Cigna Group

Previous wording

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating our financial condition as of March 31, 2024, compared with December 31, 2023 and our results of operations for the three months ended March 31, 2024, compared with the same period last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A of our 2023 Form 10-K.

Current wording

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating our financial condition as of June 30, 2024, compared with December 31, 2023 and our results of operations for the three and six months ended June 30, 2024, compared with the same periods last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A of our 2023 Form 10-K.

Previous wording

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 (loss)," "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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

Commentary: Three Months Ended March 31, 2024 versus Three Months Ended March 31, 2023

Current wording

Commentary: Three and Six Months Ended June 30, 2024 versus Three and Six Months Ended June 30, 2023

Previous wording

The commentary presented below, and in the segment discussions that follow, compare results for the three months ended March 31, 2024 with results for the three months ended March 31, 2023.

Current wording

The commentary presented below, and the segment discussions that follow, compare results for the three and six months ended June 30, 2024 with results for the three and six months ended June 30, 2023. Unless specified otherwise, commentary applies to both the three and six month periods.

Previous wording

Shareholders' net lossfor the three months ended March 31, 2024 was driven by the impairment of equity securities (see Note 11 to the Consolidated Financial Statements for further discussion), offset by adjusted income from operations.

Current wording

Shareholders' net income increased 6% for the three months ended June 30, 2024, primarily due to higher adjusted income from operations. For the six months ended June 30, 2024, shareholders' net income decreased 53%, primarily driven by the impairment of equity securities reported in the quarter ended March 31, 2024 (see Note 11 to the Consolidated Financial Statements for further discussion), partially offset by higher adjusted income from operations.

Previous wording

Adjusted income from operations increased 16%, primarily driven by higher earnings in our Cigna Healthcare and Evernorth Health Services segments.

Current wording

Adjusted income from operations increased 5% and 10% primarily driven by higher earnings in our Evernorth Health Services and Cigna Healthcare segments.

Previous wording

Medical customers decreased 1%, primarily reflecting a decline in fee-based and Individual and Family Plans customers. See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.

Current wording

Medical customers decreased 2% primarily reflecting a decline in Individual and Family Plans customers. See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.

Previous wording

Pharmacy revenues increased 31%, primarily reflecting the onboarding of Centene Corporation ("Centene") at the beginning of 2024. See the "Segment Reporting - Evernorth Health Services Segment" section of this MD&A for further discussion.

Current wording

Pharmacy revenues increased 33% and 32% reflecting higher claims volume, primarily due to new clients, including Centene Corporation ("Centene") and organic growth. See the "Segment Reporting - Evernorth Health Services Segment" section of this MD&A for further discussion.

Previous wording

Premiums increased 5% reflecting higher premium rates in Cigna Healthcare due to anticipated underlying medical costs and business mix. See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.

Current wording

Premiums increased 4% and 5%, reflecting higher premium rates in Cigna Healthcare due to expected increases in underlying medical costs, partially offset by business mix. See the "Segment Reporting - Cigna Healthcare Segment" section of this MD&A for further discussion.

Previous wording

Fees and other revenues increased 8%, primarily reflecting client growth from our continued affordability services within Evernorth Health Services.

Current wording

Fees and other revenues increased 10% and 9%, primarily reflecting continued affordability improvements and business growth within Evernorth Health Services.

Previous wording

Net investment income increased 5%, primarily due to growth in average assets. See the "Investment Assets" section of this MD&A for further discussion.

Current wording

Net investment income increased 15% and 10%, primarily due to growth in average assets. See the "Investment Assets" section of this MD&A for further discussion.

Previous wording

Medical costs and other benefit expenses increased 4%, primarily reflecting medical cost trend in Cigna Healthcare.

Current wording

Medical costs and other benefit expenses increased 5% for both the three and six months ended June 30, 2024 primarily reflecting medical cost trend in Cigna Healthcare, partially offset by business mix.

Previous wording

The effective tax rate increased substantially driven by a valuation allowance related to the impairment of equity securities, partially offset by a decrease related to the businesses held for sale and a decrease related to the release of tax reserves following a favorable state audit resolution.

Current wording

The effective tax rate decreased for the three months ended June 30, 2024, primarily as a result of decreases in state taxes following a favorable state audit resolution. For the six months ended June 30, 2024, the effective tax rate increased substantially driven by a valuation allowance relative to the impairment of equity securities, partially offset by decreases in state taxes and a decrease relative to the businesses held for sale.

Previous wording

On April 1, 2024, Centers for Medicare and Medicaid Services ("CMS") released the final Calendar Year 2025 Medicare Advantage Program and Part D Payment Policies (the "2025 Final Notice"). The Final Notice reflects no change from the January 31, 2024 advance notice. We do not expect the final rates to have a material impact on our consolidated results of operations in 2025.

Current wording

On April 1, 2024, CMS released the final Calendar Year 2025 Medicare Advantage Program and Part D Payment Policies (the "2025 Final Notice"). The Final Notice reflects no change from the January 31, 2024 advance notice. We do not expect the final rates to have a material impact on our consolidated results of operations in 2025.

Previous wording

Cash flows for the three months ended March 31 were as follows:

Current wording

Cash flows for the six months ended June 30 were as follows:

Previous wording

The following discussion explains variances in the various categories of cash flows for the three months ended March 31, 2024 compared with the same period in 2023.

Current wording

The following discussion explains variances in the various categories of cash flows for the six months ended June 30, 2024 compared with the same period in 2023.

Previous wording

Operating cash flows decreased for the three months ended March 31, 2024 due to the absence of an early CMS payment received in March 2023 and the timing of payments for accrued liabilities. This decrease is partially offset by the favorable net cash flow impacts of onboarding new clients.

Current wording

Operating cash flows decreased for the six months ended June 30, 2024 due to higher accounts receivable as a result of timing and organic business growth, the absence of an early CMS payment received in June 2023 as well as higher insurance claim payments. This decrease is partially offset by the favorable net cash flow impacts of new clients.

Previous wording

The decrease in cash used in investing activities during the three months ended March 31, 2024 was due to lower investments in equity securities.

Current wording

The decrease in cash used in investing activities during the six months ended June 30, 2024 was due to lower purchases of equity securities.

Previous wording

The Company had higher share repurchases including from the ASR Agreements (described below), partially offset by net debt inflows. These factors resulted in an increase in cash used in financing activities in 2024.

Current wording

The Company had higher share repurchases including from the recently completed ASR Agreements (described below) as well as an increase in cash used for debt financing activities in 2024.

Previous wording

Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and the issuance of long-term debt and equity securities. Our businesses generate significant cash flows from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends received from U.S. regulated subsidiaries were $0.6 billion for the three months ended March 31, 2024 and $0.3 billion for the three months ended March 31, 2023. Non-regulated subsidiaries also generate significant cash flows from operating activities, which is typically available immediately to the parent company for general corporate purposes.

Current wording

Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and the issuance of long-term debt and equity securities. Our businesses generate significant cash flows from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends received from U.S. regulated subsidiaries were $1.1 billion for the six months ended June 30, 2024 and $0.5 billion for the six months ended June 30,

Previous wording

Commercial Paper Program. The Cigna Group maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker-dealers at any time not to exceed an aggregate amount of $5.0 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had approximately $884 million outstanding at March 31, 2024.

Current wording

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. In July 2024, our commercial paper program size was increased to $6.5 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had approximately $790 million outstanding at June 30, 2024.

Previous wording

As of March 31, 2024, The Cigna Group's revolving credit agreements include: a $4.0 billion five-year revolving credit and letter of credit agreement that expires in April 2028; and a $1.0 billion 364-day revolving credit agreement that expires in April 2024.

Current wording

As of June 30, 2024, The Cigna Group's revolving credit agreements include: a $5.0 billion five-year revolving credit and letter of credit agreement that expires in April 2029; and a $1.5 billion 364-day revolving credit agreement that expires in April 2025.

Previous wording

As of March 31, 2024, 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), $4.1 billion of remaining capacity under our commercial paper program and $8.8 billion in cash and short-term investments, approximately $1.4 billion of which was held by the parent company or certain non-regulated subsidiaries.

Current wording

As of June 30, 2024, we had $6.5 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $4.2 billion of remaining capacity under our commercial paper program and $7.0 billion in cash and short-term investments, approximately $1.1 billion of which was held by the parent company or certain non-regulated subsidiaries.

Previous wording

Our debt-to-capitalization ratio was 44.3% at March 31, 2024 and 40.1% at December 31, 2023 primarily reflecting timing of debt issuance, in part due to the Accelerated Share Repurchase ("ASR") agreements.

Current wording

Our debt-to-capitalization ratio was 43.6% at June 30, 2024 and 44.3% at March 31, 2024.

Previous wording

Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.6 billion from its subsidiaries without further approvals as of March 31, 2024.

Current wording

Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.0 billion from its subsidiaries without further approvals as of June 30, 2024.

Previous wording

Capital Expenditures. Capital expenditures for property, equipment and computer software were $0.3 billion in the three months ended March 31, 2024 compared to $0.4 billion in the three months ended March 31, 2023. Anticipated capital expenditures will be funded primarily from operating cash flows.

Current wording

Capital Expenditures. Capital expenditures for property, equipment and computer software were $0.7 billion in the six months ended June 30, 2024 compared to $0.8 billion in the six months ended June 30, 2023. Anticipated capital expenditures will be funded primarily from operating cash flows.

Previous wording

Dividends. The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first quarter of 2024, compared to quarterly cash dividends of $1.23 per share during the first quarter of 2023. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On April 24, 2024, the Board of Directors declared the second quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on June 20, 2024 to shareholders of record on June 4, 2024. The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.

Current wording

Dividends. The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first six months of 2024, compared to quarterly cash dividends of $1.23 per share during the first six months of 2023. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On July 24, 2024, the Board of Directors declared the third quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on September 19, 2024 to shareholders of record on September 4, 2024. The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.

Previous wording

In February 2024, as part of our share repurchase program, we entered into separate ASR agreements ("ASR agreements") with Deutsche Bank AG and Bank of America, N.A. (collectively, the "Counterparties") to repurchase $3.2 billion of common stock in aggregate. We remitted $3.2 billion to the Counterparties and received an initial delivery of approximately 7.6 million shares of our common stock on February 15, 2024, representing $2.6 billion of the total remitted. We expect final settlement under the ASR agreements to occur in the second quarter of 2024. See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.

Current wording

In February 2024, as part of our share repurchase program, we entered into separate Accelerated Share Repurchase ("ASR") agreements to repurchase $3.2 billion of common stock in aggregate. We remitted $3.2 billion and received an initial delivery of approximately 7.6 million shares of our common stock, representing $2.6 billion of the total remitted. Upon final settlement of the ASR agreements in May 2024, we received approximately 1.7 million additional shares of our common stock for no additional consideration. See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.

Previous wording

◦Total scheduled payments on long-term debt are $50.3 billion through February 2054, which include scheduled interest payments and maturities of long-term debt.

Current wording

◦Total scheduled payments on long-term debt are $49.2 billion through February 2054, which include scheduled interest payments and maturities of long-term debt.

Previous wording

◦We expect $1.8 billion of long-term debt payments (including scheduled interest payments) to be paid for the remainder of 2024.

Current wording

◦We expect $0.7 billion of long-term debt payments (including scheduled interest payments) to be paid for the remainder of 2024.

Previous wording

Gross profit increased 8%, reflecting continued affordability improvements and growth in Specialty and Care Services businesses.

Current wording

Gross profit increased 14% and 11%, reflecting continued affordability improvements and growth in Specialty and Care Services businesses.

Previous wording

Pre-tax adjusted income from operations increased 3%, reflecting growth in Specialty and Care Services businesses and continued affordability improvements. This increase was partially offset by planned investments related to the onboarding costs of new clients, including Centene, and continued advancement of our digital capabilities and care solutions.

Current wording

Pre-tax adjusted income from operations increased 7% and 5%, reflecting growth in Specialty and Care Services businesses and continued affordability improvements. This increase was partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions.

Previous wording

The adjusted expense ratio decreased 20 bps, reflecting higher revenues, partially offset by planned investments related to the onboarding costs of new clients, including Centene, and continued advancement of our digital capabilities and care solutions.

Current wording

The adjusted expense ratio decreased 10 bps and 20 bps, reflecting higher adjusted revenues, primarily due to new clients, including Centene, and organic growth, partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions.

Previous wording

In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to Health Care Service Corporation, subject to applicable regulatory approvals and other customary closing conditions. See Note 5 to the Consolidated Financial Statements for further information.

Current wording

In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions. See Note 5 to the Consolidated Financial Statements for further information.

Previous wording

Adjusted revenues increased 4%, primarily reflecting higher premium rates due to expected increases in underlying medical costs and business mix.

Current wording

Adjusted revenues increased 3% and 4%, primarily reflecting higher premium rates due to expected increases in underlying medical costs, partially offset by business mix.

Previous wording

Pre-tax adjusted income from operations increased 20%, primarily due to a lower medical care ratio and a lower adjusted expense ratio.

Current wording

Pre-tax adjusted income from operations increased 3% and 11%, primarily due to a lower adjusted expense ratio and higher net investment income. The improvement for the three months ended June 30, 2024 was partially offset by a higher medical care ratio.

Previous wording

The medical care ratio decreased 140 bps, primarily due to a lower U.S. Healthcare medical care ratio, reflecting effective pricing execution and affordability initiatives, as well as business mix within the Individual and Family Plans business.

Current wording

The medical care ratio increased 110 bps for the three months ended June 30, 2024, primarily due to a higher U.S. Healthcare medical care ratio reflecting business mix and unfavorable revenue adjustments related to prior years, partially offset by effective pricing execution and affordability initiatives.

Previous wording

Theadjusted expense ratio decreased 90 bps, primarily due to revenue growth outpacing volume-related expenses as well as efficiencies from disciplined expense management.

Current wording

Theadjusted expense ratio decreased 90 bps in both periods, primarily due to revenue growth outpacing volume-related expenses as well as ongoing efficiencies and disciplined expense management.

Previous wording

Our unpaid claims and claim expenses liability increased 15%, driven by claim submission and payment process disruptions related to a third-party cyber incident and stop loss seasonality, partially offset by a decrease in Individual and Family Plans customers.

Current wording

Our unpaid claims and claim expenses liability increased 2%, driven by stop loss seasonality, partially offset by a decrease in Individual and Family Plans customers.