# EDGAR Filing Document

**Accession Number:** 0001739940
**File Stem:** 0001104659-23-033907
**Filing Date:** 2023-3
**Character Count:** 372483
**Document Hash:** d93a6cc201069f7acffa5f8c202212c7
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-033907.hdr.sgml**: 20230317

**ACCESSION NUMBER**: 0001104659-23-033907

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230317

**DATE AS OF CHANGE**: 20230317

**EFFECTIVENESS DATE**: 20230317

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Cigna Group
- **CENTRAL INDEX KEY:** 0001739940
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOSPITAL & MEDICAL SERVICE PLANS [6324]
- **IRS NUMBER:** 824991898
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38769
- **FILM NUMBER:** 23743024

**BUSINESS ADDRESS:**
- **STREET 1:** 900 COTTAGE GROVE ROAD
- **CITY:** BLOOMFIELD
- **STATE:** CT
- **ZIP:** 06002
- **BUSINESS PHONE:** 8602266000

**MAIL ADDRESS:**
- **STREET 1:** 900 COTTAGE GROVE ROAD
- **CITY:** BLOOMFIELD
- **STATE:** CT
- **ZIP:** 06002

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Cigna Corp
- **DATE OF NAME CHANGE:** 20181221

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Halfmoon Parent, Inc.
- **DATE OF NAME CHANGE:** 20180508

### Attached PDF Documents

**Attachment 1:** `tm239628d1_ars.pdf`

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# Connecting for a Healthier Future

THE CIGNA GROUP 2022 ANNUAL REPORT

THE CIGNA GROUP

![img-9.jpeg](img-9.jpeg)

OUR MISSION

To improve the health and vitality of those we serve

![img-10.jpeg](img-10.jpeg)

CHAIRMAN AND CHIEF EXECUTIVE OFFICER, THE CIGNA GROUP

# Connecting for a Healthier Future

Good health drives good results. This is an unmistakable conclusion from our collective experiences over the past few years. With good health, individuals are happier and more fulfilled, companies and organizations thrive, and our communities are stronger. Without it, challenges and uncertainties can feel insurmountable.

Recognizing the foundational role of good health in our society at every level, we are doubling down to do even more. In 2022, we launched the Evernorth Vitality Index1 to better understand the factors influencing an individual’s ability to not just survive but to thrive. We evolved our mission - clarifying that the reason we exist is to **improve the health and vitality of those we serve**. And we set a bold goal to increase the health of the lives we touch.

2 • THE CIGNA GROUP 2022 ANNUAL REPORT

Our vision for the health care system is built on the vitality of every individual and every community, and this means delivering on the promise of:

- Personalized, digital-first health care access and experiences at scale;
- Advanced care models for conditions, diseases and episodes with superior value; and
- Seamlessly connected pharmacy, medical and behavioral health services.

This is what we are working toward by harnessing the capabilities within our company and convening others through relationships with our partners. It is also what drives and fuels the passion of our more than 70,000 co-workers around the world. We all recognize the inevitable day each of us, or a loved one, will need to turn to the health care system with our own health challenge. Given the level of talent, capabilities and expertise we possess as a company, we view it as both our responsibility and our privilege to ensure the health care system responds by keeping good health and, therefore, vitality in reach for everyone. We will continue to support the health and vitality of customers, patients, clients and communities in ways that drive all of us forward in connecting for a healthier future.

## Our results and progress

To fulfill these commitments, we have continued to strengthen and evolve our capabilities, and we also have refreshed our brands to reflect the unique value we bring with our broad portfolio. The Cigna Group is the new name of our corporation, and we bring our mission and vision to life through our two growth platforms, Evernorth Health Services and Cigna Healthcare. Guided by our durable strategic growth framework, we leverage our platforms as we work each and every day to fulfill our promises to our key stakeholders.

In 2022, both Evernorth Health Services and Cigna Healthcare delivered strong value for the benefit of our customers, patients, clients and partners, and, as a result, we achieved strong financial results for our investors. Our company:

- Grew total revenues to $180.5 billion.2
- Achieved shareholders' net income of $6.7 billion, or $21.30 per share, and adjusted income from operations of $7.3 billion.2,3
- Returned $9 billion to shareholders via a combination of share repurchases and dividends.2

![img-11.jpeg](img-11.jpeg)

3 • THE CIGNA GROUP 2022 ANNUAL REPORT

## EVERNORTH HEALTH SERVICES

Evernorth Health Services performed well in 2022 with its Pharmacy Benefits Services, Specialty Pharmacy and Evernorth Care businesses providing market-leading innovation and affordability.

Throughout 2022, Evernorth Health Services continued to drive a digital-first approach to care with MDLIVE serving as the engine for virtual care. Last year alone, total MDLIVE patient visits grew by approximately 20 percent,4 including substantial growth in the virtual primary care program we introduced. Today, MDLIVE offers virtual primary, urgent, behavioral and dermatological care, which is expanding access, enhancing experiences and improving affordability for customers.

Evernorth Health Services' pharmacy solutions are also increasing the value of each dollar spent on medication and driving to the lowest net cost while ensuring quality outcomes. The highest therapy completion rates in the market are a key part of this success.

This applies to specialty and gene therapy costs, which comprise as much as half of total drug spending5 even though specialty drugs are used by less than 2 percent of the population. Biosimilars offer growing opportunities to lower costs for patients, clients and partners, and our leading specialty pharmacy capabilities give us a differentiated position to create value. Today, approximately 7 percent of our specialty drug spend has a biosimilar or generic equivalent on the market, and this will likely increase to more than 25 percent by 2026.4 Over time, we believe this will translate to a $100 billion market opportunity.6 And we expect to manage almost $30 billion of this market opportunity, driving significant savings for patients and clients as more biosimilar equivalents come to market.4

As a result of the value Evernorth Health Services is generating for the benefit of those we serve, we continue to be a partner of choice across health care and have established significant new relationships with Kaiser Permanente7 and Centene.8

![img-12.jpeg](img-12.jpeg)

**EVERNORTH**  
HEALTH SERVICES

Pharmacy Benefits  
Home Delivery Pharmacy  
Specialty Pharmacy  
Distribution  
Care Delivery and Management Solutions

4 • THE CIGNA GROUP 2022 ANNUAL REPORT

## CIGNA HEALTHCARE

Cigna Healthcare, our benefits portfolio, includes our U.S. Commercial, U.S. Government and International Health businesses. Together, these businesses are delivering products and services that meet the needs of employers of all sizes as well as individuals.

In U.S. Commercial, we drove strong growth, demonstrating how much clients appreciate our in-depth expertise and consultative approach, as well as the continued progress we are making with affordability. We are committed to being a differentiated partner of choice in helping individuals and their companies thrive in a time when employees increasingly are looking to their employers for health and well-being needs.

Our U.S. Government business provides an important growth opportunity for our company, and, in 2022, we continued to support individuals with plans for their personal health and well-being needs, for their lifestyle, and that fit within their budget. We continued our progress in strengthening our offerings as well as our work doubling the size of our Medicare Advantage provider network over the past two years.4,9 In our Individual and Family Plans business in 2022, we maintained our long-standing and continued commitment to participating in the ACA exchange marketplace, expanding our footprint and capabilities that provide positive experiences for those we serve.

Our International Health business contributed strong revenue and earnings in 2022. In addition, we completed the divestiture of our life, accident and supplemental benefits businesses across seven markets. We will continue to sharpen our focus on meeting the health and well-being needs in attractive growth markets and for the globally mobile.

Throughout the year, our Cigna Healthcare segment continued to find more ways of delivering value in the wake of COVID-19 as individuals and employers looked not only for medical benefits - they were looking for ways to increase their overall vitality.

U.S. Commercial
U.S. Government
International Health

![img-13.jpeg](img-13.jpeg)

5 • THE CIGNA GROUP 2022 ANNUAL REPORT

## CROSS-COMPANY COLLABORATION

Evernorth Health Services and Cigna Healthcare have delivered impactful results on their own. And, when they work together, they accelerate innovation and create new solutions for our clients and customers by leveraging our entire suite of capabilities, including our longitudinal portfolio of data.

Our Cigna Pathwell program is a prime example. Cigna Pathwell Specialty connects patients with convenient, quality and affordable options for drug infusions through Cigna Healthcare's provider network. The newest Cigna Pathwell program, Cigna Pathwell Bone & Joint, connects patients to Cigna Healthcare's provider network, as well as its personalized benefit designs, physical therapy options (both virtually and in person), behavioral health services and peer support. Through Evernorth Health Services' analytics, our team can predict potential surgeries up to a year in advance and offer holistic care while also decreasing unnecessary surgeries that can drive up costs. When surgery is necessary, the members' benefits will cover the procedure at low-to-no cost from admission to discharge.$^{10}$

Another example of the power of our cross-company collaboration is a new multi-year strategic relationship with VillageMD.$^{11}$ Through VillageMD, we are transforming how care is accessed, delivered and coordinated for better health outcomes and affordability. Operating more than 250 primary care practices across 22 markets, VillageMD is one of the largest independent primary care groups in the United States. VillageMD physicians and patients partner closely with Cigna Healthcare and also benefit from Evernorth Health Services, including real-time data and clinical insights at the point of diagnosis, enhanced virtual care options through MDLIVE, and dedicated pathways to specialty care and condition management capabilities.

![img-14.jpeg](img-14.jpeg)

THE CIGNA GROUP 2022 ANNUAL REPORT

![img-15.jpeg](img-15.jpeg)

When Evernorth Health Services  
and Cigna Healthcare work together,  
they **accelerate innovation**  
and **create new solutions**  
for our clients and customers.

7 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-16.jpeg](img-16.jpeg)

## Making an impact

Our commitment to improve the health and vitality of those we serve guides how we operate our businesses, as well as how we engage and support our communities. We are honored by the recognition our efforts have earned, including being listed on the Dow Jones Sustainability Indices for a sixth consecutive year$^{12}$ and ranking No. 1 within health care among America’s Most JUST companies by JUST Capital and CNBC.$^{13}$

In 2022, we continued to make strides across the four pillars of our environmental, social and governance framework: Healthy Environment, Healthy Society, Healthy Workforce and Healthy Company.

### HEALTHY ENVIRONMENT

We see an inextricable link between the health of our environment and people’s health. This has spurred our commitment to do more. In 2022, we signed the RE100 global corporate renewable energy initiative and pledged to transition to 100 percent renewable electricity by 2030. In addition, we see an opportunity to measure the positive impact on the environment with a number of ways we are advancing our business. Telemedicine can help to reduce the carbon footprint of health care by reducing emissions because patients do not need to travel for care. Our continued investment in virtual care is one important way we will support a healthy environment.

![img-17.jpeg](img-17.jpeg)

8 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-18.jpeg](img-18.jpeg)

## HEALTHY SOCIETY

Recognizing that some communities face greater challenges than others in supporting the health of their citizens, we maintain our long-standing focus on reducing disparities, addressing social determinants of health and creating a more sustainable health care system.

We continue to advance our Building Equity and Equality Program, a five-year commitment to accelerate our health equity and DE&I efforts, and are particularly encouraged by innovative opportunities to address racial disparities in pre-term births. By working with health care providers and convening services that include free home delivery of prenatal vitamins, transportation for medical appointments, nutrition and emotional support, we aim to reduce disparities in pregnancy-related complications among African American women in Baltimore, Houston and Memphis, where we have launched our pre-term birth program.

We partner with providers to think beyond the clinical setting to best support the holistic care of their patients. We reward value-based providers to screen for social needs and make appropriate referrals for support and to identify health disparities impacting their patient population and develop an action plan to close gaps. We are also working to embed health equity into our culture, systems, policies and practices. Starting in 2021, we reviewed all our existing and new medical coverage policies through a health equity lens and, as a result, made changes to our policies that put us on the forefront of driving advancements in equitable access to care.

The commitment to our leadership role in making a positive impact in our communities is core to our business and embraced by our co-workers. Dr. Luis Torres is a shining example, among so many others across our company, of co-workers personally dedicated to making a difference. Dr. Torres worked to drive policy change addressing health equity for racial and social justice when representing The Cigna Group during the CEO Action for Racial Equity fellowship in 2022.$^{14}$

![img-19.jpeg](img-19.jpeg)

## HEALTHY WORKFORCE

Within our company, we support transparency as we advance an inclusive culture honoring the unique talents and perspectives of our co-workers. Last year, we published our full-year 2021 Diversity Scorecard Report, reinforcing our commitment and progress in creating an environment where members of our team are able to bring their best selves to work, leaving us better able to serve the diverse needs of our customers, clients and communities.$^{15}$

9 • THE CIGNA GROUP 2022 ANNUAL REPORT

Our Diversity, Equity & Inclusion (DE&I) Council continued to provide valuable leadership in guiding our DE&I strategy, helping us strengthen our approaches within our company and in our communities. Caring deeply about our customers, patients and co-workers is a value ingrained in our culture, and we are proud of the many ways our team brings this to life, including through our Community Ambassador Fellowship Program. Each year, we select up to 15 employees who receive paid leave and additional support to work with a nonprofit partner in addressing health and well-being needs. Our 2022 class of ambassador fellows worked on projects such as humanitarian and psychological support for refugees, help for adult survivors of childhood abuse, education around addiction, and the creation of equitable opportunities for high school students. We are encouraged by the impact we are seeing with our wide-ranging approach and are pleased to be recognized among DiversityInc’s Top 50 Companies for Diversity for a fifth year in a row.$^{16}$

We also understand the added challenges that many of our employees have faced over the past few years, and we have worked to increase the support we provide them. We initially offered emergency time off in 2021, and as the Omicron variant of COVID-19 spread rapidly at the beginning of 2022, we extended that benefit for our employees. In addition to increased flexibility, we also expanded our caregiver leave program to include care for grandparents and grandchildren in addition to children, spouses and parents with a serious health condition.

## HEALTHY COMPANY

We have a deep and long-held commitment to strong governance as well as ethical and resilient business practices. The strength of our Board of Directors contributes meaningfully to upholding these commitments. Approximately 70 percent of our directors have served on our Board for fewer than six years, which demonstrates how we continue to bring new and relevant perspectives and skill sets into our company. Throughout 2022, our Board composition exceeded the S&P benchmarks on median age, tenure, gender and ethnic diversity.

Our company is purposeful about whom we work with as we seek suppliers that share our values and are committed to operating in a responsible manner. We continue to make progress in creating and supporting a diverse supplier base, and we are honored by the National Minority Supplier Development Council as being among the Forefront 50 corporations showing leadership in creating greater economic access and equity for systematically excluded entrepreneurs of color.$^{17}$

10 - THE CIGNA GROUP 2022 ANNUAL REPORT

## Building for the future

2022 was a strong year of performance, growth and positive impact for our company. With Evernorth Health Services and Cigna Healthcare, we demonstrated that we are serving the needs of our customers, clients and partners, and we expect to deliver another year of customer and earnings growth in 2023.2

We are making a defining difference in health care, and we are committed to building on our momentum by taking on new challenges where we are positioned to lead.

It is a profound privilege to lead more than 70,000 colleagues around the world who demonstrate personal dedication to our refreshed mission to improve the health and vitality of those we serve. I’m inspired by the way they guide patients to the care they need, work with employers in supporting their people and always seek more ways we can help.

Each and every day, we are bringing to life our vision of a better future, built on the vitality of every individual and every community.

**DAVID M. CORDANI**

Chairman and Chief Executive Officer
The Cigna Group

11 • THE CIGNA GROUP 2022 ANNUAL REPORT

2022 AT A GLANCE

# Innovating New Partnerships

- • Created a **new strategic collaboration with Centene** to make prescription medications more accessible and affordable for 20 million Centene health plan members beginning in 2024.$^{8}$
- • Entered into a new **strategic partnership with VillageMD** to accelerate value-based care services across the country.$^{11}$
- • Announced **five-year collaboration with Kaiser** aimed at delivering increased convenience, affordability and expanded access to high-quality care for its members.$^{7}$

12 • THE CIGNA GROUP 2022 ANNUAL REPORT

# Delivering Value

- Transforming the care experience for patients with complex conditions with the launch of **Cigna Pathwell**, a new, industry-leading suite of cost-saving products.10
- Accredo, our specialty pharmacy, was awarded URAC’s Rare Disease **Pharmacy Center of Excellence** designation.18
- Named a **2023 Best Medicare Advantage Plan** company in Alabama and Tennessee by U.S. News & World Report.19
- Driving affordability for patients and employers through the adoption of **biosimilars**.20

![img-0.jpeg](img-0.jpeg)

13 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-1.jpeg](img-1.jpeg)

# Expanding Coverage

- **Expanded virtual primary care offerings through MDLIVE** for patients with chronic conditions via personalized care plans and remote monitoring capabilities.21
- **Doubled the size of Medicare Advantage provider network** over the past two years, including significantly increasing the number of available specialists.4,9
- **Expanded ACA offerings** in three new states - Texas, Indiana and South Carolina - and 50 new counties.22

14 • THE CIGNA GROUP 2022 ANNUAL REPORT

# Investing in Our Future

- Repurchased **$3.5 billion of common stock** through accelerated stock repurchase agreements.23
- Completed ~**$5.4 billion sale** of life, accident and supplemental benefits businesses in six international markets to Chubb.24
- **$450 million capital investment** in Cigna Ventures, the strategic venture fund of The Cigna Group, to drive continuous health care transformation, innovation and growth.25

![img-2.jpeg](img-2.jpeg)

15 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-3.jpeg](img-3.jpeg)

# We are transforming the ecosystem of health.
**Advancing better health for all.**

Our approach is rooted in our drive to make the health care system well-functioning, sustainable and equitable. The approach is structured around four interconnected pillars that underscore our mission to improve the health and vitality of those we serve. The following are some 2022 highlights within each pillar.

16 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-4.jpeg](img-4.jpeg)

## Healthy Society

- Our businesses further aligned our products and services with value-based care models, leveraging integrated benefits, managing drug costs through innovation, expanding digital offerings and applying a health equity focus to coverage policy development.26
- The Cigna Group and the Cigna Foundation supported nearly **$54 million** in combined charitable giving,27 including more than **$16.5 million** toward the following focus areas: health and well-being; education and workforce development; community and social issues; military, veterans and first responders; disaster relief; global and trending causes; employee programs; and the Foundation’s signature programs: Building Equity and Equality Program, Cigna Scholars, and Healthier Kids For Our Future®.27
- Employees dedicated their time and talent to various causes, equating to more than **$2.8 million** in volunteer-engagement value.27, 28
- The Cigna Foundation, in partnership with The New York Life Foundation and E4E Relief, received a **Gold Halo** award from Engage for Good. The award recognizes the Brave of Heart Fund, which supports frontline health care workers, as the 2022 best COVID-19 Initiative.29

17 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-5.jpeg](img-5.jpeg)

![img-6.jpeg](img-6.jpeg)

## Healthy Workforce

- Expanded our caregiver leave program, which allows up to four weeks of paid leave to enable employees to care for a family member with a serious health condition, to include care for grandparents and grandchildren in addition to children, spouses and parents. This program will be expanded to eight weeks in 2023.26
- Honored by Business Group on Health as **Best Employer for Health and Well-being**.30
- Published our full-year 2021 Diversity Scorecard Report, which reflected a goal-oriented approach for progress in three key areas: colleagues, clinical and communities.15
- Ranked **#24** on DiversityInc’s Top 50 Companies For Diversity, a nine-place jump forward from 2021.16
- Awarded **“2022 Best Places to Work for LGBTQ+ Equality”** by the Human Rights Campaign Foundation.31

18 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-7.jpeg](img-7.jpeg)

![img-8.jpeg](img-8.jpeg)

## Healthy Environment

- Continued to work toward achieving our **operational sustainability targets**, including reducing our Scope 1 and 2 greenhouse gas emissions, striving for carbon neutrality, sourcing renewable electricity, and reducing water consumption and waste generation.26
- Launched digital ID cards, and encouraged customers to go paperless where feasible by providing them with the option to receive paperless statements, submit claims online, use direct deposit and view plan information through myCigna.com and the myCigna® app.32

19 • THE CIGNA GROUP 2022 ANNUAL REPORT

![img-0.jpeg](img-0.jpeg)

## Healthy Company

- Evolved our ESG governance, developed a new ESG framework and maintained ESG leadership:
  - Member of **Dow Jones Sustainability Index** for both the World and North America for the sixth consecutive year.12
  - Named one of **America's Most JUST Companies** for the third year by JUST Capital and CNBC, including #1 in the Health Care Providers industry and #16 overall in the JUST 100.13
  - **Top 1%** in EcoVadis, improving to a Platinum Medal sustainability rating over Gold in 2021.33
  - Upgraded to **AA** in MSCI ESG Ratings, representing industry leadership.34
- Made significant progress toward our goal to achieve **$1 billion** in annual diverse supplier spend by 2025, resulting in being recognized with the **Forefront 50** honor by the National Minority Supplier Development Council, which acknowledges companies that are leading the way to create greater economic access and equity for systematically excluded entrepreneurs of color.17

20 • THE CIGNA GROUP 2022 ANNUAL REPORT

$180.5 billion

adjusted revenues,
representing
growth of 4%2,3

$7.3 billion

adjusted income
from operations2,3

$23.27

adjusted earnings
per share2,3

$8.7 billion

cash flow from
operations2

27.4 million

shares repurchased
for $7.6 billion in 20222

Paid a quarterly
dividend of

$1.12

per share in 2022,
increased by 10%
for 20232

2.2 million

relationships with
health care providers,
clinics and facilities4

300,000+

mental and behavioral
health care providers4

189 million+

customer relationships2

70,000+

employees committed
to changing people's lives
for the better

~30

countries and
jurisdictions

The information provided is as
of December 31, 2022, except
where otherwise noted.
All information subject to change.

21 • THE CIGNA GROUP 2022 ANNUAL REPORT

# Corporate Board of Directors

## Board of Directors

### **DAVID M. CORDANI**

Chairman and Chief Executive Officer, The Cigna Group

### **WILLIAM J. DELANEY**

Former Chief Executive Officer, Sysco Corporation, a food marketing and distribution company

### **ERIC J. FOSS**

Former Chair, President and Chief Executive Officer, Aramark, a provider of food services, facilities management and uniform services

### **RETIRED MAJ. GEN. ELDER GRANGER, M.D.**

President and Chief Executive Officer, THE 5Ps LLC, a health care, education and leadership consulting firm

### **NEESHA HATHI**

Head of Wealth and Advice Solutions, The Charles Schwab Corporation, a financial services company

### **GEORGE KURIAN**

Chief Executive Officer, NetApp, Inc., a cloud-led, data-centric software company

### **KATHLEEN M. MAZZARELLA**

Chair, President and Chief Executive Officer, Graybar Electric Company, Inc., a North American distributor of electrical, communications and data networking products and provider of related supply chain management and logistics services

### **MARK B. MCCLELLAN, M.D., PH.D.**

Director, Duke-Robert J. Margolis, M.D., Center for Health Policy

### **KIMBERLY A. ROSS**

Former Chief Financial Officer, Baker Hughes Company, an energy technology company

### **ERIC C. WISEMAN**

Lead Independent Director, The Cigna Group Former Executive Chair, President and Chief Executive Officer, VF Corporation, an apparel and footwear company

### **DONNA F. ZARCONE**

Former President and Chief Executive Officer, The Economic Club of Chicago, a civic and business leadership organization

### **EXECUTIVE COMMITTEE**

David M. Cordani, Chair  
Eric J. Foss  
Elder Granger  
Kathleen M. Mazzarella  
Kimberly A. Ross  
Eric C. Wiseman  
Donna F. Zarcone

### **AUDIT COMMITTEE**

Kimberly A. Ross, Chair  
William J. DeLaney  
Neesha Hathi  
Donna F. Zarcone

### **COMPLIANCE COMMITTEE**

Elder Granger, Chair  
George Kurian  
Mark B. McClellan

22 • THE CIGNA GROUP 2022 ANNUAL REPORT

## Executive Officers

DAVID M. CORDANI

Chairman and Chief Executive Officer,
The Cigna Group

CHARLES G. BERG

President, U.S. Government Business
and Senior Advisor, Cigna Healthcare

DAVID J. BRAILER, M.D., PH.D.

Executive Vice President, Chief Health Officer,
The Cigna Group

NOELLE K. EDER

Executive Vice President and Global Chief
Information Officer, The Cigna Group

BRIAN C. EVANKO

Executive Vice President and Chief Financial
Officer, The Cigna Group

NICOLE S. JONES

Executive Vice President and General Counsel,
The Cigna Group

EVERETT NEVILLE

Executive Vice President, Solutions and
Corporate Development, The Cigna Group

ERIC P. PALMER

President and Chief Executive Officer,
Evernorth Health Services

CYNTHIA RYAN

Executive Vice President, Chief Human
Resources Officer, The Cigna Group

JASON D. SADLER

President, International Health,
Cigna Healthcare

PAUL A. SANFORD

Executive Vice President, Operations,
The Cigna Group

MICHAEL W. TRIPLETT

President, U.S. Commercial, Cigna Healthcare

## Other Officers

KARI KNIGHT STEVENS

Senior Vice President, Chief Counsel and
Corporate Secretary, The Cigna Group

TIMOTHY D. BUCKLEY

Senior Vice President and Treasurer,
The Cigna Group

MARY T. AGOGLIA HOELTZEL

Senior Vice President, Tax and
Chief Accounting Officer, The Cigna Group

CORPORATE GOVERNANCE
COMMITTEE

Donna F. Zarcone, Chair
William J. DeLaney
Elder Granger
Mark B. McClellan

FINANCE COMMITTEE

Eric J. Foss, Chair
Neesha Hathi
Kathleen M. Mazzarella
Kimberly A. Ross

PEOPLE RESOURCES
COMMITTEE

Kathleen M. Mazzarella, Chair
Eric J. Foss
George Kurian

23 • THE CIGNA GROUP 2022 ANNUAL REPORT

## DIRECT STOCK PURCHASE PLAN

Shareholders can automatically reinvest their annual dividends and make optional cash purchases of common shares. For information on these services, please contact:

### Computershare

150 Royall St. Suite 101
Canton, MA 02021
Toll-free: 800.760.8864; TDD: 800.952.9245

### Outside the United States, U.S. territories and Canada:

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## SHAREHOLDER ACCOUNT ACCESS

You can access your shareholder account online through the Computershare website, www.computershare.com/investor, or by calling 800.760.8864.

## DIRECT DEPOSIT OF DIVIDENDS

Direct deposit of dividends provides a prompt, efficient way to have your dividends electronically deposited into your checking or savings account. It avoids the possibility of lost or delayed dividend checks. The deposit is made electronically on the payment date.

For more information and an enrollment authorization form, contact Computershare at 800.760.8864 or, if outside the United States, U.S. territories and Canada, at 201.680.6578. You can access your account online through the Computershare website, www.computershare.com/investor.

## TRANSFER AGENCY

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PO Box 43006
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Computershare
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Canton, MA 02021
Toll-free: 800.760.8864; TDD: 800.952.9245

### Outside the United States, U.S. territories and Canada:

201.680.6578; TDD: 201.680.6610
Website: www.computershare.com/investor

## 2023 ANNUAL MEETING

The Annual Meeting of Shareholders will be held virtually on Wednesday, April 26, 2023, at 9:30 a.m. ET. Information regarding how to attend will be included in the proxy materials for the Annual Meeting. Proxies and proxy statements have been made available to shareholders of record as of the close of business on Tuesday, March 7, 2023. As of December 31, 2022, the number of shareholders of record was 28,205.

## FINANCIAL INFORMATION

The Cigna Group's Form 10-K, Form 10-Qs, quarterly earnings releases and other SEC filings are available online at TheCignaGroup.com.

## OFFICES

### 900 Cottage Grove Road

Bloomfield, CT 06002
860.226.6000

### One Express Way

St. Louis, MO 63121
314.996.0900

### Two Liberty Place

1601 Chestnut Street
Philadelphia, PA 19192-1550
215.761.1000

## STOCK LISTING

The Cigna Group's common stock is listed on the New York Stock Exchange. The ticker symbol is CI.

## THE CIGNA GROUP ONLINE

To access online information about The Cigna Group, our products and our services, visit TheCignaGroup.com.

24 • THE CIGNA GROUP 2022 ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

![img-1.jpeg](img-1.jpeg)

# FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________
Commission file number 001-38769

# The Cigna Group

(Exact name of registrant as specified in its charter)

| Delaware | 82-4991898 |
| --- | --- |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 900 Cottage Grove Road, Bloomfield, Connecticut | 06002 |
| (Address of principal executive offices) | (Zip Code) |
| (860) 226-6000 |  |

Registrant's telephone number, including area code

| Securities registered pursuant to Section 12(b) of the Act: |  |  |
| --- | --- | --- |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, Par Value $0.01 | CI | New York Stock Exchange, Inc. |

| Securities registered pursuant to Section 12(g) of the Act: |
| --- |
| NONE |

|  | Yes | No |
| --- | --- | --- |
| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | ☑ | ☐ |
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | ☐ | ☑ |
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | ☑ | ☐ |
| Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | ☑ | ☐ |
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. |  |  |
| Large accelerated filer ☑ | Accelerated filer ☐ | Non-accelerated filer ☐ |
|  | Smaller reporting company ☐ | Emerging growth company ☐ |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |  |
| Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | ☑ |  |
| If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. | ☐ |  |
| Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). | ☐ |  |
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | ☐ | ☑ |

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2022 was approximately $82.8 billion.

As of January 31, 2023, 297,059,973 shares of the registrant's Common Stock were outstanding.

# DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference information from the registrant's definitive proxy statement related to the 2023 annual meeting of shareholders.

# **TABLE OF CONTENTS**

| FREQUENTLY REQUESTED 10-K INFORMATION |  |
| --- | --- |
|  | Page |
| Risk Factors | 33 |
| Executive Overview | 53 |
| Key Transactions and Business Developments | 56 |
| Liquidity and Capital Resources | 58 |
| Critical Accounting Estimates | 63 |
| Segment Information | 134 |
| Revenues by Product Type | 137 |

**Page**

Cautionary Statement

**PART I**

| Item 1. | Business | 1 |
| --- | --- | --- |
|  | Overview | 1 |
|  | Evernorth Health Services | 3 |
|  | Cigna Healthcare | 11 |
|  | Other Operations | 17 |
|  | Investment Management | 18 |
|  | Strategic Investments | 18 |
|  | Digital, Data and Technology | 19 |
|  | Human Capital Management | 20 |
|  | Environmental, Social and Governance | 21 |
|  | Miscellaneous | 21 |
|  | Regulation | 21 |
| Item 1A. | Risk Factors | 33 |
| Item 1B. | Unresolved Staff Comments | 48 |
| Item 2. | Properties | 48 |
| Item 3. | Legal Proceedings | 48 |
| Item 4. | Mine Safety Disclosures | 48 |
|  | Information about our Executive Officers | 49 |

## **PART II**

| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 50 |
| --- | --- | --- |
| Item 6. | [Reserved] | 51 |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 52 |
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 75 |
| Item 8. | Financial Statements and Supplementary Data | 76 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 138 |
| Item 9A. | Controls and Procedures | 138 |
| Item 9B. | Other Information | 138 |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 138 |

## **PART III**

| Item 10. | Directors, Executive Officers and Corporate Governance | 139 |
| --- | --- | --- |
|  | A. Directors of the Registrant |  |
|  | B. Executive Officers of the Registrant |  |
|  | C. Code of Ethics and Other Corporate Governance Disclosures |  |
|  | D. Delinquent Section 16(a) Reports |  |
| Item 11. | Executive Compensation | 139 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 140 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 140 |
| Item 14. | Principal Accountant Fees and Services | 140 |

## **PART IV**

| Item 15. | Exhibits and Financial Statement Schedules | 141 |
| --- | --- | --- |
| Item 16. | Form 10-K Summary | 149 |
| Signatures |  | 150 |
| Index to Financial Statement Schedules |  | FS-1 |
| Exhibits |  |  |

# CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on The Cigna Group's current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning future financial or operating performance, including our ability to improve the health and vitality of those we serve; future growth, business strategy and strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas and the impact of developing inflationary and interest rate pressures; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; strategic transactions; the impact of the Inflation Reduction Act (as defined below); expectations related to our CMS (as defined below) Star Ratings and Medicare Advantage Capitation Rates; and other statements regarding The Cigna Group's future beliefs, expectations, plans, intentions, liquidity, cash flows, financial condition or performance. You may identify forward-looking statements by the use of words such as 'believe,' 'expect,' 'project,' 'plan,' 'intend,' 'anticipate,' 'estimate,' 'predict,' 'potential,' 'may,' 'should,' 'will' or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our strategic and operational initiatives; our ability to adapt to changes in an evolving and rapidly changing industry; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or increase market share; price competition, inflation and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain satisfactory relationships with physicians, hospitals, other health service providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug pricing or industry pricing benchmarks; our ability to invest in and properly maintain our information technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data security incident; the scale, scope and duration of the COVID-19 pandemic and its potential impact on our business, operating results, cash flows or financial condition; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations, including currency exchange rates; risks related to strategic transactions and realization of the expected benefits of such transactions, as well as integration or separation difficulties or underperformance relative to expectations; dependence on success of relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; potential liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; uncertainties surrounding participation in government-sponsored programs such as Medicare; the outcome of litigation, regulatory audits and investigations; compliance with applicable privacy, security and data laws, regulations and standards; potential failure of our prevention, detection and control systems; unfavorable economic and market conditions, including the risk of a recession or other economic downturn and resulting impact on employment metrics, stock market or changes in interest rates and risks related to a downgrade in financial strength ratings of our insurance subsidiaries; the impact of our significant indebtedness and the potential for further indebtedness in the future; unfavorable industry, economic or political conditions; credit risk related to our reinsurers; as well as more specific risks and uncertainties discussed in Part I, Item 1A - Risk Factors and Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K and as described from time to time in our future reports filed with the Securities and Exchange Commission (the 'SEC').

You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. The Cigna Group undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

PART I

Item 1. BUSINESS

OVERVIEW

The Cigna Group, together with its subsidiaries, is a global health company. On February 13, 2023, we changed our corporate name from Cigna Corporation to The Cigna Group. We will not distinguish between our prior and current corporate name and will refer to our current corporate name throughout this Annual Report on Form 10-K. As such, unless expressly indicated or the context requires otherwise, the terms "Company," "we," "us," and "our" in this document refer to The Cigna Group, a Delaware corporation, and, where appropriate, its subsidiaries. On February 13, 2023, we also changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K. Our common stock continues to be listed with, and trades on, the New York Stock Exchange under the ticker symbol "CI".

# Our Purpose and Mission

The Cigna Group is a global health company committed to a better future built on the vitality of every individual and every community. Our employees are trailblazers, relentlessly partnering and innovating solutions for better health. This captures who we are today - and who we aspire to be in the future. We are undergoing a revolution in health.

# Our Pathways to Growth

In order to turn the differentiated value we deliver to our customers, patients, clients, communities and investors into attractive, sustained growth, we will continue to cultivate our portfolio of businesses so that it can continue to deliver the **foundational** and **accelerated** growth and **cross-enterprise leverage** we expect today and in the future.

- **Foundational:** Mature, scaled businesses contributing steady, predictable growth.
- **Accelerated:** High-growth businesses in very attractive markets.
- **Cross-Enterprise Leverage:** Working together to create even greater value.

# How We Win

- **Deep clinical expertise** across pharmacy, medical and behavioral.
- **Robust data and insights** supporting care with greater precision and personalization.
- **Focus on developing innovative solutions** addressing needs of customers, patients and clients.
- **Partnering** with others to accelerate innovation and achieve greater impact.
- **Consultative approach** driven by an experienced and talented team.

The last couple of years have reoriented every person, every organization and every community toward a deeper relationship with health. We believe that achieving both health and vitality for those we serve must fuel the actions of our over 70,000 colleagues around the world, each and every day. We have two growth platforms: Evernorth Health Services and Cigna Healthcare. Evernorth Health Services is our pharmacy, care and benefits solution that is highly attractive to our clients and partners because of the depth of its capabilities and expertise. Evernorth Health Services also enables us to deepen existing relationships across our entire book of business. Cigna Healthcare is the health benefits provider of The Cigna Group, serving customers and clients for our U.S. Commercial, U.S. Government and International Health operating segments, and it allows us to harness our partnership relationship with physicians to deliver affordable and coordinated health care to employers and individuals.

Together, Evernorth Health Services and Cigna Healthcare provide a strong and diverse foundation that allows us to capitalize on growth opportunities by leading with our strengths - medical and pharmacy solutions - and then expanding those relationships by addressing additional client needs and innovating and delivering new services and solutions. To transform the differentiated value we deliver to our customers, patients, clients, communities and investors into attractive, sustained growth, we continue to cultivate our portfolio of businesses with the goal of consistently delivering the **foundational growth**, **accelerated growth** and opportunity for **cross-enterprise leverage** we expect today and in the future. When considering our broad portfolio of businesses, we have strong foundational businesses that will continue to grow. These businesses often serve as the key entry point for clients with either a

1

pharmacy relationship, a medical relationship or both. We also have a variety of accelerated growth businesses, both scaled and emerging, which build upon our foundational relationships or provide exposure to adjacent high-growth areas. Our cross-enterprise leverage provides us with an opportunity to unlock even more value as the combined power of the franchise is unleashed.

The Cigna Group's employees are champions for the people we serve and over the past decade, our focus has shifted to helping individuals and families thrive by offering solutions to prevent and better manage health challenges. When sickness or disability do occur, we support our customers by offering broad choices to help them best access high quality, affordable, whole person care. We see three primary ways to help individuals maintain, improve or recover their physical or mental health: 1) behavioral and lifestyle changes - with health coaches helping individuals set and meet health goals; 2) affordable, effective medication options - with access to our leading pharmacy services improving health and driving affordability; and 3) targeted medical and surgical interventions - with a clear and proven strategy around partnerships and value-based care quality programs, powered by data and analytics and aligned incentives. We maximize use of evidence-based care, while delivering best-in-class service for our customers with acute and chronic conditions through enhanced real-time insights across an expanded platform with industry-leading solutions to support care decisions.

Our portfolio of offerings solves diverse challenges across the health care system. We offer a differentiated set of pharmacy, medical, behavioral, dental and supplemental products and services, primarily through two growth platforms: Evernorth Health Services and Cigna Healthcare. Our capabilities include: 1) a broad portfolio of solutions and services, some of which can be offered on a stand-alone basis; 2) integrated behavioral, medical and pharmacy management solutions; 3) leading specialty pharmacy, clinical and care management expertise; and 4) advanced analytics that help us engage more meaningfully with individuals, the plan sponsors we serve and our provider partners.

We differentiate ourselves in the market through a number of capabilities. We improve whole-person health, in body and mind by treating physical and behavioral health together to improve outcomes and by providing early behavioral and lifestyle interventions. We make it easier to access quality care by improving navigation at every step in a patient's health journey and by meeting customers wherever they are - virtually, digitally and in home. We connect care for the most pressing conditions by closing gaps between hospitals, primary care providers, specialists and other health care providers. We also develop personalized treatment paths across every dimension of care. We continue to build upon our network of value-based provider arrangements for better customer experiences, better overall health outcomes and greater affordability, with a significant number of our eligible customers aligned to our Accountable Care programs nationally. We make medicine more affordable by reducing costs from start to finish, including those related to drug access, delivery and treatment and by identifying appropriate medication alternatives. We partner and innovate to enable us to deliver differentiated value and broaden our reach in new geographies or through the introduction of new solutions and offerings.

Our key to success revolves around how deeply we care about our customers, patients and co-workers. We intend to create a better future together by innovating and adapting, acting with speed and purpose, partnering, collaborating and keeping our promises.

## Information about Segments

We present the financial results of our businesses in the following segments (see 'Executive Overview' section of the Management Discussion and Analysis of Financial Condition and Results of Operations ('MD&A') located in Part II, Item 7 of this Form 10-K for a Financial Summary):

*Evernorth Health Services* includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and Care Delivery and Management Solutions, which are provided to health plans, employers, government organizations and health care providers. Within Evernorth Health Services, Pharmacy Benefits and Home Delivery Pharmacy are **foundational growth** businesses and Specialty Pharmacy, Distribution, and Care Delivery and Management Solutions are **accelerated growth** businesses.

*Cigna Healthcare* includes the U.S. Commercial, U.S. Government and International Health operating segments, which provide comprehensive medical and coordinated solutions to clients and customers. Within Cigna Healthcare, U.S. Commercial and International Health are our **foundational growth** businesses and U.S. Government is our **accelerated growth** business.

2

*Other Operations* comprises the remainder of our business operations, which includes certain ongoing businesses and exiting businesses. Our ongoing businesses include our continuing business, corporate-owned life insurance ('COLI'), and our run-off businesses. Our run-off businesses include (i) guaranteed minimum death benefit ('GMDB') and guaranteed minimum income benefit ('GMIB') business, (ii) settlement annuity business and (iii) individual life insurance and annuity and retirement benefits businesses. Our exiting businesses include our interest in a joint venture in Türkiye, which was sold to our partner in December 2022, the international life, accident and supplemental benefits businesses sold on July 1, 2022 and the Group Disability and Life business sold on December 31, 2020.

On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc. ('Chubb') for approximately $5.4 billion in cash (the 'Chubb transaction') (see Note 4 to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K).

*Corporate* reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and intersegment eliminations for products and services sold between segments.

## Other Information

The financial information included in this Form 10-K for the fiscal year ended December 31, 2022 is in conformity with accounting principles generally accepted in the United States of America ('GAAP') unless otherwise indicated. In the segment discussions that follow, we use the terms 'adjusted revenues' and 'pre-tax adjusted income (loss) from operations' to describe segment results. See Note 24 to the Consolidated Financial Statements of this Form 10-K for definitions of those terms. Industry rankings and percentages set forth herein are for the year ended December 31, 2022, unless otherwise indicated. In addition, statements set forth in this document concerning our rank or position in an industry or particular line of business have been developed internally based on publicly available information unless otherwise noted.

Cigna Holding Company (formerly Cigna Corporation) was incorporated in Delaware in 1981. Halfmoon Parent, Inc. was incorporated in Delaware in March 2018. Halfmoon Parent, Inc. was renamed Cigna Corporation and Cigna Holding Company became its subsidiary concurrent with the consummation of the combination with Express Scripts on December 20, 2018. Cigna Corporation was renamed The Cigna Group in February 2023.

You can access our website at http://www.thecignagroup.com to learn more about our company. We make annual, quarterly and current reports and proxy statements and amendments to those reports available, free of charge through our website as soon as reasonably practicable after we electronically file these materials with, or furnish them to, the Securities and Exchange Commission ('SEC'). We also use our website as a means of disclosing material information and for complying with our disclosure obligations under the SEC's Regulation FD (Fair Disclosure). Important information, including news releases, analyst presentations and financial information regarding The Cigna Group is routinely posted on our website. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The information contained on, or that may be accessed through, our website is neither incorporated by reference into nor a part of this report. See also 'Code of Ethics and Other Corporate Governance Disclosures' in Part III, Item 10 of this Form 10-K for additional information regarding the availability of our Codes of Ethics on our website.

## Intellectual Property Rights

We hold a variety of trademarks and service marks used throughout our businesses. We also use patents to protect our proprietary technological advances and to differentiate ourselves in the market. The Cigna Group companies hold over 320 United States patents. We are not substantially dependent on any single patent or group of related patents. We are not aware of any facts that could materially impact the continuing use of any of our intellectual property.

## EVERNORTH HEALTH SERVICES

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and Care Delivery and Management Solutions, which are provided to health plans, employers, government organizations and health care providers. These offerings are also integrated into our Cigna Healthcare solutions to span the total health care delivery system, further

3

reducing the total cost of care for our clients and customers. In 2022, Evernorth Health Services reported adjusted revenues of $140.3 billion and pre-tax adjusted income from operations of $6.1 billion.

On February 13, 2023, we changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.

## HOW WE WIN

Evernorth Health Services accelerates delivery of comprehensive, connected solutions to create value and meet the diverse needs of health plans, employers, health care providers and government organizations by:

- **Partnering** in unconventional ways to solve complex problems across a fragmented health care ecosystem, fueled by data and expertise that drives purposeful innovation
- **Creating** flexible solutions tailored to client needs, using Evernorth Health Services' combined strengths and capabilities, as well as strategic partnerships, to deliver: better, more efficient care for patients; better experiences for clients, providers and customers; and enhanced choices for clients and customers through our open architecture model
- **Evaluating** medicines, digital therapeutics and other health solutions for efficacy, adherence, value and price to assist clients in selecting a cost-effective formulary
- **Offering** home delivery, virtual and in-person care, and specialty customer-centric solutions that meet the needs of our clients and customers in ways that unlock greater value and better health services while providing better and specialized clinical care
- **Delivering** more affordable solutions that provide more discounts and drive risk-sharing and value-based care
- **Promoting** the use of generics and lowest-cost, clinically effective brands of medications

4

The following chart depicts a high-level summary of our principal products and services in this segment with definitions on subsequent pages.

|  | Principal Products & Services | Brands/ Subsidiaries | Key Relationships | Primary Competitors |
| --- | --- | --- | --- | --- |
| Driving Foundational Growth | Pharmacy Benefits | Express Scripts PBM, myMatrixx ® , Care Continuum, Express Scripts MedRx Management SM , Embarc Benefit Protection ® , FamilyPath SM , Advanced Utilization Management, Enhanced Fraud, Waste & Abuse, Ascent Health Services, Econdisc, SaveOnSP, Inside Rx ® , Evernorth Wholesale Marketplace SM , Value-Based Programs (Express Scripts SafeGuardRx ® , Express Scripts Patient Assurance ® ), National Preferred Formulary, Advanced Opioid Management ® , ScreenRx ® | Clients, Customers, Health Care Providers, Consultants, Health Plans, Commercial and Government Payors, Self-paying Customers, Pharmacy Providers | Health Plans, Independent Pharmacy Benefit Managers ("PBMs"), Managed Care PBMs, Third-Party Benefit Administrators, Group Purchasing Organizations, Clinical Solutions and Health Care Data Analytics Companies |
|  | Home Delivery Pharmacy | Express Scripts Pharmacy ® | Clients, Customers, Health Care Providers | Independent PBMs, Managed Care PBMs, Retail Pharmacies |
| Driving Accelerated Growth | Specialty Pharmacy | Accredo ® , Freedom Fertility Pharmacy ® , Therapeutic Resource Center ® | Clients, Customers, Health Care Providers, Specialty Drug Distributors | Specialty Pharmacies |
|  | Distribution | CuraScript SD ® | Clinics, Hospitals | Specialty Drug Distributors |
|  | Care Delivery and Management Solutions | Evernorth Care Group, Evernorth Care Services, Evernorth Care Solutions, Evernorth Direct Health, Evernorth Home-Based Care, eviCore Healthcare ® , MDLIVE ® , Evernorth Behavioral Health, inMynd SM , Health Connect 360 ® , RationalMed ® , Evernorth Digital Health Formulary SM , Evernorth Labs, Trend Central ® , HealthPredict SM , MediCUBE ® , ScriptVision ® | Clients, Customers, Health Care Providers | Managed Care Organizations, Care Delivery and Care Management Solutions Providers, Third-Party Benefit Administrators, Health Care Data Analytics Companies |

## Principal Products & Services

- *Pharmacy Benefits.* Express Scripts Pharmacy dispenses approximately 1.6 billion adjusted prescriptions(1) annually to members of pharmacy plans managed by our Express Scripts PBM. We drive high-quality, cost-effective care through prescription drug utilization and cost management services. We support our clients' plan design selections to deliver balanced affordability, choice, simplicity and convenience. We focus our solutions to align with our clients' service, care and cost management needs. As a result, we believe we deliver better care, healthier outcomes, higher customer satisfaction and a more affordable prescription drug benefit. We dispense drug claims via Express Scripts Pharmacy, Accredo and our retail networks by integrating retail network pharmacy administration, benefit design consultation, drug utilization review, drug formulary management and pharmacy fulfillment services. We administer payments to retail networks and bill benefits costs to our clients through our end-to-end adjudication services.
  - *Drug Utilization Review Program.* When pharmacies submit claims for prescription drugs to us, we review them electronically in real time for health and safety. We then alert the dispensing pharmacy of any detected issues. Clients may also choose to enroll in programs that result in communications about potential therapy concerns being sent to prescribers after the initial claim submission.
  - *Benefits Design Consultation.* We consult with our clients on how best to structure and leverage the pharmacy benefit to meet plan objectives for affordable access to the prescription medications customers need to stay healthy and to ensure the safe and effective use of those medications.
  - *myMatrixx.* myMatrixx is a unique PBM with an exclusive focus on workers' compensation. We combine high-touch customer service with clinical expertise and state-of-the-art business intelligence systems to deliver simplified solutions and positive outcomes. myMatrixx leverages Express Scripts' robust pharmacy network and provides a smooth and personalized experience for clients and injured workers.

(1) Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted as one script.

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- Medical Drug Management. We offer a comprehensive range of services and guaranteed savings for managing medically billed specialty drugs. Our solutions apply utilization management, site of care management and claims prepayment review to effectively reduce wasteful spend, while providing services tailored to customers ensuring safety and healthier outcomes. We also offer Express Scripts MedRx Management, a suite of solutions and consultative services for medical rebates contracting, medically-billed drug preferencing and value-based contracting.
- Embarc Benefit Protection. Embarc shields clients and members from the high costs of life-saving gene therapies, so that customers who need treatment can get it. Additionally, the program provides access to quality, cost-effective in-network providers and support from a dedicated gene therapy case management team.
- FamilyPath. FamilyPath is raising the bar for fertility health by providing more comprehensive and more flexible coverage and proactive care for growing families, including expanded medical and pharmacy benefit management; access to vetted provider and lab networks; and dedicated Fertility Advisors to proactively support and guide customers.
- Retail Network Pharmacy Administration. We contract with retail pharmacies to provide prescription drugs to customers of the pharmacy benefit plans we manage. We negotiate with pharmacies throughout the United States to discount drug prices provided to customers and manage national and regional networks responsive to client preferences related to cost containment, convenience of access for customers and network performance. We also manage networks of pharmacies customized for or under direct contract with specific clients and have contracted with pharmacy provider networks to comply with the Center for Medicare and Medicaid Services ("CMS") access requirements for the federal Medicare Part D prescription drug program ("Medicare Part D"). All retail pharmacies in our network communicate with us online and in real-time to process prescription drug claims.
- Drug Formulary Management. Formularies are lists of drugs with designations that may be used to determine drug coverage, customer out-of-pocket costs and communicate plan preferences in competitive drug categories. Our formulary management services support clients in establishing formularies that assist customers and physicians in choosing clinically-appropriate, cost-effective drugs and prioritize access, safety and affordability. We administer specific formularies on behalf of our clients, including standard formularies developed and offered by Express Scripts and custom formularies in which we play a more limited role. Most of our clients select standard formularies, governed by our National Pharmacy & Therapeutics Committee, which is comprised of a panel of independent physicians and pharmacists in active clinical practice representing a variety of specialties and practice settings, typically with major academic affiliations. In making formulary recommendations, this committee considers only the drug's safety and efficacy and not the cost of the drug, including any negotiated manufacturer discount or rebate arrangement. This process is designed to ensure the clinical recommendation is not affected by our financial arrangements. We fully comply with this committee's clinical recommendations regarding drugs that must be included or excluded from the formulary based on their assessment of safety and efficacy.
- Advanced Utilization Management. These programs include prior authorization, drug quantity management and step therapy designed to decrease client spend on pharmacy.
- Enhanced Fraud, Waste & Abuse. We help plan sponsors identify potential problem customers and prescribers with unusual or excessive utilization patterns. The program is designed to help identify outliers and situations of abnormal use or prescribing patterns by analyzing types of prescriptions, refill patterns and pharmacy utilization.
- Administration of Group Purchasing Organizations. We operate various group purchasing organizations that negotiate pricing for the purchase of pharmaceuticals and formulary rebates with pharmaceutical manufacturers on behalf of their participants. They also provide various administrative services to their participants including management and reporting.
- Copay Solutions. Our first-to-market innovative copay solutions help customers afford their medications, protect plan design preferences and achieve lower trend. Our partnership with SaveOnSP on the first non-essential health benefits copay assistance solution has driven significant savings by targeting high-cost, high-volume drugs. SaveOnSP recommends plan design and coverage changes for certain drugs, enabling maximum savings and reducing plan and client costs. As manufacturer programs and regulations change, this aggressive solution adapts, delivering lower specialty plan cost and enhanced customer support.
- Inside Rx. Inside Rx is a prescription medication savings program that offers eligible self-paying customers discounts on many brand and generic medications. This program is not insurance but offers savings at more than 60,000 participating retail pharmacies (including all major chains) in the United States and Puerto Rico. The program also offers discounts on prescription medications through private label solutions. Inside Rx earns a small fee from our supply chain partners every time a customer fills a prescription via the program. This lets us provide access to our savings card at no cost to the customer.
- Evernorth Wholesale Marketplace. Evernorth Wholesale Marketplace offers a suite of flexible, private label solutions including but not limited to Wholesale Marketplace Drug Formulary Management services, Retail Network Programs, Value-Based Solutions, Medical Rebate Programs and Utilization Management Policies. These offerings are captured under either our drug formulary administrative service arrangements or our formulary processing arrangements. As the needs of the market evolve, we will continue to partner with clients and develop additional offerings that align with their goals and objectives.

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Value-Based Programs.

- Express Scripts SafeGuardRx. We offer a solution platform aimed at therapy classes that pose budgetary threats and clinical challenges to customers. Our solutions are designed to keep our clients ahead of the drug cost curve while providing customers the personalized care and access they need. These solutions are offered throughout our pharmacy benefit management services and include, but are not limited to care for: cardiovascular, diabetes, hepatitis, HIV, inflammatory conditions, neurological, multiple sclerosis, oncology, pulmonary, rare conditions and weight management. Innovative programs, such as Express Scripts SafeGuardRx, combine utilization management, formulary management, specialized care from our Therapeutic Resource Centers and financial savings, to help us to change the market in key categories. These services optimize the safe and appropriate dispensing of therapeutic agents, minimize waste and improve clinical and financial outcomes.
- Express Scripts Patient Assurance Program. This program addresses affordability challenges for customers managing their diabetes and cardiovascular conditions by providing a lower, fixed, out-of-pocket cost directly to the customer. Express Scripts negotiates additional discounts to reduce customer cost share without increasing plan cost, and applies those discounts at the point of service. By making the cost of medication affordable and predictable, the Express Scripts Patient Assurance Program improves medication adherence, driving better customer outcomes and lower downstream medical costs for the plan.

- Home Delivery Pharmacy. Evernorth Health Services offers free standard shipping of medications nationwide, usually in a 90-day supply, directly to the customer's home and allows for automatic refills on eligible medications and unrestricted telephone access to over 4,000 customer care advocates and specially trained pharmacists to answer customer questions. Our differentiated practice of pharmacy, coupled with our advanced automated dispensing technology, results in safer and more accurate pharmacy operations when compared to retail pharmacies, convenient access to maintenance medications and better management of our clients' drug costs through operating efficiencies and generic substitutions. Our research shows that Express Scripts Pharmacy achieves a higher level of therapeutic interventions, better adherence, more cost savings and a consistently higher Net Promoter Score (marketplace "NPS") compared to retail pharmacies. The Home Delivery Pharmacy operations consist of ten home delivery pharmacies and four high-volume automated dispensing pharmacies located throughout the United States. Our high-volume automated dispensing pharmacies are located in Arizona, Indiana, Missouri and New Jersey.
- Specialty Pharmacy. Specialty medications are primarily characterized as high-cost medications for the treatment of complex and rare diseases. These medications broadly include those with frequent dosing adjustments, intensive clinical monitoring, the need for customer training, specialized product administration requirements or medications limited to certain specialty pharmacy networks by manufacturers. The front-end of our pharmacy is organized into Therapeutic Resource Centers, where pharmacists focus their practice of pharmacy by condition, which offers customers a more personalized experience while providing enhanced clinical care. Through a combination of assets and capabilities, we work to provide an enhanced level of predictable care and therapy management for customers taking specialty medications, leading to increased visibility and improved outcomes for payors and custom programs for biopharmaceutical manufacturers. The launch of biosimilars to blockbuster specialty therapies provides competition and an opportunity to drive down costs for both customers and clients. We work closely with clients to efficiently support each benefit design to improve affordability. Accredo is focused on dispensing injectable, infused, oral and inhaled drugs that require a higher level of clinical service and support than traditional pharmacies typically offer. Accredo supports successful outcomes for customers and reduces waste for clients through specialty trained clinicians, a nationwide footprint and a network of in-home nursing services, reimbursement and customer assistance programs and biopharmaceutical services. Drug manufacturers may select Accredo for exclusive dispensing of highly specialized therapies. Freedom Fertility Pharmacy is dedicated exclusively to supporting customers undergoing fertility treatment. Accredo and Freedom Fertility Pharmacy serve customers within a pharmacy benefit plan administered by Express Scripts PBM, as well as customers in plans administered by other PBMs and health plans. Our Specialty Pharmacy operations consist of 33 specialty pharmacies.
- Distribution. CuraScript SD is a specialty distributor of pharmaceuticals and medical supplies (including injectable and infusible pharmaceuticals and medications to treat specialty and rare or orphan diseases) directly to health care providers, clinics and hospitals in the United States for office or clinic administration. Through this business, we provide distribution services primarily to office and clinic-based physicians who treat customers with chronic diseases and regularly order costly specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies, operates three distribution centers and ships most products overnight within the United States; it also provides distribution capabilities

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to Puerto Rico and Guam. It is a contracted supplier with most major group purchasing organizations and leverages our distribution platform to operate as a third-party logistics provider for several pharmaceutical companies.

- • *Care Delivery and Management Solutions*. We offer clinical programs to help our clients drive better whole-person health outcomes through our Care Delivery (virtual care, in-home care, physical primary care) and Care Management (behavioral health services and health coaching capabilities) offerings.
  - ◦ *eviCore*. eviCore healthcare is a medical benefits management organization that is a leading provider of solutions that ensure customers receive optimal treatment at the right site of care by leveraging our team of medical professionals, evidence-based guidelines and innovative technologies to deliver affordable care. eviCore provides integrated solutions for key clinical diagnostic areas such as advanced imaging, cardiology and gastroenterology, as well as longitudinal areas such as musculoskeletal, oncology and post-acute care. eviCore contracts with health plans to promote the appropriate use of health care services by the customers they serve. In certain instances, this occurs through capitated risk arrangements, when we assume the financial obligation for the cost of health care services provided to eligible customers covered by eviCore healthcare management programs.
  - ◦ *MDLIVE*. MDLIVE virtual care services provide flexibility for the customer to access a network of virtual care providers for preventative and routine primary care and wellness, urgent care, dermatology care, behavioral health care needs and chronic condition management beginning with hypertension.
  - ◦ *Behavioral health*. Our behavioral health solutions simplify the complicated treatment landscape by assisting members to the right level of care at the right time, in the right place - from start to finish. Our predictive analytics models proactively identify customers who need support so that we can engage them early and provide the appropriate care, leveraging our extensive provider network including in-person providers, virtual providers and digital tools.
  - ◦ *inMynd*. Our Evernorth inMynd Behavioral Health and inMyndRx solutions provide access to expert guidance and support for anxiety, depression, insomnia, ADHD, narcolepsy, Alzheimer's and select mood stabilizing medications. These solutions include providing access to individualized support and educational resources, condition-specific care through our Neuroscience Therapeutic Resource Centers and digital Cognitive Behavioral Therapy program when applicable.
  - ◦ *Health Connect 360*. This program is a transformational, outcomes-based, clinical management model that bridges pharmacy, medical, lab and biometric data to develop insights and deliver personalized health care clinical support. Clinical outcomes and quality metrics are tailored to meet client needs.
  - ◦ *RationalMed*. RationalMed improves customer health and safety by integrating medical, pharmacy and laboratory claims data to initiate changes and correct errors in care, lowering both medical and prescription drug costs.
  - ◦ *Evernorth Digital Health Formulary*. Through the Evernorth Digital Health Formulary, we evaluate, procure, implement and manage digital health solutions on behalf of clients, alleviating administrative burden and ensuring clinical effectiveness, data security, user-friendly experiences and financial value.
  - ◦ *Cigna Pathwell Specialty*. Cigna Pathwell Specialty is designed to address one of our clients' top health care cost drivers - specialty drugs - enabling clients to reinvest in their employees, making health care more affordable. This new solution controls specialty spending across the medical and pharmacy benefits by integrating pharmacy network and care coordination for customers who need our support the most.
  - ◦ *Evernorth Intelligence Solutions*. By bringing together world-class talent, multi-disciplinary expertise and advanced data and analytics, we unlock actionable insights to help drive greater affordability, simplicity, predictability and growth. We work together with our clients and partners to create dynamic solutions, services and platforms that guide better decisions and improved performance (see '*Business - Digital, Data and Technology*' section of this Form 10-K for further information).
    - • *Evernorth Labs*. We accelerate innovation through increased collaboration with clients, customers and partners to develop solutions for launch in their businesses. With our Labs, which are state-of-the-art research facilities and shared spaces for collaboration, ideation and innovation, we gather with our clients and industry leaders to solve the toughest challenges in the health care system, including: better managing the most complex and expensive disease states, such as oncology; improving care access and delivery, such as worksite, home and virtual care; and planning for emerging trends, such as artificial intelligence, and industry disruptors, such as COVID-19.
    - • *Data, advanced analytics and platforms*. We use advanced predictive modeling to shape solutions that help decrease health care fragmentation, drive optimized care coordination, reduce key cost drivers and improve health outcomes. In-depth trend analysis helps us to identify and effectively address challenges like opioid abuse, COVID-19 and other emerging health crises. We use market surveillance and forecasting to pinpoint and proactively address cost drivers. Our platform strategy as a service gives clients the tools to build successful businesses in a flexible, customizable way: Trend Central provides access to key performance indicators to help plan sponsors reduce costs and work towards healthier outcomes; HealthPredict produces high customer-level risk scores, to show the highest value opportunities for proactive intervention; MediCUBE gives our academic detailing pharmacists the analytical power to identify ways to save plans from significant unnecessary spend and improve quality metrics; and ScriptVision provides a suite of real-time, data-driven capabilities that empower physicians to make the best

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prescribing choices, including ePrescribing (including controlled substances), real-time prescription benefit information, electronic prior authorizations, clinical care messages such as drug interactions and high-risk medication alerts and data on customer adherence rates.

### *Customers*

We provide products and services in the Evernorth Health Services segment to clients and customers, as described below. Also described below are our significant clients.

- *Clients.* We provide services to managed care organizations, health insurers, third-party administrators, employers, union-sponsored benefit plans, workers' compensation plans, government health programs, providers, clinics, hospitals and others. We provide services to a majority of customers in our Cigna Healthcare segment.
- *Customers.* Prescription drugs are dispensed to patients connected to the service offerings we provide to clients. Prescription drugs are dispensed primarily through networks of retail pharmacies under non-exclusive contracts with us and via home delivery from Express Scripts Pharmacy and specialty drug fulfillment pharmacies.

The Department of Defense ("DoD") TRICARE® Pharmacy Program is the military health care program serving active-duty service customers, National Guard and Reserve customers and retirees, as well as their dependents. Under this contract, we provide online claims adjudication, home delivery services, specialty pharmacy clinical services, claims processing and contact center support and other services critical to managing pharmacy trend. In 2021, the DoD awarded Express Scripts a seven-year pharmacy program contract beginning January 1, 2023. Under the new contract, Express Scripts will provide enhanced specialty care and expanded care coordination capabilities, while continuing to support current pharmacy operations, through 2029. Revenues from this contract are significant to the segment.

In 2019, Express Scripts and Prime Therapeutics LLC ("Prime") entered into an agreement effective on April 1, 2020 to deliver improved choice and affordability for Prime's clients and their customers by enhancing retail pharmacy networks and pharmaceutical manufacturer value. In 2022, Prime and Express Scripts agreed to extend this relationship through 2025. In 2021, the relationship with Prime was expanded to include the option for Prime's plans to access the Accredo specialty pharmacy and Express Scripts home delivery in-network pharmacies. Revenues from these contracts are significant to the segment.

In October 2022, Evernorth Health Services and Centene Corporation ("Centene") announced a multi-year agreement effective January 2024 to manage pharmacy benefit services and make prescription medications more accessible and affordable for Centene's approximately 20 million customers. In addition to greater savings on prescription drugs, Centene customers will also have access to Express Scripts' extensive national network of retail pharmacies.

### *Competition*

The health care industry has undergone periods of substantial consolidation and may continue to consolidate in the future. Many of the largest managed care organizations now also own health services businesses that compete with Evernorth Health Services in the verticals in which we participate. We believe the primary competitive factors in the industry include the ability to: negotiate with retail pharmacies to ensure our retail pharmacy networks meet the needs of our clients and customers; provide home delivery and specialty pharmacy services; negotiate discounts and rebates on prescription drugs with drug manufacturers; navigate the complexities of government-reimbursed business including Medicare, Medicaid and the public exchanges; manage cost and quality of specialty drugs; and use the information we obtain about drug utilization patterns and consumer behavior to reduce costs for our clients and customers and assess the level of service we provide.

- *Managed Care PBMs.* CVS Caremark (owned by CVS Health Corporation ("CVS")), Humana Inc. ("Humana"), IngenioRx (owned by Elevance Health Inc. ("Elevance")), OptumRx (owned by UnitedHealth Group Inc. ("UnitedHealth")) and Prime Therapeutics (owned by a collection of Blue Cross / Blue Shield Plans) compete with us on a variety of products and in various regions throughout the United States.
- *Independent PBMs.* MedImpact, Navitus Health Solutions, Elixir (owned by Rite Aid Corporation) and many other regional PBMs compete with us on a variety of products across the United States.
- *Pharmacies.* CVS, Walgreens Boots Alliance, Inc., WalMart, Inc., Rite Aid, Kroger and other independent pharmacies compete with us for the delivery of prescription drug needs to our customers. In addition, many PBMs own and operate home delivery and specialty pharmacies including CVS, OptumRx, Walgreens, Humana and Elixir. New entrants continue to emerge, including Amazon Pharmacy, Capsule and Hims.
- *Third-Party Benefits Administrators.* Third parties that specialize in claim adjudication and benefit administration, such as SS&C Health, are direct competitors. With the emergence of alternative benefit models through private exchanges, the competitive landscape also includes brokers, health plans and consultants. Some of these competitors may deploy greater financial, marketing and technological resources than we do and new market entrants, including strategic alliances aimed at

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modifying the current health care delivery models or entering the prescription drug sector from another sector of the health care industry, may increase competition as barriers to entry are relatively low. For example, GoodRx is an entrant focused on serving the uninsured and underinsured in the cash pay pharmacy administration space.

- *Care Delivery and Management Solutions*. OptumHealth, NaviHealth and Landmark (UnitedHealth); Beacon, Aspire and CareMore (owned by Elevance); CVS's HealthHubs and MinuteClinics; CenterWell Home Health (Humana); Community and Bayless (Centene); VillageMD, Teladoc, Doctor on Demand, MeMD, WalmartHealth and AmazonCare are among the companies that compete with us in this market.
- *Clinical Solutions and Health Care Data Analytics Companies*. Optum (owned by UnitedHealth), Elevance, Magellan Health and Apixio (owned by Centene Corporation), HealthHelp, Cotiviti and Inovalon are among the companies that compete with us in this market.

### *Operations*

- *Sales and Account Management*. Our sales and account management teams market and sell pharmacy benefit management solutions and are supported by client service representatives, clinical pharmacy managers and benefit analysis consultants. These teams work with clients to develop innovative strategies that put medicine within reach of customers while helping health benefit providers improve access to and affordability of prescription drugs.
- *Supply Chain*. Our supply chain contracting and strategy teams negotiate and manage pharmacy retail network contracts, pharmaceutical and wholesaler purchasing contracts and manufacturer rebate contracts. As our clients continue to experience increased cost trends, our supply chain teams develop innovative solutions such as our Express Scripts SafeGuardRx platform and preferred pharmacy networks to combat these cost increases. In addition, our Formulary Consulting team, consisting of pharmacists and financial analysts, provides services to our clients to support formulary decisions, benefit design consultation and utilization management programs.
- *Clinical Support*. Our staff of highly trained health care professionals provides clinical support for our pharmacy, medical and behavioral customers. Our services include access to:
  - Support for the individual and their caregivers from crisis care in their most vulnerable moments to stabilization and returning back to work and life for all involved
  - Comprehensive behavioral health offerings including network access, utilization management and coordination of care to treat conditions ranging from depression and anxiety to substance use, autism and eating disorders
  - Condition-specific specialized customer care through our Therapeutic Resource Center facilities staffed with specialist pharmacists, nurses and other clinicians
  - Clinical development and operational support for our pharmacy benefit management services by our clinical solutions staff of pharmacists and physicians who conduct a wide range of activities including: identifying emerging medication-related safety issues and alerting physicians, clients and customers (as appropriate); providing drug information services; managing formulary; identifying and closing gaps in care; and developing utilization management, safety (drug utilization review) and other clinical interventions

### *Suppliers*

We maintain an inventory of brand-name and generic pharmaceuticals in our home delivery and specialty pharmacies. Our specialty pharmacies also carry biopharmaceutical products to meet the needs of our customers, including pharmaceuticals for the treatment of rare or chronic diseases; if a drug is not in our inventory, we can generally obtain it from a supplier within a reasonable amount of time.

We purchase pharmaceuticals either directly from manufacturers or through authorized wholesalers. Evernorth Health Services uses one wholesaler more than others in the industry, but holds contracts with other wholesalers if needs for an alternate source arise. Generic pharmaceuticals are generally purchased directly from manufacturers.

### *Key Transactions and Business Developments*

See the "Executive Overview - Key Transactions and Business Developments" section of our MD&A located in Part II, Item 7 of this Form 10-K for discussion of key developments impacting this segment.

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# CIGNA HEALTHCARE

Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health operating segments, which provide comprehensive medical and coordinated solutions to clients and customers. Within Cigna Healthcare, U.S. Commercial and International Health are our foundational growth businesses and U.S. Government is our accelerated growth business. In 2022, Cigna Healthcare reported adjusted revenues of $45.0 billion and pre-tax adjusted income from operations of $4.1 billion.

### HOW WE WIN

- **Clinical programs** to support the highest-quality health outcomes and customer experiences
- **Partnership with high-performing providers**, emphasizing value over volume of services
- **Differentiated approach** to understanding clients and responding to evolving workforce needs to improve employee productivity and drive more consistent performance
- **Innovative coordinated benefit solutions** that deliver value for our customers, clients and partners
- **Technology and data analytics** powering actionable insights and promoting solutions to improve health and vitality with greater precision and personalization
- **Talented, experienced and caring** people who work as consultative partners in aligning client and customer needs to our solutions and putting those we serve at the center of all we do

By offering a mix of services and medical insurance products to employers, groups and individuals along with specialty products, we improve the quality of care, lower costs and help customers achieve better health outcomes. Many of these products are available on a standalone basis, but we believe they create additional value and savings when integrated with a Cigna Healthcare-administered health plan.

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The following chart depicts a high-level summary of our principal products and services in this segment, with definitions on subsequent pages.

| Principal Products & Services | Major Brand(s) | Geography | Funding Solution(s) (1) | Market Segment(s) | Primary Distribution Channel(s) | Primary Competitors |
| --- | --- | --- | --- | --- | --- | --- |
| U.S. Commercial Medical |  |  |  |  |  |  |
| Managed Care | Cigna Healthcare | Nationwide | GC, ER, ASO | U.S. Commercial | Brokers, Private Exchanges, Direct | National Insurers, Local Healthplans, Third-Party Administrators ("TPAs") |
| Preferred Provider Organization ("PPO") |  |  |  |  |  | National Insurers, Local Healthplans, TPAs |
| Consumer-Driven |  |  |  |  |  | National Insurers, Local Healthplans |
| U.S. Government Medical |  |  |  |  |  |  |
| Individual and Family Plans | Cigna Healthcare | 16 states (2) | GC | U.S. Government | Public Exchanges, Brokers, Direct | National Insurers, Local Healthplans, Provider-led Plans |
| Medicare Advantage | Cigna Healthcare | 29 states (3) & District of Columbia | GC |  | Direct, Brokers | National Insurers, Local Healthplans, Provider-led Plans |
| Medicare Stand - Alone Prescription Drug Plans | Cigna Healthcare, Express Scripts | Nationwide | GC, ASO |  | Direct, Brokers | National Insurers |
| Medicare Supplement | Cigna Healthcare | 48 states (4) & District of Columbia | GC |  | Brokers, Direct, Private Exchanges | National Insurers |
| Specialty Products and Services |  |  |  |  |  |  |
| Stop-Loss | Cigna Healthcare | Nationwide | GC | U.S. Commercial | Brokers, Direct | National Insurers, Specialty Companies |
| Cost Containment | Cigna Healthcare |  | GC, ER, ASO | U.S. Commercial |  | National Insurers, Specialty Companies |
| Consumer Health Engagement | Cigna Healthcare |  | GC, ER, ASO | U.S. Commercial, U.S. Government |  | National Insurers, Specialty Companies |
| Pharmacy Management | Cigna Healthcare |  | GC, ER, ASO | U.S. Commercial, U.S. Government |  | Independent PBMs, Managed Care PBMs |
| Behavioral Health | Cigna Healthcare |  | GC, ER, ASO | U.S. Commercial, U.S. Government |  | National Insurers, Specialty Companies |
| Dental | Cigna Dental Care® |  | GC, ER, ASO | U.S. Commercial, U.S. Government |  | Dental Insurers, National Insurers |

$^{(1)}$ Our three funding solutions include administrative services only ("ASO"), insured - guaranteed cost ("GC") and insured - experience-rated ("ER") arrangements.

$^{(2)}$ AZ, CO, FL, GA, IL, KS, MO, MS, NC, PA, TN, UT & VA. Effective January 1, 2023, also includes IN, SC & TX.

$^{(3)}$ AL, AR, AZ, CO, CT, DE, FL, GA, IL, KS, MD, MO, MS, NC, NJ, NM, OH, OK, OR, PA, SC, TN, TX, UT, VA, VT & WA. Effective January 1, 2023, also includes KY & NY.

$^{(4)}$ All states except MA & NY.

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| Principal Products & Services | Major Brand(s) | Geography | Funding Solution(s) | Market Segment(s) | Primary Distribution Channel(s) | Primary Competitors |
| --- | --- | --- | --- | --- | --- | --- |
| International Health Products and Services |  |  |  |  |  |  |
| Global Health Care | Cigna Global Health Benefits, Cigna Global Individual Health | Worldwide (except as limited by applicable law) | GC, ER, ASO | International Health | Brokers, Direct | Global insurers |
| Local Health Care | Cigna Healthcare, ManipalCigna, CignaCMB | China, Middle East, Singapore, Hong Kong, Spain, United Kingdom, India |  |  |  | Global insurers and local non-U.S. insurers |

## Principal Products & Services

### U.S. Commercial Medical

- *Managed Care Plans* are offered through our insurance companies, Health Maintenance Organizations ("HMOs") and TPA companies. HMO, LocalPlus®, Network and Open Access Plus plans use meaningful cost-sharing incentives to encourage the use of "in-network" versus "out-of-network" health care providers. The national provider network for Managed Care Plans is smaller than the national network used with the PPO plan product line.
- *PPO Plans* feature a network with broader provider access than the Managed Care Plans.
- *Consumer-Driven Products* are typically paired with a high-deductible medical plan and offer customers a tax-advantaged way to pay for eligible health care expenses. These products, consisting of health savings accounts, health reimbursement accounts and flexible spending accounts, encourage customers to play an active role in managing their health and health care costs.

### U.S. Government Medical

- *Individual and Family Plans* are Patient Protection and Affordable Care Act ("ACA") compliant exclusive provider organization ("EPO") or HMO plans marketed to individuals under age 65 who do not have access to health care coverage through an employer or government program such as Medicare or Medicaid. Customers receive comprehensive health care benefits and have access to a local network of health care providers who have been selected with cost and quality in mind.
- *Medicare Advantage Plans* allow Medicare-eligible customers to receive health care benefits, including prescription drugs, through a managed care health plan such as our coordinated care plans. Our Medicare Advantage Plans include HMO and PPO plans marketed to individuals and qualified employer groups. A significant portion of our Medicare Advantage customers receive medical care from our value-based models that focus on developing highly engaged physician networks, aligning payment incentives to improve health outcomes and using timely and transparent data sharing.
- *Medicare Stand-Alone Prescription Drug ("Part D") Products* provide a number of prescription drug plan options, as well as service and information support to Medicare-eligible individuals or individuals through a qualified employer group. Our stand-alone plans offer the coverage of Medicare combined with the flexibility to select a product that provides enhanced benefits and a formulary that aligns with the individual's needs. Eligible customers benefit from broad network access and enhanced service intended to promote adherence, wellness and affordability.
- *Medicare Supplement Plans* provide Medicare-eligible customers with federally standardized Medigap-style plans. Customers may select among the various plans with specific plan options to meet their unique needs and may visit, without the need for a referral, any health care provider or facility that accepts Medicare throughout the United States.

### Specialty Products and Services

- *Stop-Loss* insurance coverage is offered to self-insured clients whose group health plans are administered by Cigna Healthcare. Stop-loss insurance provides reimbursement for claims in excess of a predetermined amount for individuals, the entire group, or both.
- *Cost Containment Programs* are designed to contain the cost of covered health care services and supplies. These programs reduce out-of-network utilization and costs, protect customers from balance billing and educate customers regarding the availability of lower cost in-network services. In addition, under these programs we negotiate discounts with out-of-network providers, review provider bills and recover overpayments. We charge fees for providing or arranging for these services. These programs may be administered by third-party vendors that have contracted with Cigna Healthcare.

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- *Consumer Health Engagement* services are offered to customers covered under plans administered by Cigna Healthcare or by third-party administrators. These services consist of an array of health management, disease management and wellness services. Our Medical Management programs include case, specialty and utilization management and a 24/7 Health Information line which ensures around the clock access to a medical professional. Our Health Advocacy program services include early intervention in the treatment of chronic conditions and an array of health and wellness coaching. We administer incentives programs designed to encourage customers to engage in health improvement activities.
- *Pharmacy Management* services and benefits can be combined with our medical offerings. The comprehensive suite of pharmacy management services are available to clients and customers through our integration with Evernorth Health Services' capabilities.
- *Behavioral Health* services consist of a broad national network of behavioral health providers which includes one of the largest virtual networks in the United States, behavioral health specialty case and utilization management, a crisis intervention line accessible anytime, employee assistance programs and work/life programs. We integrate our programs and services with medical and pharmacy programs to facilitate customized, holistic care as well as to provide resources that increase resiliency and address non-medical factors that affect overall well-being.
- *Dental* solutions include dental HMO plans, dental PPO plans, exclusive dental provider organization plans, traditional dental indemnity plans and a dental discount program. Employers and other groups can purchase our products on either an insured or self-insured basis as standalone products or in conjunction with medical products. Additionally, individual customers can purchase insured dental PPO plans as standalone products or in conjunction with individual medical policies.

### International Health

- *Global Health Care* products and services include insurance and administrative services for medical, dental, pharmacy, vision and life, accidental death and dismemberment and disability risks. We are a leading provider of products and services that meet the needs of multinational employers, intergovernmental and nongovernmental organizations and globally mobile individuals with a focus on keeping employees healthy and productive. The employer benefits products and services are offered through guaranteed cost, experience-rated and administrative services only funding solutions, while individuals purchase guaranteed cost coverage.
- *Local Health Care* products and services include medical, dental, pharmacy and vision as well as life coverage. The customers of local health care businesses are employers and individuals located in specific countries where the products and services are purchased. These employer services can similarly be funded through a range of options; individuals purchase on a guaranteed cost basis.

### Revenues: Premiums and Fees

- *ASO*. Plan sponsors (i.e., employers, unions and other groups) self-fund all claims, but may purchase stop-loss insurance to limit exposure. We collect fees from plan sponsors for providing access to our participating provider network and for other services and programs including: claims administration; behavioral health services; disease management; utilization management; cost containment; dental and pharmacy benefit management. Approximately 85% of our U.S. Commercial medical customers are in ASO arrangements.
- *Insured*.
  *GC and ER*. In most states, individual and group insurance premium rates must be approved by the applicable state regulatory agency (typically a department of insurance). State or federal laws may restrict or limit the use of rating methods. Premium rates are established at the beginning of a policy period and, depending on group size, may be based in whole or in part on prior experience of the policyholder or on a pool of similar policyholders. With the exception of ER policies, we generally cannot subsequently adjust premiums to reflect actual claim experience until the next policy period; the policyholder does not participate, or share in, actual claim experience; and we keep any experience surplus or margin if costs are less than the premium charged (subject to minimum medical loss ratio rebate requirements discussed below). For all insured arrangements, we bear the risk for actual costs in excess of the premium charged. Approximately 15% of our U.S. Commercial medical customers are in insured arrangements.

For Medicare Advantage plans, we receive fixed monthly payments from CMS for each plan customer based on customer demographic data and actual customer health risk factors compared to the broader Medicare population. Premiums may be received from customers when our plan premium exceeds the revenue received from CMS. We also may earn additional revenue from CMS related to quality performance measures (known as "Star Ratings").

The ACA subjects individual and small group policy rate increases above an identified threshold to review by the United States Department of Health and Human Services ("HHS"). Our U.S. Commercial and U.S. Government medical plans are subject to minimum medical loss ratio ("MLR") requirements. The MLR represents the percentage of premiums used to pay

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claims and expenses for activities that improve the quality of care. If we do not satisfy the prescribed MLR, statutes require premium refunds to policyholders or to CMS.

See the "Business - Regulation" section of this Form 10-K for additional information about premiums, MLR requirements, Star Ratings and risk adjustment programs of the ACA.

### Market Segments

- U.S. Commercial comprises the following market segments:
  - National. Employers with 3,000 or more eligible employees, primarily through ASO funding solutions.
  - Middle Market. Employers generally with 500 to 2,999 eligible employees, solutions for third party payers, Taft-Hartley plans, as well as other groups, through ASO and insured funding solutions.
  - Select. Employers generally with 51 to 499 eligible employees, primarily through ASO with stop-loss insurance coverage and insured funding solutions.
  - Small Group. Employers generally with 2 to 50 eligible employees. We offer guaranteed cost insured funding solutions in select geographies with our Cigna + Oscar product.
- U.S. Government comprises the following market segments:
  - Individual. Includes individuals under age 65 who do not have access to health care coverage through an employer or government program such as Medicare or Medicaid. We offer guaranteed cost, medical ACA-compliant and dental plans in this market segment.
  - Medicare. Includes individuals who are Medicare-eligible customers, as well as employer group sponsored post-65 retirees. We receive Medicare Advantage revenue from CMS based on customer demographic data and health risk factors. Revenues from CMS are significant to the market segment.
- International Health comprises market segments offering international plans to multinational employers and globally mobile individuals, and domestic plans to employers and individuals in specific countries outside of the U.S. Employer plans in the International Health segment may be ASO or fully insured plans.

### Customers

We provide clients and customers with access to a mix of medical and specialty products and services.

- Clients. Our clients include employers, third-party administrators, union-sponsored benefit plans, government health programs and other groups which span our operating segments.
- Customers. Our customers include individuals who access our offerings through an employer-sponsored plan, government-sponsored plan, or other insured group.

### Primary Distribution Channels

- Brokers. Sales representatives distribute our products and services to a broad group of insurance brokers and consultants.
- Direct. Cigna Healthcare sales representatives distribute our products and services directly to employers, unions and other groups or individuals. Various products may also be sold directly to insurance companies, HMOs and third-party administrators. Direct distribution may take the form of in-person contact, telephone or group selling venues, or online direct to consumer enrollment platforms.
- Private Exchanges. We partner with select companies that have created private exchanges where individuals and organizations can acquire health insurance. We evaluate private exchange participation opportunities as they emerge in the market and target our participation to those models that best align with our mission and value proposition.
- Public Exchanges. Cigna Healthcare offers individual ACA-compliant policies through public health insurance exchanges in select geographies.

### Competition

The primary competitive factors affecting our business are quality of care and cost effectiveness of service and provider networks; effectiveness of medical care management; products that meet the needs of employers and their employees; total cost management; technology and effectiveness of marketing and sales. Financial strength, as indicated by ratings issued by nationally recognized rating agencies, is also a competitive factor. Our health advocacy capabilities, holistic approach to consumer engagement, breadth of product offerings, clinical care and health management capabilities along with an array of product funding solutions are competitive

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advantages. We believe our focus on improving the health and vitality of those we serve will allow us to further differentiate ourselves.

- *National Insurers*. UnitedHealth, Aetna Inc. (owned by CVS), Elevance, Humana and Blue Cross Blue Shield plans compete with us in a variety of products and regions.
- *Local Healthplans*. Blue Cross Blue Shield plans, local affiliates of major insurance companies and hospitals and regional stand-alone managed care and specialty companies compete with us in the states in which we offer managed care products.
- *TPAs*. Third-party administrators compete with us for ASO business.
- *Provider-led Plans*. Include health systems and hospitals who integrate health plan offerings with care delivery. Additionally, plan sponsors may contract directly with providers.
- *Dental Insurers*. Various companies offering primarily dental insurance compete with us on these products.
- *Specialty Companies*. Specialty insurance or service companies that offer niche products and services compete with us.
- *International Companies*. Global insurers and local non-U.S. insurers compete with us through product and service offerings.

### *Partnering to Advance our Growth Strategy*

Cigna Healthcare's strategy engages customers in their health, collaborates with providers to help them improve their performance and connects customers and providers through aligned health goals, incentives and actionable information to help enable informed decisions and drive better outcomes. Continuing to expand the breadth and depth of Evernorth Health Services care services, pharmacy services and benefits management will further reduce the total cost of care for our clients and customers. Fueled by advanced insights and predictive analytics, Cigna Healthcare continues to develop innovative solutions that span the health care delivery system and can be applied to a multitude of providers.

- *Accountable Care Program*. We have approximately 239 collaborative care arrangements with primary care groups built on the patient-centered medical home and accountable care organization ("ACO") models. Program flexibility allowed adjustments in response to the COVID-19 pandemic designed to maintain appropriate focus on high-risk individuals and populations with chronic conditions impacted by Social Determinants of Health. As we emerge from the pandemic, we are leveraging new models to increase provider adoption of upside and downside risk sharing to drive better health outcomes and lower the total cost of care.
- *Hospital Quality Program*. We have contracts with approximately 152 hospital systems, involving over 592 hospitals, with reimbursements tied to quality metrics.
- *Site of Care Redirection*. We encourage the use of clinically appropriate settings to reduce the cost of care. This results in significant cost savings compared to receiving the same care in a hospital setting, while ensuring high quality care and service.
- *Specialist Programs*. We have approximately 266 arrangements with specialist groups in value-based reimbursement arrangements across six different disciplines. Arrangements include incentives for enhanced care coordination and episodes of care reimbursements for meeting cost and quality goals. We have expanded these programs to include prospective bundled payment arrangements beginning with orthopedics.
- *Independent Practice Associations*. We have value-based physician engagement models in our Medicare Advantage plans that allow physician groups to share financial outcomes with us. This clinical model also includes outreach to new and at-risk patients to ensure they are accessing their primary care physician.
- *Participating Provider Network*. We provide our customers with an extensive network of participating health care providers, hospitals and other facilities, pharmacies and providers of health care services and supplies. In addition, we have strategic alliances with several regional managed care organizations to gain access to their provider networks and discounts.
- *Virtual Care*. We encourage access for customers through MDLIVE telehealth services as a way to support the patient/provider relationship. MDLIVE telehealth services provide flexibility for the customer to access a network of telehealth providers for services including preventative and routine primary care and wellness, urgent care, dermatology care, behavioral health care needs and chronic condition management beginning with hypertension.

### *Key Transactions and Business Developments*

See the "Executive Overview - Key Transactions and Business Developments" section of our MD&A located in Part II, Item 7 of this Form 10-K for discussion of key developments impacting this segment.

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# OTHER OPERATIONS

Other Operations comprises the remainder of our business operations, which includes certain ongoing businesses and exiting businesses. Our ongoing businesses include our continuing business, COLI, as described below, as well as our run-off businesses. Our run-off businesses include (i) GMDB and GMIB business that were effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska ('Berkshire') in 2013, (ii) settlement annuity business, and (iii) individual life insurance and annuity and retirement benefits businesses comprised of deferred gains from the sales of these businesses. Our exiting businesses include our interest in a joint venture in Türkiye, which was sold to our partner in December 2022, the international life, accident and supplemental benefits businesses sold on July 1, 2022, and the Group Disability and Life business sold on December 31, 2020.

In 2022, Other Operations reported adjusted revenues of $2.3 billion and pre-tax adjusted income from operations of $500 million. Other Operations was previously named Group Disability and Other.

## Ongoing Businesses

### *Continuing Business*

#### *Corporate-Owned Life Insurance*

The principal products of the COLI business are permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for financing employer-paid future benefit obligations. Permanent life insurance provides coverage that, when adequately funded, does not expire after a term of years. The contracts are primarily non-participating universal life policies. Fees for universal life insurance products consist primarily of mortality and administrative charges assessed against the policyholder's fund balance. Interest credited and mortality charges for universal life and mortality charges on variable universal life may be adjusted prospectively to reflect expected interest and mortality experience. To reduce our exposure to large individual losses, we purchase reinsurance from unaffiliated reinsurers.

### *Run-off Businesses*

#### *Settlement Annuity Business*

Our settlement annuity business is a closed, run-off block of single premium annuity contracts. These contracts are primarily liability settlements with approximately 15% of the liabilities associated with guaranteed payments not contingent on survivorship. Non-guaranteed payments are contingent on the survival of one or more parties involved in the settlement.

#### *Reinsurance*

Our reinsurance operations are an inactive business in run-off.

In February 2013, we effectively exited the GMDB and GMIB business by reinsuring 100% of our future exposures, net of retrocessional arrangements in place at that time, up to a specified limit. For additional information regarding this reinsurance transaction and the arrangements that secure our reinsurance recoverables, see Note 10 to the Consolidated Financial Statements.

#### *Individual Life Insurance and Annuity and Retirement Benefits Businesses*

This business includes deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004 sale of the retirement benefits business. For more information regarding the arrangements that secure our reinsurance recoverables for the retirement benefits business, see Note 10 to the Consolidated Financial Statements.

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# Exiting Businesses

### ***Our Interest in a Joint Venture in Türkiye***

In December 2022, we divested our ownership interest in Cigna Sağlık Hayat ve Emeklilik, our joint venture in Türkiye, to our long-time partner QNB Finansbank.

### ***International Life Accident and Supplemental Benefits***

We offered life, accident and supplemental benefits insurance products and services in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand until the completion of the sale of these businesses on July 1, 2022 to Chubb as described in the 'Overview' section of this Form 10-K. South Korea represented our single largest geographic market for these businesses.

### ***Group Disability and Life***

Our Group Disability and Life operating segment included our commercial long-term and short-term disability products and our term life group insurance products, until completion of the sale in 2020. We also offered personal accident insurance and will continue to offer voluntary products and services that were not part of the sale. Beginning in 2021, voluntary products and services are reported in the Cigna Healthcare segment.

## INVESTMENT MANAGEMENT

Our investment operations provide investment management and related services for our various businesses, including the insurance-related invested assets in our General Account ('General Account Invested Assets'). We acquire or originate, directly or through intermediaries, a broad range of investments, including private placement and public securities, commercial mortgage loans, real estate, mezzanine, private equity partnerships and short-term investments. Invested assets also include policy loans that are fully collateralized by insurance policy cash values. We also enter into derivative financial instruments, primarily to minimize the risk of changes in foreign currency exchange rates on our investments and to manage the interest rate exposures of our long-term debt. Invested assets are managed primarily by our subsidiaries and, to a lesser extent, external managers with whom our subsidiaries contract. Net investment income is included as a component of adjusted income from operations for each of our segments and Corporate. Realized investment gains (losses) are reported by segment but excluded from adjusted income from operations. For additional information about invested assets, see the 'Investment Assets' section of the MD&A and Notes 11 and 12 to the Consolidated Financial Statements.

We manage our investment portfolios to reflect the underlying characteristics of related insurance and contractholder liabilities and capital requirements, as well as regulatory and tax considerations pertaining to those liabilities and state investment laws. Insurance and contractholder liabilities range from short duration health care products to longer-term obligations associated with life insurance products and the run-off settlement annuity business. Assets supporting these liabilities are managed in segregated investment portfolios to facilitate matching of asset durations and cash flows to those of corresponding liabilities. Investment results are affected by the amount and timing of cash available for investment, economic and market conditions and asset allocation decisions. We routinely monitor and evaluate the status of our investments, obtaining and analyzing relevant investment-specific information and assessing current economic conditions, trends in capital markets and other factors such as industry sector, geographic and property-specific information.

### Separate Accounts

Our subsidiaries or external advisors manage invested assets of separate accounts on behalf of contractholders, including The Cigna Group Pension Plan, variable universal life products sold through our corporate-owned life insurance business and other life insurance products. These assets are legally segregated from our other businesses and are not included in General Account Invested Assets. Income, gains and losses generally accrue directly to the contractholders.

## STRATEGIC INVESTMENTS

*Cigna Ventures.* In addition to the portfolio investments in our general and separate accounts discussed in the Investment Management section above that support our insurance operations, we make targeted investments within the health care industry, specifically. In 2022, The Cigna Group committed an additional $450 million to Cigna Ventures, our strategic corporate venture fund, resulting in an aggregate commitment of $700 million to this strategic initiative. Cigna Ventures invests in promising startups and growth-stage companies who, like us, are unlocking new growth possibilities in health care. Specifically, we invest in companies

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making groundbreaking progress in three strategic areas: insights and analytics, digital health and experience, and care delivery and enablement. As of December 31, 2022, Cigna Ventures has seven venture capital partners and 22 existing direct investments. Through these deep partnerships we collaborate, innovate and develop new solutions that address critical challenges of health and vitality impacting the people we serve.

**VillageMD.** As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is an independent primary care group committed to offering high-quality, accessible primary care options for communities across the country through Village Medical. VillageMD partners with physicians to provide the tools, technology, operations, staffing support and industry relationships to deliver high-quality clinical care and better patient outcomes, while reducing the total cost of care. VillageMD and Village Medical operate in 22 markets and are responsible for more than 1.6 million patients.

## DIGITAL, DATA AND TECHNOLOGY

The Cigna Group's investments in digital, data and technology are focused on cultivating robust digital-first capabilities to better engage with customers and stakeholders. We deliver value for our clients, customers and other stakeholders by creating better health outcomes, improving customer experience and lowering total cost of care.

**Innovation.** Customer-centric, digital-first innovation remains at the forefront of our priorities. The advancement of our internal capabilities and strategic partnerships continues to produce new and more effective ways to engage with our customers to help close gaps in care, optimize treatment and improve outcomes. During 2022, technology continued to deliver value for current business while simultaneously focusing on reducing complexity and cost within our technology ecosystem. In the future, with a simplified technology ecosystem, we expect an increase in optionality, customer engagement, loyalty and speed to market. (See Evernorth Intelligence Solutions section of the '*Business - Evernorth Health Services*' discussion of this Form 10-K for additional information on our intelligent solutions and capabilities).

In 2022, The Cigna Group continued to invest in our technology capabilities to produce new and more effective ways to operate, as well as meet customers where they are. We intend to lead with digital engagement by creating connections between points of care and guiding customers through the best mechanism to the optimal location and provider. Our modernized data and technology ecosystem will empower us to integrate our assets, gather insights and engage with prospects and customers in new ways. For the year ended December 31, 2022, our capital expenditures for property, equipment and computer software were $1.3 billion.

**Data and Analytics.** Our rich, integrated data allows us to provide differentiated outcomes. We conduct timely, rigorous and objective research and analysis that informs evidence-based medical and pharmacy benefit management and evaluates the clinical, economic and individual impact of enhanced benefit designs and programs. The combination of our predictive analytics, as well as our machine and deep learning capabilities create actionable intelligence that informs decision-making of our health care professionals. Our data-driven approach to behavioral health provides personalized and customized care across the entire continuum for the populations we serve. These solutions predict emerging health needs, close gaps in care and drive cost savings - all while empowering whole-person and whole-family health.

During 2022, we continued to leverage both internal and external data to identify and address health disparities and better understand the long-term medical and behavioral complications facing our customers. The data-informed approach allows for delivery of solutions with a digital-first entry point that meet our customers where they are to offer physical and behavioral health support.

**Digital.** Our digital health focus has shown value across the enterprise by creating engaging experiences that give customers the right information at the right time. We continue to bring new technology-enabled products and services to the market, expanding on a platform that connects to a given benefit structure in a single personalized environment. This allows for further capitalization on our unique data. Cybersecurity protections continue to be a top priority across The Cigna Group's digital offerings.

**Technology Operations.** Our technology team, powered by over 8,500 employees and several thousand external resources working with our partners, supports the various information systems essential to our operations, including the health benefit claims processing systems and specialty and home delivery pharmacy systems. Uninterrupted point-of-sale electronic retail pharmacy claims processing is a significant operational requirement for our business. We believe we have substantial capacity for growth in our United States pharmacy claims processing facilities. Our pharmacy technology platform allows us to safely, rapidly and accurately adjudicate over one billion adjusted prescriptions annually. Our technology helps retail pharmacies focus on patient care and our real-time safety checks help avoid medication errors. The Cigna Group companies hold over 320 United States patents. We use these patents to protect our proprietary technological advances and to differentiate ourselves in the market.

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# HUMAN CAPITAL MANAGEMENT

The Cigna Group's mission is to improve the health and vitality of those we serve. A global healthy and diverse workforce is essential to achieving our mission and our business growth strategies. We are continually investing in our global workforce to support our employees' health and well-being, further drive diversity and inclusion, provide fair and market-competitive pay and foster employee growth and development. As of the end of 2022, we had approximately 71,300 employees, with 94% of our employees based in the United States. Approximately 97% of our employees are full-time.

## *Health, Well-Being and Other Benefits*

Tending to our employees' health and vitality is a critical business imperative for our company and one of the most important investments in our enterprise that we make each year. We believe that when we support our employees' health and well-being, they have fewer absences and are more productive and engaged in driving our mission and business strategy forward, thereby creating shareholder value. In 2022, The Cigna Group invested approximately 18% of total payroll in health, well-being and other benefits, including life and disability programs, 401(k) contributions and retirement-related benefits for our employees in the United States.

In addition to traditional medical and pharmacy benefits, we provide both physical and mental health support to employees, including: nutrition and fitness programs, employee assistance program (EAP) benefits that are free to all employees and to all members of their household, and digital tools that provide access to education and therapy to help individuals build greater resilience and cope with stress, anxiety and depression.

## *Diversity, Equity & Inclusion*

At The Cigna Group, we take an expansive view of diversity including race, ethnicity, nationality, gender, veteran status, disability, sexual orientation and gender identity. As of the end of 2022, based on employee self-reporting, 71% of our employees were women, and 39% of our employees in the United States were ethnic minorities (which includes Black / African American, Asian, Hispanic or Latinx, Pacific Islander and American Indian / Alaskan employees).

We are committed to attracting and recruiting key diverse talent into various leadership development programs and other entry level positions across the business. This success is rooted in strategic relationships with diverse student groups at our partner colleges and universities, as well as our commitment to multiple national, regional and local organizations, which provide us focused recruiting opportunities with women, the LGBTQ+ community, military veterans and underrepresented minority groups.

Our compensation practices, rooted in our pay-for-performance philosophy, promote equity in pay through measures such as benchmarking compensation by role, eliminating inquiries regarding applicants' compensation history from the hiring process and monitoring for potential disparities. Our most recent pay equity analysis among our U.S. employees, conducted in 2023, illustrated that female employees of The Cigna Group earn more than 99 cents for every dollar earned by similarly-situated male employees, and employees from underrepresented groups (which includes Black/African American, Hispanic or Latinx, Pacific Islander and American Indian/Alaskan employees) earn more than 99 cents for every dollar earned by similarly-situated white employees. This year, for the first time, we also analyzed gender pay on a global basis and found that across the entire Company female employees at The Cigna Group earn more than 99 cents for every dollar earned by similarly-situated male employees.

## *Talent Acquisition, Development and Retention*

Our talent acquisition and rewards strategies are designed to attract and retain skilled employees who are engaged in our mission. Our compensation program is rooted in market competitive base salaries and incentives that reward contributions that advance the Company's strategy and mission. Shifts in labor dynamics that started in the midst of the COVID-19 pandemic have continued to impact our employee population. As we have adapted to new ways of working post-pandemic, where possible, employees work with their leaders to determine whether they work onsite, work at home, or leverage a hybrid option. The level of worker attrition continues to be above our pre-pandemic levels as well: in 2022, the voluntary turnover rate was 16% for all employees. In previous 10-K filings, we reported the voluntary turnover rate only for exempt employees in the United States.

Our online learning platform and career development tools and events offer a broad range of training, education and development resources to all employees. In 2022, based on internal data, U.S. employees on average engaged in 34 hours of learning through these resources. Enterprise leadership development programs were provided to executive, high-potential and new manager audiences to develop and expand leadership capability across the enterprise. The Cigna Group also offers an education reimbursement program for both full and part-time employees who meet the continuing education criteria. We believe these strategies and programs contribute to employee engagement and retention.

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# ENVIRONMENTAL, SOCIAL AND GOVERNANCE

The Cigna Group's environmental, social and governance ("ESG") framework is structured around four pillars that underscore our mission to improve the health and vitality of those we serve. We drive action through this framework to deliver on our ESG vision: to transform the ecosystem of health into one that is well-functioning, sustainable, accessible and equitable - advancing better health for all. Our commitment to this vision guides us in our multidimensional value-creation strategy as we strive to meet the needs of our many stakeholders. The four pillars of our ESG framework are:

# *Healthy Environment*

We believe that responsible environmental stewardship can improve health and well-being and also makes sound business sense. We strive to identify new efficiencies and make strategic investments to drive progress on our operational sustainability targets. We aim to reduce our environmental impacts and our operating costs, but our commitments are not material to our results of operations, financial condition or liquidity.

# *Healthy Society*

We work to advance better health for all. Building a well-functioning, sustainable, accessible and equitable health care system involves understanding and addressing social determinants of health, advancing health equity and improving medical quality and access while prioritizing affordability, lowering health risks, promoting preventive health interventions and coordinating all aspects of care. We drive progress in each of these areas by aligning our products and services with value-based care models, leveraging integrated benefits, managing drug costs through innovation, expanding digital offerings, and reviewing coverage policies for health equity. We also help to eliminate barriers to care and address other factors that contribute to health disparities.

# *Healthy Workforce*

We believe that employers play a vital role in the health care system, and we strive to be a model for others by prioritizing the health and well-being of employees within our own company. We are advancing our diversity, equity and inclusion commitments, including by setting aspirational goals to increase gender equality in our leadership pipeline. We are continuing to evolve our employee programs to meet the dynamic working environment and supporting our employees in their career growth as they support the growth of our business. See further discussion of this pillar within Part I, Item 1 "Human Capital Management" section above.

# *Healthy Company*

We strive to promote positive societal impact, ethical behavior and responsible and resilient business practices across our multidimensional enterprise. This includes adhering to strong board governance practices, protecting the sensitive data of our clients and customers by ensuring cybersecurity incident response preparedness, as well as supporting a responsible supply chain and committing to increasing our annual diverse supplier spend.

# MISCELLANEOUS

- Revenues from U.S. Federal Government agencies, under a number of contracts, represented 14% of our consolidated revenues in 2022 and 2021 and 15% in 2020.
- The Company does not rely on business from one or a few brokers or agents.

# REGULATION

The laws and regulations governing our business continue to increase each year and are subject to frequent change. We are regulated by federal, state and international legislative bodies and agencies, which generally have discretion to issue regulations and interpret and enforce laws and rules. These regulations can vary significantly from jurisdiction to jurisdiction, and the interpretation of existing laws and rules also may change periodically. Domestic and international governments continue to enact and consider various legislative and regulatory proposals, which could materially impact the health care system. We expect continued legislative and regulatory debate of issues related to our businesses. As has become increasingly common with public policy reforms in the health services industry, executive, judicial or legislative intervention could alter, slow or eliminate the impact of any proposal following the related regulation's promulgation.

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Many aspects of our business are directly regulated by federal and state laws and administrative agencies, such as HHS, CMS, the Internal Revenue Service ("IRS"), the U.S. Departments of Labor ("DOL") and Treasury, the Office of Personnel Management ("OPM"), the Federal Trade Commission ("FTC"), the SEC, the Office of the National Coordinator for Health Information Technology ("ONC"), state departments of insurance and state boards of pharmacy. Our business practices may also be shaped by enforcement actions of federal agencies, such as the Department of Justice ("DOJ"), state agencies, as well as judicial decisions.

In addition, aspects of our business are subject to indirect regulation. The self-funded benefit plans sponsored by our U.S. employer clients are regulated under federal law. These self-funded clients expect us to ensure that our administration of their plans complies with the regulatory requirements applicable to them.

Our business operations and the books and records of our regulated businesses are routinely subject to examination and audit at regular intervals by state insurance and HMO regulatory agencies, state boards of pharmacy, CMS, DOL, IRS, OPM and comparable international regulators to assess compliance with applicable laws and regulations. Our operations are also subject to non-routine examinations, audits and investigations by various state and federal regulatory agencies, generally as the result of a complaint. In addition, we may be implicated in investigations of our clients whose group benefit plans we administer on their behalf. As a result, we routinely receive subpoenas and other demands or requests for information from various state insurance and HMO regulatory agencies, state attorneys general, the HHS Office of Inspector General ("HHS-OIG"), the DOJ, the DOL and other state, federal and international authorities. We may also be called upon by members of the U.S. Congress to provide information, including testifying before Congressional committees and subcommittees, regarding certain of our business practices. If The Cigna Group is determined to have failed to comply with applicable laws or regulations, these examinations, audits, investigations, reviews, subpoenas and demands may:

- result in fines, penalties, injunctions, consent orders or loss of licensure;
- suspend or exclude us from participation in government programs or limit our ability to sell or market our products;
- require changes in business practices;
- damage relationships with the agencies that regulate us and affect our ability to secure regulatory approvals necessary for the operation of our business; or
- damage our brand and reputation.

Our international subsidiaries are subject to regulations in international jurisdictions, including in certain cases many regulations similar to the federal and state regulations described below, which are complex and where foreign insurers may face more rigorous regulations than their domestic competitors and may also be affected by geopolitical developments or tensions.

The laws and regulations governing our business, as well as the related interpretations, are subject to frequent change and can be inconsistent or in conflict with each other. Changes in our business environment are likely to continue as elected and appointed officials at the national and state levels continue to propose and enact significant modifications to existing laws and regulations. Even where we believe that we are in compliance with the various laws and regulations, any enforcement actions by federal, state or international government officials alleging non-compliance with these rules and regulations could subject us to penalties or restructuring or reorganization of our business. For a discussion of the risks related to our compliance with these laws and regulations see the Risk Factors section located in Part I, Item 1A of this Form 10-K. Management continues to be actively engaged with regulators and policymakers with respect to legislation and rulemaking.

### **COVID-19-related Regulatory Actions**

In response to COVID-19 and its variants, U.S. federal and state governments have increasingly enacted new legislative and regulatory requirements, as well as provided flexibility to industry participants within existing legal requirements. These regulatory actions primarily provide for:

- mandating or requesting waiver of customer cost-sharing and other related costs such as COVID-19 testing or treatment, as well as establishing provider reimbursement and vaccine immunizations coverage requirements;
- extending claims filing deadlines for providers, customers and facilities;
- mandating or encouraging waiver of customer cost-share related to telemedicine services, as well as requiring certain reimbursement levels for telemedicine providers to encourage its utilization;
- increasing the Medicare fee-for-service reimbursement for certain items and services;
- enacting coverage and reimbursement requirements at in-network levels for certain services received from out-of-network providers;
- clarification regarding permissible sharing of information and coordination among health care providers; and

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- requiring vaccinations for certain employee populations.

These actions are in effect for various durations, but generally track the different states of emergency that have been declared at the state and federal levels. Of particular significance is the Public Health Emergency ('PHE') declared by the Secretary of HHS on January 31, 2020, which has since been extended and sets the effective period for certain of the requirements established through federal COVID-19 legislation, such as covering testing without cost sharing. On January 30, 2023, the Biden administration announced that it plans to end the PHE and Federal National Emergency on May 11, 2023. With the PHE coming to an end, states will be required to resume Medicaid redeterminations for the first time since the PHE began. These redeterminations will take place on a staggered basis, but it is anticipated that the remediations will find many beneficiaries are no longer eligible for Medicaid. As a result, it is expected that beneficiaries determined to be ineligible for Medicaid may seek alternate coverage in the individual marketplace.

## Patient Protection and the Affordable Care Act

The Patient Protection and Affordable Care Act ('ACA') mandated broad changes to the U.S. health care system that affect insured and self-insured health benefit plans and pharmacy benefit managers. Our business model is impacted by the ACA, including our relationships with current and future producers and health care providers, products, service providers and technologies. The provisions of the ACA imposed, among other things, certain assessments on health insurers, created health insurance exchanges for individuals and small group employers to purchase insurance coverage and implemented minimum MLRs for our Medicare and commercial businesses. Certain states have adopted MLR requirements applicable to our commercial businesses that are more stringent than those established by the ACA. Other provisions of the ACA in effect include reduced Medicare Advantage payment rates, the requirement to cover preventive services with no enrollee cost-sharing, banning the use of lifetime and annual limits on the dollar amount of essential health benefits, increasing restrictions on rescinding coverage, extending coverage of dependents up to age 26, restrictions on differential pricing, enforcement mechanisms and rules related to health care fraud and abuse enforcement activities and certain pharmacy benefit transparency requirements. The employer mandate requires employers with 50 or more full-time employees to offer affordable health insurance that provides minimum value (each as defined under the ACA) to full-time employees and their dependents, including children up to age 26, or be subject to penalties based on employer size. The ACA also changed certain tax laws to effectively limit tax deductions for certain employee compensation paid by health insurers. In December 2019, the federal government repealed the non-deductible health insurance industry fee effective for 2021, as well as the enacted but never implemented 40% excise tax on certain employer-sponsored coverage (known as the 'Cadillac Tax') and the medical device tax. In 2021, in response to the COVID-19 pandemic, the federal government temporarily expanded eligibility for ACA subsidies to higher-income people who did not otherwise qualify, increased ACA subsidies for lower-income people who already qualify for 2021 and 2022, provided subsidies for individuals who receive unemployment benefits in 2021 and prevented taxpayers who misestimated their income in 2020 from having to repay excess premium tax credits. The Inflation Reduction Act, which was signed into law in August 2022, extended the expanded and increased premium tax credits for individuals enrolled in ACA qualified health plans, through December 31, 2025.

## Medicare and Medicaid Regulations

Through our subsidiaries, we offer individual and group Medicare Advantage, Medicare Prescription Drug ('Part D') and Medicare Supplement products. We also provide Medicare Part D-related products and services to other Medicare Part D sponsors, Medicare Advantage Prescription Drug Plans and employers and clients offering Medicare Part D benefits to Medicare Part D eligible beneficiaries, including those dually eligible for Medicare and Medicaid benefits ('dual-eligible'). As part of our Medicare Advantage and Medicare Part D business, we contract with CMS to provide services to Medicare beneficiaries. We offer dual-eligible products and participate in state Medicaid programs directly or indirectly through our clients who are Medicaid managed care contractors. We also perform certain Medicaid subrogation services and certain delegated services for clients, including utilization management, which are regulated by federal and state laws. Our dual-eligible products are regulated by CMS and state Medicaid agencies audit our performance to determine compliance with contracts and regulations. Our ability to obtain payment (and the determination of the amount of such payments), market to, enroll and retain customers and expand into new service areas is subject to compliance with CMS' numerous and complex regulations and requirements that are frequently modified and subject to administrative discretion, review and enforcement.

CMS evaluates Medicare Advantage plans and Part D plans under its 'Star Rating' system. The Star Rating system considers various measures adopted by CMS, including, for example, quality of care, preventive services, chronic illness management, coverage determinations and appeals and customer satisfaction. A plan's Star Rating affects its image in the market and plans that perform very well are able to offer enhanced benefits and market more effectively and for longer periods of time than other plans. Medicare Advantage plans' quality-bonus payments are determined by the Star Rating, with plans receiving a rating of four or more stars eligible for such payments. The Star Rating system is subject to change annually by CMS, which may make it more difficult to achieve and maintain four stars or greater. For example, beginning with Star Ratings for payment year 2024, CMS will place more emphasis on patient experience survey-based measures which could reduce Star Ratings predictability year over year. Additionally, as a result of the COVID-19 pandemic's impact on 2020 care patterns and utilization, CMS finalized rules applying relief to Medicare Advantage

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and Part D Plan Star Ratings for payment year 2023 by utilizing the higher of the payment year 2023 or 2022 measure level Star Ratings. The 2023 Star Ratings will only include adjustments as a result of the COVID-19 pandemic's impact for three Healthcare Effectiveness Data and Information Set measures, and we expect this change will result in a decrease in our Star Ratings for payment year 2024.

CMS provides risk-adjusted premium payments for Medicare Advantage plans based on our customer demographics and medical diagnoses, which may change from period to period based on the underlying health of our customers. Under this model, rates paid to Medicare Advantage plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a 'national average risk profile.' That baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology, Medicare Advantage plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient and physician providers to CMS within prescribed deadlines. We generally rely on providers to appropriately document their claims and other submissions with appropriate diagnoses from which we extract hierarchical condition codes to submit to CMS as the basis for our payments received under the actuarial risk-adjustment model. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to the plans. These adjustments are generally settled semi-annually with CMS. The final adjustment is generally settled with CMS in the year following the contract year. CMS may conduct audits to validate risk-adjustment data submitted by health plans.

On January 30, 2023, CMS issued the Final Rule titled 'Medicare and Medicaid Programs; Policy and Technical Changes to the Medicare Advantage, Medicare Prescription Drug Benefit, Program for All-inclusive Care for the Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 2021', effective April 3, 2023. The Final Rule addresses CMS's audit methodology and related policies for the Risk Adjustment Data Validation ('RADV'). Although CMS did not specify their sampling or extrapolation methodology the rule did codify that CMS will use a statistically valid method for sampling and extrapolation of error rates and the decision not to apply a fee for service adjuster when determining RADV audit findings. CMS will not apply extrapolation to RADV audits until the 2018 payment year with payment recoveries for those RADV audits expected in 2025. Audits for payment years prior to 2018 are not subject to extrapolation. RADV audits for our contract years 2011 through 2015 are currently in process. The Company is not currently subject to RADV audits for the 2018 and subsequent payment years.

Coverage of prescription drugs under Medicare Part D is also regulated by CMS and our contracts with CMS contain provisions for risk sharing and certain payments for prescription drug costs for which we are not at risk. These provisions affect our ultimate payments from CMS. For example, premiums from CMS are subject to risk corridor payments that compare costs targeted in our annual bids with actual prescription costs, limited to actual costs that would have been incurred under the standard coverage as defined by CMS. Variances exceeding certain thresholds may result in CMS making additional payments to us or require us to refund to CMS a portion of the payments we received.

We expect CMS, HHS-OIG, DOJ and other federal agencies to continue to closely scrutinize each component of the Medicare Advantage program and modify the terms and requirements of the program through rulemaking or enforcement activities. The Company continues to believe that further regulation or changes to existing regulations could result in disruption in the marketplace including the potential for some combination of degraded plan benefits and higher monthly premiums. Noncompliance with these laws and regulations may result in significant consequences, including fines and penalties, enrollment sanctions, exclusion from the Medicare and Medicaid programs, limitations on expansion and criminal penalties.

### False Claims Act and Anti-Kickback Laws

Our products and services are also subject to the federal False Claims Act (the 'False Claims Act'), state false claims acts and federal and state anti-kickback laws. Additionally, the federal government has made investigating and prosecuting health care fraud, waste and abuse a priority. Fraud, waste and abuse prohibitions encompass a wide range of activities, including kickbacks in return for customer referrals, billing for unnecessary medical services, upcoding and improper marketing. The regulations and contractual requirements in this area are complex, frequently modified and subject to administrative discretion and judicial interpretation.

False Claims Act and Related Criminal Provisions. The False Claims Act imposes civil penalties on any person who knowingly, as defined by the statute, makes, conspires to make, or causes to be made false claims, records, or statements, or fails to return known overpayments, in connection with reimbursement by federal government programs such as Medicare and Medicaid. Private individuals may bring *qui tam* or 'whistleblower' suits under the False Claims Act, which authorizes the payment of a portion of any recovery to the individual bringing suit. The ACA amended the federal anti-kickback laws to state any claim submitted to a federal or state health care program that violates the anti-kickback laws is also a false claim under the False Claims Act. The False Claims Act generally provides for the imposition of civil penalties and for treble damages, creating the possibility of substantial financial liabilities. Criminal statutes similar to the False Claims Act provide that if a corporation is convicted of presenting a claim or making a statement it knows to be false, fictitious or fraudulent to any federal agency, the corporation may be fined. Conviction under these

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statutes may also result in exclusion from participation in federal and state health care programs. Many states have also enacted laws similar to the False Claims Act, some of which may include criminal penalties, substantial fines and treble damages.

**Anti-Kickback and Referral Laws.** Subject to certain exceptions and 'safe harbors,' the federal anti-kickback statute generally prohibits, among other things, knowingly and willfully paying, receiving or offering any payment or other remuneration to induce a person to purchase, lease, order or arrange for items (including prescription drugs) or services reimbursable in whole or in part under Medicare, Medicaid or another federal health care program. Many states have similar laws, some of which are not limited to items or services paid for with government funds. Sanctions for violating these federal and state anti-kickback laws may include criminal and civil fines and exclusion from participation in federal and state health care programs.

Anti-kickback laws have been cited as a partial basis, along with state consumer protection laws described below, for investigations and multi-state settlements relating to financial incentives provided by drug manufacturers to pharmacies or payors in connection with 'product conversion' or promotion programs. Other anti-kickback and referral laws may also be applicable including criminal and civil laws restricting illegal kickbacks and conflicts of interest in connection with plans governed by the Employee Retirement Income Security Act of 1974, as amended ('ERISA'), the federal 'Stark Law,' and various state anti-kickback restrictions.

In November 2020, HHS and HHS-OIG released a final rule that eliminates an anti-kickback regulatory safe harbor protection for price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors or pharmacy benefit managers under the Medicare Part D program. The final rule creates two new safe harbors: (i) for price reductions by manufacturers to plan sponsors under Medicare Part D and Medicaid managed care organizations that are reflected at the time of dispense and (ii) for fixed-fee service arrangements between manufacturers and pharmacy benefit managers. The effective date of the final rule has been postponed to 2032.

**Federal Civil Monetary Penalties Law.** The federal civil monetary penalty statute provides for civil monetary penalties against any person who gives something of value to a Medicare or Medicaid program beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular provider for Medicare or Medicaid items or services. Under this law, our wholly-owned home delivery pharmacies, specialty pharmacies and home health providers are restricted from offering certain items of value to influence a Medicare or Medicaid patient's use of services. The ACA also includes several civil monetary provisions, such as penalties for the failure to report and return a known overpayment and failure to grant timely access to the HHS-OIG under certain circumstances.

### **Federal and State Oversight of Government-Sponsored Health Care Programs**

Participation in government-sponsored health care programs subjects us to a variety of federal and state laws and regulations and risks associated with audits conducted under these programs. These audits may occur years after the provision of services. Risks include potential fines and penalties, restrictions on our ability to participate or expand our presence in certain programs and restrictions on marketing our plans. For example, with respect to our Medicare Advantage business, CMS and the HHS-OIG perform audits to determine a health plan's compliance with federal regulations and contractual obligations, including program audits and RADV audits, which focus on compliance with proper coding practices. Certain of our contracts are currently subject to audits by CMS and the HHS-OIG, including RADV audits. CMS has announced that its goal is to subject all Medicare Advantage contracts to either a comprehensive or a targeted RADV audit for each contract year. The DOJ is also currently conducting industry-wide investigations of the risk adjustment data submission practices and business processes of The Cigna Group and a number of other Medicare Advantage organizations. See Note 23 to the Consolidated Financial Statements for more information.

For our Medicare Part D business, compliance with certain contractual provisions and regulatory requirements is subject to review by Recovery Audit Contractor audits in which third-party contractors conduct post-payment reviews on a contingency fee basis to detect and correct improper payments.

### **Government Procurement Regulations**

We have a contract with the U.S. DoD, which subjects us to applicable Federal Acquisition Regulations ('FAR') and the DoD FAR Supplement, which govern federal government contracts. Further, there are other federal and state laws applicable to our DoD arrangement and our arrangements with other clients that may be subject to government procurement regulations. In addition, certain of our clients participate as contracting carriers in the Federal Employees Health Benefits Program administered by the OPM, which includes various pharmacy benefit management standards.

### **Employee Retirement Income Security Act**

Our domestic subsidiaries sell most of their products and services to sponsors of employee benefit plans that are governed by ERISA. ERISA is a complex set of federal laws and regulations enforced by the IRS and the DOL, as well as the courts. ERISA regulates certain aspects of the relationship between us, the employers that maintain employee welfare benefit plans subject to ERISA and the

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participants in such plans. Certain of our domestic subsidiaries are also subject to requirements imposed by ERISA affecting claim payment and appeals procedures for individual health insurance and insured and self-insured group health plans and for the insured plans we administer. Certain of our domestic subsidiaries also may contractually agree to comply with these requirements on behalf of the self-insured plans they administer. We believe the conduct of our pharmacy benefit management business is not generally subject to the fiduciary obligations of ERISA. However, there can be no assurances that the DOL may not assert that pharmacy benefit managers are fiduciaries. From time to time, states have considered, and in limited cases, enacted legislation to declare a pharmacy benefit manager or health benefit manager a fiduciary with respect to its clients.

Plans subject to ERISA may also be subject to state laws and the legal question of whether and to what extent ERISA preempts a state law is likely to continue to be a subject for interpretation by the courts for years to come.

### **Privacy, Security and Data Standards Regulations**

Numerous federal, state and foreign laws and regulations govern the creation, collection, dissemination, receipt, maintenance, protection, use, transmission, disclosure, privacy, confidentiality, security, availability, integrity, processing, and disposal (collectively 'Processing') of protected health information ('PHI') and other personally identifiable information ('PII'). Many of our activities involve Processing of PHI and PII. In addition, we use aggregated and de-identified data for our own research and analysis purposes and, in some cases, provide access to such de-identified data, or analytics created from such data, to third parties. We may also use such information to create analytic models designed to predict, and potentially improve, outcomes and patient care. We are also subject to the Payment Card Industry Data Security Standard, a set of requirements designed to help ensure that entities that Process credit card information maintain a secure environment.

On the federal level we are subject to a number of sector specific regulation. The federal Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, the 21st Century Cures Act, Public Law 116-321, and the regulations that implement these laws (collectively 'HIPAA') impose requirements on covered entities and business associates that address the privacy and security of PHI. In the conduct of our business we may be either a covered entity or business associate, and we may also be held liable under HIPAA for violations by our vendors that are business associates. HIPAA imposes contracting requirements, requires breach notifications, and establishes rules that standardize the format and content of certain electronic transactions, including eligibility and claims. Violations of HIPAA may result in enforcement actions, civil and criminal penalties and settlement, resolution, and monitoring agreements. Further, state attorneys general may bring civil actions seeking either injunctions or damages in response to violations of HIPAA that threaten the privacy of state residents and may negotiate settlements for related cases on behalf of their respective residents. There can be no assurance that we will not be the subject of an investigation, audit or compliance review regarding our compliance with HIPAA. While HIPAA does not create a private right of action, its standards have been used as a basis for the duty of care in state civil suits, such as those for negligence or recklessness in the handling, misuse or breach of PHI. HIPAA does not preempt more stringent state health privacy laws and regulations, which may protect the health information of certain individuals, such as minors, and certain types of sensitive health information, such as transgender care, HIV/AIDS status, reproductive health information, genetic information, and mental and behavioral health.

The federal government has also enacted final regulations on interoperability and information blocking to support the seamless and secure access, exchange and use of electronic health information by and between patients, enrollees and entities such as payors and health care providers. These regulations apply to a variety of entities, including health plans, and generally require significant enhancements to information technology and data governance practices. The regulations impact how industry participants, including us, comply with disclosure requirements and share information with individuals and other health care organizations.

The federal Gramm-Leach-Bliley Act ('GLBA') and its implementing regulations generally place restrictions on the disclosure of nonpublic information to nonaffiliated third parties, and requires financial institutions, including insurers, to provide customers with notice regarding how their nonpublic personal information is used, including an opportunity to 'opt out' of certain disclosures. State departments of insurance and certain federal agencies adopted implementing regulations as required by federal law. In 2023, significant changes to GLBA's 'Safeguards Rule' will go into effect, substantially raising the GLBA standards for security.

Additionally, under Section 5 of the Federal Trade Commission Act ('FTC Act'), the FTC has jurisdiction over certain privacy and security practices deemed unfair and deceptive acts and practices in or affecting commerce. The FTC has charged companies with violating this act based on failures to appropriately and transparently safeguard personal information, respect consumers' privacy rights, based on disclosures of health and personal information to third parties, the failure to limit third-party use of health information, the failure to implement policies and procedures to prevent the improper or unauthorized disclosure of health information, and the failure to provide notice and obtain consent before the use and disclosure of health information for advertising. In addition to the FTC Act, the FTC also enforces other federal laws relating to consumers' privacy and security. The FTC has also been active with respect to companies' use of big data and artificial intelligence ('AI'), specifically ensuring fair and equitable use of these tools, and the FTC has named AI as an area of enforcement focus. State legislatures and regulators are similarly interested in the use of AI, particularly as it is used in modeling, and a handful of states have either passed legislation or issued regulatory guidance concerning AI. Additionally,

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the National Association of Insurance Commissioners ('NAIC'), an organization of state insurance regulators, recently established the Innovation, Cybersecurity and Technology Committee to provide a forum for regulators to learn, monitor and confer on emerging technology issues, including, among others, cybersecurity and AI. State Departments of Insurance ('DOI') and other state government agencies and legislatures are increasingly aware and active in providing guidance in the AI space.

The SEC has proposed additional cybersecurity disclosure obligations on reporting companies, with final rulemaking expected in 2023.

The Cybersecurity Information Sharing Act of 2015 ('CISA') encouraged organizations to share cyber threat indicators with the federal government and, among other things, directed HHS to develop a set of voluntary cybersecurity best practices for organizations in the health care industry. States have also begun to issue regulations specifically related to cybersecurity, which may differ or conflict from state to state. In October 2017, the NAIC adopted the Insurance Data Security Model Law that creates rules for insurers and other covered entities addressing data security, investigation and notification of breaches. This includes maintaining an information security program based on ongoing risk assessment, overseeing third-party service providers, investigating data breaches and notifying regulators of a cybersecurity event. As the model law is intended to serve as model legislation only, states will need to enact legislation for the model law to become mandatory and enforceable. To date, twenty-one states have enacted some form of the model law.

Over the past several years, the federal government has increasingly focused on the cybersecurity requirements applicable to government contractors, including enhanced guidance and regulation. These include compliance with the Privacy Act of 1974, the Defense Federal Acquisition Regulation Supplement ('DFARS') cybersecurity requirements, the Cybersecurity Maturity Model Certification ('CMMC') (going into effect over the next four years and based on NIST standards), the Federal Information Security Modernization Act ('FISMA'), and the White House's 2021 Executive Order on Improving the Nation's Cybersecurity.

Some local authorities are increasing focused on protecting individuals from identity theft and a number of states have adopted comprehensive data security laws and regulations requiring, among other things, certain minimum data security standards and security breach notifications that may apply to us in certain circumstances, as well as certain limitations on access to and use of PII. These laws and regulations include state general data breach laws, which exist in all fifty states and protect PII generally, as well as DOI cybersecurity laws, applicable to various DOI licensees, such as insurers, PBMs and TPAs. Many states also have their own sector-specific laws regarding the Processing of PII which may apply to us as well. In the past few years, five states have adopted their own comprehensive consumer privacy statutes and many more states are considering doing so. Generally, the statutes exempt data and/or entities regulated by GLBA and/or HIPAA but are, in varying respects, applicable to other data we collect, such as PII provided by website visitors, and in California, employees and business partners. Additionally, we anticipate federal and state legislators and regulators will continue to enact legislation related to privacy and cybersecurity, including with respect to ransomware incidents.

In addition, international laws, rules and regulations governing the use and disclosure of PII can be more stringent than those in the United States, and they vary from jurisdiction to jurisdiction. The European Union's General Data Protection Regulation ('GDPR'), which became effective May 2018, enhanced or created obligations regarding the handling of PII relating to European residents (such as regarding notices, data protection impact assessments and individual rights) and provides for greater penalties for noncompliance than the previous European Directive or laws. In addition, many countries outside of Europe where we conduct business have implemented or may implement data protection laws and regulations, some of which include requirements modeled after those in the GDPR. Some non-U.S. jurisdictions are also instituting data residency regulations requiring that data be maintained within the respective jurisdiction or otherwise restricting transfer of personal data across borders unless specified regulatory requirements are met.

See Part I. Item 1A, 'Risk Factors' for a discussion of the risks related to compliance with privacy and security regulations.

## Consumer Protection Laws

We engage in direct-to-consumer activities and are increasingly offering mobile and web-based solutions to our customers. We are therefore subject to federal and state regulations applicable to electronic communications and other consumer protection laws and regulations, such as the Telephone Consumer Protection Act and the CAN-SPAM Act. With the ever increasing reliance and demand by consumers on using their mobile devices for convenient communications, we face increased risk under these laws. The FTC is also increasingly exercising its enforcement authority in the areas of consumer privacy and data security, with a focus on web-based, mobile data and 'big data.' Federal consumer protection laws may also apply in some instances to privacy and security practices related to personally identifiable information.

State and federal policymakers have taken actions intended to increase transparency and predictability of health care costs for consumers. For example, the Transparency in Coverage rule issued in October 2020 by the HHS, the DOL and the Department of the Treasury now requires most group health plans and health insurance issuers in the individual and group markets to publicly disclose

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price and cost-sharing information for all items and services to participants and enrollees. Health plans and health insurers must publicly disclose (i) in-network provider negotiated rates, and (ii) historical out-of-network allowed amounts and billed charges. The rule also required public disclosure of in-network negotiated rates and historical net prices for all covered prescription drugs, but the departments announced in August 2021 guidance that they will indefinitely defer enforcement of the rule's requirement that plans and issuers publish machine-readable files relating to prescription drug pricing pending further rulemaking. Beginning in 2023, we will be required to make available to members personalized cost-sharing information for 500 covered health care items and services. In 2024, this cost-sharing information requirement will expand to all items and services, including prescription drugs. Insurers offering group or individual health insurance coverage may receive credit in their MLR calculations for certain savings they share with enrollees that result from the enrollees shopping for, and receiving care from, lower-cost, higher-value providers.

Congress also passed the Consolidated Appropriations Act, 2021 ('CAA'), which included a number of transparency requirements on plans and issuers that are duplicative or overlap with the Transparency in Coverage rule issued by the departments. The indefinite enforcement deferral of the prescription drug pricing file under the Transparency in Coverage rule is, in part, due to the subsequent enactment of the CAA, which requires plans to report information regarding prescription drug spending to federal regulators beginning in 2022. The CAA also included the No Surprises Act, which prohibits health care providers, in certain situations, from balance billing the patient and requires that they work directly with insurers to agree on out-of-network reimbursement, including utilizing an independent dispute resolution ('IDR') process outlined in the act. Many states already have addressed balance billing, or surprise medical bills. These laws and regulations vary in their approach, resulting in different impacts on the health care system as a whole. In 2021, HHS, DOL and the Department of the Treasury, announced interim final rules ('IFR') intended to implement provisions of the No Surprises Act, certain provisions of which were vacated by a Federal district court in February and July 2022. The departments then issued a final rule on August 26, 2022, finalizing disclosure requirements relating to information that group health plans and health insurance issuers offering group or individual health insurance coverage must share about the Qualifying Payment Amount ('QPA'), which the departments have stated is generally based on the median contracted rate for a qualified IDR item or service, and requirements related to the consideration of information when a certified IDR entity makes a payment determination under the federal IDR process. The final rule was also challenged, and the final result is difficult to predict.

Additionally, most states have consumer protection laws that have been the basis for investigations and multi-state settlements relating to financial incentives provided by drug manufacturers to retail pharmacies in connection with product conversion programs. Such statutes have also been cited as the basis for claims or investigations by state attorneys general relative to privacy and data security.

### **Office of Foreign Assets Control Sanctions and Anti-Money Laundering**

We are also subject to regulation by the Office of Foreign Assets Control of the U.S. Department of the Treasury, which administers and enforces economic and trade sanctions against targeted foreign countries and regimes based on U.S. foreign policy and national security goals. Certain of our products are subject to the Department of the Treasury anti-money laundering regulations under the Bank Secrecy Act. In addition, we are subject to similar regulations in non-U.S. jurisdictions in which we operate.

### **Corporate Practice of Medicine and Other Laws**

Many states in which our subsidiaries operate limit the practice of medicine to licensed individuals or professional organizations comprised of licensed individuals, and business corporations generally may not exercise control over the medical decisions of physicians. Statutes and regulations relating to the practice of medicine, fee-splitting between physicians and referral sources and similar issues vary widely from state to state. Under management agreements between certain of our subsidiaries and physician-owned professional groups, these groups retain sole responsibility for all medical decisions, as well as for hiring and managing physicians and other licensed health care providers, developing operating policies and procedures, implementing professional standards and controls and maintaining malpractice insurance. We believe that our health services operations comply with applicable state statutes regarding corporate practice of medicine, fee-splitting and similar issues. However, any enforcement actions by governmental officials alleging noncompliance with these statutes could subject us to penalties or restructuring or reorganization of our business.

### **Utilization Management Laws**

State legislatures have begun to propose and enact laws exempting certain providers from pre-authorization requirements of insurers. These exemptions reduce the ability for insurers and medical management entities from reviewing services for medical necessity if the provider meets the law's established thresholds for approval rates in the preceding six months. The inability to apply pre-authorization requirements could lead to increased costs to plan issuers by way of the provision of unnecessary services. States are also standardizing the process for, and restricting the use of, utilization management rules and shortening the time frames within which prescription drug prior authorization determinations must be made. Even where states do not regulate pharmacy benefit or utilization management companies directly, these laws will apply to many of our clients, including managed care organizations and health insurers.

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# Laws and Legislation Affecting Pharmacy Benefit Plan Design, Administration and Pharmacy Network Access

Some states have enacted laws that prohibit managed care plan sponsors from implementing certain restrictive benefit plan design features, and many states have laws or have introduced legislation to regulate various aspects of managed care plans, including provisions relating to the pharmacy benefit. For example, some states, under so-called 'freedom of choice' legislation, provide that customers of the plan may not be required to use network providers, but must instead be provided with benefits even if they choose to use non-network providers. Some states have also enacted legislation that can negatively impact the use of cost-saving network configurations for plan sponsors, such as limiting the implementation of pharmacy benefit designs and reimbursement structures that leverage affiliate pharmacies to reduce costs. Other states have enacted legislation purporting to prohibit health plans from offering customers financial incentives for use of home delivery pharmacies. Medicare and some states have issued guidance and regulations that limit our ability to fill or refill prescriptions electronically submitted by a physician to our home delivery pharmacy without first obtaining consent from the patient. Such restrictions generate additional costs and limit our ability to maximize efficiencies, which could otherwise be gained through the electronic prescription and automatic refill processes. Legislation has been introduced in some states to prohibit or restrict therapeutic intervention, or to require coverage of all Food and Drug Administration approved drugs. Other states mandate coverage of certain benefits or conditions, and require health plan coverage of specific drugs if deemed medically necessary by the prescribing physician.

Additionally, Medicare Part D and a majority of states now have laws, regulations or some form of legislation affecting our ability, or our clients' ability, to limit access to a pharmacy provider network or remove a provider from a network. Such laws, regulations or legislation may require us or our clients to admit any retail pharmacy or provider willing to meet the plan's terms and conditions for network participation ('any willing provider') or may direct that a provider may not be removed from a network except in compliance with certain procedures ('due process').

Certain states have laws prohibiting certain pharmacy benefit management clients from imposing additional copayments, deductibles, limitations on benefits, or other conditions on covered individuals utilizing a retail pharmacy when the same conditions are not otherwise imposed on covered individuals utilizing home delivery pharmacies. However, the laws require the retail pharmacy to agree to the same reimbursement amounts and terms and conditions as are imposed on the home delivery pharmacies. An increase in the number of prescriptions filled at retail pharmacies may have a negative impact on the number of prescriptions filled through home delivery.

## Pharmacy Benefit Manager and Drug Pricing Regulation

Our pharmacy benefit management services are subject to numerous laws and regulations. These laws and regulations govern, and proposed legislation and regulations may govern, critical practices, including: disclosure, receipt and retention of rebates and other payments received from pharmaceutical manufacturers; certain pharmacy contracting practices including disclosure of cost information to customers; the receipt and retention of transmission fees from contracted pharmacies; performance-based price concessions; pharmacy price concessions to drug prices at the point of sale; audits of contracted pharmacies; use of, administration of, or changes to drug formularies, the use and disclosure of maximum allowable cost ('MAC') pricing, or clinical programs; 'most favored nation' pricing, which provides that a pharmacy participating in a specific government program must give the program the best price the pharmacy makes available to any third-party plan; disclosure of data to third parties; drug utilization management practices; the level of duty a pharmacy benefit manager owes its clients or customers; configuration of pharmacy networks; the operations of our subsidiary pharmacies; referrals to affiliated pharmacies; disclosure of negotiated provider reimbursement rates; disclosure of negotiated drug rebates, calculation of certain customer cost-share for prescription drug claims; pricing that includes differential or spread (i.e., a difference between the drug price charged to the plan sponsor by a pharmacy benefit manager and the price paid by the manager to the dispensing provider); disclosure of fees associated with administrative service agreements and patient care programs that are attributable to customers' drug utilization; utilization management; and registration or licensing of pharmacy benefit managers.

We expect federal and state governments to continue to prioritize means of addressing out-of-pocket costs for consumers, particularly related to prescription drug costs. Recently enacted legislation, and other policy proposals and regulations vary broadly in their approaches to achieve that goal. For example, proposed legislation includes, among other things, the Pharmacy Benefit Manager Transparency Act; the Pharmacy Benefit Manager Accountability Study Act; a repeal of the 2020 Medicare drug rebate, as described above under the heading 'False Claims Act and Anti-Kickback Laws-Anti-Kickback and Referral Laws;' and limits on manufacturer price increases for prescription drugs. Additionally, proposals at the federal and state levels consider increased regulation of pharmacy benefit managers and health plans as a means to limit consumer out-of-pocket costs, including: proposing to limit the use of various pharmacy benefit management tools; mandating the treatment of fees, discounts or financing mechanisms that otherwise are set in private contractual terms; increasing supply chain transparency; expanding regulatory requirements or definitions of fiduciaries; or

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mandating plan benefit designs that cap consumer out-of-pocket expense. The NAIC has also proposed laws intended to protect consumer drug benefits and has examined regulatory approaches to pharmacy benefit manager business practices.

Some states have enacted statutes regulating the use of MAC pricing. These statutes, referred to as 'MAC Transparency Laws,' generally require pharmacy benefit managers to disclose specific information related to MAC pricing to pharmacies and provide certain appeal rights for pharmacies. MAC Transparency Laws also restrict the application of MAC and may require operational changes to maintain compliance with the law. Some states have also enacted laws regulating pharmacy pricing and protecting the profitability of pharmacies for dispensing certain MAC-priced drugs. Some states have enacted laws requiring that the customer cost-share for a prescription drug claim not exceed certain price points, such as the pharmacy's usual and customary charge or its contracted reimbursement for the drug. In a recent Supreme Court decision, the Court found that certain MAC Transparency Laws may be applied by states to ERISA plans in addition to health plans regulated by the applicable state. Following this decision, state legislatures and regulators have sought to extend their oversight authority of self-funded ERISA plans to pharmacy benefit management functions and pharmacy benefit plan designs beyond MAC pricing.

The federal Medicaid Drug Rebate Program requires participating drug manufacturers to provide rebates on all drugs reimbursed through state Medicaid programs, including through Medicaid managed care organizations. Manufacturers of brand-name products must provide a rebate equivalent to the greater of (a) 23.1% of the average manufacturer price ('AMP') paid by retail community pharmacies or by wholesalers for certain drugs distributed to retail community pharmacies, or (b) the difference between AMP and the 'best price' available to essentially any customer other than the Medicaid program and certain other government programs, with certain exceptions. We negotiate rebates with drug manufacturers and, in certain circumstances, sell services to drug manufacturers. Investigations are being and have been conducted by certain government entities which call into question whether a drug's 'best price' was properly calculated and reported with respect to rebates paid by the manufacturers to the Medicaid programs. We are not responsible for such calculations, reports or payments.

In February 2022, the FTC began soliciting public comment on pharmacy benefit manager practices and their impact on patients, physicians, employers, independent and chain pharmacies, and other businesses in pharmaceutical distribution. In June 2022, the FTC announced an inquiry into pharmacy benefit managers and stated the FTC was seeking information concerning the competitive impact of the contracting and business practices of pharmacy benefit managers. The FTC required the six largest pharmacy benefit managers to provide information and records on topics including rebate contracts and ancillary agreements, documents related to strategies, conditions and plans for formulary placement, formulary exclusion, formulary tier assignment, and prior authorization regarding rebated drug products, and annual pharmacy reimbursement data for drugs on specialty drug lists and for rebated drug products. In July 2022, the FTC issued an enforcement policy statement indicating the FTC would scrutinize the impact of rebates and fees paid by pharmaceutical manufacturers to pharmacy benefit managers and other intermediaries to determine if laws such as the FTC Act, the Clayton Act, the Robinson-Patman Act and the Sherman Act may have been violated.

## Pharmacy Regulation

Our home delivery and specialty pharmacies also subject us to extensive federal, state and local regulation. The practice of pharmacy is generally regulated at the state level by state boards of pharmacy, though our pharmacies are subject to laws described above under the headings 'Privacy, Security and Data Standards Regulations' and 'Consumer Protection Laws.' We are licensed to do business as a pharmacy in the states in which our pharmacies are located and the health care professionals that we employ are also licensed by, and subject to, the laws and regulations of state boards of pharmacy and other governmental authorities. Most of the states into which we deliver pharmaceuticals have laws that require out-of-state home delivery pharmacies to register with, or be licensed by, the board of pharmacy or a similar regulatory body in the state. These states generally permit the pharmacy to follow the laws of the state where the pharmacy is located, although some states require compliance with certain laws in that state as it impacts or relates to drugs distributed or dispensed into that state.

Our various pharmacy facilities also provide services under certain Medicare and state Medicaid programs. Participation in these programs requires our pharmacies to comply with the applicable Medicare and Medicaid provider rules and regulations, and exposes the pharmacies to various changes the federal and state governments may impose regarding reimbursement methodologies, the submission of claims and amounts to be paid to participating providers under these programs. In addition, several of our pharmacy facilities are participating providers under Medicare Part D and are required to adhere to certain requirements applicable to Medicare Part D. Additionally, we are subject to CMS rules regarding the administration of our Medicare plans and pricing between our plans and related parties, including our pharmacy business.

Other statutes and regulations affect our home delivery and specialty pharmacy operations, including the federal and state anti-kickback laws, federal and state false claims acts and the federal civil monetary penalty law described above. Federal and state statutes and regulations govern the labeling, packaging, repackaging, compounding, storing, holding, disposal, distribution, advertising, misbranding, adulteration, transfer, handling and security of prescription drugs and the dispensing of prescription, over-the-counter,

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hazardous and controlled substances and certain of our pharmacies must register with the U.S. Drug Enforcement Administration, the U.S. Food and Drug Administration and individual state controlled substance authorities. The FTC requires mail order sellers of goods generally to engage in truthful advertising, to stock a reasonable supply of the product to be sold, to fill mail orders within thirty days and to provide clients with refunds when appropriate. The United States Postal Service also has significant statutory authority to restrict the delivery of drugs and medicines through the mail. Violations of pharmacy laws and regulations may result in warning letters, civil and criminal penalties, seizures, suspension, termination or revocation of licenses and registrations, restrictions on facilities or operations, and other enforcement actions.

### **Financial Reporting, Internal Control and Corporate Governance**

Regulators closely monitor the financial condition of licensed insurance companies and HMOs. States regulate the form and content of statutory financial statements, the type and concentration of permitted investments and corporate governance over financial reporting. Our insurance and HMO subsidiaries are required to file periodic financial reports and schedules with regulators in most of the jurisdictions in which they do business as well as annual financial statements audited by independent registered public accounting firms. Certain insurance and HMO subsidiaries are required to file an annual report of internal control over financial reporting with most jurisdictions in which they do business. Insurance and HMO subsidiaries' operations and financial statements are subject to examination by such agencies. Many states have expanded regulations relating to corporate governance and internal control activities of insurance and HMO subsidiaries as a result of model regulations adopted by the NAIC with elements similar to corporate governance and risk oversight disclosure requirements under federal securities laws.

### **Guaranty Associations, Indemnity Funds, Risk Pools and Administrative Funds**

Most states and certain non-U.S. jurisdictions require insurance companies to support guaranty associations or indemnity funds that are established to pay claims on behalf of insolvent insurance companies. Some states have similar laws relating to HMOs and other payors, such as consumer operated and oriented plans (co-ops) established under the ACA. In the United States, these associations levy assessments on member insurers licensed in a particular state to pay such claims. Certain states require HMOs to participate in guaranty funds, special risk pools and administrative funds. For additional information about guaranty funds and other assessments, see Note 23 to the Consolidated Financial Statements.

Certain states continue to require health insurers and HMOs to participate in assigned risk plans, joint underwriting authorities, pools or other residual market mechanisms to cover risks not acceptable under normal underwriting standards, although some states have eliminated these requirements as a result of the ACA.

### **Solvency and Capital Requirements**

Many states have adopted some form of the NAIC model solvency-related laws and risk-based capital ('RBC') rules for life and health insurance companies and HMOs. The RBC rules recommend a minimum level of capital depending on the types and quality of investments held, the types of business written and the types of liabilities incurred. If the ratio of the insurer's adjusted surplus to its RBC falls below statutorily required minimums, the insurer could be subject to regulatory actions ranging from increased scrutiny to conservatorship.

In addition, various non-U.S. jurisdictions prescribe minimum surplus requirements that are based upon solvency, liquidity and reserve coverage measures. Our HMOs and life and health insurance subsidiaries, as well as non-U.S. insurance subsidiaries, are compliant with applicable RBC and non-U.S. surplus rules.

The Risk Management and Own Risk and Solvency Assessment Model Act ('ORSA'), adopted by the NAIC, provides requirements and principles for maintaining a group solvency assessment and a risk management framework and reflects a broader approach to U.S. insurance regulation. ORSA includes a requirement to file an annual ORSA Summary Report in the lead state of domicile. To date, an overwhelming majority of the states have adopted the same or similar versions of ORSA. We file our ORSA report annually as required.

### **Holding Company Laws**

Our domestic insurance companies and certain of our HMOs are subject to state laws regulating subsidiaries of insurance holding companies. Under such laws, certain dividends, distributions and other transactions between an insurance company or an HMO subsidiary and its affiliates may require notification to, or approval by, one or more state insurance commissioners. In addition, the holding company acts of states in which our subsidiaries are domiciled restrict the ability of any person to obtain control of an insurance company or HMO subsidiary without prior regulatory approval. State holding company laws and regulations also subject our insurance companies and certain HMO subsidiaries to additional regulatory scrutiny related to their oversight of affiliates

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performing regulated services on behalf of the insurance company or HMO and require the Company to file an annual Enterprise Risk Report, which summarizes material risks that could pose enterprise risk to the insurance company subsidiaries.

## **Marketing, Advertising and Products**

In most states, our insurance companies and HMO subsidiaries are required to certify compliance with applicable advertising regulations on an annual basis. Our insurance companies and HMO subsidiaries are also required by most states to file and secure regulatory approval of products prior to the marketing, advertising and sale of such products.

## **Licensing and Registration Requirements**

Our insurance companies and HMO subsidiaries must be licensed by the jurisdictions in which they conduct business. Additionally, certain subsidiaries contract to provide claim administration, utilization management and other related services for the administration of self-insured benefit plans. These subsidiaries may be subject to state third-party administration and other licensing requirements and regulation, as well as third-party accreditation requirements.

We have received full accreditation for Utilization Review Accreditation Commission Pharmacy Benefit Management version 2.2 Standards, which includes quality standards for drug utilization management, and select subsidiaries have received full accreditation for Utilization Review Accreditation Commission for Health Utilization Management version 7.2, which includes quality standards for medical utilization management.

Certain states have adopted pharmacy benefit management registration, licensure or disclosure laws. In addition to registration laws, some states have adopted legislation mandating disclosure of various aspects of our financial practices, including those concerning pharmaceutical company revenue, as well as prescribing processes for prescription switching programs and client and provider audit terms.

Our international subsidiaries are often required to be licensed when entering new markets or starting new operations in certain jurisdictions. The licensure requirements for these subsidiaries vary by country and are subject to change.

## **International Regulations**

Our operations outside of the United States expose us to laws of multiple jurisdictions and the rules and regulations of various governing bodies and regulators, including those related to the provision of insurance, financial and other disclosures, the provision of health care-related services, corporate governance, privacy, data protection, data mining, data transfer, intellectual property, labor and employment, consumer protection, direct-to-consumer communications activities, tax, anti-corruption and anti-money laundering. Foreign laws and rules may include requirements that are different from, or more stringent than, similar requirements in the United States.

Our operations in countries outside of the United States:

- are subject to local regulations of the jurisdictions where we operate;
- in some cases, are subject to regulations in the jurisdictions where customers reside; and
- in all cases, are subject to the Foreign Corrupt Practices Act ("FCPA").

Anti-money laundering requirements in countries where we do business also may impose obligations to collect certain information about each customer at time of sale or to risk rank each customer to determine possible future money laundering risk.

The FCPA prohibits offering, promising, providing or authorizing others to give anything of value to a foreign government official or employee to obtain or retain business or otherwise secure a business advantage. Outside of the United States, we may interact with government officials in several different capacities: as regulators of our insurance business; as clients or partners who are state-owned or partially state-owned; as health care providers who are employed by the government; as hospitals that are state-owned; and as officials issuing permits in connection with real estate transactions. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties, and the SEC and DOJ have increased their enforcement activities with respect to FCPA. The UK Bribery Act of 2010 applies to all companies with a nexus to the United Kingdom. Under this act, any voluntary disclosures of FCPA violations may be shared with United Kingdom authorities, thus potentially exposing companies to liability and potential penalties in multiple jurisdictions. Other countries in which we do business also have anti-corruption laws to which we are subject.

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# **Item 1A. RISK FACTORS**

*As a large global health company operating in a complex industry, we encounter a variety of risks and uncertainties, which could have a material adverse effect on our business, liquidity, results of operations, financial condition or the trading price of our securities. You should carefully consider each of the risks and uncertainties discussed below, together with other information contained in this Form 10-K, including MD&A. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect us. The following risk factors have been organized by category for ease of use; however many of the risks may have impacts in more than one category. These categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a limitation on the potential impact of the matters discussed. Risk factors are not necessarily listed in order of importance.*

# **Strategic and Operational Risks**

*Future performance of our business will depend on our ability to execute our strategic and operational initiatives effectively.*

The future performance of our business will depend in large part on our ability to effectively implement and execute our strategic and operational initiatives. Successfully executing on these initiatives depends on a number of factors, including our ability to:

- differentiate our products, services and solutions from those of our competitors;
- develop and bring to market new and innovative products, solutions or programs that focus on improving patient outcomes and experiences and assist in controlling costs or in response to government regulation;
- develop and create data and analytic solutions to support and improve outcomes for our products, services and solutions, including creating and developing solutions and services through partnerships with other industry participants;
- grow and support our product portfolio, expand our addressable markets and identify and introduce the proper mix, coordination or integration of products that will be accepted by the marketplace;
- evaluate drugs for efficacy, value and price to assist clients in selecting a cost-effective formulary;
- offer cost-effective home delivery pharmacy and specialty services;
- access or continue accessing key drugs and successfully penetrate key treatment categories in our specialty pharmacy business;
- attract and retain sufficient numbers of qualified employees, particularly in an increasingly competitive job market;
- attract, develop and maintain collaborative relationships with a sufficient number of qualified partners;
- attract new and maintain existing customer and client relationships;
- leverage purchase volume to deliver discounts to health benefit providers;
- transition health care providers from volume-based fee-for-service arrangements to a value-based system;
- improve medical cost competitiveness in our targeted markets;
- manage our medical, pharmacy, administrative and other operating costs effectively; and
- contract with health care providers, pharmacy providers and pharmaceutical manufacturers on market competitive terms.

For our strategic initiatives to succeed, we must effectively collaborate across our operations, integrate our acquired businesses, actively work to ensure consistency throughout the organization and promote a global mindset along with a focus on individual customers and clients. If we fail to do so, our business may be unable to grow as planned, or the result of expansion may be unsatisfactory. We will be unable to rapidly respond to competitive, economic and regulatory changes if we do not make important strategic and operational decisions quickly, define our appetite for risk, implement new governance, managerial and organizational processes smoothly and communicate roles and responsibilities clearly. If these initiatives fail or are not executed effectively, our consolidated financial position and results of operations could be negatively affected.

*We operate in a highly competitive, evolving and rapidly changing industry and our failure to adapt could negatively impact our business.*

The health service industry continues to be dynamic and rapidly evolving. Any significant shifts in the structure of the industry could alter industry dynamics and adversely affect our ability to attract or retain clients and customers. Industry shifts could result (and have resulted) from, among other things:

- a large intra- or inter-industry merger or industry consolidation;
- strategic alliances;
- new or alternative business models or new government options or offerings;

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- continuing consolidation among physicians, hospitals and other health care providers, as well as changes in the organizational structures chosen by physicians, hospitals and health care providers;
- new market entrants, including those not traditionally in the health service industry;
- the ability of larger employers and clients to contract directly with providers;
- technological changes and rapid shifts in the use of technology, such as telehealth;
- the impact or consequences of legislation or regulatory changes;
- changes in the United States Postal Service or the consolidation of shipping carriers;
- increased drug acquisition cost or unexpected changes to drug pricing trend;
- changes in the generic drug market or the failure of new generic drugs to come to market; or
- changes in utilization of health care, prescription drugs or other covered services and items, including under risk-based contracts in the health benefit management market and for those businesses that utilize risk adjustment methodology.

Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.

*Our failure to compete effectively, to differentiate our products and services from those of our competitors and maintain or increase market share, including maintaining or increasing enrollments in businesses providing health benefits, could materially adversely affect our results of operations, financial position and cash flows.*

We operate in a highly competitive environment and an industry subject to significant market pressures brought about by customer and client needs, legislative and regulatory developments and other market factors. In particular markets, our competitors may have greater, better or more established capabilities, resources, market share, reputation or business relationships, or lower profit margin or financial return expectations. Our clients are well informed and organized and can easily move between our competitors and us. Our Express Scripts client contracts generally have three-year terms and may be subject to periodic renegotiation of pricing terms based on market factors. As described in greater detail in the description of our business in Item 1 of this Form 10-K, one of our key clients in the Evernorth Health Services segment is the United States Department of Defense. If one or more of our large clients terminates or does not renew a contract for any reason, including as a result of being acquired, or if the provisions of a contract with a large client are modified, renewed or otherwise changed with terms less favorable to us, our results of operations could be adversely affected and we could experience a negative reaction in the investment community resulting in decreases in the trading price of our securities or other adverse effects.

Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive markets to keep or increase our market share, increase customers as planned, differentiate our business offerings by innovating and delivering products and services that provide enhanced value to our customers, provide quality and satisfactory levels of service and retain accounts with favorable medical cost experience or more profitable products versus retaining or increasing our customer base in accounts with unfavorable medical cost experience or less profitable products.

We must remain competitive to attract new customers, retain existing customers and further integrate additional product and service offerings. To succeed in this highly competitive marketplace, it is imperative that we maintain a strong reputation. Increasingly, our customers, clients and investors consider our efforts on a variety of matters that could impact our stakeholders, including our employees and the communities in which we operate, such as our efforts with respect to the environment and diversity, equity and inclusion. The negative reputational impact of a significant event, including a failure to execute on customer or client contracts or strategic or operational initiatives, failure to comply with applicable laws or regulations, or failure to innovate and deliver products and services that demonstrate greater value to our customers, could affect our ability to grow and retain profitable arrangements, which could have a material adverse effect on our business, results of operations, financial position and cash flows.

*We face price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers.*

While we compete on the basis of many service and quality-related factors, we expect that price will continue to be a significant basis of competition and we may face pressure to contain premium rates. Our client contracts are subject to negotiation as clients seek to contain their costs, including by reducing benefits offered. Increasingly, our clients seek to negotiate performance guarantees that require us to pay penalties if the guaranteed performance standard is not met. Clients can easily move between our competitors and us. Our clients are well informed and typically have knowledgeable consultants that seek competing bids from our competitors before

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contract renewal. In addition, as brokers and benefit consultants seek to enhance their revenue streams, they look to take on services that we typically provide. Each of these events could negatively impact our financial results.

Federal and state regulatory agencies may restrict or prevent entirely our ability to implement changes in premium rates. Fiscal or other concerns related to the government-sponsored programs in which we participate, such as Medicare Advantage plans and Medicare Part D plans, may cause decreasing reimbursement rates, delays in premium payments, restrictions on implementing changes in premium rates or insufficient increases in reimbursement rates. Any limitation on our ability to maintain or increase our premium or reimbursement levels, or a significant loss of customers or clients resulting from our need to increase or maintain premium or reimbursement levels, could adversely affect our business, cash flows, financial condition and results of operations.

Premiums in the Cigna Healthcare segment are generally set for one-year periods and are priced well in advance of the date on which the contract commences or renews. Our revenue on Medicare Advantage plans, Individual and Family Plans ('IFP') and Medicare Part D plans is based on rates and bids submitted midyear in the year before the contract year. Although we base the premiums we charge and our Medicare Advantage, IFP and Medicare Part D rates and bids on our estimate of future health care costs over the contract period, actual costs may exceed what we estimate in setting premiums. Our participation in health insurance exchanges through our IFP offerings involves uncertainties associated with mix and volume of business and could adversely affect our results of operations, financial position and cash flows. Our health care costs also are affected by external events that we cannot forecast or project and over which we have little or no control, including changes in laws and regulations, as well as pandemics, costly new treatments, new treatment guidelines, provider billing practices, inflation and changes in customers' health care utilization patterns, which may, among other things, impact our ability to appropriately document their health conditions. Our profitability depends, in part, on our ability to accurately predict, price for and effectively manage future health care costs. Relatively small differences between predicted and actual medical costs or utilization rates as a percentage of revenue can result in significant changes in our financial results.

Strong competition within the pharmacy benefit business has also generated greater demand for lower product and service pricing, increased revenue sharing and enhanced product and service offerings. These competitive factors have historically applied pressure on our operating margins and caused many companies, including us, to reduce the prices charged for products and services while sharing with clients a greater portion of the formulary fees and related rebates received from pharmaceutical manufacturers. Our inability to maintain positive trends, or failure to identify and implement new ways to mitigate pricing pressures, could negatively impact our ability to attract or retain clients or sell additional services, which could negatively impact our margins and have a material adverse effect on our business and results of operations. In addition, legislative reforms related to rebates, reporting, and other activities may adversely affect our competitive position, cash flows, financial condition and results of operations.

*The reserves we hold for expected medical claims are based on estimates that involve an extensive degree of judgment and are inherently variable. If actual claims exceed our estimates, our operating results could be materially adversely affected, and our ability to take timely corrective actions to contain future costs may be limited.*

We maintain and record medical claims reserves in our Consolidated Balance Sheets for estimated future payments. Our estimates of health care costs payable are based on a number of factors, including historical claim experience, but this estimation process requires extensive judgment. Considerable variability is inherent in such estimates, and the accuracy of the estimates is highly sensitive to changes in medical claims submission and processing patterns or procedures, changes in customer base and product mix, changes in the utilization of prescription drugs, medical or other covered items or services, changes in medical cost trends, changes in our health management practices, changes in regulations and the introduction of new benefits and products. If we are not able to accurately and promptly anticipate and detect medical cost trends, our ability to take timely corrective actions to limit future costs and reflect our current benefit cost experience in our pricing process may be limited. Additionally, we must estimate the amount of rebates payable by us under the ACA's and CMS' minimum loss ratio rules and the amounts payable by us to, and receivable by us from, the United States federal government under the ACA's remaining premium stabilization program. Because establishing reserves is an inherently uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing reserves which may adversely affect our results of operations, financial position and cash flows.

*If we fail to develop and maintain satisfactory relationships with health care payers, physicians, hospitals and other health service providers and with producers and consultants, our business and results of operations may be adversely affected.*

We contract with or employ physicians, hospitals and other health service providers and facilities to provide health services to our customers, as well as health care payers (as a service provider to those payers). Our results of operations are substantially dependent on our ability to contract for these services at competitive prices. In any particular market, physicians, hospitals and health service providers may enter into exclusive arrangements with competitors or simply refuse to contract with us, demand higher payments or take other actions that could result in higher medical costs or less desirable products or services for our customers. In some markets, certain providers, particularly hospitals, physician/hospital organizations and multispecialty physician groups, may have significant or controlling market positions that could result in a diminished bargaining position for us. If providers refuse to contract with us, use

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their market position to negotiate more favorable contracts or place us at a competitive disadvantage, our ability to market products or to be profitable in those areas could be materially adversely affected. Additionally, certain regulations may impact our ability to obtain competitive prices. Establishing collaborative arrangements with physician groups, specialist groups, independent practice associations, hospitals and health care delivery systems is key to our strategic focus to transition from volume-based fee-for-service arrangements to a value-based health care system. If such collaborative arrangements do not result in the lower medical costs that we project or if we fail to attract health care providers to such arrangements, or are less successful at implementing such arrangements than our competitors, our attractiveness to customers may be reduced and our ability to profitably grow our business may be adversely affected.

Our ability to develop and maintain satisfactory relationships with providers may also be negatively impacted by other factors not associated with us, such as changes in Medicare or Medicaid reimbursement levels, increasing pressure on revenue and other pressures on health care providers and increasing consolidation activity among hospitals, physician groups and providers. Continuing consolidation among physicians, hospitals and other providers, the emergence of accountable care organizations, vertical integration of providers and other entities, changes in the organizational structures chosen by physicians, hospitals and providers, new market entrants, including those not traditionally in the health care industry, and the increased use of virtual care services (including telehealth) may affect the way providers interact with us and may change the competitive landscape in which we operate. In some instances, these organizations may compete directly with us, potentially affecting the way we price our products and services or causing us to incur increased costs if we change our operations to be more competitive.

Out-of-network providers are not limited by any agreement with us in the amounts they bill. While benefit plans place limits on the amount of charges that will be considered for reimbursement and regulations seek to prescribe payment levels, establish methodologies and dispute resolution processes, providers are increasingly sophisticated and aggressive. As a result, the outcome of disputes where we do not have a provider contract may cause us to pay higher medical or other benefit costs than we projected.

Additionally, certain of our products and services are sold in part through nonexclusive producers and consultants for whose services and allegiance we compete. Our sales could be materially adversely affected if we are unable to attract, retain and support such independent producers and consultants or if our sales strategy is not appropriately aligned across distribution channels.

*If we lose our relationship with one or more key pharmaceutical manufacturers, or if the payments made or discounts provided by pharmaceutical manufacturers decline, our business and results of operations could be adversely affected.*

We maintain relationships with numerous pharmaceutical manufacturers, which provide us with, among other things:

- discounts for drugs we purchase to be dispensed from our home delivery and specialty pharmacies;
- discounts, in the form of rebates, for drug utilization;
- fees for administering rebate programs, including invoicing, allocating and collecting rebates;
- fees for services provided to pharmaceutical manufacturers by our specialty pharmacies; and
- access to limited distribution specialty pharmaceuticals by our specialty pharmacies.

Our contracts with pharmaceutical manufacturers are typically nonexclusive and terminable on relatively short notice by either party. The consolidation of pharmaceutical manufacturers, the termination or material alteration of our relationships, or our failure to renew contracts on market competitive terms could have a material adverse effect on our business and results of operations. In addition, arrangements between payors and pharmaceutical manufacturers have been the subject of debate in federal and state legislatures and various other public and governmental forums. Adoption of new laws, rules or regulations or changes in, or new interpretations of, existing laws, rules or regulations, relating to any of these programs could materially adversely affect our business and results of operations.

*If significant changes occur within the pharmacy provider marketplace, or if other issues arise with respect to our pharmacy networks, including the loss of or adverse change in our relationship with one or more key pharmacy providers, our business and financial results could be adversely affected.*

More than 67,000 pharmacies participated in one or more of our networks as of December 31, 2022. The ten largest retail pharmacy chains represent approximately 60% of the total number of stores in our largest network. In certain geographic areas of the United States, our networks may be comprised of higher concentrations of one or more large pharmacy chains. Contracts with retail pharmacies are generally nonexclusive and are terminable on relatively short notice by either party. If one or more of the larger pharmacy chains terminates its relationship with us, or is able to renegotiate terms substantially less favorable to us, our customers' access to retail pharmacies or our business could be materially adversely affected. The entry of one or more additional large pharmacy chains into the pharmacy benefit management business, the consolidation of existing pharmacy chains or increased leverage or market share by the largest pharmacy providers could increase the likelihood of negative changes in our relationship with such pharmacies. Changes in the overall composition of our pharmacy networks, or reduced pharmacy access under our networks, could have a negative

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impact on our claims volume or our competitiveness in the marketplace, which could cause us to fall short of certain guarantees in our contracts with clients or otherwise impair our business or results of operations.

# ***Changes in drug pricing or industry pricing benchmarks could materially impact our financial performance.***

Contracts in the prescription drug industry, including our contracts with retail pharmacy networks and our pharmacy and specialty pharmacy clients, generally use pricing metrics published by third parties as benchmarks to establish pricing for prescription drugs. If these benchmarks are no longer published by third parties, we, or our contractual partners, adopt other pricing benchmarks for establishing prices within the industry, legislation or regulation requires the use of other pricing benchmarks, or future changes in drug prices substantially deviate from our expectations, the short- or long-term impacts may have a material adverse effect on our business and results of operations.

# ***Our business depends on our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation, availability and data integrity of our information technology and other business systems.***

Our business is highly dependent on maintaining effective information systems as well as the integrity and timeliness of the data we use to serve our customers and health care providers and to operate our business. If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our clients, customers and health care providers and hinder our ability to provide or establish appropriate pricing for products and services, retain and attract clients and customers, establish reserves and report financial results timely and accurately and maintain regulatory compliance, among other things.

Our information technology strategy and execution are critical to our continued success. We must continue to invest in and maintain long-term solutions that will enable us to anticipate customer needs and expectations, enhance the customer experience, act as a differentiator in the market and protect against cybersecurity risks and threats or other events that could disrupt our information technology systems such as man-made or natural disasters (including those as a result of climate change). Our success is dependent, in large part, on maintaining the effectiveness of existing technology systems and continuing to deliver and enhance technology systems that support our business processes in a cost-efficient and resource-efficient manner. Increasing regulatory and legislative changes will place additional demands on our infrastructure that could have a direct impact on resources available for other projects tied to our strategic initiatives. In addition, recent trends toward greater consumer engagement in health care require new and enhanced technologies, including more sophisticated applications for mobile devices. Connectivity among technologies is becoming increasingly important. We must also develop new systems to meet current market standards and keep pace with continuing changes in information processing technology, evolving industry and regulatory standards and customer needs. Failure to do so may present compliance challenges and impede our ability to deliver services in a competitive manner. Further, because system development projects are long-term in nature, they may be more costly than expected to complete and may not deliver the expected benefits upon completion. Our failure to effectively invest in, implement improvements to and properly maintain the uninterrupted operation, availability and data integrity of our systems could adversely affect our results of operations, financial position and cash flow.

# ***As a large global health company, we and our vendors are subject to cyberattacks or other privacy or data security incidents. If we are unable to prevent or contain the effects of any such attacks, or fail to ensure vendors do the same, we may suffer exposure to substantial liability, reputational harm, loss of revenue or other damages.***

Our business depends on our clients' and customers' willingness to entrust us with their health-related and other sensitive personal information, including information that is subject to privacy, security or data breach notification laws. Computer systems may be vulnerable to physical break-ins, computer viruses or malware, programming errors, attacks by third parties or similar disruptive problems. We have been, and will likely continue to be, the target of computer viruses or other malicious codes, unauthorized access, cyberattacks or other computer-related penetrations. There have been, and will likely continue to be, large scale cyberattacks within the health service industry. Additionally, hardware, software or applications we develop or procure from third parties may contain defects in design, manufacturer defects or other problems that could unexpectedly compromise information technology. Human or technological error has and could in the future result in, for example, unauthorized access to, acquisition, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft of sensitive, regulated, or confidential data including personal information and intellectual property; the loss of access to critical data or systems through ransomware, destructive attacks or other means; and business delays, service or system disruptions or denials of service.

As we increase the amount of personal information that we store and share digitally, our exposure to unauthorized disclosures, data privacy and related cybersecurity risks increases, including the risk of undetected attacks, damage, loss or unauthorized access or acquisition or misappropriation of proprietary or personal information, and the cost of attempting to protect against these risks also increases. The health care data ecosystem is complex and requires data exchange with vendors, business partners, the government and others. If disruptions, disclosures, security incidents or breaches are not detected quickly, their effect could be compounded. We have dedicated significant resources to implement security technologies, processes and procedures to protect consumer identity and provide

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employee awareness training around phishing, malware and other cyber risks; however, there are no assurances that such measures will be effective against all types of security incidents or breaches. Further, we depend on many vendors to support and assist our business, which requires such vendors to generate, store and use sensitive personal information.

Cybersecurity threats are rapidly evolving and those threats and the means for obtaining access to our proprietary systems are becoming increasingly sophisticated. Cyberattacks can originate from a wide variety of sources including terrorists, nation states, internal actors, or third parties, such as external service providers, and the techniques used change frequently or are often not recognized until after they have been launched. For example, there has been an increase in new financial fraud schemes akin to ransomware attacks on large companies whereby a cybercriminal installs a type of malicious software, or malware, that prevents a user or enterprise from accessing computer files, systems or networks and demands payment of a ransom for their return. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers. In addition, while we have certain standards for all vendors that provide us services, our vendors, and in turn, their own service providers, may become subject to the same types of security breaches. Finally, our offices may be vulnerable to security incidents or security attacks, acts of vandalism or theft, misplaced or lost data, human error or similar events that could negatively affect our systems and our customers' and clients' data.

The costs to eliminate or address security threats and vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service and loss of existing or potential customers.

In addition, the unauthorized access, acquisition, use, disclosure or dissemination of sensitive personal information, proprietary information or confidential information about us, our customers or other third parties could expose our customers' and their private information to the risk of financial or medical identity theft. Unauthorized access, acquisition, use, disclosure or dissemination of confidential and proprietary information about our business and strategy could also negatively affect the achievement of our strategic initiatives. Such events could cause us to breach our contractual obligations and violate applicable laws. These events would negatively affect our ability to compete, our reputation, customer base and revenues and expose us to mandatory disclosure requirements, government investigations, litigation and other enforcement proceedings, material fines, penalties or remediation costs and compensatory, special, punitive and statutory damages, consent orders and other adverse actions, any of which could adversely affect our business, results of operations, financial condition or liquidity.

*The scale, scope and duration of the ongoing COVID-19 pandemic continues to be unknown and the overall impact on our business, operating results, cash flows or financial condition has been and may continue to be material.*

The COVID-19 pandemic has adversely affected, and is continuing to affect, global economies, financial markets and the overall environment for our business, and the extent to which it may impact our future results of operations and overall financial performance remains uncertain. While vaccination rates continue to rise, the COVID-19 pandemic, including vaccination efficacy, the implementation of and reaction to vaccination and testing mandates and the occurrence of new variants, could continue to effect such economies and financial markets as well as the health and availability of our workforce. As a result, we may experience new disruptions to our business operations and our business could be adversely affected further, directly or indirectly, by the ongoing pandemic.

The COVID-19 pandemic has in some instances, and may continue to, heighten the potential adverse effects on our business, operating results, cash flows or financial condition as described below or in other risk factors within this section of the Form 10-K including, but not limited to, the likelihood of and impact from:

- • unfavorable economic conditions on our clients and customers (both employers and individuals), health care and pharmacy providers, pharmaceutical manufacturers and third-party vendors, as well as federal and state entities and programs;
- • changes in medical claims submission and processing patterns or procedures; changes in customer base and product mix; changes in utilization of prescription drugs, medical or other covered items or services, including increased behavioral health services utilization; changes in medical cost trends; changes in our health management practices; and the introduction of new benefits and products causing actual claims to exceed our estimates;
- • changes in health care utilization patterns, provider billing practices and other external events that we cannot forecast or project and over which we have little or no control impacting our ability to accurately predict, price for and manage health care costs and ultimately our profitability, including impacts from care deferral on, among other things, risk adjustment revenue and acuity of future care;
- • increased costs or reductions in revenue, including costs for COVID-19-related care, testing and treatment; vaccine and other coverage mandates; inflation; and support for employees, clients, customers and providers;

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- compliance with substantial government regulation, including privacy and security requirements associated with providing telehealth and remote care options and new laws or regulations or changes in existing laws or regulations, such as vaccine, testing and coverage mandates and premium deferrals, which laws or regulations may vary significantly by jurisdiction;
- cyberattacks or other privacy or data security incidents, including as a result of the transition to a hybrid work environment by substantially all of our workforce and the workforces of third parties with whom we contract;
- significant shifts in the structure of the industry which could alter dynamics and, if we fail to adapt, negatively impact our business;
- risks inherent in foreign operations, including political, legal, operational, regulatory, economic and other risks;
- economic and market conditions affecting the value of our financial instruments and the value of particular assets and liabilities; and
- fluctuations in equity market prices, interest rates and credit spreads limiting our ability to raise or deploy capital and affecting our overall liquidity.

We believe COVID-19 and its variants' adverse impact on our business, operating results, cash flows or financial condition will be driven primarily by the severity and duration of the pandemic, including the impact of the breadth and timing of implementation and the efficacy and costs of vaccination programs, the pandemic's continued impact on our employees, clients, customers, suppliers and partners, as well as the U.S. and global economies and the continued actions taken by governmental authorities and other third parties in response to the pandemic. Those primary drivers are largely beyond our knowledge and control, and may be more adverse than our current expectations. Given these uncertainties, we cannot estimate the full impact COVID-19 will have on our business, operating results, cash flows or financial condition, but the adverse impact could be material.

*As a global company, we face political, legal, operational, regulatory, economic and other risks that present challenges and could negatively affect our multinational operations or our long-term growth.*

As a global company, our business is increasingly exposed to risks inherent in foreign operations. These risks can vary substantially by market, and include political, legal, operational, regulatory, economic and other risks, including government intervention that we do not face in our U.S. operations. The global nature of our business and operations may present challenges including, but not limited to, those arising from:

- geopolitical business conditions and demands;
- regulation that may discriminate against U.S. companies, favor nationalization or expropriate assets;
- price controls or other pricing issues and exchange controls; restrictions that prevent us from transferring funds out of the countries in which we operate; foreign currency exchange rates and fluctuations and restrictions on converting currencies from foreign operations into other currencies; uncertainty with respect to the interpretation of tax positions;
- reliance on local employees and interpretations of labor laws in foreign jurisdictions;
- managing our partner relationships in countries outside of the United States;
- providing data protection on a global basis and sufficient levels of technical support in different locations;
- the global trend for companies to enact local data residency requirements;
- acts of civil unrest, war and terrorism, as well as other political and economic conflicts such as through imposition of economic or political sanctions;
- man-made disasters, natural disasters (including those arising as a result of climate change) and pandemics, such as the COVID-19 pandemic, in locations where we operate; and
- general economic and political conditions.

These factors may increase in significance as we continue to expand globally and operating in new foreign markets may require considerable management time before operations generate any significant revenues and earnings. Any one of these challenges could negatively affect our operations or long-term growth.

International operations also require us to devote significant resources to implement controls and systems in new markets to comply with, and to ensure that our vendors and partners comply with, U.S. and foreign laws prohibiting bribery, corruption and money laundering, in addition to other regulations regarding, among other things, our products, direct-to-consumer communications, customer privacy, data protection and data residency. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct of our business and significant reputational harm. Our success depends, in part, on our ability to anticipate these risks and manage these challenges. Our failure to comply with laws and regulations governing our conduct outside of the United States or to establish constructive relations with non-U.S. regulators

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could have a material adverse effect on our business, results of operations, financial condition, liquidity and long-term growth.

# ***Strategic transactions involve risks and we may not realize the expected benefits because of integration difficulties, underperformance relative to our expectations and other challenges.***

As part of our strategy, we regularly consider and enter into strategic transactions, including mergers, acquisitions, joint ventures, licensing arrangements, divestitures and other relationships (collectively referred to as 'strategic transactions'). There is significant competition for attractive targets and opportunities and we may be unable to identify and successfully complete strategic transactions in the future. In addition, from time to time, we evaluate alternatives for our businesses that do not meet our strategic, growth or profitability objectives, and we may divest or wind down such businesses. We may be unable to complete any such divestiture on terms favorable to us, within the expected timeframes, or at all. We may have continued financial exposure to divested businesses following the completion of any such transaction, including increased costs due to potential litigation, contingent liabilities and indemnification of the buyer related to, among other things, lawsuits, regulatory matters or tax liabilities.

Our ability to achieve the anticipated benefits of strategic transactions, including synergies, cost savings, innovation and operational efficiencies, is subject to numerous uncertainties and risks, including our ability to successfully combine or separate business operations, resources and systems, including data security systems and internal financial control standards, in an efficient and effective manner. Integration and separation activities may result in additional and unforeseen expenses, and the anticipated benefits may not be fully realized or may take longer to realize than expected. These activities are complex, costly and time-consuming and may divert management's attention from ongoing business concerns. Delays or issues encountered in these activities could have a material adverse effect on the revenues, expenses, operating results and financial condition of the Company. Additionally, the benefits of strategic transactions and the related timing could be impacted by various factors, including political instability, natural disasters, fluctuations in currency exchange rates, delays in obtaining regulatory approval and changes in regulations.

Strategic transactions could result in increased costs, including facilities and systems consolidation or separation costs and costs to retain key employees, decreases in expected revenues, earnings or cash flows and goodwill or other intangible asset impairment charges. As of December 31, 2022, our goodwill and other intangible assets had a carrying value of approximately $78 billion, representing 54% of our total consolidated assets. The value of our goodwill may be materially and adversely impacted if the businesses we acquire do not perform in a manner consistent with our assumptions. Future evaluations requiring an impairment to goodwill and other intangible assets could materially affect our results of operations and shareholders' equity in the period in which the impairment occurs. A material decrease in shareholders' equity could negatively impact our debt ratings or potentially impact our compliance with existing debt covenants. See Note 19 to the Consolidated Financial Statements for more information on goodwill and intangibles. In addition, the trading price of our securities may decline if, among other things, we are unable to achieve our estimates of earnings growth and operational cost savings, or the transaction costs are greater than expected. The trading price also may decline if we do not achieve the perceived benefits of a transaction as rapidly or to the extent anticipated by financial or industry analysts.

Additionally, joint ventures and equity investments present risks that are different from acquisitions, including risks related to: specific operations and finances of the businesses we invest in; selection of appropriate parties; differing objectives of the various parties; competition between and among parties; compliance activities (including compliance with applicable CMS requirements); growing the business in a manner acceptable to all the parties; maintaining positive relationships among the parties, clients and customers; initial and ongoing governance of joint ventures and customer and business disruption that may occur upon a joint venture termination.

Further, we may finance strategic transactions by issuing common stock for some or all of the purchase price that could dilute the ownership interests of our shareholders, or by incurring additional debt that could increase costs and impact our ability to access capital in the future.

In addition, effective internal controls are necessary to provide reliable and accurate financial reports and to mitigate the risk of fraud. The integration of businesses is likely to cause increasing complexity in our systems and internal controls and make them more difficult to manage. Any difficulties in assimilating businesses into our control system could cause us to fail to meet our financial reporting obligations. We also rely on the internal controls and financial reporting controls of joint venture entities and other entities in which we invest and their failure to maintain effectiveness or comply with applicable standards may materially and adversely affect us. Ineffective internal controls could also cause investors to lose confidence in our reported financial information that could negatively impact the trading price of our securities and our access to capital.

# ***We are dependent on the success of our relationships with third parties for various services and functions.***

To improve operating costs, productivity and efficiencies, we contract with third parties for the provision of specific services. Our operations may be adversely affected if a third party fails to satisfy its obligations, if the arrangement is terminated in whole or in part or if there is a contractual dispute between us and the third party. Even though contracts are intended to provide certain protections, we have limited control over the actions of third parties. For example, noncompliance with any privacy or security laws and regulations,

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any security breach involving one of our third-party vendors or a dispute between us and a third-party vendor related to our arrangement could have a material adverse effect on our business, results of operations, financial condition, liquidity and reputation.

Outsourcing also may require us to change our existing operations, adopt new processes for managing these service providers or redistribute responsibilities to realize the potential productivity and operational efficiencies. If there are delays or difficulties in changing business processes or our third-party vendors do not perform as expected, we may not realize, or not realize on a timely basis, the anticipated economic and other benefits of these relationships. This could result in additional costs or regulatory compliance issues or create other operational or financial problems for us. Terminating or transitioning, in whole or in part, arrangements with key vendors could result in additional costs or penalties, risks of operational delays or potential errors and control issues during the termination or transition phase. We may not be able to find an alternative vendor in a timely manner or on acceptable terms. If there is an interruption in business or loss of access to data resulting from a security breach, termination or transition in services, we may not be able to meet the demands of our customers and, in turn, our business and results of operations could be adversely impacted.

*A significant disruption in service within our operations or among our key suppliers or other third parties could materially adversely affect our business and results of operations.*

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted fashion, necessary business functions, such as claims processing and payment, internet support and customer call centers, data centers and corporate facilities, processing new and renewal business, maintaining appropriate shipment and storage conditions for prescriptions (such as temperature and protection from contamination) and home delivery processing. In some instances, our ability to provide services or products (including processing and dispensing prescriptions) depends on the availability of services and products provided by suppliers, providers, pharmaceutical manufacturers, vendors or shipping carriers. A disruption, or threat of disruption, in our supply chain, including as a result of the COVID-19 pandemic, or inability to access or deliver products that meet requisite quality safety standards and patient needs in a timely and efficient manner could adversely impact our business.

Increasing natural disasters in connection with climate change could also be a direct threat to us and our third-party vendors, service providers or other stakeholders. Natural disasters, such as wildfires, hurricanes and snow and ice storms, have impacted and may continue to impact our customers and pose a risk to our employees and facilities located in the impacted region. Responses to such scenarios have and may include, among other things, making temporary policy changes, such as waiving various medical requirements, assisting with replacement medications, transferring prescriptions and expanding our help line. In addition, there is a risk that actions taken to respond to climate change could increase the cost of energy, fuel and other commodities, which would increase our operating costs.

We are also subject to risk as a result of information technology disruptions. Any failure or disruption of our performance of, or our ability to perform, key business functions, including through unavailability or cyberattack of our information technology systems or those of third parties (including cloud service providers), could cause slower response times, decreased levels of service satisfaction and harm to our reputation. Our systems interface with and depend on third-party systems and we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption.

While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee that such plans and strategies will be effective, which could interrupt the functionality of our information technology systems or those of third parties. Our failure to implement adequate business continuity and disaster recovery strategies could significantly reduce our ability to provide products and services to our customers and clients, which could have material adverse effects on our business and results of operations.

*In managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities, we may be subject to additional liability that could result in significant time and expense.*

In addition to contracting with physicians and other health care providers for services, we employ physicians, pharmacists, nurses and other health care providers at our home delivery and specialty pharmacies, onsite low acuity and primary care practices and infusion clinics that we manage and operate for our customers, as well as certain clinics for our employees. We also provide in-home care through health care providers that we employ, as well as, through third-party contractors. As such, we may be subject to liability for certain acts, omissions, or injuries caused by our employees or agents, or occurring at one of these practices, pharmacies or clinics. The defense of any actions may require diverting personnel and other resources and incurring significant costs that could have a material adverse effect on our business, results of operations, financial condition, liquidity and reputation.

## **Legal and Compliance Risks**

*Our business is subject to substantial government regulation, as well as new laws or regulations or changes in existing laws or regulations that could have a material adverse effect on our business, results of operations, financial condition and liquidity.*

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# **Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

|  | PAGE |
| --- | --- |
| Executive Overview | 52 |
| Liquidity and Capital Resources | 58 |
| Critical Accounting Estimates | 63 |
| Segment Reporting | 66 |
| Evernorth Health Services | 67 |
| Cigna Healthcare | 69 |
| Other Operations | 71 |
| Corporate | 71 |
| Investment Assets | 72 |

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating The Cigna Group's financial condition as of December 31, 2022 compared with December 31, 2021 and our results of operations for 2022 compared with 2021 and 2020 and is intended to help you understand the ongoing trends in our business. For comparisons of our results of operations for 2021 compared with 2020, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K ("Form 10-K") and the "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Note 2 to the Consolidated Financial Statements in this Form 10-K for additional information regarding the Company's significant accounting policies. In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points ("bps").

In this MD&A, our consolidated measures "adjusted income from operations," earnings per share on that same basis and "adjusted revenues" are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of "shareholders' net income," "earnings per share" and "total revenues." We also use pre-tax adjusted income (loss) from operations and adjusted revenues to measure the results of our segments.

The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net realized investment results, amortization of acquired intangible assets, and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders' net income. See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to shareholders' net income.

The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a reconciliation of consolidated adjusted revenues to total revenues.

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# EXECUTIVE OVERVIEW

The Cigna Group, together with its subsidiaries, is a global health company. On February 13, 2023, we changed our corporate name from Cigna Corporation to The Cigna Group. We will not distinguish between our prior and current corporate name and will refer to our current corporate name throughout this Annual Report on Form 10-K. As such, unless expressly indicated or the context requires otherwise, the terms 'Company,' 'we,' 'us,' and 'our' in this document refer to The Cigna Group, a Delaware corporation, and, where appropriate, its subsidiaries. On February 13, 2023, we also changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K. Our common stock continues to be listed with, and trades on, the New York Stock Exchange under the ticker symbol 'CI'. The Cigna Group has a mission of helping those we serve improve their health and vitality. Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental and related products and services. For further information on our business and strategy, see Item 1, 'Business' in this Form 10-K.

## Financial Highlights

See Note 1 to the Consolidated Financial Statements for a description of our segments.

Summarized below are certain key measures of our performance by segment:

| Financial highlights by segment (Dollars in millions, except per share amounts) | For the Years Ended December 31, |  |  | Increase (Decrease) | Increase (Decrease) |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 |
| Revenues |  |  |  |  |  |
| Adjusted revenues by segment |  |  |  |  |  |
| Evernorth Health Services | $140,335 | $131,912 | $116,130 | 6% | 14% |
| Cigna Healthcare | 45,036 | 44,652 | 41,135 | 1 | 9 |
| Other Operations | 2,262 | 3,989 | 8,446 | (43) | (53) |
| Corporate, net of eliminations | (6,991) | (6,475) | (5,644) | (8) | (15) |
| Adjusted revenues | 180,642 | 174,078 | 160,067 | 4 | 9 |
| Net realized investment results from certain equity method investments | (126) | - | 130 | N/M | N/M |
| Special item related to contractual adjustment for a former client | - | - | 204 | N/M | N/M |
| Total revenues | $180,516 | $174,078 | $160,401 | 4% | 9% |
| Shareholders' net income | $6,668 | $5,365 | $8,458 | 24% | (37) % |
| Adjusted income from operations | $7,284 | $6,980 | $6,795 | 4% | 3% |
| Earnings per share (diluted) |  |  |  |  |  |
| Shareholders' net income | $21.30 | $15.73 | $22.96 | 35% | (31) % |
| Adjusted income from operations | $23.27 | $20.47 | $18.45 | 14% | 11% |
| Pre-tax adjusted income (loss) from operations by segment |  |  |  |  |  |
| Evernorth Health Services | $6,127 | $5,818 | $5,363 | 5% | 8% |
| Cigna Healthcare | 4,072 | 3,609 | 4,031 | 13 | (10) |
| Other Operations | 500 | 889 | 966 | (44) | (8) |
| Corporate, net of eliminations | (1,466) | (1,339) | (1,552) | (9) | 14 |
| Consolidated pre-tax adjusted income from operations | 9,233 | 8,977 | 8,808 | 3 | 2 |
| Income attributable to noncontrolling interests | 84 | 58 | 37 | 45 | 57 |
| Net realized investment (losses) gains (1) | (621) | 196 | 279 | N/M | (30) |
| Amortization of acquired intangible assets | (1,876) | (1,998) | (1,982) | 6 | (1) |
| Special items | 1,533 | (451) | 3,726 | N/M | N/M |
| Income before income taxes | $8,353 | $6,782 | $10,868 | 23% | (38) % |

$^{(1)}$ Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

For further analysis and explanation of each segment's results, see the 'Segment Reporting' section of this MD&A.

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# **Consolidated Results of Operations (GAAP basis)**

| (Dollars in millions) | For the Years Ended December 31, |  |  | Increase (Decrease) |  | Increase (Decrease) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Pharmacy revenues | $128,566 | $121,413 | $107,769 | $7,153 | 6% | $13,644 | 13% |
| Premiums | 39,915 | 41,154 | 42,627 | (1,239) | (3) | (1,473) | (3) |
| Fees and other revenues | 10,880 | 9,962 | 8,761 | 918 | 9 | 1,201 | 14 |
| Net investment income | 1,155 | 1,549 | 1,244 | (394) | (25) | 305 | 25 |
| Total revenues | 180,516 | 174,078 | 160,401 | 6,438 | 4 | 13,677 | 9 |
| Pharmacy and other service costs | 124,834 | 117,553 | 103,484 | 7,281 | 6 | 14,069 | 14 |
| Medical costs and other benefit expenses | 32,206 | 33,562 | 32,710 | (1,356) | (4) | 852 | 3 |
| Selling, general and administrative expenses | 13,186 | 13,030 | 14,072 | 156 | 1 | (1,042) | (7) |
| Amortization of acquired intangible assets | 1,876 | 1,998 | 1,982 | (122) | (6) | 16 | 1 |
| Total benefits and expenses | 172,102 | 166,143 | 152,248 | 5,959 | 4 | 13,895 | 9 |
| Income from operations | 8,414 | 7,935 | 8,153 | 479 | 6 | (218) | (3) |
| Interest expense and other | (1,228) | (1,208) | (1,438) | (20) | (2) | 230 | 16 |
| Debt extinguishment costs | - | (141) | (199) | 141 | N/M | 58 | 29 |
| Gain on sale of businesses | 1,662 | - | 4,203 | 1,662 | N/M | (4,203) | N/M |
| Net realized investment (losses) gains | (495) | 196 | 149 | (691) | N/M | 47 | 32 |
| Income before income taxes | 8,353 | 6,782 | 10,868 | 1,571 | 23 | (4,086) | (38) |
| Total income taxes | 1,607 | 1,367 | 2,379 | 240 | 18 | (1,012) | (43) |
| Net income | 6,746 | 5,415 | 8,489 | 1,331 | 25 | (3,074) | (36) |
| Less: Net income attributable to noncontrolling interests | 78 | 50 | 31 | 28 | 56 | 19 | 61 |
| Shareholders' net income | $6,668 | $5,365 | $8,458 | $1,303 | 24% | $(3,093) | (37) % |
| Consolidated effective tax rate | 19.2% | 20.2% | 21.9% | (100) bps |  | (170) bps |  |
| Medical customers (in thousands) | 18,004 | 17,081 | 16,650 | 923 | 5% | 431 | 3% |

# **Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations**

| (Dollars in millions) | For the Years Ended December 31, |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  | 2020 |  |
|  | Pre-tax | After-tax | Pre-tax | After-tax | Pre-tax | After-tax |
| Shareholders' net income |  | $6,668 |  | $5,365 |  | $8,458 |
| Adjustments to reconcile to adjusted income from operations |  |  |  |  |  |  |
| Net realized investment losses (gains) (1) | $621 | 503 | $(196) | (158) | $(279) | (244) |
| Amortization of acquired intangible assets | 1,876 | 1,345 | 1,998 | 1,494 | 1,982 | 1,431 |
| Special items |  |  |  |  |  |  |
| Integration and transaction-related costs | 135 | 103 | 169 | 71 | 527 | 404 |
| Charge for organizational efficiency plan | 22 | 17 | 168 | 119 | 31 | 24 |
| (Benefits) charges associated with litigation matters | (28) | (20) | (27) | (21) | 25 | 19 |
| (Gain) on sale of businesses | (1,662) | (1,332) | - | - | (4,203) | (3,217) |
| Debt extinguishment costs | - | - | 141 | 110 | 199 | 151 |
| Risk corridors recovery | - | - | - | - | (101) | (76) |
| Contractual adjustment for a former client | - | - | - | - | (204) | (155) |
| Total special items | $(1,533) | (1,232) | $451 | 279 | $(3,726) | (2,850) |
| Adjusted income from operations |  | $7,284 |  | $6,980 |  | $6,795 |

$^{(1)}$ Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

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# **Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations**

| (Diluted Earnings Per Share) | For the Years Ended December 31, |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  | 2020 |  |
|  | Pre-tax | After-tax | Pre-tax | After-tax | Pre-tax | After-tax |
| Shareholders' net income |  | $21.30 |  | $15.73 |  | $22.96 |
| Adjustments to reconcile to adjusted income from operations |  |  |  |  |  |  |
| Net realized investment losses (gains) (1) | $1.98 | 1.61 | $(0.57) | (0.46) | $(0.76) | (0.66) |
| Amortization of acquired intangible assets | 5.99 | 4.30 | 5.86 | 4.38 | 5.38 | 3.88 |
| Special items |  |  |  |  |  |  |
| Integration and transaction-related costs | 0.43 | 0.33 | 0.50 | 0.21 | 1.43 | 1.10 |
| Charge for organizational efficiency plan | 0.07 | 0.05 | 0.49 | 0.35 | 0.08 | 0.07 |
| (Benefits) charges associated with litigation matters | (0.09) | (0.06) | (0.08) | (0.06) | 0.07 | 0.05 |
| (Gain) on sale of businesses | (5.31) | (4.26) | - | - | (11.41) | (8.73) |
| Debt extinguishment costs | - | - | 0.41 | 0.32 | 0.54 | 0.41 |
| Risk corridors recovery | - | - | - | - | (0.27) | (0.21) |
| Contractual adjustment for a former client | - | - | - | - | (0.55) | (0.42) |
| Total special items | $(4.90) | (3.94) | $1.32 | 0.82 | $(10.11) | (7.73) |
| Adjusted income from operations |  | $23.27 |  | $20.47 |  | $18.45 |

$^{(1)}$ Includes the Company's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

# **Recent Events**

# **Inflation**

The United States economy continues to be impacted by rising inflation. We are proactively addressing potential impacts from inflation on our workforce, third party relationships (including relationships with vendors and health care providers) and drug pricing. We are also monitoring the potential impact inflation may have on client and customer health care needs. We have not experienced material impacts from inflation on our results of operations or cash flows for the year ended December 31, 2022. For further information regarding risks we encounter in our business due to economic conditions including inflationary pressures, see 'Risk Factors' contained in Part I, Item 1A of this Form 10-K.

# **Russian Invasion of Ukraine**

The war in Ukraine has significantly affected individuals, economic activity and financial markets on a global scale. The Cigna Group does not have operations or employees in Ukraine or Russia and serves a limited number of customers and clients in these countries. We have not experienced significant impacts to date on our investment portfolio, financial position or results of operations. For a more complete discussion of the risks we encounter in our business, see 'Risk Factors' contained in Part I, Item 1A of this Form 10-K.

# **COVID-19**

The Cigna Group's commitment to the health and vitality of our employees and the people we serve remains our focus as the pandemic environment evolves. We continue to actively manage our response as the COVID-19 pandemic environment evolves and assess impacts to our financial position and operating results, as well as mitigate adverse developments in our business. For further information regarding the potential impact of the COVID-19 pandemic on the Company, see 'Risk Factors' contained in Part I, Item 1A of this Form 10-K.

# **Commentary: 2022 versus 2021**

The commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2022 with results for the year ended December 31, 2021.

**Shareholders' net income** increased 24% due to the gain on the sale of our life, accident and supplemental benefits businesses in six countries (the 'Chubb transaction'), higher adjusted income from operations and the absence of debt extinguishment costs. These favorable effects were partially offset by lower realized investment results due to declines in equity securities resulting in unfavorable mark to market adjustments in 2022.

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*Adjusted income from operations* increased 4%, driven by a lower medical care ratio and increased specialty contributions in Cigna Healthcare, as well as within Evernorth Health Services, increased earnings primarily reflecting continued contract affordability improvements and growth in our accelerated businesses. These favorable effects were partially offset by the absence of earnings in the second half of 2022 from the businesses sold in the Chubb transaction and lower net investment income.

*Medical customers* increased 5%, reflecting growth in our fee-based products from Middle Market and Select market segments as well as growth in International Health, partially offset by a decrease in U.S. Government customers, including the disposition of the Medicaid business. See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.

*Pharmacy revenues* increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services' collaboration with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs. See the 'Evernorth Health Services segment' section of this MD&A for further discussion.

*Premiums* declined 3%, reflecting the impact of the Chubb transaction and the disposition of the Medicaid business in Cigna Healthcare. Partially offsetting these decreases were the favorable impact of increased specialty contributions and higher premium rates in Cigna Healthcare due to anticipated underlying medical cost trend. See the 'Cigna Healthcare segment' section of this MD&A for further discussion.

*Fees and other revenues* increased 9%, primarily reflecting customer growth from our continued contract affordability services. See the 'Evernorth Health Services segment' section of this MD&A for further discussion.

*Net investment income* decreased 25%, primarily reflecting lower returns on our partnership investments and the impact of the Chubb transaction. See the 'Investment Assets' section of this MD&A for further discussion.

*Pharmacy and other service costs* increased 6%, reflecting higher specialty claims volume due in part to Evernorth Health Services' collaboration with Prime Therapeutics, as well as inflation on, and higher sales of, branded drugs.

*Medical costs and other benefit expenses* decreased 4%, primarily reflecting the impact of the Chubb transaction and the disposition of the Medicaid business in Cigna Healthcare. Decreases also reflect lower direct COVID-19 testing, treatment and vaccine costs and are partially offset by medical cost trend in Cigna Healthcare.

*Selling, general and administrative expenses* increased 1%, primarily driven by higher expenses in Cigna Healthcare and strategic investments in expanding our services portfolio and digital capabilities in Evernorth Health Services, partially offset by decreased expenses in Other Operations driven by the impact of the Chubb transaction.

*Interest expense and other* increased 2%, primarily reflecting higher interest rates on our indebtedness.

*Debt extinguishment costs.* We did not incur debt extinguishment costs in 2022 as we did not early retire any debt in 2022.

*Gain on sale of businesses* primarily reflects the Chubb transaction, which closed on July 1, 2022.

*Realized investment results* were substantially lower, primarily due to declines in equity securities resulting in unfavorable mark to market adjustments on investments in 2022. See Note 11 to the Consolidated Financial Statements for further discussion.

*The effective tax rate* decreased by 100 basis points, driven largely by the foreign tax rate differential, including the impact of the Chubb transaction.

## Key Transactions and Business Developments

### VillageMD

As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is an independent primary care group committed to offering high-quality, accessible primary care options for communities across the country through Village Medical. VillageMD partners with physicians to provide the tools, technology, operations, staffing support and industry relationships to deliver high-quality clinical care and better patient outcomes, while reducing the total cost of care. VillageMD and Village Medical operate in 22 markets and are responsible for more than 1.6 million patients.

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# Risk Adjustment Data Validation Audit Rule

On January 30, 2023, the Centers for Medicare and Medicaid Services ('CMS') issued the Final Rule titled 'Medicare and Medicaid Programs; Policy and Technical Changes to the Medicare Advantage, Medicare Prescription Drug Benefit, Program for All-inclusive Care for the Elderly (PACE), Medicaid Fee-For-Service, and Medicaid Managed Care Programs for Years 2020 and 2021', effective April 3, 2023. The Final Rule addresses CMS's audit methodology and related policies for the Risk Adjustment Data Validation ('RADV'). RADV is the primary mechanism for CMS to determine risk adjustment revenue overpayments to Medicare Advantage organizations. Although CMS did not specify their sampling or extrapolation methodology the rule did codify that CMS will use a statistically valid method for sampling and extrapolation of error rates and the decision not to apply a fee for service adjuster when determining RADV audit findings. CMS will not apply extrapolation to RADV audits until the 2018 payment year with payment recoveries for those RADV audits expected in 2025. Audits for payment years prior to 2018 are not subject to extrapolation and the Company expects the impact for these years will not be material. The Company is not currently subject to RADV audits for the 2018 and subsequent payment years and is unable to estimate the potential impacts of RADV audits subject to extrapolation in the Final Rule. Although the Final Rule provides additional clarity regarding the structure of the methodology for RADV audits and quantification of RADV audit findings, further analysis is required to determine all potential implications. The Company continues to evaluate the recently announced Final Rule including potential legal developments which could impact the ultimate application of the regulation. See Part I, Item 1 of this Form 10-K for further discussion of RADV.

## Centene Corporation

In October 2022, Evernorth Health Services and Centene Corporation ('Centene') announced a multi-year agreement effective January 2024 to manage pharmacy benefit services and make prescription medications more accessible and affordable for Centene's approximately 20 million customers. In addition to greater savings on prescription drugs, Centene customers will also have access to Express Scripts' extensive national network of retail pharmacies. We expect to spend approximately $200 million in 2023 preparing for the implementation of our multi-year agreement with Centene. We will continue to refine this estimate during 2023.

## Inflation Reduction Act

The Inflation Reduction Act of 2022, which was signed into law in August 2022, contains a variety of provisions that impact our business, including:

- • providing a one percent excise tax on repurchases of stock made after December 31, 2022, which would generally be recorded in Treasury stock in the Consolidated Balance Sheets;
- • extending the American Rescue Plan Act of 2021's enhanced Premium Tax Credits for three years from January 2023 to January 2026;
- • instituting caps on insulin cost sharing in federal Medicare Part B medical insurance ('Part B') and federal Medicare Part D prescription drug program ('Part D') beginning in 2023 and removing deductibles for insulin provided via durable medical equipment under Part B beginning in July 2023;
- • adding a requirement that drug manufacturers pay rebates beginning in 2023 if prescription drug prices for certain Part B and Part D drugs increase beyond inflation;
- • redesigning of the Part D benefit in 2024 and capping of annual out-of-pocket costs starting in 2025;
- • allowing CMS to select Part D and Part B drugs for the drug price negotiation program beginning in 2023 and 2026, respectively, with the maximum fair prices for select Part D drugs taking effect in 2026; and
- • delaying implementation of the 2020 Medicare drug rebate rule to 2032.

We currently do not expect the Inflation Reduction Act to have a material impact on our 2023 Consolidated Financial Statements. We continue to analyze the impact on future periods.

## Sale of International Life, Accident and Supplemental Benefits Businesses in Six Countries

As discussed in Note 4 to the Consolidated Financial Statements, on July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc. ('Chubb') for approximately $5.4 billion in cash (the 'Chubb transaction'). The 'Liquidity and Capital Resources' section of this MD&A provides further information on the impact of this transaction to liquidity. See 'Other Operations' section of this MD&A for further information on the results of these businesses prior to the divestiture.

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## Sale of Group Disability and Life Business

The Cigna Group sold its Group Disability and Life business to New York Life Insurance Company for $6.2 billion on December 31, 2020.

## Medicare Star Quality Ratings ("Star Ratings")

CMS uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform. Categories of measurement include quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits. Approximately 89% of our MA customers were in four star or greater plans for bonus payments received in 2022 and we expect 84% to be in four star or greater plans for bonus payments to be received in 2023. On October 7, 2022, CMS announced Medicare Star Ratings for bonus payments to be received in 2024. Based upon the current customer mix associated with the announced Star Ratings, we estimate 67% of our MA customers will be in four star or greater plans. See Part 1, "Business - Regulation" section of this Form 10-K for further discussion of Star Ratings.

## Medicare Advantage Rates

On April 4, 2022, CMS released the final Calendar Year 2023 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the "2023 Final Notice"). On February 1, 2023, CMS released the Calendar Year 2024 Advance Notice for Medicare Advantage and Part D Prescription Drug Programs (the "Advance Notice"). CMS will accept comments on the Advance Notice through March 3, 2023, before publishing the final rate announcement by April 3, 2023. The Advance Notice is subject to the required notice and comment period, and we cannot predict when or to what extent CMS will adopt the proposals in the Advance Notice. We are in the process of analyzing the potential implications of the Advance Notice.

## LIQUIDITY AND CAPITAL RESOURCES

| Financial Summary (In millions) | For the Years Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Short-term investments | $139 | $428 | $359 |
| Cash and cash equivalents | $5,924 | $5,081 | $10,182 |
| Short-term debt | $2,993 | $2,545 | $3,374 |
| Long-term debt | $28,100 | $31,125 | $29,545 |
| Shareholders' equity | $44,872 | $47,112 | $50,321 |

## 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.

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Cash requirements at the parent company level generally consist of:

- debt service;
- payment of declared dividends to shareholders;
- lending to subsidiaries as needed; and
- pension plan funding.

The parent company normally meets its liquidity requirements by:

- maintaining appropriate levels of cash and various types of marketable investments;
- collecting dividends from its subsidiaries;
- using proceeds from issuing debt and common stock; and
- borrowing from its subsidiaries, subject to applicable regulatory limits.

Dividends from our insurance, Health Maintenance Organization ("HMO") and certain foreign subsidiaries are subject to regulatory restrictions. See Note 21 to the Consolidated Financial Statements in this Form 10-K for additional information regarding these restrictions. Most of the Evernorth Health Services segment operations are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to The Cigna Group.

Cash flows were as follows:

| (In millions) | For the Years Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net cash provided by operating activities | $8,656 | $7,191 | $10,350 |
| Net cash provided by (used in) investing activities: |  |  |  |
| Cash proceeds from sales of businesses, net of cash sold | 4,835 | (61) | 5,592 |
| Acquisitions | - | (1,833) | (139) |
| Net investment (purchases) | (272) | (660) | (1,406) |
| Purchases of property and equipment, net | (1,295) | (1,154) | (1,094) |
| Other, net | (170) | 97 | 23 |
| Net investing activities | 3,098 | (3,611) | 2,976 |
| Net cash (used in) financing activities: |  |  |  |
| Debt (repayments) issuances | (2,559) | 521 | (4,736) |
| Stock repurchase | (7,607) | (7,742) | (4,042) |
| Dividend payments | (1,384) | (1,341) | (15) |
| Other, net | 310 | 350 | 260 |
| Net financing activities | (11,240) | (8,212) | (8,533) |
| Foreign currency effect on cash | (86) | (65) | 41 |
| Change in cash, cash equivalents and restricted cash | $428 | $(4,697) | $4,834 |

The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2022 compared with the same period in 2021. For comparisons of liquidity and capital resources for the year ended December 31, 2021 compared with the year ended December 31, 2020, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2021.

### *Operating activities*

Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs, premiums, fees, investment income, taxes, benefit costs and other expenses.

Operating cash flows for the year ended December 31, 2022 include the benefits from the delayed 2021 CMS Part D settlement. The remaining increase was driven by timing of accrued liabilities and lower income tax payments, partially offset by lower insurance liabilities and higher inventories.

### *Investing activities*

In 2022, the Company received cash proceeds from the Chubb transaction. In 2021, the Company had cash outflows related to the acquisition of MDLIVE. These factors, along with lower net purchases of investments in 2022, resulted in higher cash inflow from investing activities in 2022 compared with 2021.

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# *Financing activities*

The Company repaid more debt, in 2022, which resulted in an increase in cash used in financing activities in 2022.

# **Capital Resources**

Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and the issuance of long-term debt and equity securities. Our businesses generate significant cash flow from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends from U.S. regulated subsidiaries were $1.9 billion for the year ended December 31, 2022 and $2.8 billion for the year ended December 31, 2021. Non-regulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to the parent company for general corporate purposes.

We prioritize our use of capital resources to:

- invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide the capital necessary to maintain or improve the financial strength ratings of subsidiaries and to repay debt and fund pension obligations if necessary;
- pay dividends to shareholders;
- consider acquisitions that are strategically and economically advantageous; and
- return capital to shareholders through share repurchases.

# **Funds Available**

**Commercial Paper Program.** The Cigna Group maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker-dealers at any time not to exceed an aggregate amount of $5.0 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes.

**Revolving Credit Agreements.** Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above.

As of December 31, 2022, The Cigna Group's revolving credit agreements include: a $3.0 billion five-year revolving credit and letter of credit agreement that expires in April 2027; a $1.0 billion three-year revolving credit agreement that expires in April 2025; and a $1.0 billion 364-day revolving credit agreement that expires in April 2023.

As of December 31, 2022, we had $5.0 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $5.0 billion of remaining capacity under our commercial paper program and $6.1 billion in cash and short-term investments, approximately $1.2 billion of which was held by the parent company or certain non-regulated subsidiaries.

See Note 7 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.

Our debt-to-capitalization ratio was 40.9% at December 31, 2022 and 41.7% at December 31, 2021.

We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy.

**Subsidiary Borrowings.** In addition to the sources of liquidity discussed above, the parent company can borrow an additional $3.0 billion from its subsidiaries without further approvals as of December 31, 2022.

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## Other Sources of Funds

*Sale of international life, accident and supplemental benefits businesses in six countries.* On July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash. Net after-tax proceeds of approximately $5.1 billion were utilized primarily for share repurchases, with $3.5 billion used to fund the purchases of our common stock pursuant to the ASR agreements (as described below).

## Use of Capital Resources

*Capital expenditures.* Capital expenditures for property, equipment and computer software were $1.3 billion in 2022 compared to $1.2 billion in the year ended December 31, 2021. This increase reflects our continued strategic investment in technology for future growth. We expect to deploy approximately $1.4 billion to capital expenditures in 2023. Anticipated capital expenditures will be funded primarily from operating cash flow.

*Dividends.* For 2022, The Cigna Group declared and paid quarterly cash dividends of $1.12 per share of its common stock, compared to $1.00 per share in 2021. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On February 2, 2023, the Board of Directors declared the first quarter cash dividend of $1.23 per share of The Cigna Group common stock to be paid on March 23, 2023 to shareholders of record on March 8, 2023. The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.

*Share repurchases.* We maintain a share repurchase program authorized by our Board of Directors, under which we may repurchase shares of our common stock from time to time. The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), including through Rule 10b5-1 trading plans or privately negotiated transactions. The program may be suspended or discontinued at any time.

In June 2022, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements ('2022 ASR agreements') to repurchase $3.5 billion of common stock in aggregate. In July 2022, in accordance with the 2022 ASR agreements, we remitted $3.5 billion and received an initial delivery of 10.4 million shares of our common stock. Upon final settlement of the 2022 ASR agreements in November 2022, we received an additional 1.9 million shares of our common stock for no additional consideration.

In August 2021, as part of our existing share repurchase program, we entered into accelerated share repurchase agreements to repurchase $2.0 billion of common stock. The total number of shares repurchased under the agreements was 9.5 million.

We repurchased 27.4 million shares for approximately $7.6 billion during the year ended December 31, 2022, including the $3.5 billion paid under ASR agreements, compared to 35.2 million shares for approximately $7.7 billion during the year ended December 31, 2021 including the $2.0 billion paid under ASR agreements. From January 1, 2023, through February 22, 2023, we repurchased 2.1 million shares for approximately $646 million. Share repurchase authority was $2.9 billion as of February 22, 2023.

See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.

*Strategic investments.* As of December 31, 2022, the Company had a commitment to become a minority owner in VillageMD by investing up to $2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion. VillageMD is an independent primary care group with expertise in value-based care and operates primary care practices across 22 markets.

*Pension plans.* Our pension plans were overfunded by $238 million and reported in Other assets in our Consolidated Balance Sheets as of December 31, 2022. This represents a funding improvement of $615 million from an underfunded pension liability of $377 million primarily reported in Other non-current liabilities in our Consolidated Balance Sheets as of December 31, 2021. This improvement was primarily attributable to an increase in discount rates of 261 basis points, partially offset by investment asset losses in 2022. In 2022, we made immaterial contributions to the qualified pension plans as required under the Pension Protection Act of 2006 and we expect the required contributions for 2023 to be immaterial. See Note 17 to the Consolidated Financial Statements for additional information.

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Risks to our liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the 'Risk Factors' section of this Form 10-K. Though we believe we have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase costs.

## Supply Chain Financing Program

We facilitate a voluntary supply chain finance program (the 'program') that provides suppliers the opportunity to sell their receivables due from us (i.e., our payment obligations to the suppliers) to a financial institution, on a non-recourse basis in order to be paid earlier than our payment terms provide. The Cigna Group is not a party to the program and agrees to commercial terms with its suppliers independently of their participation in the program. A supplier's participation in the program has no impact on our payment terms and the Company has no economic interest in a supplier's decision to participate in the program. The suppliers, at their sole discretion, determine which invoices, if any, to sell to the financial institution. No guarantees are provided by the Company or any of our subsidiaries under the program. We have been informed by the financial institution that $471 million as of December 31, 2022 and $331 million as of December 31, 2021 of our outstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the program. These amounts are reflected in Accounts payable in our Consolidated Balance Sheets.

## Guarantees and Contractual Obligations

We are contingently liable for various contractual obligations and financial and other guarantees entered into in the ordinary course of business. See Note 23 to the Consolidated Financial Statements for discussion of various guarantees.

### On balance sheet:

- • **Insurance liabilities**
  - ◦ *Insurance liabilities* are \$16.3 billion, which include contractholder deposit funds, future policy benefits and unpaid claims and claim expenses.
  - ◦ Of the total obligation amount, \$4.9 billion of insurance liabilities are associated with the sold retirement benefits, individual life insurance and annuity businesses, guaranteed minimum death benefit ('GMDB') business, as well as the group life and personal accident businesses as their related net cash flows are not expected to impact our cash flows.
  - ◦ The \$14.0 billion of total obligations exceeds the corresponding insurance and contractholder liabilities of \$11.4 billion recorded on the balance sheet. This is because some of the recorded insurance liabilities reflect discounting for interest and the recorded contractholder liabilities exclude future interest crediting, charges and fees. The timing and amount of actual future cash flows may differ from the projected amount disclosed.
  - ◦ We expect \$4.6 billion of insurance liabilities to be paid within the next twelve months beginning January 1, 2023.
  - ◦ See Note 9 to the Consolidated Financial Statements for information regarding insurance liabilities.
- • **Long-term debt**
  - ◦ Total scheduled payments on long-term debt are \$46.9 billion, which include scheduled interest payments and maturities of long-term debt.
  - ◦ We expect \$4.2 billion of long-term debt payments (including scheduled interest payments) to be paid within the next twelve months beginning January 1, 2023.
  - ◦ Finance leases are included in Long-term debt and primarily represent obligations for information technology network storage, servers and equipment. See Note 20 to the Consolidated Financial Statements for information regarding finance leases.
  - ◦ See Note 7 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.
- • **Other non-current liabilities**
  - ◦ These include approximately \$415 million of estimated payments for other postretirement and postemployment benefit obligations, non-qualified pension plans, reinsurance liabilities, supplemental and deferred compensation plans and interest rate and foreign currency swap contracts.
  - ◦ We expect \$85 million of other liabilities to be paid within the next twelve months beginning January 1, 2023.
  - ◦ See Note 17 to the Consolidated Financial Statements for further information on pension obligations and funded status.
- • **Operating leases**
  - ◦ These include operating lease payments of \$494 million.
  - ◦ We expect \$114 million of operating lease payments to be due within the next twelve months beginning January 1, 2023.
  - ◦ See Note 20 to the Consolidated Financial Statements for additional information.
- • **Uncertain tax positions**
  - ◦ In the event we are unable to sustain all of our \$1.3 billion of uncertain tax positions, it could result in future tax payments of approximately \$1.0 billion. We are adequately reserved for such positions. As a result, there is minimal

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direct risk to earnings should we fail to sustain our positions. We cannot reasonably estimate the timing of such future payments.

◦ See Note 22 to the Consolidated Financial Statements for additional information on uncertain tax positions.

# **Off-balance sheet:**

- **Purchase obligations**
  - These include agreements to purchase goods or services that are enforceable and legally binding. Purchase obligations exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of goods or services to be purchased.
  - As of December 31, 2022, purchase obligations consisted of a total of $6.5 billion of estimated payments required under contractual arrangements. This includes:
    - $5.1 billion of investment commitments, primarily comprised of commitment to purchase up to $2.7 billion of preferred equity in VillageMD as well as other long-term investments.
    - $1.4 billion of future service commitments, primarily comprised of contracts for certain outsourced businesses processes and information technology maintenance and support.
  - We expect $3.9 billion of purchase obligations to be paid within the next twelve months beginning January 1, 2023. This includes:
    - $3.5 billion relates to investment commitments, which includes commitment to purchase up to $2.7 billion in VillageMD preferred equity. In January 2023, we invested $2.5 billion of the $2.7 billion.
    - $402 million relates to future service commitments.
  - See Note 11 of the Consolidated Financial Statements for additional information on investment commitments.

# **CRITICAL ACCOUNTING ESTIMATES**

The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements. Management considers an accounting estimate to be critical if:

- it requires assumptions to be made that were uncertain at the time the estimate was made; and
- changes in the estimate or different estimates that could have been selected could have a material effect on our consolidated results of operations or financial condition.

Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosures presented in this Form 10-K. We regularly evaluate items that may impact critical accounting estimates.

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In addition to the estimates presented in the following tables, the Notes to the Consolidated Financial Statements describe other estimates that management has made in preparation of the financial statements. Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations and in certain situations, could have a material adverse effect on liquidity and our financial condition. The tables below present the adverse impacts of certain possible changes in assumptions. The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of operations, liquidity or financial condition, except for assessing impairment of goodwill.

# **Balance Sheet Caption / Nature of Critical Accounting Estimate**

# ***Goodwill and other intangible assets***

Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the acquisition date. Intangible assets primarily reflect the value of customer relationships and other intangibles acquired in business combinations.

Fair values of reporting units are estimated based on discounted cash flow analysis and market approach models using assumptions that we believe a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value primarily include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within each reporting unit. Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections. Future cash flows for Evernorth Health Services are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates. Future cash flows for our other reporting units are primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term growth rates.

The fair value of intangibles and the amortization method were determined using an income approach that relies on projected future cash flows including key assumptions for customer attrition and discount rates. Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value.

Our U.S. Government reporting unit contracts with CMS to provide managed health care services, including Medicare Advantage and Medicare-approved prescription drug plans. Estimated future cash flows for this reporting unit's Medicare Advantage business incorporate the current reimbursement structure for 2023 and beyond. Revenues from the Medicare programs are dependent, in whole or in part, upon annual funding from the federal government through CMS. Funding levels for these programs are dependent on many factors including changes to the risk adjustment payment methodology, government efforts to contain health care costs, budgetary constraints and general political issues and priorities. In 2022, we experienced a decrease in U.S. Government customers, including the disposition of the Medicaid business, while investing to support future growth. The U.S. Government reporting unit goodwill balance was $4.0 billion as of December 31, 2022 and December 31, 2021.

The Company conducts its quantitative evaluation for goodwill impairment at least annually during the third quarter at the reporting unit level and performs qualitative impairment assessments on a quarterly basis to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value.

Goodwill and other intangibles as of December 31 were as follows (in millions):

- 2022 - Goodwill $45,811; Other intangible assets $32,492
- 2021 - Goodwill $45,811; Other intangible assets $34,102

See Note 19 to the Consolidated Financial Statements for additional discussion of our goodwill and other intangible assets.

# **Effect if Different Assumptions Used**

We completed our normal annual evaluations for impairment of goodwill and intangible assets during the third quarter of 2022. The evaluations indicated that the fair value estimates of our reporting units exceed their carrying values by sufficient margins. Changes in assumptions concerning future financial results or other underlying assumptions, including macroeconomic factors, government legislation, changes in the competitive landscape or other market conditions could impact our ability to achieve profitability projections. If we consistently do not achieve our earnings and cash flow projections or our cost of capital rises significantly, the assumptions and estimates underlying the goodwill and intangible asset impairment evaluations could be adversely affected and result in future impairment charges that would negatively impact our operating results and financial position.

Specific to the U.S. Government reporting unit, the two most critical factors affecting our future cash flows assumptions are customer growth and profit margins. If we do not realize our targeted customer growth or profit margins, the cash flow projections could be impacted and significantly reduce the fair value of the reporting unit.

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# **Balance Sheet Caption /**
**Nature of Critical Accounting Estimate**

# ***Income taxes - uncertain tax positions***

We evaluate tax positions to determine whether the benefits are more likely than not to be sustained on audit based on their technical merits. The Company establishes a liability if the probability that the position will be sustained is 50% or less. For uncertain positions that management believes are more likely than not to be sustained, the Company recognizes a liability based upon management's estimate of the most likely settlement outcome with the taxing authority. These amounts primarily relate to federal and state uncertain positions of the value and timing of deductions and uncertain positions of attributing taxable income to states.

Balances that are included in the Consolidated Balance Sheets within Accrued expenses and other liabilities are as follows (in millions):

·2022 - $1,343
·2021 - $1,230

See Note 22 to the Consolidated Financial Statements for additional discussion around uncertain tax positions and the Liquidity and Capital Resources section of this MD&A for a discussion of their potential impact on liquidity.

# **Effect if Different Assumptions Used**

The factors that could impact our estimates of uncertain tax positions include the likelihood of being sustained upon audit based on the technical merits of the tax position and related assumed interest and penalties. If our positions are upheld upon audit, our net income would increase.

# **Balance Sheet Caption /**
**Nature of Critical Accounting Estimate**

# ***Unpaid claims and claim expenses - Cigna Healthcare***

Unpaid claims and claim expenses include both reported claims and estimates for losses incurred but not yet reported.

Unpaid claims and claim expenses in Cigna Healthcare are primarily impacted by assumptions related to completion factors and medical cost trend. Variation of actual results from either assumption could impact the unpaid claims balance as noted below. A large number of factors may cause the medical cost trend to vary from the Company's estimates, including: changes in health management practices, changes in the level and mix of benefits offered and services utilized and changes in medical practices. Completion factors may be affected if actual claims submission rates from providers differ from estimates (that can be influenced by a number of factors, including provider mix and electronic versus manual submissions), or if changes to the Company's internal claims processing patterns occur.

Unpaid claims and claim expenses for the Cigna Healthcare segment as of December 31 were as follows (in millions):

·2022 - gross $4,176; net $3,955
·2021 - gross $4,261; net $4,000

These liabilities are presented above both gross and net of reinsurance and other recoverables.

See Note 9 to the Consolidated Financial Statements for additional information regarding assumptions and methods used to estimate this liability.

# **Effect if Different Assumptions Used**

Based on studies of our claim experience, it is reasonably possible that a 100 basis point change in the medical cost trend and a 50 basis point change in completion factors could occur in the near term.

A 100 basis point increase in the medical cost trend rate would increase this liability by approximately $75 million, resulting in a decrease in net income of approximately $60 million after-tax, and a 50 basis point decrease in completion factors would increase this liability by approximately $150 million, resulting in a decrease in net income of approximately $120 million after-tax.

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# **Balance Sheet Caption /**
**Nature of Critical Accounting Estimate**

# **Effect if Different Assumptions Used**

# *Valuation of debt security investments*

Most debt securities are classified as available for sale and are carried at fair value with changes in fair value recorded in Accumulated other comprehensive loss within Shareholders' equity.

Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date.

Determining fair value for a financial instrument requires management judgment. The degree of judgment involved generally correlates to the level of pricing readily observable in the markets. Financial instruments with quoted prices in active markets or with market observable inputs to determine fair value, such as public securities, generally require less judgment. Conversely, private placements including more complex securities that are traded infrequently are typically measured using pricing models that require more judgment as to the inputs and assumptions used to estimate fair value. There may be a number of alternative inputs to select based on an understanding of the issuer, the structure of the security and overall market conditions. In addition, these factors are inherently variable in nature as they change frequently in response to market conditions. Approximately 60% of our debt securities are public securities and approximately 40% are private placement securities.

Typically, the most significant input in the measurement of fair value is the market interest rate used to discount the estimated future cash flows of the instrument. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset.

Balances that are included in the Consolidated Balance Sheets within Investments and Long-term investments are as follows, inclusive of amounts held for sale as of December 31, 2021 (in millions):

·2022 - $9,872
·2021 - $16,958

See Notes 11A. and 12 to the Consolidated Financial Statements for a discussion of our fair value measurements, the procedures performed by management to determine that the amounts represent appropriate estimates and our accounting policy regarding unrealized appreciation on debt securities.

If the derived market rates used to calculate fair value increased by 100 basis points, the fair value of the total debt security portfolio of $9.9 billion would decrease by approximately $0.6 billion, resulting in an after-tax decrease to shareholders' equity of approximately $0.4 billion as of December 31, 2022.

# **SEGMENT REPORTING**

The following section of this MD&A discusses the results of each of our segments.

On February 13, 2023, we changed the name of our Evernorth segment to Evernorth Health Services. We will not distinguish between our prior and current segment name and will refer to our current segment name throughout this Annual Report on Form 10-K.

On July 1, 2022, we completed the sale of our life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb for approximately $5.4 billion in cash.

See Note 1 to the Consolidated Financial Statements for further description of our segments.

In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results, amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Ratios presented in this segment discussion exclude the same items as adjusted revenues and pre-tax adjusted income (loss) from operations. See Note 24 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of Income before income taxes to pre-tax adjusted income from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 24 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

In these segment discussions, we also present "pre-tax adjusted margin," defined as pre-tax adjusted income (loss) from operations divided by adjusted revenues.

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See the 'Executive Overview' section of this MD&A for summarized financial results of each of our segments.

## Evernorth Health Services Segment

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, in Pharmacy Benefits, Home Delivery Pharmacy, Specialty Pharmacy, Distribution and Care Delivery and Management Solutions. As described in the introduction to Segment Reporting, Evernorth Health Services' performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.

The key factors that impact Evernorth Health Services' Pharmacy revenues and Pharmacy and other service costs are volume, mix of claims and price. These key factors are discussed further below. See Note 2 to the Consolidated Financial Statements included in this Form 10-K for additional information on revenue and cost recognition policies for this segment.

- • As our clients' claim volumes increase or decrease, our resulting revenues and cost of revenues correspondingly increase or decrease. Our gross profit, defined as Total revenues less Pharmacy and other service costs, could also increase or decrease as a result of changes in purchasing discounts.
- • The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. Types of drugs can have an impact on our Pharmacy revenues, Pharmacy and other service costs and gross profit, including amounts payable under certain financial and performance guarantees with our clients. In addition to the types of drugs, the mix of generic claims (i.e., generic fill rate) also impacts our gross profit. Generally, higher generic fill rates reduce revenues, as generic drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic drugs is incrementally lower than the price charged to our clients, higher generic fill rates generally have a favorable impact on our gross profit. The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (such as therapies for chronic conditions) commonly dispensed from home delivery pharmacies as compared to acute medications that are primarily dispensed by pharmacies in our retail networks. Furthermore, our gross profit differs among network, home delivery and specialty distribution methods and can impact our profitability.
- • Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates. As we seek to improve the effectiveness of our integrated solutions for the benefit of our clients, we are continuously innovating and improving affordability. Our gross profit could also increase or decrease as a result of drug purchasing contract initiatives implemented. Inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients continues to be a significant driver of our revenues and cost of revenues in the current environment.

In this MD&A, we present revenues and gross profit, as well as adjusted revenues and adjusted gross profit, consistent with our segment reporting metrics, which exclude special items. For the year ended December 31, 2020, we recorded an adjustment related to a former client contract that was excluded from our adjusted metrics.

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## Results of Operations

### Financial Summary

| (Dollars in millions) | For the Years Ended December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Total revenues | $140,335 | $131,912 | $116,334 | $8,423 | 6% | $15,578 | 13% |
| Less: Contractual adjustment for a former client | - | - | (204) | - | N/M | 204 | N/M |
| Adjusted revenues (1) | $140,335 | $131,912 | $116,130 | $8,423 | 6% | $15,782 | 14% |
| Pharmacy and other service costs | $131,284 | $123,504 | $108,537 | $7,780 | 6% | $14,967 | 14% |
| Gross profit (2) | $9,051 | $8,408 | $7,797 | $643 | 8% | $611 | 8% |
| Adjusted gross profit (1),(2) | $9,051 | $8,408 | $7,593 | $643 | 8% | $815 | 11% |
| Pre-tax adjusted income from operations | $6,127 | $5,818 | $5,363 | $309 | 5% | $455 | 8% |
| Pre-tax adjusted margin | 4.4% | 4.4% | 4.6% | - | bps | (20) | bps |
| Adjusted expense ratio (3) | 2.0% | 1.9% | 1.9% | (10) | bps | - | bps |

### Selected Financial Information

| (Dollars and adjusted scripts in millions) | For the Years Ended December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Pharmacy revenue by distribution channel |  |  |  |  |  |  |  |
| Adjusted network revenues (1) | $64,946 | $64,992 | $56,181 | - | % | 16 | % |
| Adjusted home delivery and specialty revenues (1) | 61,283 | 54,391 | 49,886 | 13 |  | 9 |  |
| Other pharmacy revenues | 6,753 | 6,428 | 5,403 | 5 |  | 19 |  |
| Total adjusted pharmacy revenues (1) | $132,982 | $125,811 | $111,470 | 6 | % | 13 | % |
| Adjusted fees and other revenues (1) | 7,267 | 6,084 | 4,628 | 19 |  | 31 |  |
| Net investment income | 86 | 17 | 32 | N/M |  | (47) |  |
| Adjusted revenues (3) | $140,335 | $131,912 | $116,130 | 6 | % | 14 | % |
| Pharmacy script volume (4) |  |  |  |  |  |  |  |
| Adjusted network scripts | 1,295 | 1,355 | 1,206 | (4) | % | 12 | % |
| Adjusted home delivery and specialty scripts | 280 | 283 | 287 | (1) |  | (1) |  |
| Total adjusted scripts | 1,575 | 1,638 | 1,493 | (4) | % | 10 | % |
| Generic fill rate (5) |  |  |  |  |  |  |  |
| Network | 86.4% | 85.4% | 87.4% | 100 | bps | (200) | bps |
| Home delivery | 85.1% | 85.9% | 85.2% | (80) | bps | 70 | bps |
| Overall generic fill rate | 86.3% | 85.5% | 87.2% | 80 | bps | (170) | bps |

$^{(1)}$ Total revenues and gross profit were equal to adjusted revenues and adjusted gross profit for the years ended December 31, 2022 and December 31, 2021 as there were no special items in those periods. Amounts exclude special items for the year ended December 31, 2020.

$^{(2)}$ Gross profit and adjusted gross profit are calculated as total revenues or adjusted total revenues less pharmacy and other services costs.

$^{(3)}$ Adjusted expense ratio is calculated as selling, general and administrative expenses as a percentage of adjusted revenues.

$^{(4)}$ Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted as one script.

$^{(5)}$ Generic fill rate is defined as the total number of generic scripts divided by the total overall scripts filled.

### 2022 versus 2021

**Adjusted network revenues** slightly decreased, reflecting a decrease in claims volume; partially offset by inflation on branded drugs.

**Adjusted home delivery and specialty revenues** increased 13%, reflecting higher specialty claims volume, due in part to our collaboration with Prime Therapeutics, inflation on, and higher sales of, branded drugs. These increases were partially offset by lower home delivery claims volume.

**Other pharmacy revenues** increased 5%, reflecting higher volume from our CuraScript SD business.

**Adjusted fees and other revenues** increased 19%, reflecting customer growth from our continued contract affordability services and the growth of our Care Delivery and Management Solutions.

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**Adjusted gross profit** and **pre-tax adjusted income from operations** increased 8% and 5%, respectively, reflecting continued contract affordability improvements and growth in our accelerated businesses; partially offset by strategic investments in expanding our services portfolio and digital capabilities, as well as lower volume in our network and home delivery businesses.

The **adjusted expense ratio** increased 10 bps, reflecting higher revenues and expense discipline, which enabled us to increase strategic investments in expanding our services portfolio and digital capabilities.

### **Cigna Healthcare Segment**

Cigna Healthcare includes the U.S. Commercial, U.S. Government and International Health businesses, which provide comprehensive medical and coordinated solutions to clients and customers. As described in the introduction to Segment Reporting, performance of the Cigna Healthcare segment is measured using adjusted revenues and pre-tax adjusted income from operations. Key factors affecting results for this segment include:

- customer growth;
- revenue growth;
- percentage of Medicare Advantage customers in plans eligible for quality bonus payments;
- medical costs as a percentage of premiums (medical care ratio or "MCR") for our insured businesses; and
- selling, general and administrative expenses as a percentage of adjusted revenues (adjusted expense ratio).

### **Results of Operations**

| Financial Summary | For the Years Ended December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| (Dollars in millions) |  |  |  |  |  |  |  |
| Adjusted revenues | $45,036 | $44,652 | $41,135 | $384 | 1% | $3,517 | 9% |
| Pre-tax adjusted income from operations | $4,072 | $3,609 | $4,031 | $463 | 13% | $(422) | (10) % |
| Pre-tax adjusted margin | 9.0% | 8.1% | 9.8% |  | 90 bps |  | (170) bps |
| Medical care ratio | 81.7% | 84.0% | 78.3% |  | 230 bps |  | (570) bps |
| Adjusted expense ratio | 21.8% | 21.0% | 23.5% |  | (80) bps |  | 250 bps |

### **2022 versus 2021**

**Adjusted revenues** increased 1%, primarily reflecting increased specialty contributions, higher premium rates due to anticipated underlying medical cost trend and customer growth in International Health and U.S. Commercial, mostly offset by a decrease in U.S. Government customers, including the disposition of the Medicaid business, as well as lower net investment income.

**Pre-tax adjusted income from operations** increased 13%, primarily due to lower medical care ratios in U.S. Commercial and U.S. Government and increased specialty contributions in U.S. Commercial, partially offset by lower net investment income.

The **medical care ratio** decreased 230 bps, primarily due to lower medical costs, reflecting decreased direct COVID-19 testing, treatment and vaccine costs in U.S. Commercial and U.S. Government, as well as effective pricing execution, including affordability initiatives, partially offset by U.S. Government risk adjustment updates related to prior years.

The **adjusted expense ratio** increased 80 bps, primarily due to a higher expense ratio in U.S. Government reflecting increased investments to support future growth as well as the disposition of the Medicaid business, partially offset by revenue growth and expense efficiencies in U.S. Commercial and International Health.

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## Medical Customers

A medical customer is defined as a person meeting any one of the following criteria:

- is covered under a medical insurance policy, managed care arrangement or service agreement issued by us;
- has access to our provider network for covered services under their medical plan; or
- has medical claims that are administered by us.

### Cigna Healthcare Medical Customers

| (In thousands) | As of December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Insured | 4,756 | 4,757 | 4,538 | (1) | - % | 219 | 5% |
| U.S. Commercial | 2,238 | 2,166 | 2,141 | 72 | 3 | 25 | 1 |
| U.S. Government | 1,349 | 1,510 | 1,387 | (161) | (11) | 123 | 9 |
| International Health (1) | 1,169 | 1,081 | 1,010 | 88 | 8 | 71 | 7 |
| Services only | 13,248 | 12,324 | 12,112 | 924 | 7 | 212 | 2 |
| U.S. Commercial | 12,614 | 11,688 | 11,485 | 926 | 8 | 203 | 2 |
| U.S. Government | 5 | - | - | 5 | N/M | - | N/M |
| International Health (1) | 629 | 636 | 627 | (7) | (1) | 9 | 1 |
| Total | 18,004 | 17,081 | 16,650 | 923 | 5% | 431 | 3% |

$^{(1)}$ International Health excludes medical customers served by less than 100% owned subsidiaries.

Our medical customer base increased 5%, reflecting growth in our fee-based products from Middle Market and Select market segments as well as growth in International Health, partially offset by a decrease in U.S. Government customers, including the disposition of the Medicaid business.

See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare's market segments.

## Unpaid Claims and Claim Expenses

| (In millions) | As of December 31, |  |  | Change Increase (Decrease) |  | Change Increase (Decrease) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Unpaid claims and claim expenses - Cigna Healthcare | $4,176 | $4,261 | $3,695 | $(85) | (2) % | $566 | 15% |

Our unpaid claims and claim expenses liability decreased 2%, primarily driven by lower Medicare Advantage volumes and the disposition of the Medicaid business, partially offset by higher U.S. Commercial volumes.

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## Other Operations

Other Operations includes corporate owned life insurance ('COLI'), the International businesses sold to Chubb on July 1, 2022, our interest in a joint venture in Türkiye sold to our partner in December 2022, the Group Disability and Life business sold on December 31, 2020 and the Company's run-off operations. As described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax adjusted income from operations.

### Results of Operations

#### Financial Summary

| (Dollars in millions) | For the Years Ended December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Adjusted revenues | $2,262 | $3,989 | $8,446 | $(1,727) | (43) % | $(4,457) | (53) % |
| Pre-tax adjusted income from operations | $500 | $889 | $966 | $(389) | (44) % | $(77) | (8) % |
| Pre-tax adjusted margin | 22.1% | 22.3% | 11.4% |  | (20) bps |  | 1,090 bps |

#### 2022 versus 2021

*Adjusted revenues and pre-tax adjusted income from operations* decreased [REDACTED] due to the absence of revenues and earnings from the businesses divested in the Chubb transaction.

#### Other Items Related to the Divested International Businesses

Other Operations' adjusted revenues associated with the divested International businesses were 77% and 86% for 2022 and 2021, respectively. Other Operation's pre-tax adjusted income from operations associated with the divested International businesses were 83% and 89% for 2022 and 2021, respectively.

### Corporate

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs and intersegment eliminations for products and services sold between segments.

#### Financial Summary

| (In millions) | For the Years Ended December 31, |  |  | Change Favorable (Unfavorable) |  | Change Favorable (Unfavorable) |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2022 vs. 2021 |  | 2021 vs. 2020 |  |
| Pre-tax adjusted loss from operations | $(1,466) | $(1,339) | $(1,552) | $(127) | (9) % | $213 | 14% |

#### 2022 versus 2021

*Pre-tax adjusted loss from operations* increased 9%, reflecting an increase in operating expenses for enterprise-wide initiatives.

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# INVESTMENT ASSETS

The following table presents our investment asset portfolio excluding separate account assets. Additional information regarding our investment assets is included in Notes 11, 12, 13 and 15 to the Consolidated Financial Statements.

| (In millions) | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Debt securities | $9,872 | $16,958 |
| Equity securities | 622 | 603 |
| Commercial mortgage loans | 1,614 | 1,566 |
| Policy loans | 1,218 | 1,338 |
| Other long-term investments | 3,728 | 3,574 |
| Short-term investments | 139 | 428 |
| Total |  | 24,467 |
| Investments classified as Assets of businesses held for sale (1) |  | (5,109) |
| Investments per Consolidated Balance Sheets | $17,193 | $19,358 |

$^{(1)}$ Investments related to the divested International businesses that were held for sale. See Note 4 to the Consolidated Financial Statements for additional information.

## Investment Outlook

We continue to actively monitor economic conditions including the impact of inflation, higher interest rates and the potential for a recession in 2023 on the portfolio. Future realized and unrealized investment results will be driven largely by market conditions and these future conditions are not reasonably predictable. We believe that the vast majority of our investments will continue to perform under their contractual terms. We manage the portfolio for long-term economics and therefore we expect to hold a significant portion of these assets for the long term. The following discussion addresses the strategies and risks associated with our various classes of investment assets. Although future declines in investment fair values remain possible due to interest rate movements and credit deterioration due to both investment-specific uncertainties and global economic uncertainties as discussed below, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.

## Debt Securities

Investments in debt securities include publicly traded and privately placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value in our Consolidated Balance Sheets. Additional information regarding valuation methodologies, key inputs and controls is included in Note 12 to the Consolidated Financial Statements.

The following table reflects our portfolio of debt securities by type of issuer:

| (In millions) | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Federal government and agency | $312 | $387 |
| State and local government | 41 | 171 |
| Foreign government | 365 | 2,616 |
| Corporate | 8,806 | 13,266 |
| Mortgage and other asset-backed | 348 | 518 |
| Total | $9,872 | $16,958 |

Our debt securities portfolio decreased during the year ended December 31, 2022 [REDACTED] a decrease in valuations due to a significant rise in interest rates, causing our portfolio to change to a net unrealized depreciation position at December 31, 2022, from a net unrealized appreciation position at December 31, 2021. More detailed information about debt securities by type of issuer, maturity dates and net unrealized position is included in Note 11 to the Consolidated Financial Statements.

As of December 31, 2022, $8.0 billion, or 81%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.9 billion were below investment grade. The majority of the bonds that are below investment grade were rated at the higher end of the non-investment grade spectrum. These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.

Debt securities include private placement assets of $4.1 billion. These investments are generally less marketable than publicly traded bonds; however, yields on these investments tend to be higher than yields on publicly traded bonds with comparable credit risk. We

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perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.

Investments in debt securities are diversified by issuer, geography and industry. On an aggregate basis, the debt securities portfolio continues to perform according to original expectations, which includes a long-term economic investment strategy. Elevated global inflation and rising interest rates experienced during 2022, as well as continuing supply chain disruptions are the primary risks that many of the issuers in our portfolio are facing. To date, most issuers have been successful in managing the cost escalation and product shortages without undue margin pressure. We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.

## Commercial Mortgage Loans

As of December 31, 2022, our $1.6 billion commercial mortgage loan portfolio consisted of approximately 50 fixed-rate loans, diversified by property type, location and borrower. These loans are carried in our Consolidated Balance Sheets at their unpaid principal balance, net of an insignificant allowance for expected credit losses. As a result of increasing market interest rates since the majority of these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2022. See Note 12 to the Consolidated Financial Statements for further details. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested in the property generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 11 to the Consolidated Financial Statements.

Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at less than 65% of the property's value at origination of the loan. Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations. We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.

We assess the credit quality of our commercial mortgage loan portfolio annually, generally in the second fiscal quarter by reviewing each holding's most recent financial statements, rent rolls, budgets and relevant market reports. The review performed in the second quarter of 2022 confirmed ongoing strong overall credit quality in line with the previous year's results.

Office sector fundamentals have been and continue to be weak and values are experiencing stress due to multiple headwinds: expanded work from home flexibility, shorter term leases, elevated tenant improvement allowances and corporate migration to lower cost states. Additionally, the current macroeconomic headwinds are impacting capital markets and reducing investor appetite for capital intensive assets (e.g., offices and regional shopping malls). Our commercial mortgage loan portfolio has no exposure to regional shopping malls and less than 30% exposure to office properties.

## Other Long-term Investments

Other long-term investments of $3.7 billion as of December 31, 2022 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses. Accounting policies for these investments are discussed in Note 11 to the Consolidated Financial Statements. The increase in other long-term investments of $0.2 billion since December 31, 2021 is primarily driven by net additional funding activity partially offset by the effects of completing the [REDACTED]. These limited partnership entities typically invest in mezzanine debt or equity of privately-held companies and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified across approximately 190 separate partnerships and 90 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 3% of our securities and real estate limited partnership portfolio.

Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. Our Net investment income during 2022 was strong, but decreased significantly year over year as 2021 reflected even stronger corporate earnings and higher public and private asset valuations as a result of the broad recovery coming out of the COVID-19 pandemic. We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less than 5% of our other long-term investments are exposed to real estate in the office sector.

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture under the equity method of accounting and report our share of the net assets of $0.9 billion in Other assets. Our 50% share of the investment portfolio

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supporting the joint venture's liabilities is approximately $9.2 billion as of December 31, 2022. These investments were comprised of approximately 75% debt securities, including government and corporate debt diversified by issuer, industry and geography; 15% equities, including mutual funds, equity securities and private equity partnerships; and 10% long-term deposits and policy loans. We participate in the approval of the joint venture's investment strategy and continuously review its execution. There were no investments with a material unrealized loss as of December 31, 2022.

## MARKET RISK

### Financial Instruments

Our assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for financial instruments:

- changes in the fair values of insurance-related assets and liabilities because their primary risks are insurance rather than market risk;
- changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets); and
- changes in the fair values of other significant assets and liabilities, such as goodwill, deferred policy acquisition costs, taxes and various accrued liabilities. Because they are not financial instruments, their primary risks are other than market risk.

Our primary market risk exposures changed significantly since December 31, 2021 as a result of completing the Chubb transaction during the third quarter 2022, as described in Note 4 to the Consolidated Financial Statements. Our exposure to foreign currency exchange rate risk from financial instruments is no longer significant. Excluding the items noted in the paragraph above, our primary market risk exposure from financial instruments is our interest-rate risk exposure to fixed-rate, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.

### Our Management of Market Risks

We predominantly rely on three techniques to manage our exposure to market risk:

- **Investment/liability matching.** We generally select investment assets with characteristics (such as duration, yield, currency and liquidity) that correspond to the underlying characteristics of our related insurance and contractholder liabilities so that we can match the investments to our obligations. Shorter-term investments generally support shorter-term life and health liabilities. Medium-term, fixed-rate investments support interest-sensitive and health liabilities. Longer-term investments generally support products with longer payout periods such as annuities.
- **Use of local currencies for foreign operations.** We generally conduct our international business through foreign operating entities that maintain assets and liabilities in local currencies. This technique limits exchange rate risk to our net assets.
- **Use of derivatives.** We use derivative financial instruments to reduce our primary market risks. See Note 11 to the Consolidated Financial Statements for additional information about derivative financial instruments.

### Effect of Market Fluctuations

We determine the sensitivity of our financial instruments, primarily debt securities and commercial mortgage loans, to our primary market risk exposure by estimating the present value of future cash flows using various models, primarily duration modeling. According to this analysis, assuming a 100 basis point increase in interest rates, the effect of hypothetical changes in market rates on the fair value of certain financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have been as follows:

Market scenario for certain non-insurance financial instruments

| (in billions) | Loss in Fair Value |  |
| --- | --- | --- |
|  | December 31, 2022 | December 31, 2021 |
| 100 basis point increase in interest rates (excluding the Company's long-term debt) | $0.7 | $1.4 |

In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $1.8 billion at December 31, 2022 and $2.9 billion at December 31, 2021. Changes in the fair value of our long-term debt do not impact our financial position or operating results since long-term debt is not required to be recorded at fair value. See Note 7 to the Consolidated Financial Statements for additional information about the Company's debt.

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The decrease in the effect of this hypothetical change in interest rates is a result of decreases in the fair value of our debt securities and long-term debt since December 31, 2021, as well as disposals associated with completing the Chubb transaction during the third quarter of 2022, see Note 4 to the Consolidated Financial Statements for further details.

# **Item 7A. *QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK***

The information contained under the caption 'Market Risk' in the MD&A section of this Form 10-K is incorporated by reference.

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## **Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

### **Report of Independent Registered Public Accounting Firm**

To the Board of Directors and Shareholders of The Cigna Group

#### ***Opinions on the Financial Statements and Internal Control over Financial Reporting***

We have audited the accompanying consolidated balance sheets of The Cigna Group and its subsidiaries (the 'Company') as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedules listed in the index appearing on page FS-1 of this Form 10-K (collectively referred to as the 'consolidated financial statements'). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

#### ***Basis for Opinions***

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

#### ***Definition and Limitations of Internal Control over Financial Reporting***

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

### ***Critical Audit Matters***

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

### ***Goodwill Impairment Assessment - U.S. Government Reporting Unit***

As described in Note 19 to the consolidated financial statements, as of December 31, 2022, goodwill in the Cigna Healthcare segment was $10.7 billion, of which a portion of the balance relates to the U.S. Government reporting unit. Management conducts its annual quantitative evaluation for goodwill impairment during the third quarter at the reporting unit level and writes it down through shareholders' net income if impaired. On a quarterly basis, management performs a qualitative impairment assessment to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. Fair value of a reporting unit is generally estimated based on both a discounted cash flow analysis and a market approach using assumptions that management believes a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value primarily include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital. Future cash flows for the U.S. Government reporting unit is primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the U.S. Government reporting unit is a critical audit matter are the significant judgment by management when developing the fair value estimate of the reporting unit. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions related to the discount rate, forecasted revenues, benefit expenses, operating expenses, and long-term growth rates (collectively referred to as the 'significant assumptions'). In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's goodwill impairment assessment, including controls over management's methodology, inputs, and assumptions used in developing the fair value estimate of the U.S. Government reporting unit. These procedures also included, among others (i) testing management's process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the discounted cash flow analysis and market approach; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow analysis and market approach; and (iv) evaluating the reasonableness of the significant assumptions used by management. Evaluating the reasonableness of the significant assumptions involved consideration of (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit, as applicable. Professionals with specialized skill and knowledge were used to assist in the evaluation of the reasonableness related to the discount rate and long-term growth rates significant assumptions.

/s/ PricewaterhouseCoopers LLP  
Hartford, Connecticut  
February 23, 2023

We have served as the Company's auditor since 1983.

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# **The Cigna Group**  
 **Consolidated Statements of Income**

| (In millions, except per share amounts) | For the Years Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Revenues |  |  |  |
| Pharmacy revenues | $128,566 | $121,413 | $107,769 |
| Premiums | 39,915 | 41,154 | 42,627 |
| Fees and other revenues | 10,880 | 9,962 | 8,761 |
| Net investment income | 1,155 | 1,549 | 1,244 |
| TOTAL REVENUES | 180,516 | 174,078 | 160,401 |
| Benefits and expenses |  |  |  |
| Pharmacy and other service costs | 124,834 | 117,553 | 103,484 |
| Medical costs and other benefit expenses | 32,206 | 33,562 | 32,710 |
| Selling, general and administrative expenses | 13,186 | 13,030 | 14,072 |
| Amortization of acquired intangible assets | 1,876 | 1,998 | 1,982 |
| TOTAL BENEFITS AND EXPENSES | 172,102 | 166,143 | 152,248 |
| Income from operations | 8,414 | 7,935 | 8,153 |
| Interest expense and other | (1,228) | (1,208) | (1,438) |
| Debt extinguishment costs | - | (141) | (199) |
| Gain on sale of businesses | 1,662 | - | 4,203 |
| Net realized investment (losses) gains | (495) | 196 | 149 |
| Income before income taxes | 8,353 | 6,782 | 10,868 |
| TOTAL INCOME TAXES | 1,607 | 1,367 | 2,379 |
| Net income | 6,746 | 5,415 | 8,489 |
| Less: Net income attributable to noncontrolling interests | 78 | 50 | 31 |
| SHAREHOLDERS' NET INCOME | $6,668 | $5,365 | $8,458 |
| Shareholders' net income per share |  |  |  |
| Basic | $21.54 | $15.87 | $23.17 |
| Diluted | $21.30 | $15.73 | $22.96 |

*The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.*

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# **The Cigna Group**  
 **Consolidated Statements of Comprehensive Income**

| (In millions) | For the Years Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net income | $6,746 | $5,415 | $8,489 |
| Other comprehensive income (loss), net of tax |  |  |  |
| Net unrealized depreciation on securities and derivatives | (1,005) | (215) | (75) |
| Net translation gains (losses) on foreign currencies | 72 | (232) | 252 |
| Postretirement benefits liability adjustment | 420 | 410 | (105) |
| Other comprehensive (loss) income, net of tax | (513) | (37) | 72 |
| Total comprehensive income | 6,233 | 5,378 | 8,561 |
| Comprehensive income (loss) attributable to noncontrolling interests |  |  |  |
| Net income attributable to redeemable noncontrolling interests | 11 | 19 | 14 |
| Net income attributable to other noncontrolling interests | 67 | 31 | 17 |
| Other comprehensive loss attributable to redeemable noncontrolling interests | (2) | (14) | (8) |
| Total comprehensive income attributable to noncontrolling interests | 76 | 36 | 23 |
| SHAREHOLDERS' COMPREHENSIVE INCOME | $6,157 | $5,342 | $8,538 |

*The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.*

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# **The Cigna Group**  
 **Consolidated Balance Sheets**

| (In millions) | As of December 31, |  |
| --- | --- | --- |
|  | 2022 | 2021 |
| Assets |  |  |
| Cash and cash equivalents | $5,924 | $5,081 |
| Investments | 905 | 920 |
| Accounts receivable, net | 17,218 | 15,071 |
| Inventories | 4,777 | 3,722 |
| Other current assets | 1,296 | 1,283 |
| Assets of businesses held for sale | - | 10,057 |
| Total current assets | 30,120 | 36,134 |
| Long-term investments | 16,288 | 18,438 |
| Reinsurance recoverables | 4,743 | 4,970 |
| Property and equipment | 3,774 | 3,692 |
| Goodwill | 45,811 | 45,811 |
| Other intangible assets | 32,492 | 34,102 |
| Other assets | 3,426 | 3,405 |
| Separate account assets | 7,278 | 8,337 |
| TOTAL ASSETS | $143,932 | $154,889 |
| Liabilities |  |  |
| Current insurance and contractholder liabilities | $5,385 | $5,318 |
| Pharmacy and other service costs payable | 17,070 | 15,309 |
| Accounts payable | 7,775 | 6,655 |
| Accrued expenses and other liabilities | 8,006 | 7,322 |
| Short-term debt | 2,993 | 2,545 |
| Liabilities of businesses held for sale | - | 6,423 |
| Total current liabilities | 41,229 | 43,572 |
| Non-current insurance and contractholder liabilities | 11,481 | 12,563 |
| Deferred tax liabilities, net | 7,751 | 8,346 |
| Other non-current liabilities | 3,142 | 3,762 |
| Long-term debt | 28,100 | 31,125 |
| Separate account liabilities | 7,278 | 8,337 |
| TOTAL LIABILITIES | 98,981 | 107,705 |
| Contingencies - Note 23 |  |  |
| Redeemable noncontrolling interests | 66 | 54 |
| Shareholders' equity |  |  |
| Common stock (1) | 4 | 4 |
| Additional paid-in capital | 30,233 | 29,574 |
| Accumulated other comprehensive loss | (1,395) | (884) |
| Retained earnings | 37,874 | 32,593 |
| Less: Treasury stock, at cost | (21,844) | (14,175) |
| TOTAL SHAREHOLDERS' EQUITY | 44,872 | 47,112 |
| Other noncontrolling interests | 13 | 18 |
| Total equity | 44,885 | 47,130 |
| Total liabilities and equity | $143,932 | $154,889 |

$^{(1)}$ Par value per share, $0.01; shares issued, 398 million as of December 31, 2022 and 394 million as of December 31, 2021; authorized shares, 600 million.

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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# **The Cigna Group**

# **Consolidated Statements of Changes in Total Equity**

| (In millions) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) | Retained Earnings | Treasury Stock | Shareholders' Equity | Other Non-controlling Interests | Total Equity | Redeemable Noncontrolling Interests |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at December 31, 2019 | $4 | $28,306 | $(941) | $20,162 | $(2,193) | $45,338 | $6 | $45,344 | $35 |
| Cumulative effect of adopting new credit loss guidance (ASU 2016-13) |  |  |  | (30) |  | (30) |  | (30) |  |
| Effect of issuing stock for employee benefit plans |  | 672 |  |  | (90) | 582 |  | 582 |  |
| Other comprehensive income (loss) |  |  | 80 |  |  | 80 |  | 80 | (8) |
| Net income |  |  |  | 8,458 |  | 8,458 | 17 | 8,475 | 14 |
| Common dividends declared (per share: $0.04) |  |  |  | (15) |  | (15) |  | (15) |  |
| Repurchase of common stock |  |  |  |  | (4,089) | (4,089) |  | (4,089) |  |
| Other transactions impacting noncontrolling interests |  | (3) |  |  |  | (3) | (16) | (19) | 17 |
| Balance at December 31, 2020 | $4 | $28,975 | $(861) | $28,575 | $(6,372) | $50,321 | $7 | $50,328 | $58 |
| Effect of issuing stock for employee benefit plans |  | 604 |  |  | (93) | 511 |  | 511 |  |
| Other comprehensive loss |  |  | (23) |  |  | (23) |  | (23) | (14) |
| Net income |  |  |  | 5,365 |  | 5,365 | 31 | 5,396 | 19 |
| Common dividends declared (per share: $4.00) |  |  |  | (1,347) |  | (1,347) |  | (1,347) |  |
| Repurchase of common stock |  |  |  |  | (7,710) | (7,710) |  | (7,710) |  |
| Other transactions impacting noncontrolling interests |  | (5) |  |  |  | (5) | (20) | (25) | (9) |
| Balance at December 31, 2021 | $4 | $29,574 | $(884) | $32,593 | $(14,175) | $47,112 | $18 | $47,130 | $54 |
| Effect of issuing stock for employee benefit plans |  | 659 |  |  | (76) | 583 |  | 583 |  |
| Other comprehensive loss |  |  | (511) |  |  | (511) |  | (511) | (2) |
| Net income |  |  |  | 6,668 |  | 6,668 | 67 | 6,735 | 11 |
| Common dividends declared (per share: $4.48) |  |  |  | (1,387) |  | (1,387) |  | (1,387) |  |
| Repurchase of common stock |  |  |  |  | (7,593) | (7,593) |  | (7,593) |  |
| Other transactions impacting noncontrolling interests |  |  |  |  |  | - | (72) | (72) | 3 |
| Balance at December 31, 2022 | $4 | $30,233 | $(1,395) | $37,874 | $(21,844) | $44,872 | $13 | $44,885 | $66 |

*The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.*

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