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, 2026 compared with December 31, 2025 and our results of operations for the three months ended March 31, 2026 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 in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A in our 2025 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, 2026 compared with December 31, 2025 and our results of operations for the three and six months ended June 30, 2026 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 in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 Form 10-K"). In particular, we encourage you to refer to the "Risk Factors" contained in Part I, Item 1A in our 2025 Form 10-K.

Previous wording

Statements in this Form 10-Q for updates to those policies resulting from adopting new accounting guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors call for caution in estimating full-year results based on interim results of operations. In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points ("bps").

Current wording

Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Note 2 to the Consolidated Financial Statements in our 2025 Form 10-K for additional information regarding the Company's significant accounting policies and see Note 2 to the Consolidated Financial Statements in this Form 10-Q for updates to those policies resulting from adopting new accounting guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors call for caution in estimating full-year results based on interim results of operations. In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points ("bps").

Previous wording

Commentary: Three Months Ended March 31, 2026 versus Three Months Ended March 31, 2025

Current wording

Commentary: Three and Six Months Ended June 30, 2026 versus Three and Six Months Ended June 30, 2025

Previous wording

The commentary presented below, and the segment commentaries that follow, compare results for the three months ended March 31, 2026 with results for the three months ended March 31, 2025. Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.

Current wording

The commentary presented below, and the segment commentaries that follow, compare results for the three and six months ended June 30, 2026 with results for the three and six months ended June 30, 2025. Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.

Previous wording

Shareholders' net income increased 25%, primarily reflecting higher adjusted income from operations in Cigna Healthcare, as well as Evernorth Health Services. See discussion of segment results in the "Segment Reporting" section.

Current wording

Shareholders' net income increased 8% and 16% for the three and six months ended, respectively, primarily reflecting higher adjusted income from operations in Cigna Healthcare. See discussion of segment results in the "Segment Reporting" section.

Previous wording

Pharmacy revenues increased 11%, primarily reflecting changes in claims composition (defined in the "Segment Reporting" section) within our Pharmacy Benefit Services operating segment.

Current wording

Pharmacy revenues increased 7% and 9% for the three and six months ended, respectively, primarily reflecting changes in claims composition (defined in the "Segment Reporting" section) within our Pharmacy Benefit Services operating segment.

Previous wording

Premiums decreased 23%, primarily driven by the impact of the HCSC transaction (defined in the "Segment Reporting" section) (-30%), offset primarily by higher premium rates within our ongoing U.S. Healthcare businesses.

Current wording

Premiums increased 8% for the three months ended, primarily driven by higher premium rates within Cigna Healthcare, and decreased 10% for the six months ended, primarily driven by the impact of the HCSC transaction (defined in the "Segment Reporting" section) (-17%), offset primarily by higher premium rates within Cigna Healthcare.

Previous wording

Fees and other revenues increased 14%, primarily reflecting growth in fee-based services within our Pharmacy Benefit Services operating segment.

Current wording

Fees and other revenues increased 6% for the three months ended, primarily reflecting growth in fee-based services within Cigna Healthcare, and increased 10% for the six months ended, primarily reflecting growth in fee-based services within Evernorth Health Services.

Previous wording

Net investment income decreased 15%, primarily due to lower average assets, due to the impact of the HCSC transaction.

Current wording

Net investment income for the three months ended increased 15% due to strong returns on real estate investments and securities partnerships. Net investment income for the six months ended was flat, with the stronger returns on real estate investments and securities partnerships in the second quarter mostly offset by lower average assets due to the impact of the HCSC transaction.

Previous wording

Pharmacy and other service costs increased 12%, primarily reflecting changes in claims composition within our Pharmacy Benefit Services operating segment.

Current wording

Pharmacy and other service costs increased 6% and 9% for the three and six months ended, respectively, primarily reflecting changes in claims composition within our Pharmacy Benefit Services operating segment.

Previous wording

Medical costs and other benefit expenses decreased 25%, primarily driven by the impact of the HCSC transaction (-32%), offset primarily by higher medical costs within our ongoing U.S. Healthcare businesses.

Current wording

Medical costs and other benefit expenses increased 9% for the three months ended, primarily reflecting higher medical costs within Cigna Healthcare, and decreased 10% for the six months ended, primarily driven by the impact of the HCSC transaction (-18%), offset primarily by higher medical costs within Cigna Healthcare.

Previous wording

Investment results increased, primarily due to fair value changes of derivative instruments associated with certain equity securities.

Current wording

Investment resultsfor the three and six months ended were primarily impacted by fair value changes of derivative instruments associated with certain equity securities.

Previous wording

The effective tax rate increased, primarily due to the absence of a benefit related to the HCSC transaction.

Current wording

The effective tax rate decreased 2% for the three months ended, primarily driven equally by tax benefits related to equity investments and the absence of prior-period charges related to state tax audits. The effective tax rate increased less than 1% for the six months ended, primarily due to the absence of a prior-period benefit related to the HCSC transaction (+2%), partially offset by the absence of prior-period charges related to state tax audits (-1%).

Previous wording

•Pharmacy claim volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and dispensing prescription claims from our home delivery and specialty pharmacies, along with other claims. Pharmacy claim volume is impacted by new clients or organic customer growth through the expansion of existing clients or through the loss of customers and business.

Current wording

•Pharmacy claims volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and dispensing prescription claims from our home delivery and specialty pharmacies, along with other claims. Pharmacy claim volume is impacted by new clients or organic customer growth through the expansion of existing clients or through the loss of customers and business.

Previous wording

Adjusted revenues increased 9%, primarily reflecting an increase due to claims composition in Pharmacy Benefit Services (+7%) and higher claims volume from customer growth in Specialty and Care Services (+2%).

Current wording

Adjusted revenues increased 6% and 8% for the three and six months ended, respectively, primarily reflecting an increase due to claims composition in Pharmacy Benefit Services (+7% and +8%, respectively) and higher claims volume from customer growth in Specialty and Care Services (+1% and +2%, respectively), partially offset by lower claims volume in Pharmacy Benefit Services (-2% for both periods).

Previous wording

Pre-tax adjusted income from operations increased 2%, primarily reflecting growth in Specialty and Care Services (+13%), partially offset by client- and customer-focused initiatives in Pharmacy Benefits Services (-8%) and a decrease in claims volume in Pharmacy Benefit Services (-3%).

Current wording

Pre-tax adjusted income from operations decreased 2% and was flat for the three and six months ended, respectively, primarily reflecting client- and customer-focused initiatives in Pharmacy Benefits Services (-11% and -9%, respectively) and a decrease in claims volume in Pharmacy Benefit Services (-2% for both periods), partially offset by growth in Specialty and Care Services (+7% and +9%, respectively) and operating efficiencies in Specialty and Care Services (+4% and +2%, respectively).

Previous wording

The SG&A expense ratio decreased 10 bps, primarily reflecting higher adjusted revenues as discussed above.

Current wording

The SG&A expense ratio decreased 20 bps for both the three and six months ended, primarily reflecting higher adjusted revenues as discussed above.

Previous wording

On March 19, 2025, the Company completed the sale of our Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S. Healthcare operating segment (the "HCSC transaction").

Current wording

Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S. Healthcare operating segment (the "HCSC transaction").

Previous wording

•MCR represents medical costs as a percentage of premiums for our segment's insured businesses, and it is impacted by medical cost trend and premium rates. Affordability initiatives that serve to mitigate medical cost inflation also impact the MCR.

Current wording

•MCR represents medical costs as a percentage of premiums for our segment's insured businesses, and it is impacted by medical cost trend, premium rates and mix of business. Affordability initiatives that serve to mitigate medical cost inflation also impact the MCR.

Previous wording

Adjusted revenues decreased 21%, or $3,005 million, primarily due to the impact of the HCSC transaction (-$3,850 million), partially offset by higher premiums within employer insured (+$308 million) and stop loss (+$248 million), primarily reflecting premium rate increases.

Current wording

Adjusted revenues increased 9%, or $974 million, for the three months ended, driven by higher premiums (+$664 million), mostly within employer insured (+$305 million) and stop loss (+$259 million), primarily reflecting premium rate increases. Adjusted revenues decreased 8%, or $2,031 million, for the six months ended, primarily due to the impact of the HCSC transaction (-$3,850 million), partially offset by higher premiums (+$1,419 million), mostly within employer insured (+$613 million) and stop loss (+$507 million), primarily reflecting premium rate increases.

Previous wording

Our unpaid claims and claim expenses liability increased to $4,920 million as of March 31, 2026 from $4,241 million as of December 31, 2025, primarily due to stop loss seasonality.

Current wording

Our unpaid claims and claim expenses liability increased to $5,228 million as of June 30, 2026 from $4,241 million as of December 31, 2025, primarily due to stop loss seasonality.

Previous wording

Adjusted revenues decreased and Pre-tax adjusted income from operations increased, primarily driven by the discontinuation of certain small non-strategic businesses.

Current wording

Adjusted revenues decreased for both periods, primarily driven by the discontinuation of certain small non-strategic businesses.

Previous wording

Pre-tax adjusted loss from operations decreased, primarily due to lower interest expense.

Current wording

Pre-tax adjusted loss from operations increased for both periods, primarily due to higher interest expense.

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, 2026 compared with the same period in 2025.

Current wording

The following discussion explains variances in the various categories of cash flows for the six months ended June 30, 2026 compared with the same period in 2025.

Previous wording

Operating cash flows decreased for the three months ended March 31, 2026, primarily due to the unfavorable net cash flow impact related to the Inflation Reduction Act, lower insurance liabilities, and the timing of pharmaceutical manufacturer receivables. These decreases are partially offset by the favorable timing of noninsurance customer receivables and accounts receivable factoring settlements.

Current wording

Operating cash flows increased for the six months ended June 30, 2026, primarily driven by impact of accounts receivable, in part due to timing, and factoring facilities settlements. These increases are largely offset by unfavorable net cash flow impact related to the Inflation Reduction Act and lower insurance liabilities.

Previous wording

Investing Activities. The increase in cash used in investing activities reflects the absence of the net proceeds from the HCSC transaction.

Current wording

Investing Activities. The increase in cash used in investing activities primarily reflects the absence of the net proceeds from the HCSC transaction.

Previous wording

Financing Activities. The decrease in net cash used in financing activities in 2026 is primarily driven by the absence of share repurchases as well as lower debt repayments.

Current wording

Financing Activities. The decrease in net cash used in financing activities in 2026 is primarily driven by lower share repurchases and net debt financing activities.

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, revolving credit facility, 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 $0.5 billion for the three months ended March 31, 2026 and 2025. Non-regulated subsidiaries also generate significant cash flows from operating activities, which are 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, revolving credit facility, 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 $0.8 billion and $0.5 billion, respectively, for the six months ended June 30, 2026 and 2025. Non-regulated subsidiaries also generate significant cash flows from operating activities, which are typically available immediately to the parent company for general corporate purposes.

Previous wording

As of March 31, 2026, we had $6.5 billion of undrawn committed capacity under our revolving credit agreement (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $6.5 billion of remaining capacity under our commercial paper program, and $7.3 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 June 30, 2026, we had $6.5 billion of undrawn committed capacity under our revolving credit agreement (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $5.5 billion of remaining capacity under our commercial paper program, and $6.6 billion in cash and short-term investments, approximately $0.8 billion of which was held by the parent company or certain non-regulated subsidiaries.

Previous wording

Our debt-to-capitalization ratio (calculated as Short-term debt and Long-term debt ("Total debt") as a percentage of Total shareholders' equity and Total debt ("Total capitalization")) was 42.3% and 43.0% as of March 31, 2026 and December 31, 2025, respectively.

Current wording

Our debt-to-capitalization ratio (calculated as Short-term debt and Long-term debt ("Total debt") as a percentage of Total shareholders' equity and Total debt ("Total capitalization")) was 42.8% and 43.0% as of June 30, 2026 and December 31, 2025, respectively.

Previous 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 March 31, 2026.

Current wording

Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.2 billion from its subsidiaries without further approvals as of June 30, 2026.

Previous wording

Capital Expenditures. Capital expenditures for property, equipment and computer software were $0.3 billion in both the three months ended March 31, 2026 and 2025.

Current wording

Capital Expenditures. Capital expenditures for property, equipment and computer software were $0.6 billion in both the six months ended June 30, 2026 and 2025.

Previous wording

Share Repurchases. The Company maintains a share repurchase program authorized by our Board, under which it may repurchase shares of its common stock from time to time. There were no share repurchases during the three months ended March 31, 2026, compared with repurchases of 5.0 million shares for approximately $1.5 billion during the three months ended March 31, 2025.

Current wording

Share Repurchases. The Company maintains a share repurchase program authorized by our Board, under which it may repurchase shares of its common stock from time to time. We repurchased 0.9 million shares for approximately $250 million during the six months ended June 30, 2026, compared with repurchases of 8.2 million shares for approximately $2.6 billion during the six months ended June 30, 2025.

Previous wording

During the three months ended March 31, 2026, there were no material changes to the guarantees and contractual obligations set forth in our 2025 Form 10-K.

Current wording

During the six months ended June 30, 2026, there were no material changes to the guarantees and contractual obligations set forth in our 2025 Form 10-K.

Previous wording

The carrying value of our debt securities portfolio decreased from $8.4 billion as of December 31, 2025 to $8.3 billion as of March 31, 2026. Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years.

Current wording

The carrying value of our debt securities portfolio increased from $8.4 billion as of December 31, 2025 to $8.5 billion as of June 30, 2026. Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years.

Previous wording

As of March 31, 2026, $7.3 billion, or 88%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.0 billion were below investment grade. The majority of the bonds that are below investment grade were rated at the higher end of the non-investment-grade spectrum. These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.

Current wording

As of June 30, 2026, $7.5 billion, or 88%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.0 billion were below investment grade. The majority of the bonds that are below investment grade were rated at the higher end of the non-investment-grade spectrum. These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.

Previous wording

As of March 31, 2026, our $1.3 billion commercial mortgage loan portfolio consisted of approximately 40 fixed-rate loans. Given the quality and diversity of the underlying real estate, positive debt service coverage, loan-to-value ratio and significant borrower cash invested in the property generally ranging between 30% and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key credit quality indicators, see Note 9 to the Consolidated Financial Statements.

Current wording

As of June 30, 2026, our $1.2 billion commercial mortgage loan portfolio consisted of approximately 40 fixed-rate loans. Given the quality and diversity of the underlying real estate, positive debt service coverage, loan-to-value ratio and significant borrower cash invested in the property generally ranging between 30% and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key credit quality indicators, see Note 9 to the Consolidated Financial Statements.

Previous wording

Office sector fundamentals are weak but have begun to stabilize for higher-quality assets. Our commercial mortgage loan portfolio has approximately 25% exposure to office properties. Although future losses remain possible due to further credit deterioration, we do not expect these losses to have a material unfavorable effect on our results of operations, financial condition or liquidity.

Current wording

Office sector fundamentals are weak but have begun to stabilize for higher-quality assets. Our commercial mortgage loan portfolio has approximately 26% exposure to office properties. Although future losses remain possible due to further credit deterioration, we do not expect these losses to have a material unfavorable effect on our results of operations, financial condition or liquidity.

Previous wording

We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less than 4% of our other long-term investments are exposed to real estate in the office sector.

Current wording

We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less than 3% of our other long-term investments are exposed to real estate in the office sector.