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 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.

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 September 30, 2024, compared with December 31, 2023 and our results of operations for the three and nine months ended September 30, 2024, compared with the same periods last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A of our 2023 Form 10-K.

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 (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.

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

Previous wording

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

Current wording

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

Previous wording

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our strategic and operational initiatives; our ability to adapt to changes in an evolving and rapidly changing industry; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or increase market share; price competition, inflation and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain satisfactory relationships with physicians, hospitals, other health service providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug pricing or industry pricing benchmarks; our ability to invest in and properly maintain our information technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data security incident; risks related to our use of artificial intelligence and machine learning; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations, including currency exchange rates; risks related to strategic transactions and realization of the expected benefits of such transactions, as well as integration or separation difficulties or underperformance relative to expectations; dependence on success of relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; potential liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; uncertainties surrounding participation in government-sponsored programs such as Medicare; the outcome of litigation, regulatory audits and investigations; compliance with applicable privacy, security and data laws, regulations and standards; potential failure of our prevention, detection and control systems; unfavorable economic and market conditions, the risk of a recession or other economic downturn and resulting impact on employment metrics, stock market or changes in interest rates and risks related to a downgrade in financial strength ratings of our insurance subsidiaries; the impact of our significant indebtedness and the potential …

Excerpt shortened here; the source contains the full paragraph.

Current wording

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our strategic and operational initiatives; our ability to adapt to changes in an evolving and rapidly changing industry; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or increase market share; price competition, inflation and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain satisfactory relationships with physicians, hospitals, other health service providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug pricing or industry pricing benchmarks; our ability to invest in and properly maintain our information technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data security incidents; risks related to our use of artificial intelligence and machine learning; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations, including currency exchange rates; risks related to an impairment of goodwill, intangible assets and/or investments (including as a result of the failure to realize the expected benefits of strategic transactions, as well as integration or separation difficulties or underperformance of such transactions relative to expectations); dependence on success of relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; potential liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; uncertainties surrounding participation in government-sponsored programs such as Medicare; the outcome of litigation, regulatory audits and investigations; compliance with applicable privacy, security and data laws, regulations and standards; potential failure of our prevention, detection and control systems; unfavorable economic and market conditions, the risk of a recession or other economic downturn and resulting impact on employment metrics, stock market or changes in interest rates and risks related to a downgrade in financial strength r…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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

Current wording

Commentary: Three and Nine Months Ended September 30, 2024 versus Three and Nine Months Ended September 30, 2023

Previous 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.

Current wording

The commentary presented below, and the segment discussions that follow, compare results for the three and nine months ended September 30, 2024 with results for the three and nine months ended September 30, 2023. Unless specified otherwise, commentary applies to both the three and nine month periods. In addition to the below, see the "Segment Reporting" section of this MD&A for further commentary.

Previous wording

Selling, general and administrative expenses increased 7% and 6%, primarily driven by strategic investments to support business growth and continued advancement of our digital capabilities and solutions.

Current wording

Selling, general and administrative expenses decreased 5% for the three months ended September 30, 2024, primarily driven by the absence of litigation settlements that occurred during the three months ended September 30, 2023 and increased 2% for the nine months ended September 30, 2024, primarily driven by strategic investments to support both business growth and continued advancement of our digital capabilities and solutions.

Previous wording

In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to Health Care Service Corporation ("HCSC"), subject to applicable regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of 2025 and provide approximately $3.7 billion in transaction value, which consists primarily of cash. See Note 5 to the Consolidated Financial Statements for further information.

Current wording

In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to Health Care Service Corporation ("HCSC"), subject to applicable regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of 2025 and provide approximately $3.7 billion in transaction value, which consists primarily of the purchase price cash subject to adjustments to align with the final balance sheet of the divested businesses. See Note 5 to the Consolidated Financial Statements for further information.

Previous wording

The Centers for Medicare and Medicaid Services ("CMS") uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform. Categories of measurement include quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits. We expect 67% of our MA customers to be in four star or greater plans for bonus payments to be received in 2024. On July 2, 2024, CMS published an update to the original Star Ratings (announced on October 13, 2023) for bonus payments to be received in 2025. Based upon the updated Star Ratings, we estimate 69% of our MA customers to be in four star or greater plans for bonus payments to be received in 2025. See Part I, Item I, "Business - Regulation" section of our 2023 Form 10-K for further discussion of Star Ratings.

Current wording

The Centers for Medicare and Medicaid Services ("CMS") uses a Star Rating system to measure how well Medicare Advantage ("MA") plans perform. Categories of measurement include quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits. On October 10, 2024, CMS announced Medicare Star Ratings for bonus payments to be received in 2026. We estimate 69% of our MA customers to be in four star or greater plans for bonus payments to be received in 2025 and 2026. See Part I, Item I. "Business - Regulation" section of our 2023 Form 10-K for further discussion of Star Ratings.

Previous wording

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

Current wording

Cash flows for the nine months ended September 30 were as follows:

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

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

Previous 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.

Current wording

The Company had higher share repurchases, including the completed ASR Agreements (described below), partially offset by net cash provided by debt financing activities in 2024.

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 $1.1 billion for the six months ended June 30, 2024 and $0.5 billion for the six months ended June 30,

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 $1.7 billion for the nine months ended September 30, 2024 and $0.8 billion for the nine months ended

Previous wording

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

September 30, 2023. Non-regulated subsidiaries also generate significant cash flows from operating activities, which is typically available immediately to the parent company for general corporate purposes.

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. 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.

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 $6.5 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had approximately $1.6 billion outstanding at September 30, 2024.

Previous 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.

Current wording

As of September 30, 2024, we had $6.5 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $4.9 billion of remaining capacity under our commercial paper program and $6.0 billion in cash and short-term investments, approximately $0.5 billion of which was held by the parent company or certain non-regulated subsidiaries.

Previous wording

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

Current wording

Our debt-to-capitalization ratio was 43.8% at September 30, 2024 and 43.6% at June 30, 2024.

Previous 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.

Current wording

Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.4 billion from its subsidiaries without further approvals as of September 30, 2024.

Previous wording

Debt Issuance and Debt Tender Offers. In February 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt were used to complete the repurchase of a total of $1.8 billion in aggregate principal amount of existing senior notes tendered to the Company pursuant to cash tender offers. We used the remaining net proceeds to fund the repayment of our senior notes which matured in March 2024 and for general corporate purposes, which may include repayment of indebtedness and repurchases of shares of our common stock.

Current wording

Debt Issuance and Debt Tender Offers. In February 2024, we issued $4.5 billion of new senior notes. The proceeds from this debt were used to complete the repurchase of a total of $1.8 billion in aggregate principal amount of existing senior notes tendered to the Company pursuant to cash tender offers. We used the remaining net proceeds to fund the repayment of our senior notes which matured in March 2024 and for general corporate purposes, which includes repayment of indebtedness and repurchases of shares of our common stock.

Previous 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.

Current wording

Capital Expenditures. Capital expenditures for property, equipment and computer software were $1.1 billion in the nine months ended September 30, 2024 compared to $1.2 billion in the nine months ended September 30, 2023. Anticipated capital expenditures will be funded primarily from operating cash flows.

Previous 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.

Current wording

Dividends. The Cigna Group declared and paid quarterly cash dividends of $1.40 per share of its common stock during the first nine months of 2024, compared to quarterly cash dividends of $1.23 per share during the first nine months of 2023. See Note 8 to the Consolidated Financial Statements for further information on our dividend payments. On October 23, 2024, the Board of Directors declared the fourth quarter cash dividend of $1.40 per share of The Cigna Group common stock to be paid on December 19, 2024 to shareholders of record on December 4, 2024. The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of the Company and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board may deem relevant.

Previous 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.

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. The total number of shares of our common stock repurchased under the agreements was approximately 9.3 million. See Note 8 to the Consolidated Financial Statements for further information on our ASR agreements.

Previous wording

As anticipated, including the ASR agreements, we repurchased 14.7 million shares for approximately $5.0 billion during the six months ended June 30, 2024, compared to 3.8 million shares for approximately $1.1 billion during the six months ended June 30, 2023.

Current wording

Including the ASR agreements, we repurchased 14.7 million shares for approximately $5.0 billion during the nine months ended September 30, 2024, compared to 6.1 million shares for approximately $1.8 billion during the nine months ended September 30, 2023. From October 1, 2024 through October 30, 2024, we repurchased 2.2 million shares for approximately $715 million. Share repurchase authority was $5.6 billion as of October 30, 2024.

Previous wording

Divestiture. In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of 2025 and provide approximately $3.7 billion in transaction value, which consists primarily of cash. Following the completion of the sale, we anticipate use of the proceeds in alignment with our capital deployment priorities, with the majority allocated to share repurchases.

Current wording

Divestiture. In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions. The transaction is expected to close in the first quarter of 2025 and provide approximately $3.7 billion in transaction value, which consists primarily of the purchase price cash subject to adjustments to align with the final balance sheet of the divested businesses. Following the completion of the sale, we anticipate use of the proceeds in alignment with our capital deployment priorities, with the majority allocated to share repurchases.

Previous 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.

Current wording

◦Total scheduled payments on long-term debt are $48.8 billion through February 2054, which include scheduled interest payments and maturities of long-term debt.

Previous wording

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

Current wording

◦We expect $0.3 billion of long-term debt payments (including scheduled interest payments) to be paid for the remainder of 2024.

Previous wording

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 17 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income (loss) before income taxes to pre-tax adjusted income (loss) from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 17 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

Current wording

In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results, amortization of acquired intangible assets and special items. The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Ratios presented in this segment discussion exclude the same items as adjusted revenues and pre-tax adjusted income (loss) from operations. See Note 17 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income (loss) before income taxes to pre-tax adjusted income (loss) from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 17 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

Previous wording

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, within our Pharmacy Benefit Services and Specialty and Care Services operating segments. See Note 1 to our Consolidated Financial Statements for further discussion of these two operating segments. As described in the introduction to Segment Reporting, Evernorth Health Services' performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.

Current wording

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, within our Pharmacy Benefit Services and Specialty and Care Services operating segments. See Note 1 to the Consolidated Financial Statements for further discussion of these two operating segments. As described in the introduction to Segment Reporting, Evernorth Health Services' performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.

Previous wording

The key factors that impact Evernorth Health Services' Pharmacy Benefit Services and Specialty and Care Services revenues and income from operations are volume, mix of claims, price, contract affordability services, specialty distribution customer growth and client growth. These key factors are discussed further below. Certain of the key factors impact both operating segments as services are offered through an integrated client contract. See Note 2 to the Consolidated Financial Statements included in our 2023 Form 10-K for additional information on revenue and cost recognition policies for this segment.

Current wording

The key factors that impact Evernorth Health Services' Pharmacy Benefit Services and Specialty and Care Services revenues and income from operations are volume, mix of claims, price and contract affordability services. Specialty and Care Services revenue is also impacted by specialty distribution customer growth and client growth. These key factors are discussed further below. Certain of the key factors impact both operating segments as services are offered through an integrated client contract. See Note 2 to the

Previous wording

•Pharmacy claim volume relates to processing prescription claims filled by retail pharmacies in our network and from dispensing prescription claims from our home delivery and specialty pharmacies and other claims. As our clients' prescriptions claim volumes increase or decrease, our results correspondingly increase or decrease.

Current wording

•Pharmacy claim volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and from dispensing prescription claims from our home delivery and specialty pharmacies and other claims. As pharmacy prescription claim volumes increase or decrease due to customer utilization, organic customer growth through the expansion of existing clients or new clients, our gross profit and income from operations correspondingly increase or decrease.

Previous wording

•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. In addition to the types of drugs, the mix of generic claims also impacts our results. Generally, a higher mix of generic drugs reduces 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, a higher mix of generic drugs generally has a favorable impact on our income from operations.

Current wording

•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. In addition to the types of drugs, the mix of generic or biosimilar claims also impacts our results. Generally, a higher mix of generic and biosimilar drugs reduces revenues, as generic and biosimilar drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic and biosimilar drugs is incrementally lower than the price charged to our clients, a higher mix of generic and biosimilar drugs generally has a favorable impact on our gross profit and income from operations.

Previous wording

•Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates on our clients' behalf. Through these affordability services, we seek to improve the effectiveness of our integrated solutions for the benefit of our clients by continuously innovating, improving affordability and implementing drug purchasing contract initiatives.

Current wording

•Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates on our clients' behalf (also referred to as affordability improvements). Through these affordability services, we seek to improve the effectiveness of our integrated and fee-for-service solutions, for the benefit of our new and existing clients, by continuously innovating, improving affordability and implementing drug purchasing contract initiatives. Our continued affordability improvements further reduce drug costs for the benefit of our consumers and clients and we share in the value delivered, which generally results in a favorable impact on our gross profit and income from operations.

Previous wording

•Customer growth and higher volume in our specialty distribution services where we deliver pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals, primarily to physicians who regularly order costly specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies and leverages our distribution platform to improve our results.

Current wording

•Customer growth generally results in increased revenues and income from operations. This generally includes both organic customer growth through the expansion of existing business and new business, as well as higher volume in our specialty distribution services where we deliver pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals, primarily to physicians who regularly order costly specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies and leverages our distribution platform to improve our results.

Previous wording

•Client growth in our Care Delivery and Management Solutions, through our virtual care, in-home care, physical primary care, benefits management, and behavioral health services, as we expand our businesses and build upon our cross-enterprise leverage.

Current wording

•Client growth, both organic and new business, in our Care Delivery and Management Solutions business generally results in increased revenues and income from operations. This includes client movement in our virtual care, in-home care, physical primary care, benefits management, and behavioral health services, as we expand our businesses and build upon our cross-enterprise leverage.

Previous wording

(2)Gross profit and adjusted gross profit are calculated as total revenues or adjusted revenues less pharmacy and other service costs.

Current wording

(2)Gross profit and adjusted gross profit are calculated as total revenues and adjusted revenues, respectively, less pharmacy and other service costs.

Previous wording

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

Current wording

(4)SG&A expense ratio is calculated as selling, general and administrative expenses including special items ($894 million and $881 million for the three months ended September 30, 2024 and 2023, respectively, and $2,825 million and $2,512 million, for the nine months ended September 30, 2024 and 2023, respectively) divided by total revenues. Adjusted SG&A expense ratio is calculated as selling, general and administrative expenses excluding special items ($894 million and $837 million for the three months ended September 30, 2024 and 2023, respectively, and $2,825 million and $2,468 million for the nine months ended September 30, 2024 and 2023, respectively) as a percentage of adjusted revenues. There were no special items for the three and nine months ended September 30, 2024; special items were $44 million for the three and nine months ended September 30, 2023.

Previous wording

(1)Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims. All other network and specialty prescriptions are counted as one claim.

Current wording

(2) Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims. All other network and specialty prescriptions are counted as one claim.

Previous wording

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

Current wording

Adjusted gross profit increased 11% for both periods, primarily reflecting relatively equal contributions from customer growth in Specialty and Care Services and continued affordability improvements in Pharmacy Benefit Services.