CVS HEALTH Corp

Previous wording

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a leading health solutions company building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of March 31, 2024, the Company had more than 9,000 retail locations, more than 1,000 walk-in medical clinics, 205 primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company is creating new sources of value through its integrated model allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

Current wording

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a leading health solutions company building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of June 30, 2024, the Company had more than 9,000 retail locations, more than 1,000 walk-in medical clinics, 207 primary care medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company is creating new sources of value through its integrated model allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

Previous wording

The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs and Medicaid health care management services. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” The Company sold Insured plans directly to individual consumers through the individual public health insurance exchanges (“Public Exchanges”) in 17 states as of March 31, 2024.

Current wording

The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs and Medicaid health care management services. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” The Company sold Insured plans directly to individual consumers through the individual public health insurance exchanges in 17 states as of June 30, 2024.

Previous wording

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Company also announced the launch of Cordavis TM, a wholly owned subsidiary that will work directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on Insurance Exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

Current wording

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Company also launched Cordavis TM, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on Insurance Exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

Previous wording

The following discussion explains the material changes in the Company’s operating results for the three months ended March 31, 2024 and 2023, and the significant developments affecting the Company’s financial condition since December 31, 2023. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Current wording

The following discussion explains the material changes in the Company’s operating results for the three and six months ended June 30, 2024 and 2023, and the significant developments affecting the Company’s financial condition since December 31, 2023. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Previous wording

•Operating expenses increased $710 million, or 7.4%, in the three months ended March 31, 2024 compared to the prior year. The increase in operating expenses was primarily due to increased operating expenses to support growth in the business and operating expenses associated with Signify Health and Oak Street Health which were acquired in March and May of 2023, respectively, including the amortization of acquired intangible assets. These increases were partially offset by a decline in operating expenses in the Pharmacy & Consumer Wellness segment due to the impact of a decrease in store count.

Current wording

•Operating expenses increased $1.2 billion, or 6.0%, in the six months ended June 30, 2024 compared to the prior year. The increase in operating expenses was primarily due to increased operating expenses to support growth in the business and operating expenses associated with Oak Street Health which was acquired in May of 2023, including the amortization of acquired intangible assets. These increases were partially offset by a decline in operating expenses in the Pharmacy & Consumer Wellness segment due to the impact of a decrease in store count.

Previous wording

•Interest expense increased $127 million, or 21.6%, due to higher debt in the three months ended March 31, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company’s acquisitions of Signify Health and Oak Street Health. See “Liquidity and Capital Resources” later in this report for additional information.

Current wording

•Interest expense increased $173 million, or 13.6%, due to higher debt in the six months ended June 30, 2024, primarily driven by long-term debt issued in February and June of 2023 to fund the Company’s acquisitions of Signify Health and Oak Street Health, respectively, as well as long-term debt issued in May 2024. See “Liquidity and Capital Resources” later in this report for additional information.

Previous wording

•The effective income tax rate was 28.9% for the three months ended March 31, 2024 compared to 25.6% for the three months ended March 31, 2023. The increase in the effective income tax rate was primarily due to the impact of certain discrete tax items and their proportion to lower pre-tax income recorded during the three months ended March 31, 2024.

Current wording

•The effective income tax rate was 26.2% for the six months ended June 30, 2024 compared to 25.6% for the six months ended June 30, 2023. The increase in the effective income tax rate was primarily due to the impact of certain discrete tax items, partially offset by a state tax settlement during the six months ended June 30, 2024.

Previous wording

•Utilization, particularly in Medicare Advantage programs, persisted at elevated levels through the first quarter of 2024. Although the level of Medicare utilization is difficult to accurately predict, at this time, we expect that continued elevated utilization will pressure the Company’s Health Care Benefits segment and its health care delivery assets in its Health Services segment for the remainder of the year.

Current wording

•Utilization, particularly in Medicare Advantage programs, persisted at elevated levels through the second quarter of 2024. Although the level of Medicare utilization is difficult to accurately predict, at this time, the Company expects that continued elevated utilization will pressure its Health Care Benefits segment and its health care delivery assets in its Health Services segment for the remainder of the year. Further, continued elevated utilization in Medicare Advantage may also result in the Company having to record a Medicare premium deficiency reserve in the Health Care Benefits segment during the third quarter of 2024.

Previous wording

•Ongoing GLP-1 supply constraints, and the associated impact on product mix, could pressure the Company’s Pharmacy Services business.

Current wording

•GLP-1 supply disruptions, and the associated impact on product mix, could pressure the Company’s ability to deliver savings to clients and could impact the Company’s results.

Previous wording

(1)Total revenues of the Health Services segment include approximately $3.4 billion and $4.1 billion of retail co-payments for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Total revenues of the Health Services segment include approximately $2.8 billion and $3.4 billion of retail co-payments for the three months ended June 30, 2024 and 2023, respectively, and $6.2 billion and $7.5 billion of retail co-payments for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the unaudited condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

Current wording

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the unaudited condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the

Previous wording

(3)During the three months ended March 31, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. During the three months ended March 31, 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

Current wording

(3)During the three and six months ended June 30, 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. During the three and six months ended June 30, 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

Previous wording

(4)During the three months ended March 31, 2024, the opioid litigation charge relates to a change in the Company’s accrual related to ongoing opioid litigation matters.

Current wording

(4)During the six months ended June 30, 2024, the opioid litigation charge relates to a change in the Company’s accrual related to ongoing opioid litigation matters.

Previous wording

(5)During the three months ended March 31, 2023, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the planned reduction of corporate office real estate space in response to the Company’s new flexible work arrangement. The office real estate optimization charges are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Health Care Benefits, Health Services and Corporate/Other segments.

Current wording

(6)During the three and six months ended June 30, 2023, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the planned reduction of corporate office real estate space in response to the Company’s new flexible work arrangement. The office real estate optimization charges are reflected in the Company’s unaudited condensed consolidated statements of operations in operating expenses within the Health Care Benefits, Health Services and Corporate/Other segments.

Previous wording

(6)During the three months ended March 31, 2023, the loss on assets held for sale relates to the LTC reporting unit within the Pharmacy & Consumer Wellness segment. During 2022, the Company determined that its LTC business was no longer a strategic asset and committed to a plan to sell it, at which time the LTC business met the criteria for held-for-sale accounting and its net assets were accounted for as assets held for sale. During the first quarter of 2023, a loss on assets held for sale was recorded to write down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and accordingly the net assets associated with the LTC business were reclassified to held and used at their respective fair values.

Current wording

(7)During the six months ended June 30, 2023, the loss on assets held for sale relates to the LTC reporting unit within the Pharmacy & Consumer Wellness segment. During 2022, the Company determined that its LTC business was no longer a strategic asset and committed to a plan to sell it, at which time the LTC business met the criteria for held-for-sale accounting and its net assets were accounted for as assets held for sale. During the first quarter of 2023, a loss on assets held for sale was recorded to write down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and accordingly the net assets associated with the LTC business were reclassified to held and used at their respective fair values.

Previous wording

•The MBR increased to 90.4% in the three months ended March 31, 2024 compared to 84.6% in the prior year driven by increased Medicare utilization, the unfavorable impact of the previously disclosed decline in the Company’s 2024 Medicare Advantage star ratings, an unfavorable year-over-year impact of prior-year development, as well as the impact of an additional day in 2024 due to the leap year.

Current wording

•The MBR increased to 89.6% in the three months ended June 30, 2024 compared to 86.2% in the prior year driven by increased utilization and the unfavorable impact of the previously disclosed decline in the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line, higher acuity in Medicaid primarily attributable to the resumption of redeterminations, as well as a change in estimate related to the individual exchange business risk adjustment accrual for the 2023 plan year recorded in the second quarter of 2024. These increases were partially offset by a favorable year-over-year impact of prior period development.

Previous wording

•Operating expenses increased $476 million, or 12.3%, in the three months ended March 31, 2024 compared to the prior year primarily driven by increased operating expenses to support the growth in the Medicare and Commercial product lines. Operating expenses as a percentage of total revenues decreased to 13.5% in the three months ended March 31, 2024 compared to 15.0% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth.

Current wording

•Operating expenses increased $476 million, or 12.0%, in the three months ended June 30, 2024 compared to the prior year primarily driven by increased operating expenses to support growth across the business. Operating expenses as a percentage of total revenues decreased to 13.7% in the three months ended June 30, 2024 compared to 14.8% in the prior year, reflecting improved fixed cost leverage across the business due to membership growth.

Previous wording

•Adjusted operating income decreased $1.1 billion, or 59.9%, in the three months ended March 31, 2024 compared to the prior year primarily driven by increased Medicare utilization, the unfavorable impact of the Company’s 2024 Medicare Advantage star ratings, as well as the unfavorable year-over-year impact of prior-year development. These decreases were partially offset by increased volume due to growth in the Medicare and Commercial product lines, an increase in net investment income and improved fixed cost leverage across the business due to membership growth.

Current wording

•Adjusted operating income decreased $1.7 billion, or 50.4%, in the six months ended June 30, 2024 compared to the prior year primarily driven by increased utilization and the unfavorable impact of the Company’s Medicare Advantage star ratings for the 2024 payment year within the Medicare product line. These decreases were partially offset by an increase in net investment income and improved fixed cost leverage across the business due to membership growth.

Previous wording

•Medical membership as of March 31, 2024 of 26.8 million increased 1.1 million members compared with December 31, 2023, reflecting increases in the Medicare and Commercial product lines, including an increase of 493,000 members related to the individual exchange business within the Commercial product line. These increases were partially offset by a decline in the Medicaid product line.

Current wording

•Medical membership as of June 30, 2024 of 27.0 million increased by more than 1.3 million members compared with June 30, 2023, reflecting increases in the Medicare and Commercial product lines. These increases were partially offset by a decline in the Medicaid product line, primarily attributable to the resumption of Medicaid redeterminations following the expiration of the public health emergency in May 2023.

Previous wording

•Operating expenses increased $302 million, or 56.2%, in the three months ended March 31, 2024 compared to the prior year primarily due to operating expenses associated with Oak Street Health and Signify Health, including the amortization of acquired intangible assets.

Current wording

•Operating expenses increased $55 million, or 6.9%, in the three months ended June 30, 2024 compared to the prior year primarily due to operating expenses associated with Oak Street Health, including the amortization of acquired intangible assets.

Previous wording

•Pharmacy claims processed decreased 21.2% on a 30-day equivalent basis in the three months ended March 31, 2024 compared to the prior year, reflecting the previously announced loss of a large client during the three months ended March 31, 2024.

Current wording

•Pharmacy claims processed decreased 18.3% on a 30-day equivalent basis in the three months ended June 30, 2024 compared to the prior year, reflecting the previously announced loss of a large client.

Previous wording

•The Health Services segment’s generic dispensing rate remained relatively consistent at 88.3% in the three months ended March 31, 2024 compared to 88.4% in the prior year.

Current wording

•The Health Services segment’s generic dispensing rate remained relatively consistent at 88.2% in the three months ended June 30, 2024 compared to 88.3% in the prior year.

Previous wording

•Total revenues decreased $4.3 billion, or 9.7%, in the three months ended March 31, 2024 compared to the prior year primarily driven by the previously announced loss of a large client during the three months ended March 31, 2024 and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, growth in specialty pharmacy and the acquisitions of Oak Street Health and Signify Health.

Current wording

•Total revenues decreased $8.4 billion, or 9.2%, in the six months ended June 30, 2024 compared to the prior year primarily driven by the previously announced loss of a large client and continued pharmacy client price improvements. These decreases were partially offset by pharmacy drug mix, increased contributions from the Company’s health care delivery assets, including the acquisitions of Oak Street Health and Signify Health, as well as growth in specialty pharmacy.

Previous wording

•Total revenues increased $3.2 billion, or 3.7%, in the three months ended March 31, 2024 compared to the prior year primarily driven by growth in the Health Care Benefits and Pharmacy & Consumer Wellness segments, partially offset by a decline in the Health Services segment.

Current wording

•Total revenues increased $1.1 billion, or 3.7%, in the three months ended June 30, 2024 compared to the prior year primarily driven by increased prescription volume and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count and lower contributions from COVID-19 over-the-counter (“OTC”) test kits since the expiration of the public health emergency in May 2023.

Previous wording

•Pharmacy same store sales increased 7.3% in the three months ended March 31, 2024 compared to the prior year. The increase was primarily driven by the 5.8% increase in pharmacy same store prescription volume on a 30-day equivalent basis and pharmacy drug mix. These increases were partially offset by the impact of recent generic introductions and continued pharmacy reimbursement pressure.

Current wording

•Pharmacy same store sales increased 9.1% in the three months ended June 30, 2024 compared to the prior year. The increase was primarily driven by the 6.5% increase in pharmacy same store prescription volume on a 30-day equivalent basis and pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure and the impact of recent generic introductions.

Previous wording

•Front store same store sales decreased 2.2% in the three months ended March 31, 2024 compared to the prior year. The decrease was primarily due to decreased sales of COVID-19 OTC test kits.

Current wording

•Front store same store sales decreased 4.0% in the three months ended June 30, 2024 compared to the prior year. The decrease was primarily due to general softening of consumer demand and lower contributions from COVID-19 OTC test kits compared to the prior year.

Previous wording

•The Pharmacy & Consumer Wellness segment’s generic dispensing rate increased to 90.1% in the three months ended March 31, 2024 compared to 89.4% in the prior year. The increase in the segment’s generic dispensing rate was primarily driven by the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate.

Current wording

•The Pharmacy & Consumer Wellness segment’s generic dispensing rate increased to 90.1% in the three months ended June 30, 2024 compared to 89.5% in the prior year. The increase in the segment’s generic dispensing rate was primarily driven by the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate.

Previous wording

•Total revenues increased $803 million, or 2.9%, in the three months ended March 31, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as pharmacy drug mix. These increases were partially offset by the impact of recent generic introductions, continued pharmacy reimbursement pressure and decreased front store volume, reflecting the impact of a decrease in store count and lower contributions from coronavirus disease 2019 (“COVID-19”) over-the-counter (“OTC”) test kits.

Current wording

•Total revenues increased $1.9 billion, or 3.3%, in the six months ended June 30, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, as well as pharmacy drug mix. These increases were partially offset by continued pharmacy reimbursement pressure, the impact of recent generic introductions and decreased front store volume, including the impact of a decrease in store count and lower contributions from COVID-19 OTC test kits since the expiration of the public health emergency in May 2023.

Previous wording

•During the three months ended March 31, 2023, the Company recorded a $349 million loss on assets held for sale related to the write-down of its LTC business.

Current wording

•During the six months ended June 30, 2023, the Company recorded a $349 million loss on assets held for sale related to the write-down of its LTC business.

Previous wording

•Adjusted operating income increased $43 million, or 3.8%, in the three months ended March 31, 2024 compared to the prior year primarily driven by increased prescription volume, including increased contributions from vaccinations, improved drug purchasing and decreased operating expenses, including the favorable impact of the decrease in store count, during the three months ended March 31, 2024. These increases were partially offset by continued pharmacy reimbursement pressure.

Current wording

•Adjusted operating income decreased $127 million, or 5.0%, in the six months ended June 30, 2024 compared to the prior year primarily driven by continued pharmacy reimbursement pressure and decreased front store volume, including lower contributions from COVID-19 OTC test kits. These decreases were partially offset by increased prescription volume, including increased contributions from vaccinations and improved drug purchasing.

Previous wording

•Adjusted operating loss increased $47 million, or 17.5%, in the three months ended March 31, 2024 compared to the prior year primarily driven by the decrease in net investment income described above, partially offset by decreased operating expenses associated with the termination of certain transformation initiatives.

Current wording

•Adjusted operating loss decreased $15 million, or 4.1%, in the three months ended June 30, 2024 compared to the prior year primarily driven by the increase in net investment income described above.

Previous wording

•Total revenues decreased $73 million, or 38.8%, in the three months ended March 31, 2024 compared to the prior year primarily driven by a decrease in net investment income, reflecting lower average invested assets compared to the prior year.

Current wording

•Total revenues decreased $45 million, or 16.6%, in the six months ended June 30, 2024 compared to the prior year primarily driven by a decrease in net investment income, reflecting lower average invested assets compared to the prior year, partially offset by favorable average investment yields compared to the prior year.

Previous wording

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of March 31, 2024, the Company had approximately $9.8 billion in cash and cash equivalents, approximately $1.9 billion of which was held by the parent company or nonrestricted subsidiaries.

Current wording

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of June 30, 2024, the Company had approximately $12.5 billion in cash and cash equivalents, approximately $2.9 billion of which was held by the parent company or nonrestricted subsidiaries.

Previous wording

The net change in cash, cash equivalents and restricted cash during the three months ended March 31, 2024 and 2023 was as follows:

Current wording

The net change in cash, cash equivalents and restricted cash during the six months ended June 30, 2024 and 2023 was as follows:

Previous wording

•Net cash provided by operating activities decreased by $2.5 billion in the three months ended March 31, 2024 compared to the prior year. The decrease was primarily due to the early receipt of the April 2023 CMS payment of $5.1 billion in the prior year, partially offset by lower inventory purchases and the timing of payments and receipts.

Current wording

•Net cash provided by operating activities decreased by $5.4 billion in the six months ended June 30, 2024 compared to the prior year, primarily as a result of the early receipt of the July 2023 CMS payment of $5.3 billion in the prior year and the impact of Medicare utilization, partially offset by the timing of cash receipts and payments.

Previous wording

•Net cash used in investing activities decreased by $6.4 billion in the three months ended March 31, 2024 compared to the prior year primarily due to the acquisition of Signify Health in March 2023, partially offset by higher net purchases of investments.

Current wording

•Net cash used in investing activities decreased by $15.2 billion in the six months ended June 30, 2024 compared to the prior year primarily due to the acquisitions of Oak Street Health in May 2023 and Signify Health in March 2023, partially offset by higher net purchases of investments.

Previous wording

•Net cash used in financing activitieswas $1.2 billion in the three months ended March 31, 2024 compared to net cash provided by financing activities of $2.7 billion in the prior year. The change in cash provided by (used in) financing activities primarily related to proceeds from the issuance of $6.0 billion of long-term senior notes in the prior year and higher share repurchases during the three months ended March 31, 2024 compared to the prior year, partially offset by proceeds from commercial paper borrowings during the three months ended March 31, 2024.

Current wording

•Net cash provided by financing activitieswas $22 million in the six months ended June 30, 2024 compared to $6.4 billion in the prior year. The decrease in cash provided by financing activities primarily related to proceeds from the issuance of approximately $10.9 billion of long-term senior notes and commercial paper borrowings of $1.0 billion in the prior year, as well as higher share repurchases during the six months ended June 30, 2024 compared to the prior year, partially offset by proceeds from the issuance of $5.0 billion of long-term senior notes in the six months ended June 30, 2024.

Previous wording

The Company had $2.7 billion of commercial paper outstanding at a weighted average interest rate of 5.56% as of March 31, 2024. In connection with its commercial paper program, the Company maintains a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2025, a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2026, and a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2027. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of March 31, 2024, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Current wording

The Company did not have any commercial paper outstanding as of June 30, 2024. In connection with its commercial paper program, the Company maintains a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2027, a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2028, and a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2029. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of June 30, 2024, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Previous wording

On March 25, 2024, the Company entered into a 364-day $3.0 billion term loan credit agreement. The term loan credit agreement allows for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings. As of March 31, 2024, there were no borrowings outstanding under the term loan credit agreement.

Current wording

On March 25, 2024, the Company entered into a 364-day $3.0 billion term loan credit agreement. The term loan credit agreement allowed for borrowings at various rates that were dependent, in part, on the Company’s public debt ratings. On May 9, 2024, following the issuance of the $5.0 billion in senior notes described under “Long-term Borrowings” below, the term loan credit agreement terminated. There were no borrowings under the term loan credit agreement through the date of termination.

Previous wording

During the three months ended March 31, 2024 and 2023, the Company repurchased an aggregate of 39.7 million shares of common stock for approximately $3.0 billion and an aggregate of 22.8 million shares of common stock for approximately $2.0 billion, respectively, both pursuant to the 2021 Repurchase Program. This activity includes the share repurchases under the ASR transactions described below.

Current wording

During the six months ended June 30, 2024 and 2023, the Company repurchased an aggregate of 39.7 million shares of common stock for approximately $3.0 billion and an aggregate of 22.8 million shares of common stock for approximately $2.0 billion, respectively, both pursuant to the 2021 Repurchase Program. This activity includes the share repurchases under the ASR transactions described below.