^{_____________________________________________}

~~(1)~~

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


~~(2)~~	During the three months ended March 31, 2020 and 2019, acquisition-related integration costs relate to the Aetna Acquisition. The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

~~(3)~~

During the three months ended March 31, 2019, the store rationalization charge primarily relates to operating lease right-of-use asset impairment charges in connection with the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charge is reflected in the Company’s unaudited GAAP condensed consolidated statement of operations in operating expenses within the Retail/LTC segment.

Index to Condensed Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of CVS Health Corporation

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of CVS Health Corporation (the Company) as of March 31, ~~2020,~~2021, the related condensed consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the three-month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2019,~~2020, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February ~~18, 2020,~~16, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2019,~~2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Ernst & Young LLP

Boston, Massachusetts

May ~~6, 2020~~

4, 2021

Form 10-Q Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Overview of Business

CVS Health Corporation (“CVS Health”), together with its subsidiaries (collectively, the “Company,” “we,” “our” or “us”), is ~~the nation’s premier~~a diversified health ~~innovation~~services company united around a common purpose of helping people on their path to better health. ~~Whether in one of its pharmacies or through its~~In an increasingly connected and digital world, we are meeting people wherever they are and changing health ~~services and plans, the Company is pioneering a bold new approach~~care to total health by making quality care more affordable, accessible, simple and seamless. The Company is community-based and locally focused, engaging consumers with the care they need when and where they need it.meet their needs. The Company has ~~approximately~~more than 9,900 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately ~~102~~108 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year and expanding specialty pharmacy services. The Company also serves an estimated 34 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs. As we move through the year, the Company is expected to benefit from the continuation of its enterprise-wide cost savings initiatives, including ongoing digitalization and technology improvements, a reduction in non-retail real estate associated with workforce management changes and initiatives to increase productivity and operational efficiency.

The Company has four reportable segments: Health Care Benefits, Pharmacy Services, Retail/LTC ~~Health Care Benefits~~ and Corporate/Other, which are described below.

~~Overview of the Pharmacy Services Segment~~

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges and private health insurance exchanges, other sponsors of health benefit plans and individuals throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

~~Overview of the Retail/LTC Segment~~

The Retail/LTC segment sells prescription drugs and a wide assortment of general merchandise, including over-the-counter drugs, beauty products, cosmetics and personal care products, provides health care services through its MinuteClinic^® walk-in medical clinics and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of March 31, 2020, the Retail/LTC segment operated approximately 9,900 retail locations, approximately 1,100 MinuteClinic~~locations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies.~~

Overview of the Health Care Benefits Segment

The Health Care Benefits segment is one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services, ~~workers’ compensation administrative services~~ and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” During 2021, the Health Care Benefits segment is expected to benefit from Medicare membership growth, partially offset by the adverse impact of the coronavirus disease 2019 (“COVID-19”) pandemic and the repeal of the non-deductible health insurer fee (“HIF”) for calendar years after 2020. The projected medical benefit ratio (“MBR”) is expected to increase compared to 2020, reflecting the return to more normal levels of utilization, the repeal of the HIF, lower Medicare risk adjustment revenue and the continued shift in business mix. The COVID-19 pandemic is expected to adversely impact earnings in 2021 due to the regulatory changes included in the Consolidated Appropriations Act of 2021; testing, treatment and vaccination costs; and lower Medicare risk adjustment revenue.

Overview of the Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services, mail order pharmacy, specialty pharmacy and infusion services, clinical services, disease management services and medical spend management. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on public health insurance exchanges and private health insurance exchanges and other sponsors of health benefit plans throughout the United States. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services. During 2021, the Pharmacy Services segment is expected to benefit from continued growth in specialty pharmacy and our ability to drive further improvements in purchasing economics, partially offset by continued price compression.

Overview of the Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of health and wellness products and general merchandise, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic

testing, administers vaccinations for illnesses such as influenza, coronavirus disease 2019 (“COVID-19”) and shingles and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of March 31, 2021, the Retail/LTC segment operated more than 9,900 retail locations, approximately 1,100 MinuteCliniclocations as well as online retail pharmacy websites, LTC pharmacies and onsite pharmacies. During 2021, the Retail/LTC segment is expected to benefit from increased prescription volume, diagnostic testing and vaccinations and improved generic drug purchasing, partially offset by continued reimbursement pressure.

Overview of the Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which primarily consists of:

•Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and ~~Enterprise~~enterprise modernization programs and acquisition-related integration costs; and

•Products for which the Company no longer solicits or accepts new customers such as large case pensions and long-term care insurance products.

COVID-19 ~~and 2020 Outlook~~

~~As coronavirus disease 2019 (“COVID-19”)~~The COVID-19 pandemic continues to ~~spread and severely~~ impact the economies of the U.S. and other countries around the ~~world,~~world. We believe COVID-19’s impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the Company has put preparedness plans in place at our facilities to maintain continuity of our operations, while also taking steps to keep our colleagues healthy and safe. In accordance with governmental directions to shelter-in-place, eliminate large gatherings and practice social distancing, the Company has transitioned many office-based colleagues to a remote work environment. The various initiatives we have implemented to slow and/or reduce the impact of COVID-19, such as colleagues working remotely and installing protective equipment in our retail pharmacies,geographies impacted and the ~~COVID-19-related support programs we have put in place for our customers, medical members~~severity and ~~colleagues have increased our operating expenses~~duration of the pandemic, as well as the pandemic’s impact on the U.S. and ~~reduced the efficiency of our operations.~~

~~The legislative~~global economies, consumer behavior and ~~regulatory environment governing our businesses is dynamic and changing frequently~~health care utilization patterns. In addition, as described in ~~more detail below under~~the “Government ~~Regulation,” including mandated increases to~~Regulation” section of the ~~medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products. Federal,~~2020 Form 10-K, federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 may not effectively combat the severity and/or duration of the COVID-19 pandemic, and have resulted in ~~among other things,~~ a ~~reduction in utilization~~myriad of medical services (“utilization”) that is discretionary, the cancellation of elective medical procedures, reduced customer traffic and front store sales in our retail pharmacies, our customers being ordered to close or severely curtail their operations, the adoption of work-from-home policies and a reduction in diagnostic reporting due to reductions in provider visits and restrictionsimpacts on our ~~access to providers’ medical records, all of which impact our~~ businesses. ~~Among other impacts of these policies and initiatives, we expect an adverse impact on:~~

~~Drug utilization due to the reduction in discretionary visits with providers;~~

~~Front store sales as a result of reduced customer traffic in our retail pharmacies due to shelter-in-place orders and COVID-19 related unemployment;~~

Medical membership in our Health Care Benefits segment and covered lives in our PBM clients due to reductions in workforce at our existing customers (including due to business failures) as well as reduced willingness to change benefits providers by prospective customers;

Benefit costs due to COVID-19 related support programs we have put in place for our medical members and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products; and

~~The timing and collectability of payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them.~~

In addition to the items described above, we expect the current adverse economic conditions in the U.S. and abroad caused by COVID-19 to continue at least throughout 2020 and possibly longer, resulting in increased unemployment, reduced economic activity, continued capital markets volatility, downward pressure on our net investment income and the value of our investment portfolio and lower interest rates. We also expect to see upward pressure on provider unit costs and changes in provider behavior as providers attempt to maintain revenue levels in their efforts to adjust to their own COVID-19 related impacts and other economic challenges. We may continue to experience similar adverse effects on our businesses, operating results and cash flows from a recessionary economic environment that is expected to persist after the COVID-19 pandemic has moderated. As a result, the quarterly cadence of our earnings is likely to vary from historical patterns.

The COVID-19 pandemic is evolving rapidly. We believe COVID-19’s adverse impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the ~~adverse~~ impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the ~~adverse~~ impact could be adverse and material.

~~In addition to the~~ Specific COVID-19 related ~~matters described above,~~impacts on the Company ~~continues to expect it will experience the following key trends during 2020:~~

The Pharmacy Services segment is expected to benefit from continued improvements in purchasing economics and Enterprise modernization, partially offset by 2020 selling season net losses and continued price compression.

~~The Retail/LTC segment is expected to experience continued reimbursement pressure.~~

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) imposes a significant industry-wide health insurer fee known as the “HIF.” The HIF is non-deductible for federal income tax purposes and is allocated to insurers based on the ratio of the amount of an insurer’s net premium revenues written during the preceding calendar year to the amount of health insurance premium for all U.S. health risk for certain lines of business during the preceding calendar year. The HIF was suspended for 2019, will be $15.5 billion for 2020 and has been repealed for calendar years after 2020. Our estimated share of the HIF for 2020 is approximately $1.1 billion. While the Company expects the reintroduction of the HIF to result in a lower medical benefit ratio (“MBR”) in 2020 compared to 2019, all else being equal, the Company expects its 2020 consolidated net income and effective income tax rate will be negatively impacted by the HIF compared to 2019 due to the non-deductibility of the HIF for federal income tax purposes.

The Company expects changes to its business environment to continue for the next several years as elected and other government officials at the national and state levels continue to propose and enact significant modifications to public policy and existing laws and regulations that govern the Company’s businesses.

~~The Company’s current expectations described above under “COVID-19~~three months ended March 31, 2021 and 2020 ~~Outlook” and below under “Government Regulation”~~ are forward-looking statements. Please see “Cautionary Statement Concerning Forward-Looking Statements” in this report and the Risk Factors sections of this report and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”), for information regarding important factors that may cause the Company’s actual results to differ from those currently projected and/or otherwise materially affect the Company.further described below.

~~Government Regulation~~

The Families First Coronavirus Response Act (the “Families First Act”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were enacted in March 2020. Each of the Families First Act and the CARES Act requires the Company to provide coverage for COVID-19 related medical services, in many cases without member cost sharing, in its Insured Health Care Benefits products. The CARES Act also provides relief funding to health care providers to reimburse them for health care related expenses incurred in preventing, preparing for and/or responding to COVID-19 (provided no other source is obligated to reimburse those expenses) or lost health care related revenues that are attributable to COVID-19.

In addition to the Families First Act and the CARES Act, the Company is experiencing an unprecedented level of new laws, regulations, directives and orders from federal, state, county and municipal authorities related to the COVID-19 pandemic, most of which have been issued on an emergency basis with immediate, or in some instances retroactive, effect. These governmental actions include, but are not limited to, requirements to waive member cost sharing associated with COVID-19 testing and treatment, provide coverage for additional COVID-19-related services, expand the use of telemedicine, suspend precertification or other utilization management mechanisms (including review of claims for medical necessity), allow earlier or longer renewal of prescriptions, extend grace periods for payments of premiums or limit coverage termination based on non-payment of premiums or fees, modify health benefits coverage eligibility rules to help maintain employee eligibility, and facilitate, accelerate or advance payments to health care providers. Related governmental actions have required the Company to close or significantly limit operations at traditional office worksites and affected the hours of operation of MinuteClinic locations and the Company’s pharmacies. In some instances the Company has taken permitted proactive actions consistent with more general regulatory directives, such as expanding home delivery of prescription medications, extending hours of operation for member assistance lines and liberalizing certain other terms of coverage. Similar directives have affected the Company’s international operations around the world. The Company anticipates additional mandates and directives from domestic and foreign federal, state, county and city authorities throughout the continuation of the COVID-19 pandemic and for some time thereafter, some of which may result in permanent changes in the Company’s operations or the health care and other benefits cost and other risks assumed by the Company. Further, although the Company has seen regulators relax certain requirements in light of the COVID-19 pandemic, such as temporary suspension of certain audits and extensions of certain filing deadlines, failure to provide regulatory relief or accommodations in other areas may result in increased costs or reduced revenue for the Company.

The impact of this governmental activity on the U.S. economy, consumer, customer and health care provider behavior and health care utilization patterns is beyond our knowledge and control. As a result, the financial and/or operational impact these COVID-19 related governmental actions and inactions will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the collective impact could be material and adverse.

Separately, in April 2020, the U.S. Supreme Court ruled that health insurance companies may sue the federal government for amounts owed as calculated under the ACA’s temporary risk corridor program. The Company filed a lawsuit in August 2019 to recover the approximately $310 million it is owed under the ACA’s risk corridor program, which had been stayed pending the Supreme Court decision. The Company will continue to seek the payments owed to it and to evaluate the impact of the ACA

and legislative, regulatory, administrative policy and litigation-driven changes to the ACA. At March 31, 2020, the Company did not record any ACA risk corridor receivables because payment is uncertain.

Operating Results

The following discussion explains the material changes in the Company’s operating results for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and the significant developments affecting the Company’s financial condition since December 31, ~~2019.~~2020. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the ~~2019~~2020 Form 10-K.

Summary of Consolidated Financial Results

Three Months Ended
March 31, Change
In millions 2020 2019 $ %
Revenues:
Products $ 47,003
$ 43,343
$ 3,660
8.4 %
Premiums 17,640
16,282
1,358
8.3 %
Services 1,950
1,772
178
10.0 %
Net investment income 162
249
(87 ) (34.9 )%
Total revenues 66,755
61,646
5,109
8.3 %
Operating costs:

Cost of products sold 40,347
37,247
3,100
8.3 %
Benefit costs 14,387
13,459
928
6.9 %
Operating expenses 8,563
8,250
313
3.8 %
Total operating costs 63,297
58,956
4,341
7.4 %
Operating income 3,458
2,690
768
28.6 %
Interest expense 733
782
(49 ) (6.3 )%
Other income (54 ) (31 ) (23 ) (74.2 )%
Income before income tax provision 2,779
1,939
840
43.3 %
Income tax provision 767
512
255
49.8 %
Net income 2,012
1,427
585
41.0 %
Net income attributable to noncontrolling interests (5 ) (6 ) 1
16.7 %
Net income attributable to CVS Health $ 2,007
$ 1,421
$ 586
41.2 %



	Three Months Ended March 31,				Change
In millions	2021		2020			$		%
Revenues:
Products	$	47,387	$	47,003		$	384	0.8	%
Premiums	18,960		17,640			1,320		7.5	%
Services	2,453		1,950			503		25.8	%
Net investment income	297		162			135		83.3	%
Total revenues	69,097		66,755			2,342		3.5	%
Operating costs:
Cost of products sold	40,894		40,347			547		1.4	%
Benefit costs	15,704		14,387			1,317		9.2	%
Operating expenses	8,922		8,563			359		4.2	%
Total operating costs	65,520		63,297			2,223		3.5	%
Operating income	3,577		3,458			119		3.4	%
Interest expense	657		733			(76)		(10.4)	%

Other income	(50)		(54)			4		7.4	%
Income before income tax provision	2,970		2,779			191		6.9	%
Income tax provision	746		767			(21)		(2.7)	%


Net income	2,224		2,012			212		10.5	%
Net income attributable to noncontrolling interests	(1)		(5)			4		80.0	%
Net income attributable to CVS Health	$	2,223	$	2,007		$	216	10.8	%

Commentary - Three Months Ended March 31, ~~2020~~2021 vs. ~~2019~~2020

Revenues

•Total revenues increased ~~$5.1~~$2.3 billion, or ~~8.3%~~3.5%, in the three months ended March 31, ~~2020~~2021 compared to the prior year ~~primarily~~ driven by ~~strong underlying core~~ growth across all segments. Revenues in the Retail/LTC and Pharmacy Services segments in the three months ended March 31, 2020 also increased as a result of the COVID-19 pandemic, which resulted in greater use of 90-day prescriptions and early refills of maintenance medications, as well as increased front store volume in the Retail/LTC segment.

•Please see “Segment Analysis” later in this report for additional information about the revenues of the Company’s segments.

Operating expenses

•Operating expenses increased ~~$313~~$359 million, or ~~3.8%~~4.2%, in the three months ended March 31, ~~2020 compared to the prior year. Operating expenses as a percentage of total revenues were 12.8% in the three months ended March 31, 2020, an increase of 60 basis points~~2021 compared to the prior year. The increase in operating expenses was primarily due to incremental costs associated with COVID-19 related services and protocols in the ~~reinstatement~~Retail/LTC segment and increased operating expenses associated with growth in the business. These increases were partially offset by the repeal of the HIF for ~~2020~~2021 and ~~incremental operating expenses to support the increased volume described above. The increase in operating expenses was partially offset by~~ the favorable impact of enterprise-wide cost savings initiatives ~~the absence~~in 2021.

•Operating expenses as a percentage of ~~the $135 million store rationalization charge recorded~~total revenues remained relatively consistent at 12.9% and 12.8% in the three months ended March 31, ~~2019~~2021 and ~~a decrease in acquisition-related integration costs of $79 million in the three months ended March 31,~~ 2020, ~~compared to the prior period.~~respectively.

•Please see “Segment Analysis” later in this report for additional information about the operating expenses of the Company’s segments.

Operating income

•Operating income increased $119 million, or 3.4%, in the three months ended March 31, 2021 compared to the prior year. The increase in operating income was primarily due to growth in the Pharmacy Services and Health Care Benefits segments, partially offset by declines in the Retail/LTC segment.

•

Operating income increased $768 million, or 28.6%, in the three months ended March 31, 2020 compared to the prior year. The increase was primarily due to (i) increased volume across all segments, (ii) improved purchasing economics in the Pharmacy Services segment, (iii) the favorable impact of cost savings initiatives, (iv) the absence of the $135 million store rationalization charge recorded in the three months ended March 31, 2019 and (v) a decrease in acquisition-related integration costs in the three months ended March 31, 2020 compared to the prior period. These increases were partially offset by a decline in operating income in the Health Care Benefits segment, continued reimbursement pressure in the Retail/LTC segment and continued price compression in the Pharmacy Services segment. The COVID-19 pandemic increased operating income in the three months ended March 31, 2020 due to increased volume in the Retail/LTC segment, as well as reduced benefit costs due to the deferral of elective procedures and other discretionary utilization in the Health Care Benefits segment, partially offset by lower net investment income.

Please see “Segment Analysis” later in this report for additional information about the operating ~~income~~results of the Company’s segments.

Interest expense

•Interest expense decreased ~~$49~~$76 million, or 10.4%, in the three months ended March 31, ~~2020~~2021 compared to the prior year primarily due to lower ~~average~~ debt in the three months ended March 31, ~~2020.~~2021. See “Liquidity and Capital Resources” later in this report for additional information.

Income tax provision

•The Company’s effective income tax rate was ~~27.6% in~~25.1% for the three months ended March 31, ~~2020~~2021 compared to ~~26.4% in~~27.6% for the ~~prior year.~~three months ended March 31, 2020. The ~~increase~~decrease in the effective income tax rate was primarily due to the ~~reinstatement~~repeal of the ~~non-deductible~~ HIF for ~~2020.~~2021.

Segment Analysis

The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 109 ‘‘Segment Reporting’’ to the unaudited condensed consolidated financial statements.

The Company has three operating segments, ~~Pharmacy Services, Retail/LTC and~~ Health Care Benefits, Pharmacy Services and Retail/LTC, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. See the reconciliations of operating income (GAAP measure) to adjusted operating income below for further context regarding the items excluded from operating income in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:


In millions	Health Care Benefits		Pharmacy Services (1)		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended
March 31, 2021
Total revenues	$	20,483	$	36,321	$	23,274	$	135	$	(11,116)	$	69,097
Adjusted operating income (loss)	1,782		1,507		1,394		(303)		(175)		4,205
March 31, 2020
Total revenues	19,198		34,983		22,749		90		(10,265)		66,755
Adjusted operating income (loss)	1,491		1,181		1,902		(285)		(176)		4,113

In millions
Pharmacy
Services ⁽¹⁾
Retail/
LTC Health Care
Benefits Corporate/
Other
Intersegment
Eliminations ⁽²⁾
Consolidated
Totals
Three Months Ended
March 31, 2020
Total revenues $ 34,983
$ 22,749
$ 19,198
$ 90
$ (10,265 ) $ 66,755
Adjusted operating income (loss) 1,181
1,902
1,491
(285 ) (176 ) 4,113
March 31, 2019
Total revenues 33,558
21,115
17,870
110
(11,007 ) 61,646
Adjusted operating income (loss) 947
1,489
1,562
(231 ) (172 ) 3,595

^{_____________________________________________}(1)


~~(1)~~	Total revenues of ~~the Pharmacy Services segment include approximately $3.4 billion and $3.3 billion of retail co-payments for the three months ended March 31, 2020 and 2019, respectively.~~


~~(2)~~	~~Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.~~

~~The following are reconciliations of operating income to adjusted operating income for the three months ended March 31, 2020 and 2019:~~

Three Months Ended March 31, 2020
In millions Pharmacy
Services Retail/
LTC Health Care
Benefits Corporate/
Other Intersegment
Eliminations Consolidated
Totals
Operating income (loss) (GAAP measure) $ 1,114
$ 1,780
$ 1,095
$ (355 ) $ (176 ) $ 3,458
Non-GAAP adjustments:
Amortization of intangible assets ⁽¹⁾
67
122
396
1
—
586
Acquisition-related integration costs ⁽²⁾
—
—
—
69
—
69
Adjusted operating income (loss) $ 1,181
$ 1,902
$ 1,491
$ (285 ) $ (176 ) $ 4,113

Three Months Ended March 31, 2019
In millions Pharmacy
Services Retail/
LTC Health Care
Benefits Corporate/
Other Intersegment
Eliminations Consolidated
Totals
Operating income (loss) (GAAP measure) $ 850
$ 1,238
$ 1,155
$ (381 ) $ (172 ) $ 2,690
Non-GAAP adjustments:
Amortization of intangible assets ⁽¹⁾
97
116
407
2
—
622
Acquisition-related integration costs ⁽²⁾
—
—
—
148
—
148
Store rationalization charge ⁽³⁾
—
135
—
—
—
135
Adjusted operating income (loss) $ 947
$ 1,489
$ 1,562
$ (231 ) $ (172 ) $ 3,595

^{_____________________________________________}

~~(1)~~


~~(2)~~	During the three months ended March 31, 2020 and 2019, acquisition-related integration costs relate to the Company’s acquisition (the “Aetna Acquisition”) of Aetna Inc. (“Aetna”). The acquisition-related integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

~~(3)~~

~~Pharmacy Services Segment~~

~~The following table summarizes the Pharmacy Services segment’s performance for the respective periods:~~

Three Months Ended
March 31, Change
In millions, except percentages 2020 2019 $ %
Revenues:
Products $ 34,746
$ 33,450
$ 1,296
3.9 %
Services 237
108
129
119.4 %
Total revenues 34,983
33,558
1,425
4.2 %
Cost of products sold 33,503
32,339
1,164
3.6 %
Operating expenses 366
369
(3 ) (0.8 )%
Operating expenses as a % of total revenues 1.0 % 1.1 %
Operating income $ 1,114
$ 850
$ 264
31.1 %
Operating income as a % of total revenues 3.2 % 2.5 %
Adjusted operating income ⁽¹⁾
$ 1,181
$ 947
$ 234
24.7 %
Adjusted operating income as a % of total revenues 3.4 % 2.8 %
Revenues (by distribution channel):
Pharmacy network ^{(2) (3)}
$ 21,100
$ 21,532
$ (432 ) (2.0 )%
Mail choice ^{(3) (4)}
13,674
11,881
1,793
15.1 %
Other 209
145
64
44.1 %
Pharmacy claims processed: ⁽⁵⁾

Total 541.4
481.8
59.6
12.4 %
Pharmacy network ⁽²⁾
461.1
407.7
53.4
13.1 %
Mail choice ⁽⁴⁾
80.3
74.1
6.2
8.4 %
Generic dispensing rate: ⁽⁵⁾

Total 89.0 % 88.3 %
Pharmacy network ⁽²⁾
89.5 % 88.9 %
Mail choice ⁽⁴⁾
85.7 % 84.8 %

^{_____________________________________________}


~~(1)~~	~~See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Pharmacy Services segment.~~

~~(2)~~

Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.


~~(3)~~	~~Certain prior year amounts have been reclassified for consistency with the current period presentation.~~


~~(4)~~	~~Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect~~^® ~~claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.~~


~~(5)~~	Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

~~Commentary - Three Months Ended March 31, 2020 vs. 2019~~

~~Revenues~~

Total revenues increased $1.4 billion, or 4.2%, to $35.0 billion for the three months ended March 31, 2020 compared to the prior year primarily due to growth in specialty pharmacy, brand inflation and increased total pharmacy claims volume, including greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic. The increase was partially offset by previously disclosed client losses, continued price compression and an increased generic dispensing rate.

~~Operating expenses~~

~~Operating expenses in~~ the Pharmacy Services segment include ~~selling, general and administrative expenses; depreciation and amortization related to selling, general and administrative activities; and expenses related to specialty~~approximately $3.4 billion of retail ~~pharmacies, which include store and administrative payroll, employee benefits and occupancy costs.~~

~~Operating expenses remained flat in the three months ended March 31, 2020 compared to the prior year.~~

~~Operating expenses as a percentage of total revenues remained relatively consistent at 1.0% and 1.1%~~co-payments in each of the three-month periods ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020.

~~Operating~~

The following are reconciliations of consolidated operating income ~~and~~(GAAP measure) to consolidated adjusted operating income,

~~Operating~~ as well as reconciliations of segment GAAP operating income ~~increased $264 million, or 31.1%, and~~to segment adjusted operating ~~income increased $234 million,~~income:


	Three Months Ended March 31, 2021
In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	1,380	$	1,452	$	1,265	$	(345)	$	(175)	$	3,577
Amortization of intangible assets (1)	402		55		129		1		—		587
Acquisition-related integration costs (2)	—		—		—		41		—		41

Adjusted operating income (loss)	$	1,782	$	1,507	$	1,394	$	(303)	$	(175)	$	4,205


	Three Months Ended March 31, 2020
In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	$	1,095	$	1,114	$	1,780	$	(355)	$	(176)	$	3,458
Amortization of intangible assets (1)	396		67		122		1		—		586
Acquisition-related integration costs (2)	—		—		—		69		—		69


Adjusted operating income (loss)	$	1,491	$	1,181	$	1,902	$	(285)	$	(176)	$	4,113

(1)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or ~~24.7%, in~~the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(2)During the three months ended March 31, 2021 and 2020, ~~compared~~acquisition-related integration costs relate to the prior year primarily driven by growth in specialty pharmacy, improved purchasing economics and an increased generic dispensing rate, partially offset by previously disclosed client losses and continued price compression.Company’s acquisition (the “Aetna Acquisition”) of Aetna Inc. (“Aetna”). The ~~increase in operating income also was driven by lower amortization expense~~acquisition-related integration costs are reflected in the ~~three months ended March 31, 2020.~~

~~As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business:~~

~~The~~ Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on operating income and adjusted operating income. In particular, competitive pressures in the PBM industry have caused the Company and other PBMs to continue to share with clients a larger portionunaudited GAAP condensed consolidated statements of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for the drug by the PBM to the dispensing provider.

~~Pharmacy claims processed~~

Total pharmacy claims processed represents the number of prescription claims processed through our pharmacy benefits manager and dispensed by either our retail network pharmacies or our own mail and specialty pharmacies. Management uses this metric to understand variances between actual claims processed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of pharmacy claim volume on segment revenues and operating results.

The Company’s pharmacy network claims processed on a 30-day equivalent basis increased 13.1% to 461.1 million claims in the three months ended March 31, 2020, compared to 407.7 million claims in the prior year. The increase in pharmacy network claims processed was primarily driven by increased claims processed under the Company’s agreement with IngenioRx, which began in the second quarter of 2019, and greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic.

The Company’s mail choice claims processed on a 30-day equivalent basis increased 8.4% to 80.3 million claims in the three months ended March 31, 2020, compared to 74.1 million claims in the prior year. The increase in mail choice claims was primarily driven by increased claims processed under the Company’s agreement with IngenioRx, greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for the COVID-19 pandemic and the continued adoption of Maintenance Choice offerings.

~~Generic dispensing rate~~

Generic dispensing rate is calculated by dividing the Pharmacy Services segment’s generic drug prescriptions processed or filled by its total prescriptions processed or filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

The Pharmacy Services segment’s total generic dispensing rate increased to 89.0% in the three months ended March 31, 2020 compared to 88.3% in the prior year. The continued increase in the segment’s generic dispensing rate was primarily due to the impact of new generic drug introductions and the Company’s ongoing efforts to encourage plan members to use generic drugs when they are available and clinically appropriate. The Company believes the segment’s generic dispensing rate will continue to increase in future periods, albeit at a slower pace. This increase will be affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.

~~Retail/LTC Segment~~

~~The following table summarizes the Retail/LTC segment’s performance for the respective periods:~~

Three Months Ended
March 31, Change
In millions, except percentages 2020 2019 $ %
Revenues:
Products $ 22,522
$ 20,900
$ 1,622
7.8 %
Services 227
215
12
5.6 %
Total revenues 22,749
21,115
1,634
7.7 %
Cost of products sold 16,578
15,297
1,281
8.4 %
Operating expenses 4,391
4,580
(189 ) (4.1 )%
Operating expenses as a % of total revenues 19.3 % 21.7 %
Operating income $ 1,780
$ 1,238
$ 542
43.8 %
Operating income as a % of total revenues 7.8 % 5.9 %
Adjusted operating income ⁽¹⁾
$ 1,902
$ 1,489
$ 413
27.7 %
Adjusted operating income as a % of total revenues 8.4 % 7.1 %
Revenues (by major goods/service lines):
Pharmacy $ 17,355
$ 16,118
$ 1,237
7.7 %
Front Store 5,208
4,799
409
8.5 %
Other 186
198
(12 ) (6.1 )%
Prescriptions filled ⁽²⁾
375.1
346.8
28.3
8.2 %
Same store sales increase: ⁽³⁾

Total 9.0 % 3.8 %
Pharmacy 9.3 % 4.9 %
Front Store 8.0 % 0.4 %
Prescription volume ⁽²⁾
9.8 % 6.7 %
Generic dispensing rate⁽²⁾
89.3 % 88.7 %

^{_____________________________________________}


~~(1)~~	~~See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Retail/LTC segment.~~


~~(2)~~	Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

~~(3)~~

Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues from MinuteClinic, revenues and prescriptions from LTC operations and, in 2019, revenues and prescriptions from stores in Brazil. Management uses these metrics to evaluate the performance of existing stores on a comparable basis and to inform future decisions regarding existing stores and new locations. Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores.

~~Commentary - Three Months Ended March 31, 2020 vs. 2019~~

~~Revenues~~

Total revenues increased $1.6 billion, or 7.7%, to $22.7 billion in the three months ended March 31, 2020 compared to the prior year primarily driven by increased prescription volume, higher front store revenues and brand inflation, partially offset by continued reimbursement pressure and an increased generic dispensing rate. Total revenues in the three months ended March 31, 2020 reflected the greater use of 90-day prescriptions, early refills of maintenance medications and increased front store volume as consumers prepared for the COVID-19 pandemic, as well as the impact of an additional day in 2020 due to the leap year.

Pharmacy same store sales increased 9.3% in the three months ended March 31, 2020 compared to the prior year. The increase was driven by the 9.8% increase in pharmacy same store prescription volume on a 30-day equivalent basis, including increased prescription volume related to COVID-19, brand inflation and the impact of the additional day in 2020 due to the leap year. These increases were partially offset by continued reimbursement pressure and an increased generic dispensing rate.

•

Front store same store sales increased 8.0% in the three months ended March 31, 2020 compared to the prior year. The increase in front store sales in the three months ended March 31, 2020 compared to the prior year was primarily due to strength in consumer health and general merchandise sales, which was primarily driven by COVID-19 related sales; the expansion of the CarePass^® ~~program; and the impact of the additional day in 2020 due to the leap year.~~

~~Operating expenses~~

Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses.

Operating expenses decreased $189 million, or 4.1%, in the three months ended March 31, 2020 compared to the prior year, primarily due to the absence of the $135 million store rationalization charge primarily related to operating lease right-of-use asset impairment charges in connection with the planned closure of underperforming retail pharmacy stores recorded in the three months ended March 31, 2019, the impact of cost savings initiatives and the favorable resolution of certain legal matters in the three months ended March 31, 2020. These decreases were partially offset by increased operating expenses associated with the increased volume described above, including the impact of COVID-19 in the three months ended March 31, 2020.

~~Operating expenses as a percentage of total revenues decreased to 19.3% in the three months ended March 31, 2020 compared to 21.7% in the prior year. The decrease~~ in operating expenses ~~as a percentage of total revenues was primarily driven by the increases in revenues and decreases in operating expenses described above.~~

~~Operating income and adjusted operating income~~

Operating income increased $542 million, or 43.8%, and adjusted operating income increased $413 million, or 27.7%, in the three months ended March 31, 2020 compared to the prior year. The increase in both operating income and adjusted operating income was primarily due to the increased pharmacy and front store volume described above, improved generic drug purchasing, the impact of cost savings initiatives and the favorable resolution of certain legal matters in the three months ended March 31, 2020, partially offset by continued reimbursement pressure. The increase in operating income was also due to the absence of the $135 million store rationalization charge recorded in the three months ended March 31, 2019.

~~As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business:~~

The segment’s pharmacy operating income and adjusted operating income has been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the ~~pharmacy portion of the Retail/LTC~~Corporate/Other segment. ~~If the reimbursement pressure accelerates, the segment may not be able grow revenues, and its operating income and adjusted operating income could be adversely affected.~~

The increased use of generic drugs has positively impacted the segment’s operating income and adjusted operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the segment realizes from brand to generic drug conversions.

~~Prescriptions filled~~

Prescriptions filled represents the number of prescriptions dispensed through the Retail/LTC segment’s pharmacies. Management uses this metric to understand variances between actual prescriptions dispensed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of prescription volume on segment revenues and operating results.

Prescriptions filled increased 8.2% on a 30-day equivalent basis, driven primarily by the continued adoption of patient care programs, greater use of 90-day prescriptions and early refills of maintenance medications as consumers prepared for COVID-19, and the impact of the additional day in 2020 due to the leap year.

~~Generic dispensing rate~~

Generic dispensing rate is calculated by dividing the Retail/LTC segment’s generic drug prescriptions filled by its total prescriptions filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

The Retail/LTC segment’s generic dispensing rate increased to 89.3% in the three months ended March 31, 2020 compared to 88.7% in the prior year. The continued increase in the segment’s generic dispensing rate was primarily due to the impact of new generic drug introductions. The Company believes the segment’s generic dispensing rate will continue to increase in future periods, albeit at a slower pace. This increase will be affected by, among other things, the number of new brand and generic drug introductions and the Company’s success at encouraging plan members to utilize generic drugs when they are available and clinically appropriate.

Health Care Benefits Segment

The following table summarizes the Health Care Benefits segment’s performance for the respective periods:



	Three Months Ended March 31,						Change
In millions, except percentages and basis points (“bps”)	2021			2020				$			%
Revenues:
Premiums	$	18,942		$	17,621			$	1,321		7.5	%
Services	1,393			1,484				(91)			(6.1)	%
Net investment income	148			93				55			59.1	%
Total revenues	20,483			19,198				1,285			6.7	%
Benefit costs	15,757			14,516				1,241			8.5	%
MBR	83.2		%	82.4		%		80		bps
Operating expenses	$	3,346		$	3,587			$	(241)		(6.7)	%
Operating expenses as a % of total revenues	16.3		%	18.7		%
Operating income	$	1,380		$	1,095			$	285		26.0	%
Operating income as a % of total revenues	6.7		%	5.7		%
Adjusted operating income (1)	$	1,782		$	1,491			$	291		19.5	%
Adjusted operating income as a % of total revenues	8.7		%	7.8		%
Premium revenues (by business):
Government	$	13,917		$	12,469			$	1,448		11.6	%
Commercial	5,025			5,152				(127)			(2.5)	%

Three Months Ended
March 31, Change
In millions, except percentages and basis points (“bps”) 2020 2019 $ %
Revenues:
Premiums $ 17,621
$ 16,259
$ 1,362
8.4 %
Services 1,484
1,447
37
2.6 %
Net investment income 93
164
(71 ) (43.3 )%
Total revenues 19,198
17,870
1,328
7.4 %
Benefit costs 14,516
13,655
861
6.3 %
MBR 82.4 % 84.0 % (160) bps
Operating expenses $ 3,587
$ 3,060
$ 527
17.2 %
Operating expenses as a % of total revenues 18.7 % 17.1 %
Operating income $ 1,095
$ 1,155
$ (60 ) (5.2 )%
Operating income as a % of total revenues 5.7 % 6.5 %
Adjusted operating income ⁽¹⁾
$ 1,491
$ 1,562
$ (71 ) (4.5 )%
Adjusted operating income as a % of total revenues 7.8 % 8.7 %
(1)See “Segment Analysis” above in this report for a reconciliation of Health Care Benefits segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

^{_____________________________________________}


~~(1)~~	~~See “Segment Analysis” above in this report for a reconciliation of operating income (GAAP measure) to adjusted operating income for the Health Care Benefits segment.~~

Commentary - Three Months Ended March 31, ~~2020~~2021 vs. ~~2019~~2020

Revenues

•Total revenues increased $1.3 billion, or ~~7.4%~~6.7%, to ~~$19.2~~$20.5 billion in the three months ended March 31, ~~2020~~2021 compared to the prior year primarily driven by ~~membership~~ growth in the ~~Health Care Benefits segment’s~~ Government ~~products and~~Services business, partially offset by the ~~favorable~~unfavorable impact of the ~~reinstatement~~repeal of the HIF for 2020. These increases were partially offset by the absence of the financial results of Aetna’s standalone Medicare Part D prescription drug plans, which the Company retained through 2019, membership declines in the segment’s Commercial Insured products, as well as a decline in net investment income due to lower interest rates and the capital markets volatility associated with the COVID-19 pandemic.2021.

Medical Benefit Ratio (“MBR”)

•Medical benefit ratio is calculated as benefit costs divided by premium revenues and represents the percentage of premium revenues spent on medical benefits for the Company’s Insured members. Management uses MBR to assess the underlying business performance and underwriting of its insurance products, understand variances between actual results and expected results and identify trends in period-over-period results. MBR provides management and investors with information useful in assessing the operating results of the Company’s Insured Health Care Benefits products.

•The ~~Health Care Benefits segment’s~~ MBR ~~decreased 160~~increased 80 basis points ~~for~~from 82.4% to 83.2% in the three months ended March 31, ~~2020~~2021 compared to the prior year primarily ~~due to~~driven by the ~~reinstatement~~repeal of the HIF for ~~2020.~~2021 and lower Medicare risk adjustment revenue. These increases were partially offset by improved performance in the Company’s Medicaid products and favorable development of prior-years’ health care cost estimates.

Operating expenses

•Operating expenses in the Health Care Benefits segment include selling, general and administrative expenses and depreciation and amortization expenses.

•Operating expenses ~~increased $527~~decreased $241 million, or ~~17.2%~~6.7%, in the three months ended March 31, ~~2020~~2021 compared to the prior year. The ~~increase~~decrease in operating expenses was primarily due to the ~~reinstatement~~repeal of the HIF for ~~2020~~2021 and the impact of cost savings initiatives in the three months ended March 31, 2021, partially offset by incremental operating expenses to support the increased membership described ~~above, including incremental operating~~above.

•Operating expenses as a percentage of total revenues decreased to ~~onboard additional Medicaid members~~16.3% in the three months ended March 31, ~~2020. This increase~~2021 compared to 18.7% in the prior year. The decrease in operating expenses as a percentage of total revenues was ~~partially offset by~~primarily due to the ~~impact~~repeal of ~~cost reduction efforts, including integration synergies.~~


•	~~Operating expenses as a percentage of total revenues increased to~~ the HIF for 2021.~~18.7%~~ in the three months ended March 31, 2020 compared to 17.1% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily due to the reinstatement of the HIF for 2020.

~~Operating income and adjusted~~

Adjusted operating income

~~Operating~~•Adjusted operating income ~~decreased $60~~increased $291 million, or ~~5.2%, and adjusted operating income decreased $71 million, or 4.5%~~19.5% in the three months ended March 31, ~~2020,~~2021 compared to the prior year. The ~~decrease~~increase in adjusted operating income was primarily driven by ~~membership declines~~improved performance in the segment’s Commercial Insured products including the migration of Commercial customers from Insured to ASC products, higher Medicaid benefit costs in certain states and incremental operating expenses to onboard additional Medicaid members. This decrease was partially offset by membership growth in the segment’s Government products and increased integration synergies. The COVID-19 pandemic had a modest impact on operating income and adjusted operating income in the three months ended March 31, 2020, as the reduction in benefit costs primarily related to the deferral of elective procedures and other discretionary utilization was largely offset by lower net investment income due to lower interest ratesServices business and the ~~capital markets volatility associated with the COVID-19 pandemic.~~impact of cost savings initiatives.

The following table summarizes the Health Care Benefits segment’s medical membership for the respective periods:


	March 31, 2020			December 31, 2019			March 31, 2019				March 31, 2021			December 31, 2020		March 31, 2020
In thousands	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total	In thousands	Insured	ASC	Total		Insured	ASC	Total	Insured	ASC	Total
Medical membership:										Medical membership:
Commercial	3,372	14,206	17,578	3,591	14,159	17,750	3,611	14,302	17,913	Commercial	3,201	13,584	16,785		3,258	13,644	16,902	3,372	14,206	17,578
Medicare Advantage	2,584	—	2,584	2,321	—	2,321	2,231	—	2,231	Medicare Advantage	2,874	—	2,874		2,705	—	2,705	2,584	—	2,584
Medicare Supplement	913	—	913	881	—	881	804	—	804	Medicare Supplement	1,146	—	1,146		1,082	—	1,082	913	—	913
Medicaid	1,835	552	2,387	1,398	558	1,956	1,315	571	1,886	Medicaid	2,184	637	2,821		2,100	623	2,723	1,835	552	2,387
Total medical membership	8,704	14,758	23,462	8,191	14,717	22,908	7,961	14,873	22,834	Total medical membership	9,405	14,221	23,626		9,145	14,267	23,412	8,704	14,758	23,462

Supplemental membership information:	Supplemental membership information:									Supplemental membership information:
Medicare Prescription Drug Plan (standalone) ⁽¹⁾			5,624			5,994			6,044
Medicare Prescription Drug Plan (standalone)										Medicare Prescription Drug Plan (standalone)			5,694				5,490			5,624

^{_____________________________________________}

~~(1)~~

Represents the Company’s SilverScript PDP membership only. Excludes 2.5 million and 2.4 million members as of December 31, 2019 and March 31, 2019, respectively, related to Aetna’s standalone PDPs that were sold effective December 31, 2018. The Company retained the financial results of the divested plans through 2019 through a reinsurance agreement. Subsequent to 2019, the Company no longer retains the financial results of the divested plans.

Medical Membership

•Medical membership represents the number of members covered by the Company’s Insured and ASC medical products and related services at a specified point in time. Management uses this metric to understand variances between actual medical membership and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of medical membership on segment total revenues and operating results.

•Medical membership as of March 31, ~~2020~~2021 of 23.6 million increased approximately 214,000 members compared with December 31, ~~2019,~~2020, primarily reflecting increases in Medicare and Medicaid products, partially offset by a decline in Commercial ~~Insured~~ products. ~~Medical membership as of March 31, 2020 increased compared with March 31, 2019, reflecting increases in Medicare and Medicaid products, partially offset by declines in Commercial products.~~

Medicare Update

On ~~April 6, 2020,~~January 15, 2021, the U.S. Centers for Medicare & Medicaid Services issued its final notice detailing final ~~2021~~2022 Medicare Advantage benchmark payment rates (the “Final Notice”). ~~Overall~~Final 2022 Medicare Advantage rates resulted in an increase in industry benchmark rates of approximately 4.1%.

Pharmacy Services Segment

The following table summarizes the Pharmacy Services segment’s performance for the respective periods:



	Three Months Ended March 31,						Change
In millions, except percentages	2021			2020				$		%
Revenues:
Products	$	36,067		$	34,746			$	1,321	3.8	%
Services	254			237				17		7.2	%
Total revenues	36,321			34,983				1,338		3.8	%
Cost of products sold	34,523			33,503				1,020		3.0	%
Operating expenses	346			366				(20)		(5.5)	%
Operating expenses as a % of total revenues	1.0		%	1.0		%
Operating income	$	1,452		$	1,114			$	338	30.3	%
Operating income as a % of total revenues	4.0		%	3.2		%
Adjusted operating income (1)	$	1,507		$	1,181			$	326	27.6	%
Adjusted operating income as a % of total revenues	4.1		%	3.4		%
Revenues (by distribution channel):
Pharmacy network (2)	$	21,893		$	21,100			$	793	3.8	%
Mail choice (3)	14,248			13,674				574		4.2	%
Other	180			209				(29)		(13.9)	%
Pharmacy claims processed: (4)
Total	535.9			541.4				(5.5)		(1.0)	%
Pharmacy network (2)	455.4			461.1				(5.7)		(1.2)	%
Mail choice (3)	80.5			80.3				0.2		0.2	%
Generic dispensing rate: (4)
Total	88.1		%	89.0		%
Pharmacy network (2)	88.5		%	89.5		%
Mail choice (3)	85.7		%	85.7		%

(1)See “Segment Analysis” above in this report for a reconciliation of Pharmacy Services segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

(2)Pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, but excluding Maintenance Choice activity, which is included within the mail choice category. Maintenance Choice permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS Pharmacy retail store for the same price as mail order.

(3)Mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.

(4)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

Commentary - Three Months Ended March 31, 2021 vs. 2020

Revenues

•Total revenues increased $1.3 billion, or 3.8%, to $36.3 billion in the three months ended March 31, 2021 compared to the prior year primarily driven by net new business, growth in specialty pharmacy, product mix and brand inflation, partially offset by continued price compression and a weak cough, cold and flu season.

Operating expenses

•Operating expenses in the Pharmacy Services segment include selling, general and administrative expenses; depreciation and amortization expense; and expenses related to specialty retail pharmacies, which include store and administrative payroll, employee benefits and occupancy costs.

•Operating expenses as a percentage of total revenues remained consistent at 1.0% in each of the three-month periods ended March 31, 2021 and 2020.

Adjusted operating income

•Adjusted operating income increased $326 million, or 27.6% in the three months ended March 31, 2021 compared to the prior year. The increase in adjusted operating income was primarily driven by improved purchasing economics and growth in specialty pharmacy, partially offset by continued price compression.

•As you review the Pharmacy Services segment’s performance in this area, you should consider the following important information about the business:

•The Company’s efforts to (i) retain existing clients, (ii) obtain new business and (iii) maintain or improve the rebates and/or discounts the Company ~~projects the benchmark rates~~receives from manufacturers, wholesalers and retail pharmacies continue to have an impact on adjusted operating income. In particular, competitive pressures in the ~~Final Notice will increase funding~~PBM industry have caused the Company and other PBMs to continue to share with clients a larger portion of rebates and/or discounts received from pharmaceutical manufacturers. In addition, marketplace dynamics and regulatory changes have limited the Company’s ability to offer plan sponsors pricing that includes retail network “differential” or “spread,” and the Company expects these trends to continue. The “differential” or “spread” is any difference between the drug price charged to plan sponsors, including Medicare Part D plan sponsors, by a PBM and the price paid for ~~its Medicare Advantage business, excluding~~the drug by the PBM to the dispensing provider.

Pharmacy claims processed

•Total pharmacy claims processed represents the number of prescription claims processed through our pharmacy benefits manager and dispensed by either our retail network pharmacies or our own mail and specialty pharmacies. Management uses this metric to understand variances between actual claims processed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of pharmacy claim volume on segment total revenues and operating results.

•The Company’s pharmacy network claims processed on a 30-day equivalent basis decreased 1.2% to 455.4 million claims in the ~~HIF, by approximately 1.8% in~~three months ended March 31, 2021 compared to ~~2020.~~461.1 million claims in the prior year primarily driven by a weak cough, cold and flu season, partially offset by net new business in the three months ended March 31, 2021.

•The Company’s mail choice claims processed on a 30-day equivalent basis remained relatively consistent at 80.5 million claims in the three months ended March 31, 2021 compared to 80.3 million claims in the prior year.

Generic dispensing rate

•Generic dispensing rate is calculated by dividing the Pharmacy Services segment’s generic drug prescriptions processed or filled by its total prescriptions processed or filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

•The Pharmacy Services segment’s total generic dispensing rate decreased to 88.1% in the three months ended March 31, 2021 compared to 89.0% in the prior year. The decrease in the segment’s generic dispensing rate was primarily driven by an increase in brand prescriptions, largely attributable to COVID-19 vaccinations in the three months ended March 31, 2021.

Retail/LTC Segment

The following table summarizes the Retail/LTC segment’s performance for the respective periods:



	Three Months Ended March 31,						Change
In millions, except percentages	2021			2020				$		%
Revenues:
Products	$	22,394		$	22,522			$	(128)	(0.6)	%
Services	834			227				607		267.4	%
Net investment income	46			—				46		100.0	%
Total revenues	23,274			22,749				525		2.3	%
Cost of products sold	17,042			16,578				464		2.8	%
Operating expenses	4,967			4,391				576		13.1	%
Operating expenses as a % of total revenues	21.3		%	19.3		%
Operating income	$	1,265		$	1,780			$	(515)	(28.9)	%
Operating income as a % of total revenues	5.4		%	7.8		%
Adjusted operating income (1)	$	1,394		$	1,902			$	(508)	(26.7)	%
Adjusted operating income as a % of total revenues	6.0		%	8.4		%
Revenues (by major goods/service lines):
Pharmacy	$	17,885		$	17,355			$	530	3.1	%
Front Store	4,642			5,208				(566)		(10.9)	%
Other	701			186				515		276.9	%
Net investment income	46			—				46		100.0	%
Prescriptions filled (2)	375.4			375.1				0.3		0.1	%
Same store sales increase (decrease): (3)
Total	0.4		%	9.0		%
Pharmacy	4.1		%	9.3		%
Front Store	(11.4)		%	8.0		%
Prescription volume (2)	1.0		%	9.8		%
Generic dispensing rate (2)	87.4		%	89.3		%

(1)See “Segment Analysis” above in this report for a reconciliation of Retail/LTC segment operating income (GAAP measure) to adjusted operating income, which represents the Company’s principal measure of segment performance.

(2)Includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. This adjustment reflects the fact that these prescriptions include approximately three times the amount of product days supplied compared to a normal prescription.

(3)Same store sales and prescription volume represent the change in revenues and prescriptions filled in the Company’s retail pharmacy stores that have been operating for greater than one year, expressed as a percentage that indicates the increase or decrease relative to the comparable prior period. Same store metrics exclude revenues from MinuteClinic, revenues and prescriptions from LTC operations. Management uses these metrics to evaluate the performance of existing stores on a comparable basis and to inform future decisions regarding existing stores and new locations. Same-store metrics provide management and investors with information useful in understanding the portion of current revenues and prescriptions resulting from organic growth in existing locations versus the portion resulting from opening new stores.

Commentary - Three Months Ended March 31, 2021 vs. 2020

Revenues

•Total revenues increased $525 million, or 2.3%, to $23.3 billion in the three months ended March 31, 2021 compared to the prior year primarily driven by increased COVID-19 diagnostic testing and vaccinations and brand inflation. These increases were partially offset by lower front store revenues, primarily due to the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and a weak cough, cold and flu season; continued reimbursement pressure and the impact of recent generic introductions.

•Pharmacy same store sales increased 4.1% in the three months ended March 31, 2021 compared to the prior year. The increase was primarily driven by the 1.0% increase in pharmacy same store prescription volume on a 30-day equivalent basis and brand inflation. These increases were partially offset by continued reimbursement pressure and the impact of recent generic introductions.

•Front store same store sales decreased 11.4% in the three months ended March 31, 2021 compared to the prior year. The decrease was primarily due to the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and a weak cough, cold and flu season.

•Other revenues increased $515 million in the three months ended March 31, 2021 compared to the prior year. The increase was primarily due to increased COVID-19 diagnostic testing in the three months ended March 31, 2021.

Operating expenses

•Operating expenses in the Retail/LTC segment include store payroll, store employee benefits, store occupancy costs, selling expenses, advertising expenses, depreciation and amortization expense and certain administrative expenses.

•Operating expenses increased $576 million, or 13.1%, in the three months ended March 31, 2021 compared to the prior year. The increase was primarily due to incremental costs associated with COVID-19 related services and protocols in the three months ended March 31, 2021.

•Operating expenses as a percentage of total revenues increased to 21.3% in the three months ended March 31, 2021 compared to 19.3% in the prior year. The increase in operating expenses as a percentage of total revenues was primarily driven by the increases in operating expenses described above.

Adjusted operating income

•Adjusted operating income decreased $508 million, or 26.7% in the three months ended March 31, 2021 compared to the prior year. The decrease in adjusted operating income was primarily driven by continued reimbursement pressure and the lower front store volume described above. These decreases were partially offset by increased COVID-19 diagnostic testing in the three months ended March 31, 2021.

•As you review the Retail/LTC segment’s performance in this area, you should consider the following important information about the business:

•The segment’s adjusted operating income has been adversely affected by the efforts of managed care organizations, PBMs and governmental and other third-party payors to reduce their prescription drug costs, including the use of restrictive networks, as well as changes in the mix of business within the pharmacy portion of the Retail/LTC segment. If the reimbursement pressure accelerates, the segment may not be able grow revenues, and its adjusted operating income could be adversely affected.

•The increased use of generic drugs has positively impacted the segment’s adjusted operating income but has resulted in third-party payors augmenting their efforts to reduce reimbursement payments to retail pharmacies for prescriptions. This trend, which the Company expects to continue, reduces the benefit the segment realizes from brand to generic drug conversions.

Prescriptions filled

•Prescriptions filled represents the number of prescriptions dispensed through the Retail/LTC segment’s pharmacies. Management uses this metric to understand variances between actual prescriptions dispensed and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of prescription volume on segment total revenues and operating results.

•Prescriptions filled remained relatively consistent on a 30-day equivalent basis in the three months ended March 31, 2021 compared to the prior year, with COVID-19 vaccinations and the continued adoption of patient care programs largely offset by the impact of a weak cough, cold and flu season, the acceleration of demand in March 2020 as consumers prepared for the COVID-19 pandemic and decreased long-term care prescription volume.

Generic dispensing rate

•Generic dispensing rate is calculated by dividing the Retail/LTC segment’s generic drug prescriptions filled by its total prescriptions filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

•The Retail/LTC segment’s generic dispensing rate decreased to 87.4% in the three months ended March 31, 2021 compared to 89.3% in the prior year. The decrease in the segment’s generic dispensing rate was primarily driven by an increase in brand prescriptions, largely attributable to COVID-19 vaccinations in the three months ended March 31, 2021.

Corporate/Other Segment

The following table summarizes the Corporate/Other segment’s performance for the respective periods:



	Three Months Ended March 31,				Change
In millions, except percentages	2021		2020			$		%
Revenues:
Premiums	$	18	$	19		$	(1)	(5.3)	%
Services	14		2			12		600.0	%
Net investment income	103		69			34		49.3	%
Total revenues	135		90			45		50.0	%
Cost of products sold	8		—			8		100.0	%
Benefit costs	45		68			(23)		(33.8)	%
Operating expenses	427		377			50		13.3	%
Operating loss	(345)		(355)			10		2.8	%
Adjusted operating loss (1)	(303)		(285)			(18)		(6.3)	%

Three Months Ended
March 31,
Change
In millions, except percentages 2020 2019 $ %
Revenues:
Premiums $ 19
$ 23
$ (4 ) (17.4 )%
Services 2
2
—
— %
Net investment income 69
85
(16 ) (18.8 )%
Total revenues 90
110
(20 ) (18.2 )%
Benefit costs 68
79
(11 ) (13.9 )%
Operating expenses 377
412
(35 ) (8.5 )%
Operating loss (355 ) (381 ) 26
6.8 %
Adjusted operating loss ⁽¹⁾
(285 ) (231 ) (54 ) (23.4 )%
(1)See “Segment Analysis” above in this report for a reconciliation of Corporate/Other segment operating loss (GAAP measure) to adjusted operating loss, which represents the Company’s principal measure of segment performance.

^{_____________________________________________}


~~(1)~~	~~See “Segment Analysis” above in this report for a reconciliation of operating loss (GAAP measure) to adjusted operating loss for the Corporate/Other segment.~~

Commentary - Three Months Ended March 31, ~~2020~~2021 vs. ~~2019~~2020

Revenues

•Revenues primarily relate to products for which the Company no longer solicits or accepts new customers, such as large case pensions and long-term care insurance products.

•Total revenues ~~decreased $20~~increased $45 million, or 50.0% to $135 million in the three months ended March 31, ~~2020~~2021 compared to the prior ~~year,~~year. The increase was primarily ~~due to~~driven by increased net ~~realized capital losses associated with~~investment income, largely as a result of the adverse COVID-19 related capital markets volatility ~~during~~experienced in the three months ended March 31, ~~2020 compared to net realized capital gains during the three months ended March 31, 2019.~~2020.

~~Operating expenses~~Adjusted operating loss

Operating expenses within the Corporate/Other segment consist of management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources, information technology and finance departments, expenses associated with the Company’s investments in its transformation and Enterprise modernization programs and acquisition-related integration costs. Segment•Adjusted operating ~~expenses also include operating costs to support the large case pensions and long-term care insurance products.~~

~~Operating expenses decreased $35~~loss increased $18 million in the three months ended March 31, ~~2020~~2021 compared to the prior year. The ~~decrease~~increase was primarily driven by ~~a decrease~~incremental operating expenses associated with Company’s investments in ~~acquisition-related integration costs of $79 million~~transformation, partially offset by the increase in net investment income in the three months ended March 31, 2020 compared to the prior period, partially offset by incremental operating expenses associated with the Company’s investments in transformation and increased legal costs in the three months ended March 31, 2020.2021 described above.

Liquidity and Capital Resources

Cash Flows

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, sale-leaseback program, as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of March 31, ~~2020,~~2021, the Company had approximately ~~$10.1~~$5.6 billion in cash and cash equivalents, ~~approximately $5.8 billion~~$712 million of which was held by the parent company or nonrestricted subsidiaries.

The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in the capital markets. In addition to adversely affecting the Company’s businesses, which may have a material adverse impact on the Company’s profitability and cash flows, these developments may adversely affect the timing and collectability of

payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them. As a result of the continued uncertainty generated by COVID-19, on March 31, 2020, the Company issued $4 billion aggregate principal amount of unsecured senior notes to enhance its liquidity and strengthen its capital. The net proceeds from this offering will be used for general corporate purposes, which may include working capital, capital expenditures and repayment of indebtedness. As the net proceeds from this offering were not immediately used for these purposes, the net proceeds were held in cash or temporarily invested in cash equivalents and short-term investment-grade securities as of March 31, 2020. The Company will continue to monitor the severity and duration of the pandemic and its impact on the U.S. and global economies, consumer behavior and health care utilization patterns and our businesses, results of operations, financial condition, and cash flows.

The net change in cash, cash equivalents and restricted cash during the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 was as follows:


	Three Months Ended March 31,				Change
In millions, except percentages	2021		2020		$		%
Net cash provided by operating activities	$	2,892	$	3,305	$	(413)	(12.5)	%
Net cash used in investing activities	(1,867)		(1,597)		(270)		16.9	%
Net cash provided by (used in) financing activities	(3,244)		2,675		(5,919)		(221.3)	%
Net increase (decrease) in cash, cash equivalents and restricted cash	$	(2,219)	$	4,383	$	(6,602)	(150.6)	%

Three Months Ended
March 31, Change
In millions, except percentages 2020 2019 $ %
Net cash provided by operating activities $ 3,305
$ 1,948
$ 1,357
69.7 %
Net cash used in investing activities (1,597 ) (891 ) (706 ) 79.2 %
Net cash provided by financing activities 2,675
816
1,859
227.8 %
Net increase in cash, cash equivalents and restricted cash $ 4,383
$ 1,873
$ 2,510
134.0 %

Commentary

•

~~Net cash provided by operating activities~~ increased by $1.4 billion in the three months ended March 31, 2020 compared to the prior year due primarily to the timing of payables and higher operating income in the Pharmacy Services and Retail/LTC segments, which were impacted by the COVID-19 pandemic as described in “Segment Analysis” above in this report.

•Net cash provided by operating activities decreased by $413 million in the three months ended March 31, 2021 compared to the prior year primarily due to the timing of payments and pricing actions during 2020 designed to recover the HIF, which was paid in the third quarter of 2020.

•Net cash used in investing activities increased by $270 million in the three months ended March 31, 2021 compared to the prior year primarily due to increased net purchases of investments, partially offset by a decrease in cash used for acquisitions.

•Net cash used in financing activities was $3.2 billion in the three months ended March 31, 2021 compared to net cash provided by financing activities of $2.7 billion in the prior year. The decrease in cash provided by financing activities primarily related to the absence of proceeds from the issuance of $4.0 billion of senior notes in the three months ended March 31, 2020 and increased repayments of long-term debt in the three months ended March 31, 2021 compared to the prior year.


•	~~Net cash used in investing activities~~ ~~increased by $706 million in the three months ended March 31, 2020 compared to the prior year due primarily to an increase in cash used for acquisitions and increased net purchases of investments.~~

•

~~Net cash provided by financing activities~~ was $2.7 billion in the three months ended March 31, 2020 compared to $816 million in the prior year. The increase in cash provided by financing activities primarily related to the issuance of $4.0 billion of senior notes during the three months ended March 31, 2020, partially offset by lower short-term borrowings during the three months ended March 31, 2020 compared to the prior year.

Short-term Borrowings

Commercial Paper and Back-up Credit Facilities

The Company had ~~approximately $255~~$252 million of commercial paper outstanding at a weighted average interest rate of ~~3.72%~~0.13% as of March 31, ~~2020.~~2021. In connection with its commercial paper program, the Company maintains a $1.0 billion 364-day unsecured back-up revolving credit facility, which expires on May ~~14, 2020,~~12, 2021 (the “2021 Facility”), a $1.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 18, 2022 (the “2022 Facility”), a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 17, 2023, and a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2024. The Company intends to ~~renew~~replace both its ~~364-day~~2021 Facility and its 2022 Facility with a new $2.0 billion five-year unsecured back-up revolving credit facility prior to the expiration of its ~~expiration.~~2021 Facility. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately ~~.03%~~0.03%, regardless of usage. As of March 31, ~~2020,~~2021, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Federal Home Loan Bank of Boston

A subsidiary of the Company is a member of the Federal Home Loan Bank of Boston (the “FHLBB”). As a member, the subsidiary has the ability to obtain cash advances, subject to certain minimum collateral requirements. The maximum borrowing capacity available from the FHLBB as of March 31, ~~2020,~~2021 was approximately ~~$855~~$975 million. As of March 31, ~~2020,~~2021, there were no outstanding advances from the FHLBB.

~~Long-term Borrowings~~

~~2020 Notes~~

On March 31, 2020, the Company issued $750 million aggregate principal amount of 3.625% unsecured senior notes due April 1, 2027, $1.5 billion aggregate principal amount of 3.75% unsecured senior notes due April 1, 2030, $1.0 billion aggregate principal amount of 4.125% unsecured senior notes due April 1, 2040 and $750 million aggregate principal amount of 4.25% unsecured senior notes due April 1, 2050 (collectively, the “2020 Notes”) for total proceeds of approximately $3.95 billion, net of discounts and underwriting fees. The net proceeds of the 2020 Notes will be used for general corporate purposes, which may include working capital, capital expenditures and repayment of indebtedness. As the net proceeds from this offering were not immediately used for these purposes, the net proceeds were held in cash or temporarily invested in cash equivalents and short-term investment-grade securities as of March 31, 2020.

During March 2020, the Company entered into several interest rate swap transactions to manage interest rate risk. These agreements were designated as cash flow hedges and were used to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of the 2020 Notes. In connection with the issuance of the 2020 Notes, the Company terminated all outstanding cash flow hedges. The Company paid a net amount of $7 million to the hedge counterparties upon termination, which was recorded as a loss, net of tax, of $5 million in accumulated other comprehensive income and will be reclassified as interest expense over the life of the 2020 Notes. See Note 7 ‘‘Other Comprehensive Income’’ to the unaudited condensed consolidated financial statements for additional information.

Debt Covenants

The Company’s back-up revolving credit facilities ~~unsecured senior notes~~ and unsecured ~~floating rate~~senior notes contain customary restrictive financial and operating covenants. These covenants do not include an acceleration of the Company’s debt maturities in the event of a downgrade in the Company’s credit ratings. The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of March 31, ~~2020,~~2021, the Company was in compliance with all of its debt covenants.

Debt Ratings

As of March 31, ~~2020,~~2021, the Company’s long-term debt was rated “Baa2” by Moody’s Investor Service, Inc. (“Moody’s”) and “BBB” by Standard & Poor’s Financial Services LLC (“S&P”), and its commercial paper program was rated “P-2” by Moody’s

and “A-2” by S&P. The outlook on the Company’s long-term debt is “Stable” by both Moody’s and S&P. In assessing the Company’s credit strength, the Company believes that both Moody’s and S&P considered, among other things, the Company’s capital structure and financial policies as well as its consolidated balance sheet, its historical acquisition activity and other financial information. Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot guarantee the future actions of Moody’s and/or S&P. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.

Share Repurchase Program

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company did not repurchase any shares of common stock. See Note 65 ‘‘Shareholders’ Equity’’ to the unaudited condensed consolidated financial statements for additional information on the Company’s share repurchase program.

~~Off-Balance Sheet Arrangements~~

~~See Note 9 ‘‘Commitments and Contingencies’’ to the unaudited condensed consolidated financial statements for information on the Company’s lease guarantees.~~

Critical Accounting Policies

The Company prepares the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, which require management to make certain estimates and apply judgment. Estimates and judgments are based on historical experience, current trends and other factors that management believes to be important at the time the unaudited condensed consolidated financial statements are prepared. On a regular basis, the Company reviews its accounting policies and how they are applied and disclosed in the unaudited condensed consolidated financial statements. While the Company believes the historical experience, current trends and other factors considered by management support the preparation

of the unaudited condensed consolidated financial statements in conformity with generally accepted accounting principles, actual results could differ from estimates, and such differences could be material.

~~Measurement of Credit Losses on Financial Instruments~~

~~Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13,~~ ~~Financial Instruments - Credit Losses~~ (Topic 326). This standard requires the use of a forward-looking expected credit loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. The Company adopted the credit loss impairment model on a modified retrospective basis and recorded a $3 million cumulative effect adjustment to reduce retained earnings as of the adoption date. The Company adopted the available-for-sale debt security impairment model on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows or financial condition. See Note 1 ‘‘Significant Accounting Policies’’ to the unaudited condensed consolidated financial statements for a discussion of the adoption of this new accounting standard and associated updates to the Company’s accounting policies from those previously disclosed in the 2019 Form 10-K.

Recoverability of Goodwill

During ~~2019,~~2020, the Company performed its required annual impairment test of goodwill. The results of this impairment test indicated that there was no impairment of goodwill as of the testing date. The goodwill impairment test resulted in the fair values of all of the Company’s reporting units exceeding their carrying values by significant margins, with the exception of the Commercial Business and LTC reporting units, which exceeded their carrying values by approximately 4%6% and 9%12%, respectively.

~~In connection with the Aetna Acquisition in November 2018, the Company added the Health Care Benefits segment which includes the Commercial Business reporting unit.~~ The ~~transaction was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their~~ fair ~~values at the date of acquisition. As a result, at the time~~value of the ~~acquisition~~reporting units is estimated using a combination of a discounted cash flow method and a market multiple method. The determination of the fair value of the ~~Commercial Business~~ reporting unit was equal to its carrying value. Given the close proximity of the Aetna Acquisition to the 2019 annual impairment test of goodwill, as expected, the fair value of the Commercial Business reporting unit remained relatively in line with the carrying value of the reporting unit. In addition,units requires the Company ~~has experienced declines~~to make significant assumptions and estimates. These assumptions and estimates primarily include the selection of appropriate peer group companies; control premiums and valuation multiples appropriate for acquisitions in ~~its Commercial Insured medical membership subsequent to~~ the ~~closing date~~industries in which the Company competes; discount rates; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, income taxes, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the ~~Aetna Acquisition~~Company considers each reporting unit’s historical results and ~~may continue to do so for~~current operating trends; consolidated revenues, profitability and cash flow results and forecasts; and industry trends. The Company’s estimates can be affected by a number of ~~reasons,~~factors, including general economic and regulatory conditions; the risk-free interest rate environment; the Company’s market capitalization; efforts of customers ~~continuing~~and payers to ~~migrate from Insured~~reduce costs, including their prescription drug costs, and/or increase member co-payments; the continued efforts of competitors to ~~ASC products. The~~gain market share, consumer spending patterns and the Company’s ~~fair value estimate is sensitive~~ability to ~~significant assumptions including changes in medical membership,~~achieve its revenue growth ~~rate, operating income~~projections and ~~the discount rate.~~execute on its cost reduction initiatives.

~~Although the Company believes the financial projections used to determine the fair value of the LTC reporting unit in the third quarter of 2019 were reasonable and achievable, the~~The LTC reporting unit has ~~faced~~continued to face challenges that affect the Company’s ability to grow the LTC reporting unit’s business at the rate estimated when ~~such~~its 2020 goodwill impairment test was performed and may continue to do so. These challenges include lower net bed additions and ~~some~~the prolonged adverse impact of the COVID-19 pandemic, which resulted in more significant declines in occupancy rates experienced by the Company’s long-term care facility customers than previously anticipated. Some of the key assumptions included in the Company’s financial projections to determine the estimated fair value of the LTC reporting unit include client retention rates; occupancy rates in skilled nursing facilities; the financial health of skilled nursing facility customers; facility reimbursement pressures; the Company’s ability to ~~execute its senior living initiative; the Company’s ability to make acquisitions and integrate those businesses into its LTC operations in an orderly manner; and the Company’s ability to~~ extract cost savings from labor productivity and other ~~initiatives.~~initiatives; the geographies impacted and the severity and duration of COVID-19; COVID-19’s impact on health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to COVID-19. The fair value of the LTC reporting unit also is dependent on market multiples of peer group companies and the risk-free interest rate environment, which impacts the discount rate used in the discounted cash flow valuation method.

The COVID-19 pandemic continues to evolve. The impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. If the LTC reporting unit does not achieve its forecasts, it is reasonably possible in the near term that the goodwill of the LTC reporting unit could be deemed to be impaired by a material amount. As of March 31, ~~2020,~~2021, the goodwill balance in the LTC reporting unit was $431 million.

The COVID-19 pandemic severely impacted global economic activity in the first quarter of 2020, including the businesses of some of the Company’s customers, and caused significant volatility and negative pressure in the capital markets. In addition to adversely affecting the Company’s businesses, which may have a material adverse impact on the Company’s profitability and cash flows, these developments may adversely affect the timing and collectability of payments to the Company from customers, clients, government payers and members as a result of the impact of COVID-19 on them. As a result of COVID-19, we expect an adverse impact on medical membership in our Commercial business due to reductions in workforce at our existing customers (including due to business failures) as well as reduced willingness to change benefit providers by prospective customers. We also expect COVID-19 may have an adverse impact on the financial health of our long-term care facility customers due to declines in new patient intakes as well as increased patient attrition, which may be magnified due to the

concentration of higher risk individuals served. For further information regarding the potential adverse impact of COVID-19 on the Company, please see “Risk Factors” in Part II, Item 1A of this report. The COVID-19 pandemic is evolving rapidly. We believe COVID-19’s adverse impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the adverse impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the adverse impact could be material. If the Company’s businesses, results of operations, financial condition and/or cash flows are materially adversely affected, the goodwill of the LTC and Commercial Business reporting units could be deemed to be impaired by a material amount.

For a full description of the Company’s other critical accounting policies, see “Critical Accounting Policies” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the ~~2019~~2020 Form 10-K.

Cautionary Statement Concerning Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements, so long as (1) those statements are identified as forward-looking and (2) the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions.

Certain information contained in this Quarterly Report on Form 10-Q (this “report”) is forward-looking within the meaning of the Reform Act or SEC rules. This information includes, but is not limited ~~to: “COVID-19 and 2020 Outlook” and “Government Regulation“ of~~to the forward-looking information in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in Part I, Item 2 ~~“Quantitative and Qualitative Disclosures About Market Risk” included in Part I, Item 3, and “Risk Factors” included in Part II, Item 1A~~ of this report. In addition, throughout this report and our other reports and communications, we use the following words or variations or negatives of these words and similar expressions when we intend to identify forward-looking statements:

Anticipates

Believes

Can

Continue

Could

Estimates

Evaluate

Expects

Explore

Forecast

Guidance

Intends

Likely

May

Might

Outlook

Plans

Potential

Predict

Probable

Projects

Seeks

Should

View

Will

All statements addressing the future operating performance of CVS Health or any segment or any subsidiary and/or future events or developments, including statements relating to the projected impact of COVID-19 on the Company’s businesses, investment portfolio, operating results, cash flows and/or financial ~~condition;~~condition, statements relating to corporate strategy, ~~revenue or adjusted~~statements relating to future revenue, operating income or adjusted operating income, earnings per share or adjusted earnings per share, Pharmacy Services segment business, sales results and/or trends and/or operations, Retail/LTC segment business, sales results and/or trends and/or operations, Health Care Benefits segment business, sales results and/or trends, medical cost trends, medical membership, Medicare Part D membership, medical benefit ratios and/or operations, incremental investment spending, interest expense, effective tax rate, weighted-average share count, cash flow from operations, net capital expenditures, cash available for debt repayment, integration synergies, net synergies, integration costs, enterprise modernization, transformation, leverage ratio, cash available for enhancing shareholder value, inventory reduction, turn rate and/or loss rate, debt ratings, the Company’s ability to attract or retain customers and clients, store development and/or relocations, new product development, and the impact of industry and regulatory ~~developments; and~~developments as well as statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.

Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements. Many of these risks and uncertainties and other factors are outside our control. Certain of these risks and uncertainties and other factors are described under “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 and/or under “Risk Factors” included in Part II, Item 1A of this report;~~2020; these are not the only risks and uncertainties we face. There can be no assurance that the Company has identified all the risks that affect it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial also may adversely affect the Company’s businesses. If any of those risks or uncertainties develops into actual

~~Form 10-Q Table of Contents~~

events, those events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.

You should not put undue reliance on forward-looking statements. Any forward-looking statement speaks only as of the date of this report, and we disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise.

Form 10-Q Table of Contents


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

~~The Company’s earnings and financial condition are exposed to interest rate risk, credit quality risk, market valuation risk, foreign currency risk, commodity risk and operational risk.~~

~~Evaluation of Interest Rate and Credit Quality Risk~~

The Company manages interest rate risk by seeking to maintain a tight match between the durations of assets and liabilities when appropriate. The Company manages credit quality risk by seeking to maintain high average credit quality ratings and diversified sector exposure within its debt securities portfolio. In connection with its investment and risk management objectives, the Company also uses derivative financial instruments whose market value is at least partially determined by, among other things, levels of orhas not experienced any material changes in ~~interest rates (short-term or long-term), duration, prepayment rates, equity markets or credit ratings/spreads. The Company’s use of these derivatives is generally limited~~exposures to ~~hedging~~market risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps. These instruments, viewed separately, subject the Company to varying degrees of interest rate, equity price and credit risk. However, when used for hedging, the Company expects these instruments to reduce overall risk.

~~Investments~~

~~The Company’s investment portfolio supported the following products at March 31, 2020 and~~since December 31, ~~2019:~~

In millions March 31,
2020 December 31,
2019
Experience-rated products $ 1,048
$ 1,100
Remaining products 18,424
18,587
Total investments $ 19,472
$ 19,687

~~Investment risks associated with experience-rated products generally do not impact~~2020. See the ~~Company’s operating results. The risks associated with investments supporting experience-rated pension~~information contained in Part II, Item 7A “Quantitative and annuity products in the large case pensions business in the Company’s Corporate/Other segment are assumed by the contract holders and not by the Company (subject to, among other things, certain minimum guarantees). Assets supporting experience-rated products may be subject to contract holder or participant withdrawals.

~~The debt securities in the Company’s investment portfolio had an average credit quality rating~~Qualitative Disclosures About Market Risk” of A at both March 31, 2020 and December 31, 2019 with approximately $4.7 billion and $4.4 billion rated AAA at March 31, 2020 and December 31, 2019, respectively. The debt securities that were rated below investment grade (that is, having a credit quality rating below BBB-/Baa3) were $1.1 billion and $1.2 billion at March 31, 2020 and December 31, 2019, respectively (of which 5% and 4% at March 31, 2020 and December 31, 2019, respectively, supported experience-rated products).

At March 31, 2020 and December 31, 2019, the Company held $325 million and $333 million, respectively, of municipal debt securities that were guaranteed by third parties, representing 2% of total investments at both March 31, 2020 and December 31, 2019. These securities had an average credit quality rating of AA at both March 31, 2020 and December 31, 2019 with the guarantee. These securities had an average credit quality rating of A and A+ at March 31, 2020 and December 31, 2019, respectively, without the guarantee. The Company does not have any significant concentration of investments with third party guarantors (either direct or indirect).

The Company generally classifies debt securities as available for sale, and carries them at fair value on the unaudited condensed consolidated balance sheets. At both March 31, 2020 and December 31, 2019, less than 1% of debt securities were valued using inputs that reflect the Company’s assumptions (categorized as Level 3 inputs in accordance with accounting principles generally accepted in the United States of America). See Note 4 ‘‘Fair Value’’ included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for additional information on the methodologies and key assumptions used to determine the fair value of investments. For additional information related to investments, see Note 2 ‘‘Investments’’ to the unaudited condensed consolidated financial statements.

The Company regularly reviews debt securities in its portfolio to determine whether a decline in fair value below the cost basis or carrying value has occurred. If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt

~~Form 10-Q Table of Contents~~

security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related components. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income. The accounting for and measurement of credit losses on financial instruments is considered a critical accounting policy. See Note 1 ‘‘Significant Accounting Policies’’ to the unaudited condensed consolidated financial statements2020 for a discussion of the Company’s ~~accounting policy for debt securities.~~exposures to market risk.

~~Evaluation of Market Valuation Risks~~

Item 4.Controls and Procedures

The Company regularly evaluates its risk from market-sensitive instruments by examining, among other things, levels of or changes in interest rates (short-term or long-term), duration, prepayment rates, equity markets and/or credit ratings/spreads. The Company also regularly evaluates the appropriateness of investments relative to management-approved investment guidelines (and operates within those guidelines) and the business objectives of its portfolios.

On a quarterly basis, the Company reviews the impact of hypothetical net losses in its investment portfolio on the Company’s consolidated near-term financial condition, operating results and cash flows assuming the occurrence of certain reasonably possible changes in near-term market rates and prices. Interest rate changes (whether resulting from changes in treasury yields or credit spreads or other factors) represent the most material risk exposure category for the Company. The Company has estimated the impact on the fair value of market sensitive instruments based on the net present value of cash flows using a representative set of likely future interest rate scenarios. The assumptions used were as follows: an immediate increase of 100 basis points in interest rates (which the Company believes represents a moderately adverse scenario) and an immediate decrease of 15% in prices for publicly traded domestic equity securities.

~~Assuming an immediate increase of 100 basis points in interest rates, the theoretical decline in the fair values of market sensitive instruments at March 31, 2020 is as follows:~~

The fair value of long-term debt would decline by approximately $4.6 billion ($5.8 billion pretax). Changes in the fair value of long-term debt do not impact the Company’s operating results or financial condition.

The theoretical reduction in the fair value of debt investment securities partially offset by the theoretical reduction in the fair value of interest rate sensitive liabilities would result in a net decline in fair value of approximately $410 million ($520 million pretax) related to continuing non-experience-rated products. Reductions in the fair value of investment securities would be reflected as an unrealized loss in equity, as the Company classifies these debt securities as available for sale. The Company does not record liabilities at fair value.

~~If the value of the Company’s publicly traded domestic equity securities were to decline by 15%, this would result in a net decline in fair value of $6 million ($7 million pretax).~~

Based on overall exposure to interest rate risk and equity price risk, the Company believes that these changes in market rates and prices would not materially affect consolidated near-term financial condition, operating results or cash flows as of March 31, 2020.

~~Evaluation of Foreign Currency and Commodity Risk~~

At March 31, 2020 and December 31, 2019, the Company did not have any material foreign currency exchange rate or commodity derivative instruments in place and believes its exposure to foreign currency exchange rate risk is not material.

At March 31, 2020 and December 31, 2019, 4.8% and 6.1%, respectively, of the Company’s investment portfolio was comprised of investments that have exposure to the oil and gas industry, with more than half that amount comprised of investment grade rated debt securities. These exposures are experiencing varied degrees of financial strains in the current depressed oil and gas price environment, and the likelihood of the Company’s portfolio incurring additional realized capital losses on these exposures may increase if such depressed prices persist and/or decline further.

~~Form 10-Q Table of Contents~~

~~Evaluation of Operational Risks~~

~~The Company also faces certain operational risks. Those risks include risks related to the COVID-19 pandemic and risks related to information security, including cybersecurity.~~

The spread of COVID-19, or actions taken to mitigate its spread, could have material and adverse effects on our ability to operate our businesses effectively, including as a result of the complete or partial closure of facilities or labor shortages. Disruptions in our supply chains, our distribution chains and/or public and private infrastructure, including communications, financial services and supply chains, could materially and adversely impact our business operations. We have transitioned a significant subset of our colleagues to a remote work environment in an effort to mitigate the spread of COVID-19, as have a significant number of our third-party service providers, which may amplify certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cyber attacks, increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us or our medical members or other third-parties and increased risk of business interruptions.

The Company and its vendors have experienced and continue to experience a variety of cyber attacks, and the Company and its vendors expect to continue to experience cyber attacks going forward. Among other things, the Company and its vendors have experienced automated attempts to gain access to public facing networks, brute force, SYN flood and distributed denial of service attacks, attempted malware infections, vulnerability scanning, ransomware attacks, spear-phishing campaigns, mass reconnaissance attempts, injection attempts, phishing, PHP injection and cross-site scripting. The Company also has seen an increase in attacks designed to obtain access to consumers’ accounts using illegally obtained demographic information. The Company is dedicating and will continue to dedicate significant resources and incur significant expenses to maintain and update on an ongoing basis the systems and processes that are designed to mitigate the information security risks it faces and protect the security of its computer systems, software, networks and other technology assets against attempts by unauthorized parties to obtain access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage. The impact of cyber attacks has not been material to the Company’s operations or operating results through March 31, 2020. The Board of Directors of CVS Health Corporation and its Audit Committee and Nominating and Corporate Governance Committee are regularly informed regarding the Company’s information security policies, practices and status.


~~Item 4.~~	~~Controls and Procedures~~

Evaluation of disclosure controls and procedures: The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a‑15(f) and 15d‑15(f)) as of March 31, ~~2020,~~2021, have concluded that as of such date the Company’s disclosure controls and procedures were adequate and effective and designed to provide reasonable assurance that material information relating to the Company and its subsidiaries would be made known to such officers on a timely basis.

Changes in internal control over financial reporting: There has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that occurred in the three months ended March 31, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


~~Part II.~~	~~Other Information~~

Part II.Other Information


~~Item 1.~~	~~Legal Proceedings~~

Item 1.Legal Proceedings

The information contained in Note 98 ‘‘Commitments and Contingencies’’ contained in “Notes to Condensed Consolidated Financial ~~Statements”~~Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.


~~Item 1A.~~	~~Risk Factors~~

~~The following information supplements~~Item 1A.Risk Factors

There have been no material changes to the ~~risk factors described~~“Risk Factors” disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 (the “2019 10-K”) and should be read in conjunction with the~~2020. Those risk factors ~~described in~~could adversely affect the 2019 10-K. The COVID-19 pandemic underscores and amplifies certain risks we face in our businesses, including those discussed in the 2019 10-K. Due to the unprecedented nature of the pandemic, we cannot identify all of the risks we face from the pandemic.

~~Form 10-Q Table of Contents~~

The spread, impact of and response to coronavirus disease 2019, or COVID-19, underscores and amplifies certain risks we face, including those discussed in our Form 10-K for the fiscal year ended December 31, 2019. The adverse impact COVID-19 will have on ourCompany’s businesses, operating results, cash flows and/or financial condition ~~is uncertain, but the adverse impact could be material.~~

Coronavirus disease 2019 (“COVID-19”) has spread to every state in the U.S., has been declared a pandemic by the World Health Organization and has severely impacted, and is expected to continue to severely impact, the economies of the U.S. and other countries around the world.

The legislative and regulatory environment governing our businesses is dynamic and changing frequently, including the Families First Coronavirus Response Act (the “Families First Act”), the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Health Care Benefits insurance products where we assume all or a majority of the risk for medical and dental care costs (our “Insured” products). As a result of COVID-19, including legislative and/or regulatory responses to COVID-19, the premiums we charge in our Insured Health Care Benefits products may prove to be insufficient to cover the cost of medical services delivered to our Insured medical members, which may increase significantly as a result of higher utilization rates of medical facilities and services and other increases in associated hospital and pharmaceutical costs. Federal, state and local governmental policies and initiatives to reduce the transmission of COVID-19, including shelter-in-place orders and social distancing directives, may not effectively combat the severity and/or duration of the COVID-19 pandemic and have resulted in, among other things, a reduction in utilization of medical services (“utilization”) that is discretionary, the cancellation of elective medical procedures, reduced customer traffic and front store sales in our retail pharmacies, our customers being ordered to close or severely curtail their operations, the adoption of work-from-home policies and a reduction in diagnostic reporting due to reductions in health care provider visits and restrictions on our access to providers’ medical records, all of which impact our businesses. Among other impacts of these policies and initiatives on our businesses, we expect changes in medical claims submission patterns and an adverse impact on (i) drug utilization due to the reduction in discretionary visits with health care providers; (ii) front store sales as a result of reduced customer traffic in our retail pharmacies due to shelter-in-place orders and COVID-19 related unemployment; (iii) medical membership in our Health Care Benefits segment and covered lives in our PBM clients due to reductions in workforce at our existing customers (including due to business failures) as well as reduced willingness to change benefits providers by prospective customers; (iv) benefit costs due to COVID-19 related support programs we have put in place for our medical members and mandated increases to the medical services we must pay for without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products; and (v) the timing and collectability of payments to the Company from customers, clients, government payers and members as a resultmarket price of the ~~impact~~Company’s common shares.

Item 2.Unregistered Sales of ~~COVID-19 on them. Over time, these policies~~Equity Securities and ~~initiatives also may cause us to experience increased benefit costs and/or decreased revenues in our Health Care Benefits segment if, as a result~~Use of our medical members not seeing their health care providers as a result of COVID-19, we are unable to implement clinical initiatives to manage benefit costs and chronic conditions of our medical members and appropriately document their risk profiles.Proceeds

In addition, in response to COVID-19, during the first quarter of 2020, we began to offer our medical members expanded benefit coverage and became obligated by governmental action to provide other additional coverage. This expanded benefit coverage is being provided without a corresponding increase in the premiums we receive in our Insured Health Care Benefits products. We also are taking actions designed to help provide financial and administrative relief for the health care provider community. Such measures and any further steps we take or are required to take to expand or otherwise modify the services delivered to our Health Care Benefits members, provide relief for the health care provider community, or in connection with the relaxation of shelter-in-place orders and social distancing directives and other restrictions on movement and economic activity intended to reduce the spread of COVID-19, including the potential for widespread testing as a component of lifting those measures, could adversely impact our benefit costs, medical benefit ratio and operating results.

The various initiatives we have implemented to slow and/or reduce the impact of COVID-19, such as colleagues working remotely and installing protective equipment in our retail pharmacies, and the COVID-19-related support programs we have put in place for our customers, medical members and colleagues have increased our operating expenses and reduced the efficiency of our operations. Our operating results will continue to be adversely affected so long as these initiatives continue or if they are expanded. In addition, the significant deterioration of the U.S. and global economies is having, and is expected to continue to have, a significant adverse impact on our net investment income and the value of our investment portfolio.

The spread of COVID-19, or actions taken to mitigate its spread, could have material and adverse effects on our ability to operate our businesses effectively, including as a result of the complete or partial closure of facilities, labor shortages and/or financial difficulties experienced by third-party service providers. Disruptions in our supply chains, our distribution chains and/or public and private infrastructure, including communications, financial services and supply chains, could materially and

~~Form 10-Q Table of Contents~~

adversely impact our business operations. We have transitioned a significant subset of our colleagues to a remote work environment in an effort to mitigate the spread of COVID-19, as have a significant number of our third-party service providers, which may amplify certain risks to our businesses, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us or our medical members or other third-parties and increased risk of business interruptions.

The COVID-19 pandemic is evolving rapidly. We believe COVID-19’s adverse impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond our knowledge and control. As a result, the adverse impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the adverse impact could be material.

A number of factors, many of which are beyond our control, including COVID-19, contribute to rising health care and other benefit costs. We may not be able to accurately forecast health care and other benefit costs, which could adversely affect our Health Care Benefits segment’s operating results. There can be no assurance that future health care and other benefits costs will not exceed our projections.

As a result of COVID-19, the current economic environment is deteriorating and less predictable than recently experienced, which has caused and may continue to cause unanticipated and significant volatility in our health care and other benefits costs, including post-acute care skilled nursing facility and behavioral health costs. Premiums for our Insured Health Care Benefits products, which comprised 91% of our Health Care Benefits revenues for 2019, are priced in advance based on our forecasts of health care and other benefit costs during a fixed premium period, which is generally twelve months. These forecasts are typically developed several months before the fixed premium period begins, are influenced by historical data (and recent historical data in particular), are dependent on our ability to anticipate and detect medical cost trends and changes in our members’ behavior and health care utilization patterns and medical claim submission patterns and require a significant degree of judgment. For example, our revenue on Medicare policies is based on bids submitted in June of the year before the contract year. Cost increases in excess of our projections cannot be recovered in the fixed premium period through higher premiums. As a result, our profits are particularly sensitive to the accuracy of our forecasts of the increases in health care and other benefit costs that we expect to occur and our ability to anticipate and detect medical cost trends. For 2020 those forecasts do not include any projections for COVID-19 related costs, including COVID-19 related post-acute care skilled nursing facility and behavioral health costs and government mandated and voluntary expansions of benefits coverage which may be significant. During periods such as 2020 when health care and other benefit costs, utilization and/or medical costs trends experience significant volatility and medical claim submission patterns are changing rapidly as a result of COVID-19, accurately detecting, forecasting, managing, reserving and pricing for our (and our self-insured customers’) medical cost trends and incurred and future health care and other benefits costs is more challenging. There can be no assurance regarding the accuracy of the health care or other benefit cost projections reflected in our pricing, and our health care and other benefit costs (including post-acute care skilled nursing facility and behavioral health costs) are affected by COVID-19 and other external events over which we have no control. Even relatively small differences between predicted and actual health care and other benefit costs as a percentage of premium revenues can result in significant adverse changes in our Health Care Benefits segment’s operating results.

A number of factors contribute to rising health care and other benefit costs, including COVID-19, previously uninsured members entering the health care system, changes in members’ behavior and health care utilization patterns, turnover in our membership, additional government mandated benefits or other regulatory changes (including under the Families First Act and the CARES Act), changes in the health status of our members, the aging of the population and other changing demographic characteristics, advances in medical technology, increases in the number and cost of prescription drugs (including specialty pharmacy drugs and ultra-high cost drugs and therapies), direct-to-consumer marketing by drug manufacturers, the increasing influence of social media on our members’ health care utilization and other behaviors, changes in health care practices and general economic conditions (such as inflation and employment levels). In addition, government-imposed limitations on Medicare and Medicaid reimbursements to health plans and providers have caused the private sector to bear a greater share of increasing health care and other benefits costs over time, and future amendments or repeal or replacement of the ACA that increase the uninsured population may amplify this problem. Other factors that affect our health care and other benefit costs include epidemics or other pandemics, changes as a result of the ACA, changes to the ACA and other changes in the regulatory environment, the evolution toward a consumer driven business model, new technologies, influenza related health care costs (which may be substantial and have been higher than we projected for the 2019-2020 influenza season), clusters of high-cost cases, health care provider and member fraud, and numerous other factors that are or may be beyond our control.

~~Form 10-Q Table of Contents~~

Furthermore, if we are not able to accurately and promptly anticipate and detect medical cost trends or accurately estimate the cost of incurred but not yet reported claims or reported claims that have not been paid, our ability to take timely corrective actions to limit future health care costs and reflect our current benefit cost experience in our pricing process may be limited, which would further amplify the extent of any adverse impact on our operating results. These risks are particularly acute during periods such as 2020 when health care and other benefit costs, utilization and/or medical cost trends experience significant volatility and medical claim submission patterns are changing rapidly as a result of COVID-19. Such risks are further magnified by the ACA and other existing and future legislation and regulations that limit our ability to price for our projected and/or experienced increases in utilization and/or medical cost trends.

~~There can be no assurance that future health care and other benefits costs will not exceed our projections.~~

Adverse economic conditions in the U.S. and abroad can materially and adversely impact our businesses, operating results, cash flows and financial condition, and we do not expect these conditions to improve in the near future.

The COVID-19 pandemic, the availability and cost of credit and other capital, higher unemployment rates and other factors have contributed to a deterioration in the global economy and significantly diminished expectations for the global economy, and particularly the U.S. economy, at least through the end of 2020 and possibly longer. Our customers, medical providers and the other companies with which we do business are generally headquartered in the U.S.; however many of our largest customers are global companies with operations around the world. As a result, adverse economic conditions in the U.S. and abroad, including those caused by COVID-19, can materially and adversely impact our businesses, operating results, cash flows and financial condition, including:

~~In our Pharmacy Services segment, by causing drug utilization to decline, reducing demand for PBM services and adversely affecting the financial health of our PBM clients.~~

In our Retail/LTC segment, by causing drug utilization to decline, changing consumer purchasing power, preferences and/or spending patterns leading to reduced consumer demand for products sold in our stores and adversely affecting the financial health of our LTC pharmacy customers.

By leading to reductions in workforce by our existing customers (including due to business failures), which would reduce our revenues, the number of covered lives in our PBM clients and/or the number of members our Health Care Benefits segment serves.

By leading our clients and customers and potential clients and customers, particularly those with the most employees or members, and state and local governments, to force us to compete more vigorously on factors such as price and service to retain or obtain their business.

By leading customers and potential customers of our Retail/LTC and Health Care Benefits segments to purchase fewer products and/or products that generate less profit for us than the ones they currently purchase or otherwise would have purchased.

By leading customers and potential customers of our Health Care Benefits segment, particularly smaller employers and individuals, to forego obtaining or renewing their health and other coverage with us.

In our Health Care Benefits segment, by causing unanticipated increases and volatility in utilization of medical and other covered services, including behavioral health services, by our medical members, changes in medical claim submission patterns and/or increases in medical unit costs and/or provider behavior, each of which would increase our costs and limit our ability to accurately detect, forecast, manage, reserve and price for our (and our self-insured customers’) medical cost trends and incurred and future health care and other benefits costs.

By increasing medical unit costs and causing changes in provider behavior in our Health Care Benefits segment as hospitals and other providers attempt to maintain revenue levels in their efforts to adjust to their own COVID-19-related and other economic challenges.

By weakening the ability or perceived ability of the issuers and/or guarantors of the debt or other securities we hold in our investment portfolio to perform on their obligations to us, which could result in defaults in those securities and has reduced, and may further reduce, the value of those securities and has created, and may continue to create, net realized capital losses for us that reduce our operating results.

By weakening the ability of our customers, including self-insured customers in our Health Care Benefits segment, medical providers and the other companies with which we do business as well as our medical members to perform their obligations to us or causing them not to perform those obligations, either of which could reduce our operating results.

By weakening the ability of our former subsidiaries and/or their purchasers to satisfy their lease obligations that we have guaranteed and causing the Company to be required to satisfy those obligations.

~~Form 10-Q Table of Contents~~

By weakening the financial condition of other insurers, including long-term care insurers and life insurers, which increases the risk that we will receive significant assessments for obligations of insolvent insurers to policyholders and claimants.

By causing, over time, inflation that could cause interest rates to increase and thereby increase our interest expense and reduce our operating results, as well as decrease the value of the debt securities we hold in our investment portfolio, which would reduce our operating results and/or adversely affect our financial condition.

Furthermore, reductions in workforce by our customers can cause unanticipated increases in the health care and other benefits costs of our Health Care Benefits segment. For example, our business associated with members who have elected to receive benefits under Consolidated Omnibus Budget Reconciliation Act (known as “COBRA”) typically has a medical benefit ratio (“MBR”) that is significantly higher than our overall Commercial MBR.

There can be no assurance that our health care and other benefit costs, businesses, operating results, cash flows and/or financial condition will not be materially and adversely impacted by these economy-related conditions or other factors.


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

The following table presents the total number of shares purchased in the three months ended March 31, ~~2020~~,2021, the average price paid per share and the approximate dollar value of shares that still could have been purchased at the end of the applicable fiscal period, pursuant to the share repurchase program authorized by CVS Health Corporation’s Board of Directors on November 2, 2016. See Note 65 ‘‘Shareholders’ Equity’’ contained in “Notes to Condensed Consolidated Financial ~~Statements”~~Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.


Fiscal Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2021 through January 31, 2021	—	$	—	—	$	13,869,392,446
February 1, 2021 through February 28, 2021	—	$	—	—	$	13,869,392,446
March 1, 2021 through March 31, 2021	—	$	—	—	$	13,869,392,446
	—			—

Fiscal Period Total Number
of Shares
Purchased Average
Price Paid per
Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs
January 1, 2020 through January 31, 2020 —
$ —
—
$ 13,869,392,446
February 1, 2020 through February 29, 2020 —
$ —
—
$ 13,869,392,446
March 1, 2020 through March 31, 2020 —
$ —
—
$ 13,869,392,446
—
—

Item 3. Defaults Upon Senior Securities

None.

Form 10-Q Table of Contents

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Form 10-Q Table of Contents

Item 6. Exhibits

The exhibits listed in this Item 6 are filed as part of this Quarterly Report on Form 10-Q. Exhibits marked with an asterisk (*) are management contracts or compensatory plans or arrangements. Exhibits other than those listed are omitted because they are not required to be listed or are not applicable. Pursuant to Item 601(b)(4)(iii) of regulation S-K, the Registrant hereby agrees to furnish to the Securities and Exchange Commission a copy of any omitted instrument that is not required to be listed.

INDEX TO EXHIBITS



10		Material Contracts
4		~~Instruments defining the rights of security holders, including indentures~~

~~4.1~~	~~Form of the Registrant’s 2027 Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 31, 2020).~~

~~4.2~~	~~Form of the Registrant’s 2030 Note (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on March 31, 2020).~~

~~4.3~~	~~Form of the Registrant’s 2040 Note (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on March 31, 2020).~~

~~4.4~~	~~Form of the Registrant’s 2050 Note (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed on March 31, 2020).~~

10	~~Material Contracts~~

10.1*10.1	~~Separation~~Restrictive Covenant Agreement dated ~~March 3,~~September 2 9 , 2020 between ~~CVS Pharmacy, Inc.~~the Registrant and ~~Derica W. Rice.~~Alan Lotvin

1510.2		Change in Control Agreement dated October 15, 2012 between the Registrant and Alan Lotvin

15		Letter re: unaudited interim financial information

15.1		Letter from Ernst & Young LLP acknowledging awareness of the use of a report dated May ~~6, 2020~~4, 2021 related to their reviews of interim financial information.

31		Rule 13a-14(a)/15d-14(a) Certifications

31.1		Certification by the Chief Executive Officer.

31.2		Certification by the Chief Financial Officer.

32		Section 1350 Certifications

32.1		Certification by the Chief Executive Officer.

32.2		Certification by the Chief Financial Officer.

101

101		The following materials from the CVS Health Corporation Quarterly Report on Form 10-Q for the three months ended March 31, ~~2020~~2021 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104

104		Cover Page Interactive Data File - The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020,~~2021, formatted in Inline XBRL (included as Exhibit 101).

Form 10-Q Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		~~CVS HEALTH CORPORATION~~



~~Date:~~						CVS HEALTH CORPORATION


Date:	May ~~6, 2020~~4, 2021	By:	/s/ Eva C. Boratto
			Eva C. Boratto
			Executive Vice President and Chief Financial Officer



~~Delaware~~		~~05-0494040~~
~~(State or other jurisdiction of incorporation or organization)~~		~~(I.R.S. Employer Identification No.)~~



Delaware						05-0494040
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CVS	New York Stock Exchange



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐


		Page
		~~Page~~
Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020	2

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020		3

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020		4

Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020		5

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020		7

Notes to Condensed Consolidated Financial Statements (Unaudited)		8

Report of Independent Registered Public Accounting Firm		3532



TABLE OF CONTENTS		~~Page~~
		Page
Part I	Financial Information

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3633
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5749
Item 4.	Controls and Procedures	5949

Part II	Other Information

Item 1.	Legal Proceedings	5949
Item 1A.	Risk Factors	5949
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6349
Item 3	Defaults Upon Senior Securities	6349
Item 4.	Mine Safety Disclosures	6350
Item 5.	Other Information	6350
Item 6.	Exhibits	6451

Signatures		6552


	Three Months Ended March 31,
In millions, except per share amounts	2021		2020
Revenues:
Products	$	47,387	$	47,003
Premiums	18,960		17,640
Services	2,453		1,950
Net investment income	297		162
Total revenues	69,097		66,755
Operating costs:
Cost of products sold	40,894		40,347
Benefit costs	15,704		14,387
Operating expenses	8,922		8,563
Total operating costs	65,520		63,297
Operating income	3,577		3,458
Interest expense	657		733

Other income	(50)		(54)
Income before income tax provision	2,970		2,779
Income tax provision	746		767


Net income	2,224		2,012
Net income attributable to noncontrolling interests	(1)		(5)
Net income attributable to CVS Health	$	2,223	$	2,007

Net income per share attributable to CVS Health:
Basic	$	1.69	$	1.54
Diluted	$	1.68	$	1.53
Weighted average shares outstanding:
Basic	1,313		1,306
Diluted	1,322		1,312










Dividends declared per share	$	0.50	$	0.50


In millions, except per share amounts	March 31, 2021		December 31, 2020
Assets:
Cash and cash equivalents	$	5,598	$	7,854
Investments	3,190		3,000
Accounts receivable, net	23,855		21,742
Inventories	17,618		18,496
Other current assets	5,458		5,277
Total current assets	55,719		56,369
Long-term investments	21,025		20,812
Property and equipment, net	12,611		12,606
Operating lease right-of-use assets	20,542		20,729
Goodwill	79,552		79,552
Intangible assets, net	30,639		31,142
Separate accounts assets	4,692		4,881
Other assets	4,826		4,624
Total assets	$	229,606	$	230,715

Liabilities:
Accounts payable	$	10,804	$	11,138
Pharmacy claims and discounts payable	16,282		15,795
Health care costs payable	8,272		7,936
Policyholders’ funds	4,440		4,270
Accrued expenses	14,312		14,243
Other insurance liabilities	1,534		1,557
Current portion of operating lease liabilities	1,786		1,638
Short-term debt	252		0
Current portion of long-term debt	2,422		5,440
Total current liabilities	60,104		62,017
Long-term operating lease liabilities	18,587		18,757
Long-term debt	59,270		59,207
Deferred income taxes	6,610		6,794
Separate accounts liabilities	4,692		4,881
Other long-term insurance liabilities	6,870		7,007
Other long-term liabilities	2,309		2,351
Total liabilities	158,442		161,014

Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; 0ne issued or outstanding	0		0
Common stock, par value $0.01: 3,200 shares authorized; 1,735 shares issued and 1,313 shares outstanding at March 31, 2021 and 1,733 shares issued and 1,310 shares outstanding at December 31, 2020 and capital surplus	46,727		46,513
Treasury stock, at cost: 422 shares at March 31, 2021 and 423 shares at December 31, 2020	(28,102)		(28,178)
Retained earnings	51,203		49,640
Accumulated other comprehensive income	1,022		1,414
Total CVS Health shareholders’ equity	70,850		69,389
Noncontrolling interests	314		312
Total shareholders’ equity	71,164		69,701
Total liabilities and shareholders’ equity	$	229,606	$	230,715



In millions, except per share amounts	March 31, 2020			December 31, 2019
Assets:
Cash and cash equivalents	$	10,081		$	5,683
Investments	2,632			2,373
Accounts receivable, net	23,037			19,617
Inventories	16,976			17,516
Other current assets	6,232			5,113
Total current assets	58,958			50,302
Long-term investments	16,840			17,314
Property and equipment, net	12,146			12,044
Operating lease right-of-use assets	20,672			20,860
Goodwill	79,993			79,749
Intangible assets, net	32,727			33,121
Separate accounts assets	4,555			4,459
Other assets	4,748			4,600
Total assets	$	230,639		$	222,449

Liabilities:
Accounts payable	$	10,223		$	10,492
Pharmacy claims and discounts payable	15,449			13,601
Health care costs payable	7,585			6,879
Policyholders’ funds	3,110			2,991
Accrued expenses	13,574			12,133
Other insurance liabilities	1,774			1,830
Current portion of operating lease liabilities	1,762			1,596
Short-term debt	255			—
Current portion of long-term debt	5,828			3,781
Total current liabilities	59,560			53,303
Long-term operating lease liabilities	18,739			18,926
Long-term debt	65,735			64,699
Deferred income taxes	7,121			7,294
Separate accounts liabilities	4,555			4,459
Other long-term insurance liabilities	7,338			7,436
Other long-term liabilities	2,117			2,162
Total liabilities	165,165			158,279

Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding	—			—
Common stock, par value $0.01: 3,200 shares authorized; 1,729 shares issued and 1,305 shares outstanding at March 31, 2020 and 1,727 shares issued and 1,302 shares outstanding at December 31, 2019 and capital surplus	46,180			45,972
Treasury stock, at cost: 424 shares at March 31, 2020 and 425 shares at December 31, 2019	(28,182		)	(28,235		)
Retained earnings	46,455			45,108
Accumulated other comprehensive income	687			1,019
Total CVS Health shareholders’ equity	65,140			63,864
Noncontrolling interests	334			306
Total shareholders’ equity	65,474			64,170
Total liabilities and shareholders’ equity	$	230,639		$	222,449


			Attributable to CVS Health
	Number of shares outstanding		Common Stock and Capital Surplus (2)		Treasury Stock (1)		Retained Earnings		Accumulated Other Comprehensive Income		Total CVS Health Shareholders’ Equity		Noncontrolling Interests		Total Shareholders’ Equity

	Common Shares	Treasury Shares (1)
In millions
Balance at December 31, 2020	1,733	(423)	$	46,513	$	(28,178)	$	49,640	$	1,414	$	69,389	$	312	$	69,701
Net income	—	—	—		—		2,223		—		2,223		1		2,224
Other comprehensive loss (Note 6)	—	—	—		—		—		(392)		(392)		—		(392)
Stock option activity, stock awards and other	2	—	214		—		—		—		214		—		214
ESPP issuances, net of purchase of treasury shares	—	1	—		76		—		—		76		—		76
Common stock dividends	—	—	—		—		(660)		—		(660)		—		(660)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		1		1
Balance at March 31, 2021	1,735	(422)	$	46,727	$	(28,102)	$	51,203	$	1,022	$	70,850	$	314	$	71,164















Balance at December 31, 2019	1,727	(425)	$	45,972	$	(28,235)	$	45,108	$	1,019	$	63,864	$	306	$	64,170
Adoption of new accounting standard (3)	—	—	—		—		(3)		—		(3)		—		(3)
Net income	—	—	—		—		2,007		—		2,007		5		2,012
Other comprehensive loss (Note 6)	—	—	—		—		—		(332)		(332)		—		(332)
Stock option activity, stock awards and other	2	—	208		—		—		—		208		—		208
ESPP issuances, net of purchase of treasury shares	—	1	—		53		—		—		53		—		53
Common stock dividends	—	—	—		—		(657)		—		(657)		—		(657)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		23		23
Balance at March 31, 2020	1,729	(424)	$	46,180	$	(28,182)	$	46,455	$	687	$	65,140	$	334	$	65,474



				Attributable to CVS Health
	Number of shares outstanding			Common Stock and Capital Surplus ⁽²⁾		Treasury Stock ⁽¹⁾			Retained Earnings			Accumulated Other Comprehensive Income			Total CVS Health Shareholders Equity			Noncontrolling Interests			Total Shareholders’ Equity
	Number of shares outstanding
	Common Shares	Treasury Shares ⁽¹⁾
In millions	Common Shares	Treasury Shares ⁽¹⁾
Three Months Ended March 31, 2020
Balance at December 31, 2019	1,727	(425	)	$	45,972	$	(28,235	)	$	45,108		$	1,019		$	63,864		$	306		$	64,170
Adoption of new accounting standard (Note 1)	—	—		—		—			(3		)	—			(3		)	—			(3		)
Net income	—	—		—		—			2,007			—			2,007			5			2,012
Other comprehensive loss (Note 7)	—	—		—		—			—			(332		)	(332		)	—			(332		)
Stock option activity, stock awards and other	2	—		208		—			—			—			208			—			208
Purchase of treasury shares, net of ESPP issuances	—	1		—		53			—			—			53			—			53
Common stock dividends	—	—		—		—			(657		)	—			(657		)	—			(657		)
Other increases in noncontrolling interests	—	—		—		—			—			—			—			23			23
Balance at March 31, 2020	1,729	(424	)	$	46,180	$	(28,182	)	$	46,455		$	687		$	65,140		$	334		$	65,474

Three Months Ended March 31, 2019
Balance at December 31, 2018	1,720	(425	)	$	45,440	$	(28,228	)	$	40,911		$	102		$	58,225		$	318		$	58,543
Adoption of new accounting standard ⁽³⁾	—	—		—		—			178			—			178			—			178
Net income	—	—		—		—			1,421			—			1,421			6			1,427
Other comprehensive income (Note 7)	—	—		—		—			—			331			331			—			331
Stock option activity, stock awards and other	2	—		175		—			—			—			175			—			175
Purchase of treasury shares, net of ESPP issuances	—	1		—		7			—			—			7			—			7
Common stock dividends	—	—		—		—			(651		)	—			(651		)	—			(651		)
Other decreases in noncontrolling interests	—	—		—		—			—			—			—			(4		)	(4		)
Balance at March 31, 2019	1,722	(424	)	$	45,615	$	(28,221	)	$	41,859		$	433		$	59,686		$	320		$	60,006


~~(1)~~	~~Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of March 31, 2020 and 2019 and December 31, 2019 and 2018.~~


~~(2)~~	~~Common stock and capital surplus includes the par value of common stock of $17 million as of March 31, 2020 and 2019 and December 31, 2019 and 2018.~~


~~(2)~~	~~Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail order facility, which includes specialty mail claims inclusive of Specialty Connect~~^® ~~claims picked up at a retail pharmacy, as well as prescriptions filled at the Company’s retail pharmacies under the Maintenance Choice program.~~


In millions	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2021
Debt securities:
U.S. government securities	$	2,236	$	72	$	(2)	$	2,306
States, municipalities and political subdivisions	2,778		142		(4)		2,916
U.S. corporate securities	8,671		689		(36)		9,324
Foreign securities	2,655		215		(12)		2,858
Residential mortgage-backed securities	744		24		(6)		762
Commercial mortgage-backed securities	943		55		(13)		985
Other asset-backed securities	2,295		30		(2)		2,323
Redeemable preferred securities	27		3		0		30
Total debt securities (2)	$	20,349	$	1,230	$	(75)	$	21,504

December 31, 2020
Debt securities:
U.S. government securities	$	2,341	$	128	$	0	$	2,469
States, municipalities and political subdivisions	2,556		172		0		2,728
U.S. corporate securities	7,879		1,023		(8)		8,894
Foreign securities	2,595		324		(1)		2,918
Residential mortgage-backed securities	673		32		0		705
Commercial mortgage-backed securities	962		84		0		1,046
Other asset-backed securities	2,369		36		(2)		2,403
Redeemable preferred securities	21		4		0		25
Total debt securities (2)	$	19,396	$	1,803	$	(11)	$	21,188


1.	~~Significant Accounting Policies~~



In millions	Gross Amortized Cost		Allowance for Credit Losses ⁽¹⁾			Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2020
Debt securities:
U.S. government securities	$	1,853	$	—		$	1,853	$	162	$	—		$	2,015
States, municipalities and political subdivisions	2,182		—			2,182		91		(7		)	2,266
U.S. corporate securities	7,128		(28		)	7,100		412		(109		)	7,403
Foreign securities	2,202		(18		)	2,184		112		(48		)	2,248
Residential mortgage-backed securities	574		—			574		38		—			612
Commercial mortgage-backed securities	662		—			662		43		(1		)	704
Other asset-backed securities	1,509		(2		)	1,507		7		(80		)	1,434
Redeemable preferred securities	35		—			35		1		(1		)	35
Total debt securities ⁽²⁾	$	16,145	$	(48	)	$	16,097	$	866	$	(246	)	$	16,717

December 31, 2019
Debt securities:
U.S. government securities	$	1,791	$	—		$	1,791	$	62	$	(1	)	$	1,852
States, municipalities and political subdivisions	2,202		—			2,202		108		(1		)	2,309
U.S. corporate securities	7,167		—			7,167		573		(3		)	7,737
Foreign securities	2,149		—			2,149		200		(1		)	2,348
Residential mortgage-backed securities	508		—			508		25		—			533
Commercial mortgage-backed securities	654		—			654		46		—			700
Other asset-backed securities	1,397		—			1,397		13		(5		)	1,405
Redeemable preferred securities	30		—			30		8		—			38
Total debt securities ⁽²⁾	$	15,898	$	—		$	15,898	$	1,035	$	(11	)	$	16,922


In millions	Amortized Cost		Fair Value
Due to mature:
Less than one year	$	1,199	$	1,213
One year through five years	6,997		7,289
After five years through ten years	4,150		4,367
Greater than ten years	4,021		4,565
Residential mortgage-backed securities	744		762
Commercial mortgage-backed securities	943		985
Other asset-backed securities	2,295		2,323
Total	$	20,349	$	21,504


	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
March 31, 2021
Debt securities:
U.S. government securities	235	$	877	$	2	0	$	0	$	0	235	$	877	$	2
States, municipalities and political subdivisions	219	386		4		0	0		0		219	386		4
U.S. corporate securities	1,199	1,633		35		11	12		1		1,210	1,645		36
Foreign securities	293	453		12		7	8		0		300	461		12
Residential mortgage-backed securities	105	396		6		5	0		0		110	396		6
Commercial mortgage-backed securities	112	311		13		0	0		0		112	311		13
Other asset-backed securities	231	476		2		25	31		0		256	507		2
Redeemable preferred securities	2	5		0		0	0		0		2	5		0
Total debt securities	2,396	$	4,537	$	74	48	$	51	$	1	2,444	$	4,588	$	75

December 31, 2020
Debt securities:
U.S. government securities	32	$	205	$	0	0	$	0	$	0	32	$	205	$	0
States, municipalities and political subdivisions	49	83		0		0	0		0		49	83		0
U.S. corporate securities	145	155		8		2	0		0		147	155		8
Foreign securities	41	69		1		5	5		0		46	74		1
Residential mortgage-backed securities	23	26		0		3	0		0		26	26		0
Commercial mortgage-backed securities	22	75		0		0	0		0		22	75		0
Other asset-backed securities	156	256		1		49	41		1		205	297		2
Total debt securities	468	$	869	$	10	59	$	46	$	1	527	$	915	$	11


	Supporting experience-rated products				Supporting remaining products				Total					Supporting experience-rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:													Due to mature:
Less than one year	$	7	$	—	$	163	$	3	$	170	$	3	Less than one year	$	0	$	0	$	9	$	0	$	9	$	0
One year through five years	30		1		1,082		44		1,112		45		One year through five years	2		0		1,569		13		1,571		13
After five years through ten years	61		4		776		60		837		64		After five years through ten years	29		0		1,287		25		1,316		25
Greater than ten years	55		4		515		49		570		53		Greater than ten years	23		1		455		15		478		16
Residential mortgage-backed securities													Residential mortgage-backed securities	0		0		396		6		396		6
Commercial mortgage-backed securities	1		—		49		1		50		1		Commercial mortgage-backed securities	6		1		305		12		311		13
Other asset-backed securities	16		1		945		79		961		80		Other asset-backed securities	3		0		504		2		507		2
Total	$	170	$	10	$	3,530	$	236	$	3,700	$	246	Total	$	63	$	2	$	4,525	$	73	$	4,588	$	75


•	~~Categories 2 to 4~~ ~~- Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.~~


•	~~Categories 5 and 6~~ ~~- Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.~~


•	~~Category 7~~ ~~- Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.~~


	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2021		2020		2019		2018		2017		Prior		Total
March 31, 2021
1	$	0	$	0	$	0	$	0	$	22	$	36	$	58
2 to 4	30		48		97		75		112		542		904
5 and 6	0		0		0		3		4		28		35
7	0		0		0		0		0		0		0
Total	$	30	$	48	$	97	$	78	$	138	$	606	$	997

December 31, 2020
1			$	0	$	0	$	0	$	22	$	37	$	59
2 to 4			46		96		91		124		595		952
5 and 6			0		0		3		4		29		36
7			0		0		0		0		0		0
Total			$	46	$	96	$	94	$	150	$	661	$	1,047


~~(1)~~	Net realized capital losses include credit-related and yield-related impairment losses on debt securities of $45 million and $41 million, respectively, in the three months ended March 31, 2020. Net realized capital gains are net of other than temporary impairment losses on debt securities of $7 million in the three months ended March 31, 2019.


~~(2)~~	~~Net investment income includes $11 million for both the three months ended March 31, 2020 and 2019 related to investments supporting experience-rated products.~~


In millions	Level 1		Level 2		Level 3		Total
March 31, 2021
Cash and cash equivalents	$	1,913	$	3,685	$	0	$	5,598
Debt securities:
U.S. government securities	2,256		50		0		2,306
States, municipalities and political subdivisions	0		2,916		0		2,916
U.S. corporate securities	0		9,282		42		9,324
Foreign securities	0		2,858		0		2,858
Residential mortgage-backed securities	0		762		0		762
Commercial mortgage-backed securities	0		985		0		985
Other asset-backed securities	0		2,323		0		2,323
Redeemable preferred securities	0		29		1		30
Total debt securities	2,256		19,205		43		21,504
Equity securities	15		0		30		45
Total	$	4,184	$	22,890	$	73	$	27,147

December 31, 2020
Cash and cash equivalents	$	3,985	$	3,869	$	0	$	7,854
Debt securities:
U.S. government securities	2,370		99		0		2,469
States, municipalities and political subdivisions	0		2,727		1		2,728
U.S. corporate securities	0		8,842		52		8,894
Foreign securities	0		2,918		0		2,918
Residential mortgage-backed securities	0		705		0		705
Commercial mortgage-backed securities	0		1,046		0		1,046
Other asset-backed securities	0		2,403		0		2,403
Redeemable preferred securities	0		24		1		25
Total debt securities	2,370		18,764		54		21,188
Equity securities	17		0		30		47
Total	$	6,372	$	22,633	$	84	$	29,089


	Carrying Value		Estimated Fair Value
In millions			Level 1		Level 2		Level 3		Total
March 31, 2021
Assets:
Mortgage loans	$	997	$	0	$	0	$	1,011	$	1,011
Equity securities (1)	194		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		0		0		5		5
Without a fixed maturity	322		0		0		353		353
Long-term debt	61,692		68,890		0		0		68,890

December 31, 2020
Assets:
Mortgage loans	$	1,047	$	0	$	0	$	1,070	$	1,070
Equity securities (1)	145		N/A		N/A		N/A		N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	5		0		0		5		5
Without a fixed maturity	322		0		0		371		371
Long-term debt	64,647		75,940		0		0		75,940


~~(1)~~	~~It was not practical to estimate the fair value of these cost-method investments as it represents shares of unlisted companies.~~


~~(1)~~	Amounts reclassified from accumulated other comprehensive income for specifically identified debt securities are included in net investment income in the unaudited condensed consolidated statements of operations.



In millions	Pharmacy Services ⁽¹⁾		Retail/ LTC		Health Care Benefits		Corporate/ Other			Intersegment Eliminations			Consolidated Totals
Three Months Ended
March 31, 2020
Revenues from external customers	$	32,118	$	15,357	$	19,097	$	21		$	—		$	66,593
Intersegment revenues	2,865		7,392		8		—			(10,265		)	—
Net investment income	—		—		93		69			—			162
Total revenues	34,983		22,749		19,198		90			(10,265		)	66,755
Adjusted operating income (loss)	1,181		1,902		1,491		(285		)	(176		)	4,113

March 31, 2019
Revenues from external customers	$	29,826	$	13,846	$	17,700	$	25		$	—		$	61,397
Intersegment revenues	3,732		7,269		6		—			(11,007		)	—
Net investment income	—		—		164		85			—			249
Total revenues	33,558		21,115		17,870		110			(11,007		)	61,646
Adjusted operating income (loss)	947		1,489		1,562		(231		)	(172		)	3,595


~~(1)~~	~~Total revenues of the Pharmacy Services segment include approximately $3.4 billion and $3.3 billion of retail co-payments for the three months ended March 31, 2020 and 2019, respectively.~~