: the subsidiary level and the parent company level.
Cash requirements at the subsidiary level generally consist of:
•pharmacy, medical costs and other benefit payments;
•expense requirements, primarily for employee compensation and benefits, information technology and facilities costs;
•income taxes; and
•debt service.
Our subsidiaries normally meet their liquidity requirements by:
•maintaining appropriate levels of cash, cash equivalents and short-term investments;
•using cash flows from operating activities;
•matching investment durations to those estimated for the related insurance and contractholder liabilities;
•selling investments; and
•borrowing from affiliates, subject to applicable regulatory limits.
42
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 our 2023 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 for the nine months ended September 30 were as follows:
Nine Months Ended September 30,
(In millions)
2024
2023
Operating activities
$
5,151
$
10,346
Investing activities
$
(1,911)
$
(4,734)
Financing activities
$
(4,399)
$
(3,044)
The following discussion explains variances in the various categories of cash flows for the nine months ended September 30, 2024 compared with the same period in 2023.
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 decreased for the nine months ended September 30, 2024 due to higher accounts receivable as a result of timing and organic business growth, higher insurance claims and related payments, as well as the absence of an early CMS payment received in September 2023. This decrease is partially offset by the favorable net cash flow impacts of new clients in Evernorth Health Services.
Investing activities
The decrease in cash used in investing activities during the nine months ended September 30, 2024 was due to lower purchases of equity securities.
Financing activities
The Company had higher share repurchases, including the completed ASR Agreements (described below), partially offset by net cash provided by debt financing activities in 2024.
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 flows 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 $1.7 billion for the nine months ended September 30, 2024 and $0.8 billion for the nine months ended
43
September 30, 2023. Non-regulated subsidiaries also generate significant cash flows 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 $6.5 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had approximately $1.6 billion outstanding at September 30, 2024.
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 September 30, 2024, The Cigna Group's revolving credit agreements include: a $5.0 billion five-year revolving credit and letter of credit agreement that expires in April 2029; and a $1.5 billion 364-day revolving credit agreement that expires in April 2025.
As of September 30, 2024, we had $6.5 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), $4.9 billion of remaining capacity under our commercial paper program and $6.0 billion in cash and short-term investments, approximately $0.5 billion of which was held by the parent company or certain non-regulated subsidiaries.
See Note 7 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.
Our debt-to-capitalization ratio was 43.8% at September 30, 2024 and 43.6% at June 30, 2024.
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 $1.4 billion from its subsidiaries without further approvals as of September 30, 2024.
Use of Capital Resources
Debt Issuance and Debt Tender Offers. In February 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt were used to complete the repurchase of a total of $1.8 billion in aggregate principal amount of existing senior notes tendered to the Company pursuant to cash tender offers. We used the remaining net proceeds to fund the repayment of our senior notes which matured in March 2024 and for general corporate purposes, which includes repayment of indebtedness and repurchases of shares of our common stock.
Capital Expenditures. Capital expenditures for property, equipment and computer software were $1.1 billion in the nine months ended September 30, 2024 compared to $1.2 billion in the nine months ended September 30, 2023. Anticipated capital expenditures will be funded primarily from operating cash flows.
Dividends. The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first nine months of 2024, compared to quarterly cash dividends of $1.23 per share during the first nine months of 2023. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On October 23, 2024, the Board of Directors declared the fourth quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on December 19, 2024 to shareholders of record on December 4, 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.
44
Share Repurchases. We maintain a share repurchase program authorized by our Board of Directors, under which we may repurchase shares of our common stock from time to time. The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including through Rule 10b5-1 trading plans or privately negotiated transactions. The program may be suspended or discontinued at any time.
In February 2024, as part of our share repurchase program, we entered into separate Accelerated Share Repurchase ("ASR") agreements to repurchase $3.2 billion of common stock in aggregate. The total number of shares of our common stock repurchased under the agreements was approximately 9.3 million. See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.
Including the ASR agreements, we repurchased 14.7 million shares for approximately $5.0 billion during the nine months ended September 30, 2024, compared to 6.1 million shares for approximately $1.8 billion during the nine months ended September 30, 2023. From October 1, 2024 through October 30, 2024, we repurchased 2.2 million shares for approximately $715 million. Share repurchase authority was $5.6 billion as of October 30, 2024.
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 $3.7 billion in transaction value, which consists primarily of the purchase price cash subject to adjustments to align with the final balance sheet of the divested businesses. 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.
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 our 2023 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 16 to the Consolidated Financial Statements for discussion of various guarantees.
Due to the issuance and repurchase of certain senior notes in the three months ended March 31, 2024, we have updated long-term debt obligations as of September 30, 2024 compared to those previously provided in our 2023 Form 10-K. See Note 7 to the Consolidated Financial Statements for discussion of these debt activities. There have been no material changes to other information presented in our guarantees and contractual obligations set forth in our 2023 Form 10-K.
On balance sheet:
•Long-term debt
◦Total scheduled payments on long-term debt are $48.8 billion through February 2054, which include scheduled interest payments and maturities of long-term debt.
◦We expect $0.3 billion of long-term debt payments (including scheduled interest payments) to be paid for the remainder of 2024.
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
45
•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 our 2023 Form 10-K. We regularly evaluate items that may impact critical accounting estimates.
Our most critical accounting estimates, as well as the effect of hypothetical changes in material assumptions used to develop each estimate, are described in our 2023 Form 10-K. As of September 30, 2024, there were no significant changes to the critical accounting estimates from what was reported in our 2023 Form 10-K.
Goodwill and Other intangible assets
Our annual evaluations of goodwill and other intangible assets for impairments were completed during the third quarter of 2024. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses or market data. The estimated fair value of each of our reporting units exceeded their carrying values by substantial margins.
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.
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 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 reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. 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 17 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income (loss) before income taxes to pre-tax adjusted income (loss) from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 17 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.
Evernorth Health Services Segment
Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, within our Pharmacy Benefit Services and Specialty and Care Services operating segments. See Note 1 to the Consolidated Financial Statements for further discussion of these two operating segments. 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.
Key Factors Affecting Segment Performance
The key factors that impact Evernorth Health Services' Pharmacy Benefit Services and Specialty and Care Services revenues and income from operations are volume, mix of claims, price and contract affordability services. Specialty and Care Services revenue is also impacted by specialty distribution customer growth and client growth. These key factors are discussed further below. Certain of the key factors impact both operating segments as services are offered through an integrated client contract. See Note 2 to the
46
Consolidated Financial Statements included in our 2023 Form 10-K for additional information on revenue and cost recognition policies for this segment.
Key Factors that impact both Pharmacy Benefit Services and Specialty and Care Services:
•Pharmacy claim volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and from dispensing prescription claims from our home delivery and specialty pharmacies and other claims. As pharmacy prescription claim volumes increase or decrease due to customer utilization, organic customer growth through the expansion of existing clients or new clients, our gross profit and income from operations correspondingly increase or decrease.
•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. In addition to the types of drugs, the mix of generic or biosimilar claims also impacts our results. Generally, a higher mix of generic and biosimilar drugs reduces revenues, as generic and biosimilar drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic and biosimilar drugs is incrementally lower than the price charged to our clients, a higher mix of generic and biosimilar drugs generally has a favorable impact on our gross profit and income from operations.
•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.
•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 (also referred to as affordability improvements). Through these affordability services, we seek to improve the effectiveness of our integrated and fee-for-service solutions, for the benefit of our new and existing clients, by continuously innovating, improving affordability and implementing drug purchasing contract initiatives. Our continued affordability improvements further reduce drug costs for the benefit of our consumers and clients and we share in the value delivered, which generally results in a favorable impact on our gross profit and income from operations.
Key factors that impact Specialty and Care Services:
•Customer growth generally results in increased revenues and income from operations. This generally includes both organic customer growth through the expansion of existing business and new business, as well as higher volume in our specialty distribution services where we deliver pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals, primarily to physicians who regularly order costly specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies and leverages our distribution platform to improve our results.
•Client growth, both organic and new business, in our Care Delivery and Management Solutions business generally results in increased revenues and income from operations. This includes client movement in our virtual care, in-home care, physical primary care, benefits management, and behavioral health services, as we expand our businesses and build upon our cross-enterprise leverage.
In this MD&A, we present our segment performance measures adjusted revenues and pre-tax adjusted income from operations. We also present adjusted gross profit, which is calculated as adjusted revenues less Pharmacy and other service costs (which is inclusive of all costs of revenue). We utilize adjusted revenues in this calculation, consistent with our reporting measure that excludes special items, as this reflects the underlying results of business operations.
47
Results of Operations
Financial Summary
Three Months Ended September 30,
Nine Months Ended September 30,
(Dollars in millions)
2024
2023
Change
2024
2023
Change
Total revenues
$
52,455
$
38,596
36
%
$
148,229
$
112,980
31
%
Adjusted revenues (1)
$
52,637
$
38,596
36
%
$
148,411
$
112,980
31
%
Pharmacy and other service costs
$
49,768
$
36,000
38
%
$
140,458
$
105,819
33
%
Gross profit (2)
$
2,687
$
2,596
4
%
$
7,771
$
7,161
9
%
Adjusted gross profit (1),(2)
$
2,869
$
2,596
11
%
$
7,953
$
7,161
11
%
Pre-tax adjusted income from operations
$
1,876
$
1,716
9
%
$
4,855
$
4,552
7
%
Pre-tax adjusted margin (3)
3.6
%
4.4
%
(80)
bps
3.3
%
4.0
%
(70)
bps
SG&A expense ratio (4)
1.7
%
2.3
%
(60)
bps
1.9
%
2.2
%
(30)
bps
Adjusted SG&A expense ratio (4)
1.7
%
2.2
%
(50)
bps
1.9
%
2.2
%
(30)
bps
(1)Adjusted revenues and adjusted gross profit each exclude $182 million of the Special item related to impairment of dividend receivable for each of the three and nine months ended September 30, 2024. There were no special items in the comparable prior periods.
(2)Gross profit and adjusted gross profit are calculated as total revenues and adjusted revenues, respectively, less pharmacy and other service costs.
(3)Pre-tax adjusted margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues. See Note 17 to the Consolidated Financial Statements for reconciliation of pre-tax adjusted income from operations and adjusted revenues to Income before income taxes and Total revenues, respectively.
(4)SG&A expense ratio is calculated as selling, general and administrative expenses including special items ($894 million and $881 million for the three months ended September 30, 2024 and 2023, respectively, and $2,825 million and $2,512 million, for the nine months ended September 30, 2024 and 2023, respectively) divided by total revenues. Adjusted SG&A expense ratio is calculated as selling, general and administrative expenses excluding special items ($894 million and $837 million for the three months ended September 30, 2024 and 2023, respectively, and $2,825 million and $2,468 million for the nine months ended September 30, 2024 and 2023, respectively) as a percentage of adjusted revenues. There were no special items for the three and nine months ended September 30, 2024; special items were $44 million for the three and nine months ended September 30, 2023.
In this selected financial information, we present adjusted revenues and pre-tax income from operations by our two operating segments, Pharmacy Benefit Services and Specialty and Care Services.
Selected Financial Information
Three Months Ended September 30,
Change
Nine Months Ended September 30,
Change
(Dollars and adjusted scripts in millions)
2024
2023
2024
2023
Total adjusted revenues
Pharmacy Benefit Services
$
28,785
$
19,158
50
%
$
81,492
$
56,186
45
%
Specialty and Care Services
23,812
19,375
23
66,755
56,619
18
Net investment income (1)
40
63
(37)
164
175
(6)
Total adjusted revenues
$
52,637
$
38,596
36
%
$
148,411
$
112,980
31
%
Pre-tax adjusted income from operations
Pharmacy Benefit Services
$
1,011
$
981
3
%
$
2,322
$
2,270
2
%
Specialty and Care Services
825
672
23
2,369
2,107
12
Net investment income (1)
40
63
(37)
164
175
(6)
Total pre-tax adjusted income from operations
$
1,876
$
1,716
9
%
$
4,855
$
4,552
7
%
Pharmacy claim volume (2)
531
394
35
%
1,577
1,171
35
%
(1)Net investment income excludes the Special item related to impairment of dividend receivable for certain accrued dividends of $182 million for each of the three and nine months ended September 30, 2024.
(2) Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims. All other network and specialty prescriptions are counted as one claim.
Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023
Commentary in parentheses regarding percentage changes represents the driver's impact on the overall category.
Adjusted revenues increased 36% and 31%, primarily reflecting higher utilization of prescription drugs from customer growth in both Pharmacy Benefit Services and Specialty and Care Services.
Adjusted gross profit increased 11% for both periods, primarily reflecting relatively equal contributions from customer growth in Specialty and Care Services and continued affordability improvements in Pharmacy Benefit Services.
48
Pre-tax adjusted income from operations increased 9% and 7%, primarily reflecting customer growth in Specialty and Care Services (+11% and +10%) and continued affordability improvements in Pharmacy Benefit Services (+3% in both periods). This increase was partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions (-2% and -4% in Specialty and Care Services and -2% in both periods in Pharmacy Benefit Services).
Theadjusted SG&A expense ratio decreased 50 bps and 30 bps, primarily reflecting higher adjusted revenues as discussed above.
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. 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.
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. See Note 5 to the Consolidated Financial Statements for further information.
Key Factors Affecting Segment Performance
Key factors affecting results for this segment include:
•customer growth;
•revenue growth, including increases to premium rates in consideration of anticipated medical costs (also referred to as premium rate increases);
•medical cost trend (also referred to as higher medical costs), which is impacted by utilization (the quantity of medical services consumed by our customers), unit costs (the cost per medical service) and mix of services;
•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, which includes affordability initiatives that serve to mitigate medical cost inflation; and
•selling, general and administrative expenses excluding special items as a percentage of adjusted revenues (which we refer to as adjusted SG&A expense ratio).
Results of Operations
Financial Summary
Three Months Ended September 30,
Change
Nine Months Ended September 30,
Change
(Dollars in millions)
2024
2023
2024
2023
Adjusted revenues
$
13,163
$
12,768
3
%
$
39,583
$
38,200
4
%
Pre-tax adjusted income from operations
$
1,174
$
1,222
(4)
%
$
3,718
$
3,509
6
%
Pre-tax adjusted margin (1)(2)
8.9
%
9.6
%
(70)
bps
9.4
%
9.2
%
20
bps
Medical care ratio
82.8
%
80.5
%
230
bps
81.7
%
81.0
%
70
bps
SG&A expense ratio (2)(3)
19.8
%
22.9
%
(310)
bps
20.1
%
21.7
%
(160)
bps
Adjusted SG&A expense ratio (2)(3)
20.0
%
21.6
%
(160)
bps
20.2
%
21.3
%
(110)
bps
(1)Pre-tax adjusted margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues.
(2)See Note 17 to the Consolidated Financial Statements for reconciliation of pre-tax adjusted income from operations and adjusted revenues to Income before income taxes and Total revenues, respectively.
(3)SG&A expense ratio is calculated as selling, general and administrative expenses including special items ($2,637 million and $2,920 million for the three months ended September 30, 2024 and 2023, respectively, and $7,986 million and $8,298 million for the nine months ended September 30, 2024 and 2023, respectively) divided by Total revenues. Adjusted SG&A expense ratio is calculated as selling, general and administrative expenses excluding special items ($2,637 million and $2,763 million for the three months ended September 30, 2024 and 2023, respectively, and $7,986 million and $8,141 million for the nine months ended September 30, 2024 and 2023, respectively) as a percentage of adjusted revenues. There were no special items for the three and nine months ended September 30, 2024; special items were $157 million for the three and nine months ended September 30, 2023.
49
Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023
Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on overall category.
Adjusted revenues increased 3% and 4%, primarily due to higher premiums within employer insured (+$238 million and +$810 million), Medicare Part D (+$202 million and +$410 million) and stop loss (+$141 million and +$457 million), in each case reflecting premium rate increases to cover expected increases in underlying medical costs, partially offset by lower premiums within Individual and Family Plans (-$268 million and -$754 million), reflecting a decrease in customers.
Pre-tax adjusted income from operations decreased 4% for the three months ended September 30, 2024, primarily due to higher medical costs (-$569 million), partially offset by higher adjusted revenues (+$395 million) and lower selling, general and administrative expenses excluding special items (+$126 million), primarily reflecting ongoing efficiencies. Pre-tax adjusted income from operations increased 6% for the nine months ended September 30, 2024, primarily due to higher adjusted revenues (+$1.4 billion) and lower selling, general and administrative expenses excluding special items (+$155 million), primarily reflecting ongoing efficiencies, partially offset by higher medical costs (-$1.3 billion). The impact of higher premiums in adjusted revenues and medical costs are reflected in the medical care ratio calculation.
The medical care ratio increased 230 bps for the three months ended September 30, 2024, primarily due to a higher U.S. Healthcare medical care ratio, reflecting relatively equal contributions from business mix and one additional business day in the third quarter of 2024. The medical care ratio increased 70 bps for the nine months ended September 30, 2024, primarily due to a higher U.S. Healthcare medical care ratio driven by business mix.
The adjusted SG&A expense ratio decreased 160 bps and 110 bps, primarily due to revenue growth outpacing volume-related expenses (-80 bps and -60 bps) and ongoing efficiencies (-60 bps and -30 bps).
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
As of September 30,
(In thousands)
2024
2023
Change
U.S. Healthcare
3,833
4,189
(8)
International Health (1)
1,209
1,198
1
Insured
5,042
5,387
(6)
%
U.S. Healthcare
13,573
13,790
(2)
International Health (1)
433
430
1
Administrative services only
14,006
14,220
(2)
Total
19,048
19,607
(3)
%
(1)International Health excludes medical customers served by less than 100% owned subsidiaries, as well as certain customers served by our third-party administrator.
Total medical customers decreased 3%, primarily due to a decrease in Individual and Family Plans customers.
See Part I, Item 1 of our 2023 Form 10-K for definitions of Cigna Healthcare's market segments. 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. Medical Customer information presented as of September 30, 2023 has been restated to conform to the new operating segment presentation.
Unpaid Claims and Claim Expenses
As of September 30,
As of December 31,
(In millions)
2024
2023
Change
Unpaid claims and claim expenses
$
5,088
$
5,092
—
%
50
Our unpaid claims and claim expenses liability was flat, driven by a decrease in Individual and Family Plans customers (-$290 million), mostly offset by stop loss seasonality (+$175 million) and Medicare Advantage (+$80 million).
Other Operations
Other Operations includes corporate owned life insurance ("COLI"), the Company's run-off operations and other non-strategic businesses. See Note 1 to the Consolidated Financial Statements for additional information regarding these operations. As described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax adjusted income from operations.
Results of Operations
Financial Summary
Three Months Ended September 30,
Change
Nine Months Ended September 30,
Change
(Dollars in millions)
2024
2023
2024
2023
Adjusted revenues
$
234
$
147
59
%
$
627
$
462
36
%
Pre-tax adjusted (loss) income from operations
$
(6)
$
26
N/M
%
$
(4)
$
70
N/M
%
Pre-tax adjusted margin
(2.6)
%
17.7
%
(2,030)
bps
(0.6)
%
15.2
%
(1,580)
bps
Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023
Adjusted revenues for both periods primarily reflect premiums and net investment income associated with COLI, our run-off operations and other non-strategic businesses.
Pre-tax adjusted (loss) income from operations decreased for both periods primarily driven by unfavorable margins in our non-strategic businesses.
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
Three Months Ended September 30,
Change
Nine Months Ended September 30,
Change
(In millions)
2024
2023
2024
2023
Pre-tax adjusted loss from operations
$
(425)
$
(435)
(2)
%
$
(1,269)
$
(1,272)
—
%
Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023
Commentary regarding bps represents the driver's impact on overall category.
Pre-tax adjusted loss from operations decreased for both periods primarily due to lower operating and pension costs (-800 bps for both periods), partially offset by higher interest rates on our indebtedness (+600 bps for both periods).
51
INVESTMENT ASSETS
The following table presents our investment asset portfolio excluding separate account assets. Additional information regarding our investment assets is included in Notes 11, 12, 13 and 14 to the Consolidated Financial Statements.
(In millions)
September 30, 2024
December 31, 2023
Debt securities
$
9,881
$
9,855
Equity securities
517
3,362
Commercial mortgage loans
1,460
1,533
Policy loans
1,163
1,211
Other long-term investments
4,545
4,181
Short-term investments
182
206
Total
$
17,748
$
20,348
Investments classified as assets of businesses held for sale (1)
(1,614)
(1,438)
Investments per Consolidated Balance Sheets
$
16,134
$
18,910
(1) Investments related to the HCSC transaction that were held for sale as of September 30, 2024 and December 31, 2023. These investments were primarily comprised of debt securities and commercial mortgage loans, and to a lesser extent, other long-term investments.
Investment Outlook
Although impacts to our core insurance and operating business portfolios have been limited to date, we continue to actively monitor geopolitical events and economic conditions and their potential impact on the investment portfolio, including expectations for inflation and interest rates, the potential for a recession, and ongoing conflict in Europe and the Middle East. 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. 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. The following discussion addresses the strategies and risks associated with our various classes of investment assets.
Debt Securities
Investments in debt securities include publicly traded and privately placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value in our Consolidated Balance Sheets. Additional information regarding valuation methodologies, key inputs and controls is included in Note 12 to the Consolidated Financial Statements.
The following table reflects our portfolio of debt securities by type of issuer:
(In millions)
September 30, 2024
December 31, 2023
Federal government and agency
$
289
$
267
State and local government
38
38
Foreign government
376
352
Corporate
8,825
8,833
Mortgage and other asset-backed
353
365
Total
$
9,881
$
9,855
The carrying value of our debt securities portfolio slightly increased during the nine months ended September 30, 2024, reflecting a valuation increase due to a decline of market interest rates, offset by net sales activity. Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years. More detailed information about debt securities by type of issuer, maturity dates and net unrealized position is included in Note 11 to the Consolidated Financial Statements.
As of September 30, 2024, $8.6 billion, or 86%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.3 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.
52
Debt securities include private placement assets of $3.9 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. Primary risks facing many of the issuers in our portfolio include on-going geopolitical events and economic conditions, including expectations for a longer period of higher inflation and interest rates. To date, most issuers have been successful in managing these issues without a meaningful change in credit quality. We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.
Commercial Mortgage Loans
As of September 30, 2024, our $1.5 billion commercial mortgage loan portfolio consisted of approximately 45 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 September 30, 2024. See Note 12 to the Consolidated Financial Statements for further details. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested in the property generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 11 to the Consolidated Financial Statements.
Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at approximately 60% 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 2024 confirmed ongoing strong overall credit quality in line with the previous year's results. See Note 11 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 25% 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 $4.5 billion as of September 30, 2024 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses. Accounting policies for these investments are discussed in Note 11 to the Consolidated Financial Statements. 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 220 separate partnerships and 110 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 3% of our securities and real estate limited partnership portfolio.
Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. 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. Our 50% share of the investment portfolio supporting the joint venture's liabilities is approximately $15.1
53
billion as of September 30, 2024. 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 September 30, 2024.
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. Our primary market risk exposures are interest rate risk and equity price risk. We encourage you to read this in conjunction with "Market Risk – Financial Instruments" included in the MD&A section of our 2023 Form 10-K.
As of September 30, 2024, there was an increase in our interest rate risk due to an increase in the fair value of our long-term debt since December 31, 2023. In the event of a 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $2.1 billion at September 30, 2024 compared to approximately $1.8 billion at December 31, 2023.
If the market price for all equity securities declined by 10%, the fair value of the Company's equity securities would decrease by approximately $0.1 billion as of September 30, 2024, compared to approximately $0.3 billion at December 31, 2023. This decline in our equity price risk exposure is driven by the impairment of equity securities. See Note 11 to the Consolidated Financial Statements for more information regarding the impairment in equity securities.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responsive to this item is contained under the caption "Market Risk" in Item 2 above, Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
Item 4. 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.
Change in Internal Control over Financial Reporting
The Cigna Group is in the process of a multi-year enterprise resource planning system implementation to increase efficiency and modernize the tools and technology used in certain financial close and reporting processes. During the quarter ended September 30, 2024, certain subsidiaries completed the initial phase of this implementation.
In conjunction with this implementation, during the quarter ended September 30, 2024, certain internal controls over financial reporting have been added or modified to accommodate related changes in the Company's systems and business processes. There have been no other changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, The Cigna Group's internal control over financial reporting. As additional phases of the implementation occur, we will continue to monitor and modify, as needed, the design and operating effectiveness of the Company's internal control over financial reporting.
54
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information contained under "Legal and Regulatory Matters" in Note 16 to the Consolidated Financial Statements is incorporated herein by reference.
Item 1A. RISK FACTORS
For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information about The Cigna Group's share repurchase activity for the quarter ended September 30, 2024:
Period
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)
July 1-31, 2024
2,879
$
267.74
—
$
6,293
August 1-31, 2024
1,719
$
276.21
—
$
6,293
September 1-30, 2024
4,202
$
285.34
—
$
6,293
Total
8,800
$
277.80
—
N/A
(1)Includes shares tendered by employees under the Company's equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered 2,879 shares in July, 1,719 shares in August and 4,202 shares in September 2024.
(2)Additionally, the Company maintains a share repurchase program authorized by the Board. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. From October 1, 2024 through October 30, 2024, the Company repurchased 2.2 million shares for approximately $715 million, leaving repurchase authority at $5.6 billion as of October 30, 2024.
(3)Approximate dollar value of shares is as of the last date of the applicable month and excludes the impact of excise tax.
Item 5. OTHER INFORMATION
Rule 10b5-1 Plan Elections
During the quarter ended September 30, 2024, the following 10b5-1 director and officer trading plan arrangement change occurred:
1.On September 12, 2024, Noelle K. Eder, Executive Vice President, Global Chief Information Officer of The Cigna Group, adopted a 10b5-1 plan. Ms. Eder's plan provides for (i) the sale of up to 5,981 shares of The Cigna Group common stock, (ii) the sale of shares of The Cigna Group common stock issuable upon vesting of a performance award (the actual number of shares depends on actual performance achieved and may range from 0% to 200% of the 6,300 shares subject to the award at the target level of performance), and (iii) the exercise of vested stock options and the associated sale of up to 7,026 shares of The Cigna Group common stock, in each case through May 2, 2025.
This trading plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934 and the Company's policies regarding insider transactions.
The following materials from The Cigna Group's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Total Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements
Filed herewith.
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
Filed herewith.
56
SIGNATURE
Pursuant to the requirements 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: October 31, 2024
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
(Principal Financial Officer and Authorized Signatory)
