Cigna Group

Evernorth Health Services Segment

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

Key Factors Affecting Segment Performance

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

Consolidated Financial Statements included in our 2023 Form 10-K for additional information on revenue and cost recognition policies for this segment.

Key Factors that impact both Pharmacy Benefit Services and Specialty and Care Services:

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

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

•Pharmaceutical manufacturer inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients continues to be a significant driver of our revenues and cost of revenues in the current environment.

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

Key factors that impact Specialty and Care Services:

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

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

In this MD&A, we present our segment performance measures adjusted revenues and pre-tax adjusted income from operations. We also present adjusted gross profit, which is calculated as adjusted revenues less Pharmacy and other service costs (which is inclusive of all costs of revenue). We utilize adjusted revenues in this calculation, consistent with our reporting measure that excludes special items, as this reflects the underlying results of business operations.

(1)Adjusted revenues and adjusted gross profit each exclude $182 million of the Special item related to impairment of dividend receivable for each of the three and nine months ended September 30, 2024. There were no special items in the comparable prior periods.

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

(3)Pre-tax adjusted margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues. See Note 17 to the Consolidated Financial Statements for reconciliation of pre-tax adjusted income from operations and adjusted revenues to Income before income taxes and Total revenues, respectively.

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

In this selected financial information, we present adjusted revenues and pre-tax income from operations by our two operating segments, Pharmacy Benefit Services and Specialty and Care Services.

(1)Net investment income excludes the Special item related to impairment of dividend receivable for certain accrued dividends of $182 million for each of the three and nine months ended September 30, 2024.

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

Commentary in parentheses regarding percentage changes represents the driver's impact on the overall category.

Adjusted revenues increased 36% and 31%, primarily reflecting higher utilization of prescription drugs from customer growth in both Pharmacy Benefit Services and Specialty and Care Services.

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

Pre-tax adjusted income from operations increased 9% and 7%, primarily reflecting customer growth in Specialty and Care Services (+11% and +10%) and continued affordability improvements in Pharmacy Benefit Services (+3% in both periods). This increase was partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions (-2% and -4% in Specialty and Care Services and -2% in both periods in Pharmacy Benefit Services).

The adjusted SG&A expense ratio decreased 50 bps and 30 bps, primarily reflecting higher adjusted revenues as discussed above.