UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from _____ to _____

Commission file number 1-38769

Cigna Corporation

(Exact name of registrant as specified in its charter)


Delaware			82-4991898
(State or other jurisdiction			(I.R.S. Employer
of incorporation or organization)			Identification No.)

900 Cottage Grove Road

Bloomfield, Connecticut 06002

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (860) 226-6000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01	CI	New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No _

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No _

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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.

Yes _

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~October 16, 2020, 361,267,280~~April 30, 2021, 343,145,549 shares of the issuer’s common stock were outstanding.

Cigna Corporation

TABLE OF CONTENTS

As used herein, “Cigna” or the “Company” refers to one or more of Cigna Corporation and its consolidated

subsidiaries.

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS


Cigna Corporation Consolidated Statements of Income	Cigna Corporation Consolidated Statements of Income									Cigna Corporation Consolidated Statements of Income
		Unaudited				Unaudited					Unaudited
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In millions, except per share amounts)	(In millions, except per share amounts)	2020		2019		2020		2019		(In millions, except per share amounts)		2021		2020
Revenues	Revenues									Revenues
Pharmacy revenues	Pharmacy revenues	$	27,802	$	25,987	$	79,464	$	77,454	Pharmacy revenues		$	28,025	$	25,098
Premiums	Premiums	10,682		9,935		31,928		29,709		Premiums		10,214		10,840
Fees and other revenues	Fees and other revenues	2,174		2,285		6,424		7,123		Fees and other revenues		2,341		2,178
Net investment income	Net investment income	297		349		873		1,035		Net investment income		391		353
Total revenues		40,955		38,556		118,689		115,321
TOTAL REVENUES										TOTAL REVENUES		40,971		38,469
Benefits and expenses	Benefits and expenses									Benefits and expenses
Pharmacy and other service costs	Pharmacy and other service costs	26,624		24,552		76,425		73,565		Pharmacy and other service costs		27,235		24,190
Medical costs and other benefit expenses	Medical costs and other benefit expenses	8,429		7,734		23,863		22,930		Medical costs and other benefit expenses		8,005		8,322
Selling, general and administrative expenses	Selling, general and administrative expenses	3,301		3,413		10,106		10,096		Selling, general and administrative expenses		3,279		3,398
Amortization of acquired intangible assets	Amortization of acquired intangible assets	493		734		1,487		2,214		Amortization of acquired intangible assets		495		498
Total benefits and expenses		38,847		36,433		111,881		108,805
TOTAL BENEFITS AND EXPENSES										TOTAL BENEFITS AND EXPENSES		39,014		36,408
Income from operations	Income from operations	2,108		2,123		6,808		6,516		Income from operations		1,957		2,061
Interest expense and other	Interest expense and other	(336)		(411)		(1,101)		(1,291)		Interest expense and other		(314)		(391)
Debt extinguishment costs	Debt extinguishment costs	0		0		(199)		0		Debt extinguishment costs		(131)		(185)

Net realized investment gains (losses)	Net realized investment gains (losses)	32		51		(18)		84		Net realized investment gains (losses)		1		(88)
Income before income taxes	Income before income taxes	1,804		1,763		5,490		5,309		Income before income taxes		1,513		1,397
Total income taxes		406		409		1,143		1,173
TOTAL INCOME TAXES										TOTAL INCOME TAXES		342		208
Net income	Net income	1,398		1,354		4,347		4,136		Net income		1,171		1,189
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	10		3		24		9		Less: Net income attributable to noncontrolling interests		10		8
Shareholders’ net income		$	1,388	$	1,351	$	4,323	$	4,127
SHAREHOLDERS' NET INCOME										SHAREHOLDERS' NET INCOME		$	1,161	$	1,181
Shareholders’ net income per share	Shareholders’ net income per share									Shareholders’ net income per share
Basic	Basic	$	3.81	$	3.60	$	11.77	$	10.94	Basic		$	3.33	$	3.19
Diluted	Diluted	$	3.78	$	3.57	$	11.66	$	10.83	Diluted		$	3.30	$	3.15

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.


Cigna Corporation Consolidated Statements of Comprehensive Income	Cigna Corporation Consolidated Statements of Comprehensive Income									Cigna Corporation Consolidated Statements of Comprehensive Income
		Unaudited				Unaudited					Unaudited
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)		2021		2020
Net income	Net income	$	1,398	$	1,354	$	4,347	$	4,136	Net income		$	1,171	$	1,189
Other comprehensive income, net of tax
Net unrealized appreciation on securities and derivatives		120		223		401		1,008
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax
Net unrealized appreciation (depreciation) on securities and derivatives										Net unrealized appreciation (depreciation) on securities and derivatives		(273)		(428)
Net translation gains (losses) on foreign currencies	Net translation gains (losses) on foreign currencies	109		(127)		4		(195)		Net translation gains (losses) on foreign currencies		(119)		(175)
Postretirement benefits liability adjustment	Postretirement benefits liability adjustment	14		12		(15)		37		Postretirement benefits liability adjustment		18		13
Other comprehensive income, net of tax		243		108		390		850
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax		(374)		(590)
Total comprehensive income	Total comprehensive income	1,641		1,462		4,737		4,986		Total comprehensive income		797		599

Comprehensive income (loss) attributable to noncontrolling interests	Comprehensive income (loss) attributable to noncontrolling interests									Comprehensive income (loss) attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interest	Net income attributable to redeemable noncontrolling interest	4		3		12		8		Net income attributable to redeemable noncontrolling interest		5		4
Net income attributable to other noncontrolling interests	Net income attributable to other noncontrolling interests	6		0		12		1		Net income attributable to other noncontrolling interests		5		4
Other comprehensive (loss) attributable to redeemable noncontrolling interest	Other comprehensive (loss) attributable to redeemable noncontrolling interest	(4)		1		(10)		(3)		Other comprehensive (loss) attributable to redeemable noncontrolling interest		(4)		(4)
Total comprehensive income attributable to noncontrolling interests	Total comprehensive income attributable to noncontrolling interests	6		4		14		6		Total comprehensive income attributable to noncontrolling interests		6		4
SHAREHOLDERS' COMPREHENSIVE INCOME	SHAREHOLDERS' COMPREHENSIVE INCOME	$	1,635	$	1,458	$	4,723	$	4,980	SHAREHOLDERS' COMPREHENSIVE INCOME		$	791	$	595

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.


Cigna Corporation Consolidated Balance Sheets	Cigna Corporation Consolidated Balance Sheets					Cigna Corporation Consolidated Balance Sheets
							Unaudited
							As of March 31,		As of December 31,
		Unaudited
(In millions)	(In millions)	As of September 30, 2020		As of December 31, 2019		(In millions)	2021		2020
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	5,344	$	4,619	Cash and cash equivalents	$	6,505	$	10,182
Investments	Investments	1,324		937		Investments	1,477		1,331
Accounts receivable, net	Accounts receivable, net	13,488		10,716		Accounts receivable, net	13,588		12,191
Inventories	Inventories	2,657		2,661		Inventories	2,919		3,165
Other current assets	Other current assets	1,722		1,400		Other current assets	1,065		930
Assets of business held for sale		10,022		9,512
Total current assets	Total current assets	34,557		29,845		Total current assets	25,554		27,799
Long-term investments	Long-term investments	21,952		21,542		Long-term investments	22,821		23,262
Reinsurance recoverables	Reinsurance recoverables	4,898		5,100		Reinsurance recoverables	5,175		5,200
Deferred policy acquisition costs	Deferred policy acquisition costs	3,161		2,958		Deferred policy acquisition costs	3,351		3,385
Property and equipment	Property and equipment	4,203		4,417		Property and equipment	4,114		4,205
Goodwill	Goodwill	44,685		44,602		Goodwill	44,635		44,648
Other intangible assets	Other intangible assets	35,492		36,562		Other intangible assets	34,792		35,179
Other assets	Other assets	2,480		2,283		Other assets	2,551		2,687
Separate account assets	Separate account assets	8,616		8,465		Separate account assets	9,088		9,086
TOTAL ASSETS	TOTAL ASSETS	$	160,044	$	155,774	TOTAL ASSETS	$	152,081	$	155,451
Liabilities	Liabilities					Liabilities
Current insurance and contractholder liabilities	Current insurance and contractholder liabilities	$	5,223	$	4,921	Current insurance and contractholder liabilities	$	5,743	$	5,308
Pharmacy and service costs payable		12,539		10,454
Pharmacy and other service costs payable						Pharmacy and other service costs payable	13,762		13,347
Accounts payable	Accounts payable	5,327		5,090		Accounts payable	5,640		5,478
Accrued expenses and other liabilities	Accrued expenses and other liabilities	7,153		7,347		Accrued expenses and other liabilities	7,921		8,515
Short-term debt	Short-term debt	6,449		5,514		Short-term debt	404		3,374
Liabilities of business held for sale		7,195		6,812
Total current liabilities	Total current liabilities	43,886		40,138		Total current liabilities	33,470		36,022
Non-current insurance and contractholder liabilities	Non-current insurance and contractholder liabilities	16,213		16,052		Non-current insurance and contractholder liabilities	16,424		16,844
Deferred tax liabilities, net	Deferred tax liabilities, net	9,142		9,387		Deferred tax liabilities, net	8,832		8,939
Other non-current liabilities	Other non-current liabilities	4,552		4,460		Other non-current liabilities	4,485		4,629
Long-term debt	Long-term debt	29,537		31,893		Long-term debt	31,568		29,545
Separate account liabilities	Separate account liabilities	8,616		8,465		Separate account liabilities	9,088		9,086
TOTAL LIABILITIES	TOTAL LIABILITIES	111,946		110,395		TOTAL LIABILITIES	103,867		105,065
Contingencies — Note 18
Contingencies — Note 15						Contingencies — Note 15	0		0
Redeemable noncontrolling interests	Redeemable noncontrolling interests	59		35		Redeemable noncontrolling interests	59		58
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common stock (1)	Common stock (1)	4		4		Common stock (1)	4		4
Additional paid-in capital	Additional paid-in capital	28,777		28,306		Additional paid-in capital	29,254		28,975
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(541)		(941)		Accumulated other comprehensive loss	(1,231)		(861)
Retained earnings	Retained earnings	24,440		20,162		Retained earnings	29,389		28,575
Less: treasury stock, at cost	Less: treasury stock, at cost	(4,648)		(2,193)		Less: treasury stock, at cost	(9,267)		(6,372)
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	48,032		45,338		TOTAL SHAREHOLDERS’ EQUITY	48,149		50,321
Other noncontrolling interests	Other noncontrolling interests	7		6		Other noncontrolling interests	6		7
Total equity	Total equity	48,039		45,344		Total equity	48,155		50,328
Total liabilities and equity	Total liabilities and equity	$	160,044	$	155,774	Total liabilities and equity	$	152,081	$	155,451

(1)Par value per share, $0.01; shares issued, ~~389~~393 million as of ~~September 30, 2020~~March 31, 2021 and ~~386~~390 million as of December 31, ~~2019;~~2020; authorized shares, 600 million.

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

Cigna Corporation
Consolidated Statements of Changes in Total Equity
Unaudited
Three months ended September 30, 2020
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total Equity Redeemable Noncontrolling Interests
Balance at June 30, 2020 $ 4 $ 28,699 $ (788) $ 23,052 $ (3,601) $ 47,366 $ 5 $ 47,371 $ 34
Effects of issuing stock for employee benefits plans 78 (2) 76 76
Other comprehensive income (loss) 247 247 247 (4)
Net income 1,388 1,388 6 1,394 4
Repurchase of common stock (1,045) (1,045) (1,045)
Other transactions impacting noncontrolling interests 0 (4) (4) 25
Balance at September 30, 2020 $ 4 $ 28,777 $ (541) $ 24,440 $ (4,648) $ 48,032 $ 7 $ 48,039 $ 59
Three months ended September 30, 2019
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total Equity Redeemable Noncontrolling Interests
Balance at June 30, 2019 $ 4 $ 27,891 $ (965) $ 17,834 $ (949) $ 43,815 $ 3 $ 43,818 $ 31
Effect of issuing stock for employee benefit plans 224 (125) 99 99
Other comprehensive income (loss) 107 107 107 1
Net income 1,351 1,351 1,351 3
Repurchase of common stock (676) (676) (676)
Other transactions impacting noncontrolling interests (1)
Balance at September 30, 2019 $ 4 $ 28,115 $ (858) $ 19,185 $ (1,750) $ 44,696 $ 3 $ 44,699 $ 34

Cigna Corporation
Consolidated Statements of Changes in Total Equity
Unaudited
Nine Months Ended September 30, 2020
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total
Equity Redeemable Noncontrolling Interests
Balance at December 31, 2019 $ 4 $ 28,306 $ (941) $ 20,162 $ (2,193) $ 45,338 $ 6 $ 45,344 $ 35
Cumulative effect of adopting new credit loss guidance (ASU 2016-13) (1)
(30) (30) (30)
Effect of issuing stock for employee benefit plans 471 (86) 385 385
Other comprehensive income (loss) 400 400 400 (10)
Net income 4,323 4,323 12 4,335 12
Common dividends declared (per share: $0.04) (15) (15) (15)
Repurchase of common stock (2,369) (2,369) (2,369)
Other transactions impacting noncontrolling interests (11) (11) 22
Balance at September 30, 2020 $ 4 $ 28,777 $ (541) $ 24,440 $ (4,648) $ 48,032 $ 7 $ 48,039 $ 59
Nine Months Ended September 30, 2019
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total
Equity Redeemable Noncontrolling Interests
Balance at December 31, 2018 $ 4 $ 27,751 $ (1,711) $ 15,088 $ (104) $ 41,028 $ 7 $ 41,035 $ 37
Cumulative effect of adopting new lease accounting guidance (ASU 2016-02) (15) (15) (15)
Effect of issuing stock for employee benefit plans 364 (102) 262 262
Other comprehensive income (loss) 853 853 853 (3)
Net income 4,127 4,127 1 4,128 8
Common dividends declared (per share: $0.04) (15) (15) (15)
Repurchase of common stock (1,544) (1,544) (1,544)
Other transactions impacting noncontrolling interests (5) (5) (8)
Balance at September 30, 2019 $ 4 $ 28,115 $ (858) $ 19,185 $ (1750) $ 44,696 $ 3 $ 44,699 $ 34

~~(1)See Note 3 for further information about the Company's adoption of new credit loss guidance (ASU 2016-13).~~


Cigna Corporation
Consolidated Statements of Changes in Total Equity
Unaudited
Three Months Ended March 31, 2021
(In millions)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss)		Retained Earnings		Treasury Stock		Shareholders’ Equity		Other Non- controlling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance at December 31, 2020	$	4	$	28,975	$	(861)	$	28,575	$	(6,372)	$	50,321	$	7	$	50,328	$	58

Effect of issuing stock for employee benefit plans			279						(87)		192				192
Other comprehensive loss					(370)						(370)				(370)		(4)
Net income							1,161				1,161		5		1,166		5
Common dividends declared (per share: $1.00)							(347)				(347)				(347)
Repurchase of common stock									(2,808)		(2,808)				(2,808)
Other transactions impacting noncontrolling interests													(6)		(6)		0
Balance at March 31, 2021	$	4	$	29,254	$	(1,231)	$	29,389	$	(9,267)	$	48,149	$	6	$	48,155	$	59

Three Months Ended March 31, 2020
(In millions)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss)		Retained Earnings		Treasury Stock		Shareholders’ Equity		Other Non- controlling Interests		Total Equity		Redeemable Noncontrolling Interests
Balance at December 31, 2019	$	4	$	28,306	$	(941)	$	20,162	$	(2,193)	$	45,338	$	6	$	45,344	$	35
Cumulative effect of adopting new credit loss guidance (ASU 2016-13)							(30)				(30)				(30)
Effect of issuing stock for employee benefit plans			248						(78)		170				170
Other comprehensive loss					(586)						(586)				(586)		(4)
Net income							1,181				1,181		4		1,185		4
Common dividends declared (per share: $0.04)							(15)				(15)				(15)
Repurchase of common stock									(979)		(979)				(979)
Other transactions impacting noncontrolling interests													(3)		(3)		0
Balance at March 31, 2020	$	4	$	28,554	$	(1,527)	$	21,298	$	(3,250)	$	45,079	$	7	$	45,086	$	35

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

Cigna Corporation

Cigna Corporation
Consolidated Statements of Cash Flows
Unaudited
Nine Months Ended September 30,
(In millions) 2020 2019
Cash Flows from Operating Activities
Net income $ 4,347 $ 4,136
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,089 2,724
Realized investment losses (gains), net 18 (84)
Deferred income tax (benefit) (340) (400)
Debt extinguishment costs 199 0
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable (2,810) (1,171)
Inventories 5 661
Deferred policy acquisition costs (244) (162)
Reinsurance recoverable and Other assets (468) (92)
Insurance liabilities 740 590
Pharmacy and service costs payable 2,084 210
Accounts payable and Accrued expenses and other liabilities (32) 23
Other, net 468 257
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,056 6,692
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities 2,038 2,639
Investment maturities and repayments:
Debt securities and equity securities 1,097 1,281
Commercial mortgage loans 14 174
Other sales, maturities and repayments (primarily short-term and other long-term investments) 1,086 978
Investments purchased or originated:
Debt securities and equity securities (3,317) (3,347)
Commercial mortgage loans (55) (221)
Other (primarily short-term and other long-term investments) (1,434) (1,214)
Property and equipment purchases, net (775) (740)
Acquisitions, net of cash acquired (135) (6)
Other, net 37 (7)
NET CASH (USED IN) INVESTING ACTIVITIES (1,444) (463)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds 769 731
Withdrawals and benefit payments from contractholder deposit funds (736) (845)
Net change in short-term debt 592 (479)
Net proceeds on issuance of term loan 1,398 0
Payments for debt extinguishment (212) 0
Repayment of long-term debt (6,897) (3,340)
Net proceeds on issuance of long-term debt 3,465 0
Repurchase of common stock (2,352) (1,540)
Issuance of common stock 239 101
Other, net (78) (108)
NET CASH (USED IN) FINANCING ACTIVITIES (3,812) (5,480)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash (7) (27)
Net increase in cash, cash equivalents and restricted cash 793 722
Cash, cash equivalents, and restricted cash January 1, (1)
5,411 3,855
Cash, cash equivalents and restricted cash, September 30, 6,204 4,577
Cash reclassified to assets of business held for sale (798) 0
Cash, cash equivalents, and restricted cash September 30, per Consolidated Balance Sheets (2)
$ 5,406 $ 4,577
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 1,408 $ 1,607
Interest paid $ 1,112 $ 1,257
Consolidated Statements of Cash Flows



	Unaudited
	Three Months Ended March 31,
(In millions)	2021		2020
Cash Flows from Operating Activities
Net income	$	1,171	$	1,189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	715		693
Realized investment (gains) losses, net	(1)		88
Deferred income tax (benefit)	(35)		(161)

Debt extinguishment costs	131		185
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable	(1,420)		(1,056)
Inventories	247		96
Deferred policy acquisition costs	(60)		(138)
Reinsurance recoverable and Other assets	40		(210)
Insurance liabilities	443		341
Pharmacy and other service costs payable	415		408
Accounts payable and Accrued expenses and other liabilities	(637)		308
Other, net	84		144
NET CASH PROVIDED BY OPERATING ACTIVITIES	1,093		1,887
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities	378		756
Investment maturities and repayments:
Debt securities and equity securities	328		408
Commercial mortgage loans	72		5
Other sales, maturities and repayments (primarily short-term and other long-term investments)	364		346
Investments purchased or originated:
Debt securities and equity securities	(980)		(1,174)

Other (primarily short-term and other long-term investments)	(637)		(380)
Property and equipment purchases, net	(242)		(267)


Other, net	0		37
NET CASH (USED IN) INVESTING ACTIVITIES	(717)		(269)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds	47		267
Withdrawals and benefit payments from contractholder deposit funds	(35)		(255)
Net change in short-term debt	(1,030)		(180)


Payments for debt extinguishment	(126)		(192)
Repayment of long-term debt	(4,199)		(4,209)
Net proceeds on issuance of long-term debt	4,262		3,470
Repurchase of common stock	(2,794)		(956)
Issuance of common stock	204		153
Common stock dividend paid	(345)		0
Other, net	(35)		84
NET CASH (USED IN) FINANCING ACTIVITIES	(4,051)		(1,818)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(26)		(37)
Net (decrease) in cash, cash equivalents and restricted cash	(3,701)		(237)
Cash, cash equivalents and restricted cash January 1, (1)	10,245		5,411
Cash, cash equivalents and restricted cash, March 31,	6,544		5,174
Cash reclassified to assets of business held for sale	0		(597)
Cash, cash equivalents and restricted cash March 31, per Consolidated Balance Sheets (2)	$	6,544	$	4,577
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	$	122	$	81
Interest paid	$	331	$	395

(1)

~~(1)~~ Includes ~~restricted cash of $26 million reported in Other assets, $23 million in Long-term investments, and~~ $743 million reported in Assets of business held for sale as of January 1, 2020. See table below for Cash, cash equivalents and restricted cash reconciliation.

(2)See table below for Cash, cash equivalents and restricted cash reconciliation as of ~~September 30, 2020~~March 31, 2021 and ~~September 30, 2019.~~

2020.

The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents reported within the Consolidated Balance Sheets to the totals above:

Unaudited
As of September 30,
2020 2019
Cash and cash equivalents $ 5,344 $ 4,577
Restricted cash and cash equivalents, included in other long-term investments 62 0
Total cash, cash equivalents, and restricted cash and cash equivalents $ 5,406 $ 4,577


	Unaudited
	As of March 31,
(In millions)	2021		2020
Cash and cash equivalents	$	6,505	$	4,452
Restricted cash and cash equivalents, included in other long-term investments	39		125
Total cash, cash equivalents and restricted cash and cash equivalents	$	6,544	$	4,577

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.

CIGNA CORPORATION

~~NOTES TO THE~~ CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TABLE OF CONTENTS


Note Number	Note Number	Footnote	Page	Note Number	Footnote	Page

BUSINESS AND CAPITAL STRUCTURE	BUSINESS AND CAPITAL STRUCTURE			BUSINESS AND CAPITAL STRUCTURE
1	1	Description of Business	11	1	Description of Business	10
2	2	COVID-19 and Related Economic Impact	12	2	Summary of Significant Accounting Policies	11
3	3	Summary of Significant Accounting Policies	13	3	Accounts Receivable, Net	11
4	4	Accounts Receivable, Net	15	4	Mergers , Acquisitions and Divestitures	12
5	5	Mergers and Acquisitions	16	5	Earnings Per Share	12
6	6	Assets and Liabilities of Business Held for Sale	17	6	Debt	13

INSURANCE INFORMATION				INSURANCE INFORMATION
7	7	Earnings Per Share	17	7	Insurance and Contractholder Liabilities	15
8	8	Debt	19	8	Reinsurance	17
INSURANCE INFORMATION
INVESTMENTS				INVESTMENTS
9	9	Insurance and Contractholder Liabilities	21	9	Investments	19
10	10	Reinsurance	24	10	Fair Value Measurements	24
INVESTMENTS
11	11	Investments	28	11	Variable Interest Entities	29
12	12	Fair Value Measurements	36	12	Accumulated Other Comprehensive Income (Loss)	30

PROPERTY, LEASES AND OTHER ASSET BALANCES				PROPERTY, LEASES AND OTHER ASSET BALANCES

13	13	Variable Interest Entities	42	13	Leases	31
COMPLIANCE, REGULATION AND CONTINGENCIES				COMPLIANCE, REGULATION AND CONTINGENCIES

14	14	Accumulated Other Comprehensive Income (Loss)	44	14	Income Taxes	31
WORKFORCE MANAGEMENT AND COMPENSATION
15	15	Organizational Efficiency Plan	45	15	Contingencies and Other Matters	31
PROPERTY, LEASES AND OTHER ASSET BALANCES
RESULTS DETAILS				RESULTS DETAILS
16	16	Leases	45	16	Segment Information	34
COMPLIANCE, REGULATION AND CONTINGENCIES
17		Income Taxes	45
18		Contingencies and Other Matters	46
RESULTS DETAILS
19		Segment Information	49

109

Note 1 – Description of Business

Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”) is a global health services organization with a mission of helping those we serve improve their health, well-being and peace of ~~mind.~~mind by making health care simple, affordable and predictable. We offer a differentiated set of pharmacy, medical, dental ~~disability, life and accident insurance~~ and related products and services ~~offered~~ by our subsidiaries.

The majority of these products are offered through employers and other groups such as governmental and non-governmental organizations, unions and associations. Cigna also offers commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the United States and selected international markets. In addition to these ongoing operations, Cigna also has certain run-off operations.

The Company reports its results in the ~~following segments.~~segments detailed below:

AsIn connection with the sale of the U.S. Group Disability and Life business on December 31, 2020, the remainder of our operations previously referred to as "Group Disability and Other" in our 2020 Form 10-K is now referred to as "Other Operations". There were no changes to the underlying business included in this category. Our business that offers group voluntary products and services was not sold to New York Life and results of this business are reported in the U.S. Medical segment.

In connection with the launch of Evernorth in the third quarter of 2020, 2two reporting segments were ~~re-named:~~renamed. Health Services towas renamed as Evernorth and Integrated Medical towas renamed U.S. Medical. In addition, 2two of our operating segments were ~~re-named:~~renamed: Commercial and Government towere renamed U.S. Commercial and U.S. Government respectively. There were no changes to the underlying businesses reported in the segments.

Evernorth includes a broad range of coordinated and point solution health services ~~including~~capabilities, as well as those from partners across the health care system in pharmacy ~~services,~~solutions, benefits management solutions, care solutions and ~~data and analytics,~~intelligence solutions, which are provided to health plans, employers, government organizations and health care providers.

U.S. Medical ~~offers a variety of health care~~includes U.S. Commercial and U.S. Government businesses that provide comprehensive medical and coordinated solutions to ~~employers~~clients and ~~individuals.~~

•~~The~~ customers. U.S. Commercial ~~operating segment serves employers (also referred to as “clients”) and their employees (also referred to as “customers”) and other groups. This segment's~~ products and services include medical, pharmacy, ~~dental,~~ behavioral health, dental, vision, health advocacy programs and other products and services for insured and ~~self-insured~~administrative services only ("ASO") clients.

•~~The~~ U.S. Government ~~operating segment offers~~ solutions include Medicare Advantage, Medicare Supplement and Medicare Part D plans for seniors, ~~(including the acquired Express Scripts' Medicare Part D business),~~ Medicaid plans and individual health insurance plans both on and off the public exchanges.

International Markets includes supplemental health, life and accident insurance products and health care coverage in our international markets, as well as health care benefits tofor globally mobile employees of multinational organizations.

The remainder of our business operations are reported in ~~Group Disability and~~ Other Operations, consisting of the following:

•Group Disability and Life ~~provides~~. Prior to the sale of the U.S. Group Disability and Life business on December 31, 2020, this segment provided group long-term and short-term disability, group life, accident, voluntary and specialty insurance products and related services. In December 2019, Cigna entered into a definitive agreement to sell the U.S. Group Disability and Life insurance business to New York Life Insurance Company. See Note 6 for further information on the classification of this business as held for sale.

•Corporate-Owned Life Insurance (“COLI”) offers permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for the purpose of financing employer-paid future benefit obligations.

•Run-off businesses:

•Reinsurance: predominantly comprised of guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) business effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) in 2013.

•Settlement Annuity business in run-off.

•Individual Life Insurance and Annuity and Retirement Benefits ~~Businesses:~~businesses: deferred gains from the sales of these businesses.

Corporatereflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other ~~operations, interest on uncertain tax positions,~~operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, severance, certain ~~enterprise-wide projects~~overhead and project costs and intersegment eliminations for products and services sold between segments.

~~Note 2 – COVID-19 and Related Economic Impact~~

Cigna continues to actively monitor all aspects of our business in light of the ongoing coronavirus ("COVID-19") pandemic. The Company also initiated several actions to assist our customers, clients, health care providers, and employees in this time of crisis. As described below, management has taken a number of steps to assess the impact on our business, including the financial reporting implications associated with this pandemic.

The COVID-19 pandemic has pervasively impacted the economy, financial markets and the global health care delivery systems. The effects of the COVID-19 pandemic on the Company began to emerge in the U.S. at the end of the first quarter and were not material to the Company's results of operations or financial condition for that period. Beginning in April, we experienced a significant deferral of care by our customers. The deferral of care moderated over the course of the second quarter with utilization levels eventually returning to nearly normal levels by the end of June. As expected, in the third quarter we experienced medical utilization at more typical levels as we observed a reduction to the level of deferred care and our customers sought care for COVID-19 testing and treatment. These impacts were most prevalent in the U.S. Medical segment where quarterly earnings reflect the impacts of COVID-19 including the return of medical utilization to more typical levels, costs of COVID-19 care as well as the costs of actions we have taken to support customers and providers, decreased contributions from our specialty products, and lower net investment income. Higher year to date U.S. Medical results reflect deferral of care by our customers in April and May that exceeded the cost of COVID-19 testing and treatment, the cost of COVID-19 related actions including premium relief programs for employer clients as well as cost share waivers for customers, and lower net investment income. Our Group Disability and Other results reflect significantly elevated life insurance claims related to the COVID-19 pandemic and its effects in the third quarter. Quarterly and year to date earnings in our Evernorth segment also reflected effects of the pandemic, specifically, a favorable mix of claims as a result of both the type of drugs dispensed as well as the distribution method used for dispensing and fulfilling, partially offset by lower non-specialty, 30-day retail script volume.

The Company conducted its annual quantitative evaluation of goodwill impairment during the third quarter of 2020. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses and market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

For all other long-lived assets, including intangible assets, the Company conducted its normal quarterly qualitative impairment assessment and concluded that the current economic and business conditions did not result in a triggering event requiring a quantitative impairment analysis. There were no material impairments recorded for the nine months ended September 30, 2020.

The Company reviewed all classes of financial instruments including investments, accounts receivable and reinsurance recoverables. The additional allowance for expected credit losses recorded was not material for the nine months ended September 30, 2020.

Note 32 – Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Cigna Corporation and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment and receivable valuations, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment.

These interim Consolidated Financial Statements are unaudited but include all adjustments (including normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the periods reported. The interim Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes included in the ~~2019~~2020 Annual Report on Form 10-K (“~~2019~~2020 Form 10-K”). The preparation of interim Consolidated Financial Statements necessarily relies heavily on estimates. This and other factors, including the seasonal nature of portions of the health care and related benefits business, competitive and other market conditions, as well as COVID-19 related impacts, call for caution in estimating full-year results based on interim results of operations.

Recent Accounting Pronouncements

The Company's ~~2019~~2020 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted our financial statements or may impact them in the future. ~~The following information provides~~There have been no updates on ~~recently adopted or~~ recently issued accounting pronouncements that have occurred since the Company filed its ~~2019~~2020 Form 10-K.

~~Recently Adopted Accounting Guidance~~


~~Accounting Standard and Adoption Date~~	~~Requirements and Effects of Adopting New Guidance~~
Measurement of Credit Losses on Financial Instruments (Accounting Standards Update (ASU) 2016-13 and related amendments) Adopted as of January 1, 2020	~~Requires:~~
	•	A new approach using expected credit losses to estimate and recognize credit losses for certain financial instruments (such as mortgage loans, reinsurance recoverables and other receivables) when such instruments are first originated or acquired, and in each subsequent reporting period, compared with the incurred loss model previously followed under GAAP. At adoption, the Company recorded an allowance for estimated credit losses and subsequent changes in the allowance will be reported in current period earnings.
	•	~~Changes in the criteria for impairment of available-for-sale debt securities~~
	~~Effects of adoption:~~
	•	~~Adopted using a modified retrospective approach~~
	•	Cumulative effect adjustment of $30 million after-tax was recorded as a reduction to retained earnings as of January 1, 2020, reflecting an additional allowance for future expected credit losses required under the new model, primarily related to reinsurance recoverables.
	•	See additional information regarding the Company’s accounting policy for establishing the allowance for credit losses in Note 4, Accounts Receivable, Net, Note 10, Reinsurance, and Note 11, Investments.
Simplifying the Test for Goodwill Impairment (ASU 2017-04) Adopted as of January 1, 2020	~~Requires:~~
	•	A simplified approach to the accounting for goodwill impairment by eliminating the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment
	•	~~The amount of goodwill impairment to equal the amount by which a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill of the reporting unit~~
	~~Effects of adoption:~~
	•	~~Adopted on a prospective basis~~
	•	There was no impact of adopting this new standard to the Company’s financial statements because our quarterly qualitative assessments did not result in a triggering event for impairment of goodwill, and the results of our annual quantitative evaluation performed in the third quarter of 2020 indicated that the estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

~~Accounting Guidance Not Yet Adopted~~


~~Accounting Standard and Effective Date~~	~~Requirements and Expected Effects of New Guidance Not Yet Adopted~~
~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04)~~ ~~Optional, effective upon issuance (March 12, 2020) through December 31, 2022~~	~~Guidance:~~
	•	~~Provides temporary optional relief to ease the potential burden of accounting for reference rate reform under existing GAAP.~~Amendments are elective and apply to all entities that have contracts, hedging relationships and other transactions that reference interbank offered rates, including LIBOR, expected to be discontinued by December 31, 2021.
	•	Permits optional expedients and exceptions to simplify the accounting for contract modifications, hedging arrangements and held-to-maturity investments, when certain changes are made to a contract or instrument to facilitate reference rate reform.
	•	An entity may elect to apply the amendments, by topic or subsection, at any point prospectively through December 31, 2022. When elected, the optional expedients must be applied consistently for all eligible contracts or transactions.
	~~Expected effects:~~
	•	~~To date, the Company has identified minimal exposure to LIBOR and does not anticipate that LIBOR’s phase-out will have a material impact on its operations or financial results.~~

~~The Financial Accounting Standards Board voted to propose the deferral of the effective date of ASU 2018-12,~~ ~~Targeted Improvements to the Accounting for Long-Duration Contracts~~ ~~and, in September 2020, affirmed its decision to extend the effective date by one year, or until January 1, 2023 for the Company. A final standard is expected~~ There were no new accounting standards adopted in the ~~fourth quarter.~~first quarter of 2021 that had a material impact to our financial statements.

Note ~~4 -~~3 – Accounts Receivable, Net

~~Accounting policy.~~ The Company's accounts receivable balances primarily include amounts due from clients, third-party payors, customers and pharmaceutical manufacturers, and are presented net of allowances. The Company's adoption of ASU 2016-13, ~~Measurement of Credit Losses on Financial Instruments~~ (ASU 2016-13), as of January 1, 2020 did not have a material impact on our accounts receivable credit loss allowance, as there were no substantive changes to our methodology for this class of assets. The allowance for expected credit losses for current accounts receivable is based primarily on past collections experience relative to the length of time receivables are past due; however, when available evidence reasonably supports an assumption that counterparty credit risk over the expected payment period will differ from current and historical payment collections, a forecasting adjustment is reflected in the allowance for expected credit losses.

All other (non-credit) allowances are based on the current status of each customer's receivable balance as well as current economic and market conditions and a variety of other factors, including the length of time the receivables are past due, the financial health of customers and our past experience. We bill pharmaceutical manufacturers based on management's interpretation of contractual terms and estimate a contractual allowance based on the best information available at the time a claim is processed. Contractual allowances for certain rebates receivable from pharmaceutical manufacturers are determined by reviewing payment experience and specific known items that could be adjusted under contract terms. The Company's estimation process for contractual allowances for pharmaceutical

manufacturer receivables generally results in an allowance for balances outstanding greater than 90 days. Contractual allowances for certain receivables from third-party payors are based on their contractual terms and are estimates based on the Company's best information available at the time revenue is recognized.

Receivables and any associated allowance are written off only when all collection attempts have failed and such amounts are determined unrecoverable. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted.

The following amounts were included within ~~accounts~~Accounts receivable, net:


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Noninsurance customer receivables	Noninsurance customer receivables	$	5,688	$	5,143	Noninsurance customer receivables	$	6,249	$	5,534
Pharmaceutical manufacturers receivable	Pharmaceutical manufacturers receivable	5,433		3,439		Pharmaceutical manufacturers receivable	4,978		4,676
Insurance customer receivables	Insurance customer receivables	2,575		2,321		Insurance customer receivables	2,172		1,789
Other receivables	Other receivables	368		334		Other receivables	189		192
Total	Total	14,064		11,237		Total	$	13,588	$	12,191
Accounts receivable, net classified as assets of business held for sale		(576)		(521)
Accounts receivable, net per Consolidated Balance Sheets		$	13,488	$	10,716

These receivables are reported net of our allowances of $1.3 billion as of March 31, 2021 and $1.2 billion as of ~~September 30, 2020 and $778 million as of~~ December 31, ~~2019.~~2020. These allowances include contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain receivables from third-party payors, discounts and claims adjustments issued to customers in the form of client credits, an allowance for current expected credit losses and other non-credit adjustments.

The Company's allowance for current expected credit losses was ~~$69~~$70 million as of ~~September 30, 2020~~March 31, 2021 and ~~$39~~$65 million as of ~~January 1, 2020 (no change to allowance for credit losses from~~ December 31, ~~2019). The allowance for current expected credit losses as of September 30, 2020 includes an additional forecasting adjustment of $11 million related to COVID-19.~~2020.

Note 4 – Mergers, Acquisitions and Divestitures

A.Acquisition of MDLIVE

In April 2021, Cigna's Evernorth segment completed the 100% acquisition of MDLIVE, Inc. ("MDLIVE"), a 24/7 virtual care platform. The acquisition of MDLIVE will enable Evernorth to continue expanding access to virtual care and delivering a more affordable, convenient and connected care experience for consumers. The Company will complete the purchase price allocation in the second quarter of 2021.

~~Note 5 – Mergers~~B.Divestiture of U.S. Group Disability and ~~Acquisitions~~Life business

On December 31, 2020, Cigna completed the sale of its U.S. Group Disability and Life business to New York Life Insurance Company for cash proceeds of $6.2 billion. The Company recognized a gain of $4.2 billion pre-tax ($3.2 billion after-tax), which includes recognition of previously unrealized capital gains on investments sold.

C.Integration and Transaction-related Costs

~~The~~In the first three months of 2021, the Company incurred ~~integration and transaction~~ costs related to the acquisition ~~and integration~~ of ~~Express Scripts,~~MDLIVE, the terminated merger with Anthem, Inc. (“Anthem”), the sale of the U.S. Group Disability and Life business and other transactions. In the first three months of 2020, the Company incurred costs related to the acquisition and integration of Express Scripts Holding Company ("Express Scripts"), the terminated merger with Anthem, the sale of the U.S. Group Disability and Life insurance business and other transactions. These costs were ~~$112~~$29 million pre-tax ($8322 million after-tax) for the three months ~~and $339~~ended March 31, 2021, compared with $97 million pre-tax ($~~256 million after-tax) for the nine months ended September 30, 2020, compared with $114 million pre-tax ($88~~74 million after-tax) for the three months ~~and $405 million pre-tax ($311 million after-tax) for the nine months~~ ended ~~September 30, 2019. These costs~~March 31, 2020, and consisted primarily of certain projects related to ~~integrate or separate~~ the Company’s systems, products and services, fees for legal, advisory and other professional services and certain employment-related costs.

Note ~~6 – Assets and Liabilities of Business Held for Sale~~

In December 2019, Cigna entered into a definitive agreement to sell its U.S. Group Disability and Life insurance business to New York Life Insurance Company for $6.3 billion. The sale is expected to close in the fourth quarter of 2020 following applicable regulatory approvals and other customary closing conditions. The Company believes this sale is probable and has aggregated and classified the assets and liabilities directly associated with the pending sale of its Group Disability and Life insurance business as held for sale and has reported them separately on our Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019. The assets and liabilities of business held for sale were as follows:

(In millions) September 30, 2020 December 31, 2019
Cash and cash equivalents $ 798 $ 743
Accounts receivable, net 576 521
Investments 8,258 7,709
Other assets 390 539
Total assets of business held for sale 10,022 9,512
Insurance and contractholder liabilities 6,591 6,308
Other liabilities 604 504
Total liabilities of business held for sale $ 7,195 $ 6,812

~~Note 7~~5 – Earnings Per Share (“EPS”)

Basic and diluted earnings per share were computed as follows:


	Three Months Ended
	March 31, 2021						March 31, 2020
(Shares in thousands, dollars in millions, except per share amounts)	Basic		Effect of Dilution		Diluted		Basic		Effect of Dilution		Diluted
Shareholders’ net income	$	1,161			$	1,161	$	1,181			$	1,181
Shares:
Weighted average	348,248				348,248		370,440				370,440
Common stock equivalents			3,728		3,728				4,199		4,199
Total shares	348,248		3,728		351,976		370,440		4,199		374,639
EPS	$	3.33	$	(0.03)	$	3.30	$	3.19	$	(0.04)	$	3.15

Three Months Ended
September 30, 2020 September 30, 2019
(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of Dilution Diluted Basic Effect of Dilution Diluted
Shareholders’ net income $ 1,388 $ 1,388 $ 1,351 $ 1,351
Shares:
Weighted average 364,427 364,427 374,842 374,842
Common stock equivalents 2,763 2,763 3,479 3,479
Total shares 364,427 2,763 367,190 374,842 3,479 378,321
EPS $ 3.81 $ (0.03) $ 3.78 $ 3.60 $ (0.03) $ 3.57

Nine Months Ended
September 30, 2020 September 30, 2019
(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of
Dilution Diluted Basic Effect of
Dilution Diluted
Shareholders’ net income $ 4,323 $ 4,323 $ 4,127 $ 4,127
Shares:
Weighted average 367,410 367,410 377,381 377,381
Common stock equivalents 3,421 3,421 3,710 3,710
Total shares 367,410 3,421 370,831 377,381 3,710 381,091
EPS $ 11.77 $ (0.11) $ 11.66 $ 10.94 $ (0.11) $ 10.83

The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive.


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended March 31,
(In millions)	(In millions)	2020	2019	2020	2019	(In millions)		2021	2020
Anti-dilutive options	Anti-dilutive options	4.6	3.6	4.2	3.9	Anti-dilutive options		1.5	4.1

The Company held approximately ~~26.7~~48.7 million shares of common stock in treasury at ~~September 30, 2020, 13.0~~March 31, 2021, 35.5 million shares as of December 31, ~~2019~~2020 and ~~10.4~~18.8 million shares as of ~~September 30, 2019.~~March 31, 2020.

1812

Note 86 – Debt

The outstanding amounts of debt and finance leases were as follows:


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Short-term debt	Short-term debt					Short-term debt
$1,000 million, Floating Rate Notes due 3/2020		$	0	$	999
$300 million, 5.125% Notes due 6/2020		0		300
$1,750 million, 3.2% Notes due 9/2020		0		1,748
$349 million, 4.125% Notes due 9/2020		0		351
$500 million, 2.6% Notes due 11/2020		500		496
$400 million, Floating Rate Notes due 11/2020		400		400
$250 million, 4.375% Notes due 12/2020		250		249
$1,400 million, Floating Rate Term Loan due 3/2021		1,399		0
$78 million, 6.37% Notes due 6/2021	$78 million, 6.37% Notes due 6/2021	78		0		$78 million, 6.37% Notes due 6/2021	78		78
$1,000 million, Floating Rate Notes due 9/2021	$1,000 million, Floating Rate Notes due 9/2021	999		0		$1,000 million, Floating Rate Notes due 9/2021	0		999
$1,250 million, 3.4% Notes due 9/2021	$1,250 million, 3.4% Notes due 9/2021	1,248		0		$1,250 million, 3.4% Notes due 9/2021	0		1,249
$181 million, 3.9% Notes due 2/2022						$181 million, 3.9% Notes due 2/2022	181		0
$120 million, 4% Notes due 2/2022						$120 million, 4% Notes due 2/2022	120		0
Commercial paper	Commercial paper	1,555		944		Commercial paper	5		1,030
Other, including finance leases	Other, including finance leases	20		27		Other, including finance leases	20		18
Total short-term debt	Total short-term debt	$	6,449	$	5,514	Total short-term debt	$	404	$	3,374
Long-term debt	Long-term debt					Long-term debt
$500 million, 3.3% Notes due 2021		$	0	$	499
$300 million, 4.5% Notes due 2021		0		298
$78 million, 6.37% Notes due 2021		0		78
$1,000 million, Floating Rate Notes due 2021		0		998
$1,250 million, 3.4% Notes due 2021		0		1,247
$1,248 million, 4.75% Notes due 2021		0		1,272
$277 million, 4% Notes due 2022	$277 million, 4% Notes due 2022	276		747		$277 million, 4% Notes due 2022	0		276
$973 million, 3.9% Notes due 2022	$973 million, 3.9% Notes due 2022	972		999		$973 million, 3.9% Notes due 2022	0		972
$500 million, 3.05% Notes due 2022	$500 million, 3.05% Notes due 2022	489		485		$500 million, 3.05% Notes due 2022	491		490
$17 million, 8.3% Notes due 2023	$17 million, 8.3% Notes due 2023	17		17		$17 million, 8.3% Notes due 2023	17		17
$63 million, 7.65% Notes due 2023	$63 million, 7.65% Notes due 2023	63		100		$63 million, 7.65% Notes due 2023	63		63
$700 million, Floating Rate Notes due 2023	$700 million, Floating Rate Notes due 2023	698		698		$700 million, Floating Rate Notes due 2023	698		698
$1,000 million, 3% Notes due 2023	$1,000 million, 3% Notes due 2023	973		966		$1,000 million, 3% Notes due 2023	978		975
$2,187 million, 3.75% Notes due 2023		2,180		3,088
$1,187 million, 3.75% Notes due 2023						$1,187 million, 3.75% Notes due 2023	1,184		2,181
$500 million, 0.613% Notes due 2024						$500 million, 0.613% Notes due 2024	498		0
$1,000 million, 3.5% Notes due 2024	$1,000 million, 3.5% Notes due 2024	976		970		$1,000 million, 3.5% Notes due 2024	979		977
$900 million, 3.25% Notes due 2025	$900 million, 3.25% Notes due 2025	896		895		$900 million, 3.25% Notes due 2025	896		896
$2,200 million, 4.125% Notes due 2025	$2,200 million, 4.125% Notes due 2025	2,189		2,188		$2,200 million, 4.125% Notes due 2025	2,191		2,191
$1,500 million, 4.5% Notes due 2026	$1,500 million, 4.5% Notes due 2026	1,505		1,506		$1,500 million, 4.5% Notes due 2026	1,504		1,505
$800 million, 1.25% Notes due 2026						$800 million, 1.25% Notes due 2026	796		0
$1,500 million, 3.4% Notes due 2027	$1,500 million, 3.4% Notes due 2027	1,406		1,396		$1,500 million, 3.4% Notes due 2027	1,413		1,410
$259 million, 7.875% Debentures due 2027	$259 million, 7.875% Debentures due 2027	259		259		$259 million, 7.875% Debentures due 2027	259		259
$600 million, 3.05% Notes due 2027	$600 million, 3.05% Notes due 2027	595		595		$600 million, 3.05% Notes due 2027	595		595
$3,800 million, 4.375% Notes due 2028	$3,800 million, 4.375% Notes due 2028	3,779		3,776		$3,800 million, 4.375% Notes due 2028	3,781		3,780
$1,500 million, 2.4% Notes due 2030	$1,500 million, 2.4% Notes due 2030	1,489		0		$1,500 million, 2.4% Notes due 2030	1,490		1,489
$1,500 million, 2.375% Notes due 2031						$1,500 million, 2.375% Notes due 2031	1,489		0
$45 million, 8.3% Step Down Notes due 2033	$45 million, 8.3% Step Down Notes due 2033	45		45		$45 million, 8.3% Step Down Notes due 2033	45		45
$190 million, 6.15% Notes due 2036	$190 million, 6.15% Notes due 2036	190		190		$190 million, 6.15% Notes due 2036	190		190
$2,200 million, 4.8% Notes due 2038	$2,200 million, 4.8% Notes due 2038	2,180		2,178		$2,200 million, 4.8% Notes due 2038	2,180		2,180
$750 million, 3.2% Notes due 2040	$750 million, 3.2% Notes due 2040	742		0		$750 million, 3.2% Notes due 2040	742		742
$121 million, 5.875% Notes due 2041	$121 million, 5.875% Notes due 2041	119		119		$121 million, 5.875% Notes due 2041	119		119
$448 million, 6.125% Notes due 2041	$448 million, 6.125% Notes due 2041	490		491		$448 million, 6.125% Notes due 2041	490		490
$317 million, 5.375% Notes due 2042	$317 million, 5.375% Notes due 2042	315		315		$317 million, 5.375% Notes due 2042	315		315
$1,500 million, 4.8% Notes due 2046	$1,500 million, 4.8% Notes due 2046	1,465		1,465		$1,500 million, 4.8% Notes due 2046	1,465		1,465
$1,000 million, 3.875% Notes due 2047	$1,000 million, 3.875% Notes due 2047	988		988		$1,000 million, 3.875% Notes due 2047	988		988
$3,000 million, 4.9% Notes due 2048	$3,000 million, 4.9% Notes due 2048	2,966		2,964		$3,000 million, 4.9% Notes due 2048	2,966		2,966
$1,250 million, 3.4% Notes due 2050	$1,250 million, 3.4% Notes due 2050	1,235		0		$1,250 million, 3.4% Notes due 2050	1,235		1,235
$1,500 million , 3.4% Notes due 2051						$1,500 million , 3.4% Notes due 2051	1,476		0
Other, including finance leases	Other, including finance leases	40		61		Other, including finance leases	35		36
Total long-term debt	Total long-term debt	$	29,537	$	31,893	Total long-term debt	$	31,568	$	29,545

1913

Debt Issuance and Redemption. In order to decrease future interest expense, ~~and reduce~~mitigate future refinancing risk and raise proceeds for general corporate purposes, the Company entered into the following ~~transactions:~~transactions during the three months ended March 31, 2021:

•Debt issuance: On March ~~16, 2020,~~3, 2021, the Company issued ~~$3.5~~$4.3 billion of new senior notes. The proceeds of this ~~debt~~issuance were mainly used to ~~pay the consideration~~redeem outstanding debt securities. The remaining proceeds are available for ~~the cash tender and redemption offer as described below.~~general corporate purposes. Interest on this debt is paid semi-annually.

Principal

Maturity Date

Interest Rate

Net Proceeds

$~~1,500~~500 million

March 15, ~~2030~~2024

~~2.40%~~0.613%

$~~1,491~~499 million

$~~750~~800 million

March 15, ~~2040~~2026

~~3.20%~~1.250%

$~~743~~797 million

$~~1,250~~1,500 million

March 15, ~~2050~~2031

~~3.40%~~2.375%

$~~1,237~~1,492 million

$1,500 million

March 15, 2051

3.400%

$1,479 million

•Debt ~~tender and~~ redemption: In ~~March and April 2020,~~the first quarter of 2021, the Company completed the redemption of a ~~tender offer and an optional redemption totaling $3.5~~total of $4.2 billion ofin aggregate principal amount of certain of its outstanding debt securities. The ~~principal amount repurchased in this tender offer was $1.5 billion. Additionally, $2.0 billion of notes were repurchased via optional redemption. The~~ Company recorded a pre-tax loss of ~~$199~~$131 million ($~~151~~101 million after-tax), consisting primarily of premium ~~payments~~payments. An additional $301 million of outstanding debt securities due February 2022 were redeemed on ~~the tender and optional redemption.~~

~~Debt Exchange~~.~~In the fourth quarter~~April 2, 2021. The effect of ~~2019, the Company settled an exchange~~a pre-tax loss from this April redemption is not expected to be material to results of ~~approximately $12.7 billion of Notes issued by Express Scripts Holding Company, Medco Health Solutions, Inc. and Cigna Holding Company (formerly named Cigna Corporation)~~operations for ~~privately placed Notes issued by Cigna with the same interest rates and maturities and comparable other terms. We initiated an exchange offer to register such debt in~~ the second quarter of ~~2020 and completed the exchange in July 2020~~.

~~Debt Repayment.~~ ~~During the first nine months of 2020, the Company repaid $6.9 billion of long-term debt, including the $3.5 billion debt tender and redemption described above.~~2021.

Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed below. For the first quarter of 2021, Cigna ~~has~~had a $3.25 billion revolving credit and letter of credit agreement maturing in April 2023 that was diversified among 23 banks. Under the facility $3.25 billion was available for general corporate purposes and up to $500 million was available for issuance of letters of credit. The facility included options to extend the termination date for additional one-year periods and increase the facility by $500 million, subject to the consent of the banks. Additionally, for the first quarter of 2021, Cigna had a $1.0 billion 364-day revolving credit agreement maturing in October 2021 that was diversified among 23 banks. Under this agreement, Cigna could borrow up to $1.0 billion for general corporate purposes. The agreement included the option to “term out” any revolving loans that were outstanding at maturity by converting them into a term loan maturing on the one-year anniversary of conversion. The revolving credit agreements contained customary covenants and restrictions, including a financial covenant that Cigna’s leverage ratio may not exceed 60%. As of March 31, 2021, there were 0 outstanding balances under these revolving credit agreements.

In April 2021, Cigna entered into a $3.0 billion five-year revolving credit and letter of credit agreement that matures in April ~~2023~~2026 and isa $1.0 billion three-year revolving credit agreement that matures in April 2024, which are diversified among 23 ~~banks.~~banks and replace the five-year revolving credit and letter of credit agreement that was scheduled to mature in April 2023. Under the current agreements, Cigna can borrow up to ~~$3.25~~$3.0 billion and $1.0 billion, respectively, for general corporate purposes, with up to $500 million available under the five-year facility for issuance of letters of credit. ~~This~~The revolving credit ~~agreement~~agreements also ~~includes an option to increase the facility amount up to $500 million and~~include an option to extend the termination date for an additional ~~one year periods,~~one-year period, subject to consent of the banks.

Additionally, in April 2021, Cigna ~~has~~entered into a ~~364-day~~ $1.0 billion 364-day revolving credit agreement that will mature in ~~October 2021. The~~April 2022 and is diversified among 23 banks. This agreement replaces the $1.0 billion 364-day revolving credit agreement that ~~expired~~was scheduled to expire in October ~~2020. The agreement is diversified among 23 banks.~~2021. Pursuant to this revolving credit agreement, Cigna can borrow up to $1.0 billion for general corporate purposes. The agreement includes the option to “term out” any revolving loans that are outstanding at maturity by converting them into a term loan maturing on the ~~one year~~one-year anniversary of conversion.

Each of the five

~~The revolving credit agreements~~-year facility, the three-year facility and the 364-day facility include an option to increase commitments in an aggregate amount of up to $1.5 billion across all three facilities. Each of the three facilities also contain customary covenants and restrictions including a financial covenant that the Company’s leverage ratio may not exceed 60%~~. As~~, subject to certain exceptions upon the consummation of ~~September 30, 2020, there were 0 outstanding balances under the revolving credit agreements.~~an acquisition.

~~Term Loan Credit Agreement.~~

Commercial Paper. On April 1, 2020, the Company borrowed an aggregate principal amount of $1.4 billion under a new 364-Day Term Loan Credit Agreement (the "Credit Agreement"). The Company entered into the Credit Agreement to enhance its liquidity position in light of disruption in theUnder our commercial paper ~~market and used a portion of the net proceeds to pay down amounts outstanding under its~~program we may issue short-term, unsecured commercial paper ~~facility. The Credit Agreement may be prepaid~~notes privately placed on a discount basis through certain broker dealers at any time ~~in whole or in part without premium or penalty. Term loans prepaid~~not to exceed $4.25 billion. Amounts available under the program may ~~not~~ be ~~re-borrowed.~~borrowed, repaid and re-borrowed from time to time. The ~~Credit Agreement provides~~net proceeds of issuances have been and are expected to be used for mandatory prepayment of the term loans in an amount equal to 20% of any Net Cash Proceeds (as defined in the Credit Agreement) arising from the previously announced sale of Cigna’s U.S. Group Disability and Life insurance business to New York Life Insurance Company.

~~Commercial Paper. The commercial paper program had approximately $1.6 billion outstanding at September 30, 2020 at an average interest rate of 0.2%.~~general corporate purposes.

The Company was in compliance with its debt covenants as of ~~September 30, 2020.~~March 31, 2021.

2014

Note 97 – Insurance and Contractholder Liabilities

A.Account Balances – Insurance and Contractholder Liabilities

~~As of September 30, 2020, December 31, 2019 and September 30, 2019, the~~The Company’s insurance and contractholder liabilities were comprised of the following:


		September 30, 2020						December 31, 2019						September 30, 2019			March 31, 2021						December 31, 2020						March 31, 2020
(In millions)	(In millions)	Current		Non-current		Total		Current		Non-current		Total		Total		(In millions)	Current		Non-current		Total		Current		Non-current		Total		Total
Contractholder deposit funds	Contractholder deposit funds	$	624	$	7,038	$	7,662	$	600	$	7,139	$	7,739	$	7,789	Contractholder deposit funds	$	355	$	6,806	$	7,161	$	350	$	6,823	$	7,173	$	7,699
Future policy benefits	Future policy benefits	597		9,505		10,102		553		9,281		9,834		9,808		Future policy benefits	361		8,945		9,306		327		9,317		9,644		9,651
Unearned premiums																Unearned premiums	561		389		950		485		394		879		840
Unpaid claims and claim expenses	Unpaid claims and claim expenses															Unpaid claims and claim expenses
U.S. Medical	U.S. Medical	3,182		18		3,200		2,875		17		2,892		3,061		U.S. Medical	3,528		21		3,549		3,166		18		3,184		3,000
Other segments	Other segments	2,521		3,714		6,235		2,529		3,474		6,003		5,857		Other segments	938		263		1,201		980		292		1,272		6,119
Unearned premiums		449		379		828		453		360		813		755
Total	Total	7,373		20,654		28,027		7,010		20,271		27,281		27,270		Total													27,309
Insurance and contractholder liabilities classified as liabilities of business held for sale(1)	Insurance and contractholder liabilities classified as liabilities of business held for sale(1)	(2,150)		(4,441)		(6,591)		(2,089)		(4,219)		(6,308)				Insurance and contractholder liabilities classified as liabilities of business held for sale (1)													(6,441)
Total insurance and contractholder liabilities	Total insurance and contractholder liabilities	$	5,223	$	16,213	$	21,436	$	4,921	$	16,052	$	20,973	$	27,270	Total insurance and contractholder liabilities	$	5,743	$	16,424	$	22,167	$	5,308	$	16,844	$	22,152	$	20,868

(1)Amounts classified as Liabilities of business held for sale primarily include ~~$5.2~~$5.1 billion of unpaid claims, ~~$759~~$726 million of contractholder deposit funds and ~~$646~~$640 million of future policy benefits as of ~~September 30, 2020 and $4.9 billion of unpaid claims, $717 million of contractholder deposit funds and $653 million of future policy benefits as of December~~March 31, ~~2019.~~2020.

Insurance and contractholder liabilities expected to be paid within one year are classified as current.

B.Unpaid Claims and Claim Expenses – U.S. Medical

This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities.

The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was ~~$3.0~~$3.3 billion at ~~September 30, 2020~~March 31, 2021 and ~~$2.8~~$2.7 billion at ~~September 30, 2019.~~March 31, 2020.

Activity, net of intercompany transactions, in the unpaid claims liability for the U.S. Medical segment for the ~~nine~~three months ended ~~September 30~~March 31 was as follows:


		Nine Months Ended					Three Months Ended
(In millions)	(In millions)	September 30, 2020		September 30, 2019		(In millions)	March 31, 2021		March 31, 2020
Beginning balance	Beginning balance	$	2,892	$	2,697	Beginning balance	$	3,184	$	2,892
Less: Reinsurance and other amounts recoverable	Less: Reinsurance and other amounts recoverable	303		264		Less: Reinsurance and other amounts recoverable	224		303
Beginning balance, net	Beginning balance, net	2,589		2,433		Beginning balance, net	2,960		2,589

Incurred costs related to:	Incurred costs related to:					Incurred costs related to:
Current year	Current year	18,935		18,169		Current year	7,285		6,661
Prior years	Prior years	(126)		(159)		Prior years	(185)		(152)
Total incurred	Total incurred	18,809		18,010		Total incurred	7,100		6,509
Paid costs related to:	Paid costs related to:					Paid costs related to:
Current year	Current year	16,061		15,555		Current year	4,423		4,271
Prior years	Prior years	2,363		2,160		Prior years	2,317		2,027
Total paid	Total paid	18,424		17,715		Total paid	6,740		6,298
Ending balance, net	Ending balance, net	2,974		2,728		Ending balance, net	3,320		2,800
Add: Reinsurance and other amounts recoverable	Add: Reinsurance and other amounts recoverable	226		333		Add: Reinsurance and other amounts recoverable	229		200
Ending balance	Ending balance	$	3,200	$	3,061	Ending balance	$	3,549	$	3,000

Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certain business for which the Company administers the plan benefits without any right of offset. See Note 108 for additional information on reinsurance.

Variances in incurred costs related to prior years’ unpaid claims and ~~claims~~claim expenses that resulted from the differences between actual experience and the Company’s key assumptions for the ~~nine~~three months ended ~~September 30~~March 31 were as follows:


		Nine Months Ended									Three Months Ended
(Dollars in millions)	(Dollars in millions)	September 30, 2020				September 30, 2019				(Dollars in millions)	March 31, 2021				March 31, 2020
		$		%(1)		$		%(2)			$		%(1)		$		%(2)
Actual completion factors	Actual completion factors	$	47	0.2	%	$	87	0.4	%	Actual completion factors	$	68	0.2	%	$	63	0.3	%
Medical cost trend	Medical cost trend	79		0.3		72		0.3		Medical cost trend	117		0.5		89		0.3

Total favorable variance	Total favorable variance	$	126	0.5	%	$	159	0.7	%	Total favorable variance	$	185	0.7	%	$	152	0.6	%

(1)Percentage of current year incurred costs as reported for the year ended December 31, ~~2019.~~2020.

(2)Percentage of current year incurred costs as reported for the year ended December 31, ~~2018.~~2019.

Incurred costs related to prior years in the table above, although adjusted through shareholders’ net income, do not directly correspond to an increase or decrease to shareholders’ net income. The primary reason for this difference is that decreases to prior year incurred costs pertaining to the portion of the liability established for moderately adverse conditions are not considered as impacting shareholders’ net income if they are offset by increases in the current year provision for moderately adverse conditions.

Prior year development increased shareholders’ net income by $30 million ($38 million before-tax) for the nine months ended September 30, 2020, compared with $68 million ($86 million before-tax) for the nine months ended

~~September 30, 2019.~~ Favorable prior year development in both ~~periods~~years reflects lower than expected utilization of medical services.

C.Unpaid Claims and Claim Expenses – ~~Group Disability~~International Markets and Other ~~and International Markets~~Operations

Liability balance details. The liability details for unpaid claims and claim expenses are as follows:


(In millions)	(In millions)	September 30, 2020 (1)		September 30, 2019		(In millions)	March 31, 2021		March 31, 2020
Group Disability and Other
Other Operations						Other Operations
Group Disability and Life	Group Disability and Life	$	5,206	$	4,887	Group Disability and Life	$	0	$	5,084
Other Operations	Other Operations	162		189		Other Operations	281		209
Total Group Disability and Other		5,368		5,076
Total Other Operations						Total Other Operations	281		5,293
International Markets	International Markets	867		781		International Markets	920		826
Unpaid claims and claim expenses Group Disability and Other and International Markets		$	6,235	$	5,857
Unpaid claims and claim expenses Other Operations and International Markets						Unpaid claims and claim expenses Other Operations and International Markets	$	1,201	$	6,119

~~(1)~~ ~~Includes unpaid claim amounts classified as Liabilities of business held for sale.~~

Activity in the Company’s liabilities for unpaid claims and claim expenses ~~excluding Other Operations, are~~for International Markets and, prior to the sale, Group Disability and Life, is presented in the following table. Liabilities associated with Other Operations are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.


		Nine Months Ended					Three Months Ended
(In millions)	(In millions)	September 30, 2020(1)		September 30, 2019		(In millions)	March 31, 2021		March 31, 2020 (1)
Beginning balance	Beginning balance	$	5,816	$	5,432	Beginning balance	$	963	$	5,816
Less: Reinsurance	Less: Reinsurance	184		156		Less: Reinsurance	59		184
Beginning balance, net	Beginning balance, net	5,632		5,276		Beginning balance, net	904		5,632
Incurred claims related to:	Incurred claims related to:					Incurred claims related to:
Current year	Current year	4,277		4,205		Current year	724		1,473
Prior years:	Prior years:					Prior years:
Interest accretion	Interest accretion	118		117		Interest accretion	0		42
All other incurred	All other incurred	(12)		(59)		All other incurred	(48)		46
Total incurred	Total incurred	4,383		4,263		Total incurred	676		1,561
Paid claims related to:	Paid claims related to:					Paid claims related to:
Current year	Current year	2,435		2,422		Current year	326		490
Prior years	Prior years	1,702		1,594		Prior years	372		946
Total paid	Total paid	4,137		4,016		Total paid	698		1,436

Foreign currency	Foreign currency	5		(26)		Foreign currency	(20)		(25)

Ending balance, net	Ending balance, net	5,883		5,497		Ending balance, net	862		5,732
Add: Reinsurance	Add: Reinsurance	190		171		Add: Reinsurance	58		178
Ending balance	Ending balance	$	6,073	$	5,668	Ending balance	$	920	$	5,910

(1)Includes unpaid claims amounts classified as Liabilities of business held for sale.

Reinsurance in the table above reflects amounts due from reinsurers related to unpaid claims liabilities. The Company’s insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses. See Note 108 for additional information on reinsurance.

2316

~~The majority~~Following the sale of the Company's Group Disability and Life business (see Note 4 for further information), the liability for unpaid claims and claim expenses isrelates to products sold in the International Markets segment. Prior to the sale, the majority of the liability related to disability claims with long-tailed payouts that relate to a business held for sale. Interest earned on assets backing these liabilities is an integral part of pricing and reserving. Therefore, interest accreted on prior year balances is shown as a separate component of prior year incurred claims and reported in Medical costs and other benefit expenses in the income statement. This interest is calculated by applying the average discount rate used in determining the liability balancelong tailed payouts. See Note 9C to the average liability balance over the period. The remaining prior year incurred claims amount primarily reflects updates to the Company’s liability estimates and variances between actual experience during the period relative to the assumptions and expectations reflectedConsolidated Financial Statements included in ~~determining the liability. Assumptions reflect the Company’s expectations over the life~~our 2020 Form 10-K for additional discussion of ~~the book of business and will vary from actual experience in any period, both favorably and unfavorably, with variation in resolution rates being the most significant driver for the long-term~~these disability business. Favorable prior year incurred claims for the nine months ended September 30, 2019 primarily reflected favorable long-term disability resolution rate experience relative to expectations reflected in the prior year reserve and favorable reserve development for life, accident and voluntary driven by lower than expected incidence.

reserves that are now sold.

Note 108 – Reinsurance

The Company’s insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance is also used to limit losses from large exposures and to permit recovery of a portion of direct or assumed losses. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.

A.Reinsurance Recoverables

~~Accounting policy.~~ Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the Company’s insurance businesses. Most reinsurance recoverables are classified as non-current assets. The current portion of reinsurance recoverables is reported in Other current assets and consists primarily of recoverables on paid claims expected to be settled within one year. Reinsurance recoverables are presented net of allowances for uncollectible reinsurance that, effective with adopting ASU 2016-13 on January 1, 2020, consists primarily of an allowance for expected credit losses. Estimates of the allowance for expected credit losses are based on internal and external data used to develop expected loss rates over the anticipated duration of the recoverable asset that vary by external credit rating and collateral level. The Company's allowance for credit losses on reinsurance recoverables was $34 million as of September 30, 2020, of which $31 million was recorded as a cumulative effect adjustment to retained earnings at adoption.

The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Included in the table below ~~is $209~~are $216 million of current reinsurance recoverables that are reported in Other current assets as of ~~September 30, 2020;~~March 31, 2021; as of December 31, ~~2019~~2020 there was ~~$222~~$217 million of current reinsurance recoverables reported in Other current assets. The Company’s reinsurance recoverables as of March 31, 2021 are presented in the following table by range of external credit rating and collateral level.


(Dollars in millions)	Fair value of collateral contractually required to meet or exceed carrying value of recoverable		Collateral provisions exist that may mitigate risk of credit loss(3)		No collateral		Total
Ongoing Operations
Upper-medium grade and higher (1)	$	0	$	0	$	173	$	173
Lower-medium grade (2)	0		0		63		63
Not rated	92		0		34		126
Total recoverables related to ongoing operations	92		0		270		362
Acquisition, disposition or runoff activities
Upper-medium grade and higher (1)
Lincoln National Life and Lincoln Life & Annuity of New York	0		3,022		0		3,022
Berkshire	301		399		0		700
Prudential Retirement Insurance and Annuity	607		0		0		607
Life Insurance Company of North America	0		449		0		449
Other	230		17		18		265

Not rated	0		13		4		17
Total recoverables related to acquisition, disposition or runoff activities	1,138		3,900		22		5,060
Total	$	1,230	$	3,900	$	292	$	5,422
Allowance for uncollectible reinsurance							(31)
Total reinsurance recoverables							$	5,391

(1)Includes A- equivalent and higher current ratings certified by a nationally recognized statistical rating organization ("NRSRO")

(Dollars in millions) Fair value of collateral contractually required to meet or exceed carrying value of recoverable
Collateral provisions exist that may mitigate risk of credit loss (3)
No collateral Total
Ongoing Operations
Upper-medium grade and higher (1)
$ 0 $ 8 $ 326 $ 334
Lower-medium grade (2)
0 0 63 63
Not rated 90 14 29 133
Total recoverables related to ongoing operations (3)
$ 90 $ 22 $ 418 $ 530
Acquisition, disposition or runoff activities
Upper-medium grade and higher (1)
Lincoln National Life and Lincoln Life & Annuity of New York 0 3,049 0 3,049
Berkshire 318 476 0 794
Prudential Retirement Insurance and Annuity 641 0 0 641
Other 237 21 17 275
Not rated 0 38 4 42
Total recoverables related to acquisition, disposition or runoff activities 1,196 3,584 21 4,801
Total $ 1,286 $ 3,606 $ 439 $ 5,331
Allowance for uncollectible reinsurance (34)
Reinsurance recoverables classified as assets of business held for sale (190)
Total reinsurance recoverables $ 5,107
(1) Includes A- equivalent and higher current ratings certified by a nationally recognized statistical rating organization ('NRSRO')
(2) Includes BBB- to BBB+ equivalent current credit ratings certified by a NRSRO
(3) This includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level
(2)Includes BBB- to BBB+ equivalent current credit ratings certified by an NRSRO

(3)Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level

Collateral levels are defined internally based on the fair value of the collateral relative to the carrying amount of the reinsurance recoverable, the frequency at which collateral is required to be replenished and the potential for volatility in the collateral’s fair value.

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables, as further described above.

2517

B.Effects of Reinsurance

In the Company’s Consolidated Statements of Income, premiums were reported net of amounts ceded to reinsurers and medical costs and other benefit expenses were reported net of reinsurance recoveries in the following amounts:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(In millions)	(In millions)	2020		2019		2020		2019		(In millions)		2021		2020
Total ceded premiums	Total ceded premiums	$	122	$	124	$	367	$	380	Total ceded premiums		$	149	$	128
Total reinsurance recoveries	Total reinsurance recoveries	$	117	$	180	$	397	$	292	Total reinsurance recoveries		$	148	$	178

C.Effective Exit of GMDB and GMIB Business

The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction in 2013. Berkshire reinsured 100% of the Company’s future claim payments in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.2 billion remaining at ~~September 30, 2020.~~March 31, 2021.

GMDB is accounted for as assumed and ceded reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below. GMIB assets are reported in Other current assets and Other assets, and GMIB liabilities are reported in Accrued expenses and other liabilities and Other non-current liabilities. Assumptions used in fair value measurement these assets and liabilities are discussed in Note 10 of the Company's 2020 Form 10-K.

GMDB

The GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death. The Company’s exposure arises when the guaranteed minimum death benefit exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death.

The following table presents the account value, net amount at risk and the number of contractholders for guarantees assumed by the Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded.


(Dollars in millions, excludes impact of reinsurance ceded)	(Dollars in millions, excludes impact of reinsurance ceded)	September 30, 2020		December 31, 2019		(Dollars in millions, excludes impact of reinsurance ceded)	March 31, 2021		December 31, 2020
Account value	Account value	$	8,650	$	9,110	Account value	$	9,518	$	9,523
Net amount at risk	Net amount at risk	$	1,694	$	1,764	Net amount at risk	$	1,518	$	1,570

Number of contractholders (estimated)	Number of contractholders (estimated)	190,000		200,000		Number of contractholders (estimated)	180,000		185,000

GMIB

The Company reinsured contracts with issuers of GMIB products. The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the related underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that can only occur within 30 days of a policy

anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”) for these contracts including retrocessional coverage from Berkshire.

~~Assumptions used in fair value measurement~~. GMIB assets and liabilities are established using capital market assumptions and assumptions related to future annuitant behavior (including mortality, lapse, and annuity election rates). The Company classifies GMIB assets and liabilities in Level 3 of the fair value hierarchy described in Note 12 because assumptions related to future annuitant behavior are largely unobservable.

The only assumption expected to impact future shareholders’ net income is non-performance risk. The non-performance risk adjustment reflects a market participant’s view of nonpayment risk by adding an additional spread to the discount rate in the calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral. The impact of non-performance risk was immaterial for the three and nine months ended September 30, 2020 and September 30, 2019.

GMIB liabilities totaling ~~$786~~$595 million as of ~~September 30, 2020~~March 31, 2021 and ~~$688~~$729 million as of December 31, ~~2019 were reported in Accrued expenses and other liabilities and Other non-current liabilities.~~2020 are classified as Level 3 because fair value inputs are largely unobservable. There were 3 reinsurers covering 100% of the GMIB exposures as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 as follows:


(In millions)	(In millions)							(In millions)
Line of Business	Line of Business	Reinsurer	September 30, 2020		December 31, 2019		Collateral and Other Terms at September 30, 2020	Line of Business	Reinsurer	March 31, 2021		December 31, 2020		Collateral and Other Terms at March 31, 2021
GMIB	GMIB	Berkshire	$	382	$	332	100% were secured by assets in a trust.	GMIB	Berkshire	$	288	$	353	100% were secured by assets in a trust.
		Sun Life Assurance Company of Canada	233		202				Sun Life Assurance Company of Canada	173		215
		Liberty Re (Bermuda) Ltd.	205		179		100% were secured by assets in a trust.		Liberty Re (Bermuda) Ltd.	155		190		100% were secured by assets in a trust.
Total GMIB recoverables reported in Other current assets and Other assets	Total GMIB recoverables reported in Other current assets and Other assets		$	820	$	713		Total GMIB recoverables reported in Other current assets and Other assets		$	616	$	758

All reinsurers are rated A- equivalent and higher by ~~a nationally recognized statistical rating organization ('NRSRO')~~an NRSRO.

Amounts included in shareholders’ net income for GMIB assets and liabilities were not material for the three ~~or nine~~ months ended ~~September 30, 2020~~March 31, 2021 or ~~September 30, 2019.~~March 31, 2020.

Note 119 – Investments

Cigna’s investment portfolio consists of a broad range of investments including debt securities, equity securities, commercial mortgage loans, policy loans, other long-term investments, short-term investments and derivative financial instruments. The sections below provide more detail regarding our investment balances and realized investment gains and losses. See Note 1210 for information about the valuation of the Company’s investment portfolio. Further information about our accounting policies for investment assets can be found in Note 11 of the Company's 2020 Form 10-K.

The following table summarizes the Company's investments by category and current or long-term classification.


		September 30, 2020						December 31, 2019						March 31, 2021				December 31, 2020
(In millions)	(In millions)	Current		Long-term		Total		Current		Long-term		Total			(In millions)	Current		Long-term		Total		Current		Long-term		Total
Debt securities	Debt securities	$	1,113	$	23,560	$	24,673	$	928	$	22,827	$	23,755		Debt securities	$	906	$	16,743	$	17,649	$	959	$	17,172	$	18,131
Equity securities	Equity securities	0		379		379		0		303		303			Equity securities	0		550		550		0		501		501
Commercial mortgage loans	Commercial mortgage loans	13		1,966		1,979		0		1,947		1,947			Commercial mortgage loans	60		1,287		1,347		13		1,406		1,419
Policy loans	Policy loans	0		1,347		1,347		0		1,357		1,357			Policy loans	0		1,344		1,344		0		1,351		1,351
Other long-term investments	Other long-term investments	0		2,698		2,698		0		2,403		2,403			Other long-term investments	0		2,897		2,897		0		2,832		2,832
Short-term investments	Short-term investments	458		0		458		423		0		423			Short-term investments	511		0		511		359		0		359
Total	Total	$	1,584	$	29,950	$	31,534	$	1,351	$	28,837	$	30,188		Total	$	1,477	$	22,821	$	24,298	$	1,331	$	23,262	$	24,593
Investments classified as assets of business held for sale(1)		(260)		(7,998)		(8,258)		(414)		(7,295)		(7,709)
Investments per Consolidated Balance Sheets		$	1,324	$	21,952	$	23,276	$	937	$	21,542	$	22,479
(1) The table above includes $8.3 billion as of September 30, 2020 and $7.7 billion as of December 31, 2019 of investments associated with the U.S. Group Disability and Life business that are held for sale to New York Life. Under the terms of the definitive agreement, some of the assets currently associated with the Group Disability and Life business can be substituted for other assets. The assets that will transfer to New York Life will be primarily debt securities and to a lesser extent commercial mortgage loans and short-term investments.

A.Investment Portfolio

Debt Securities

~~Accounting policy.~~ Debt securities (including bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor) are classified as available for sale and are carried at fair value with changes in fair value recorded either in Accumulated other comprehensive income (loss) within Shareholders’ equity or in credit loss expense based on fluctuations in the allowance for credit losses, as further discussed below. Net unrealized appreciation on debt securities supporting the Company’s run-off settlement annuity business is reported in Non-current insurance and contractholder liabilities rather than Accumulated other comprehensive income (loss). When the Company intends to sell or determines that it is more likely than not to be required to sell an impaired debt security, the excess of amortized cost over fair value is directly written down with a charge to Realized investment gains and losses.

As of January 1, 2020, the Company adopted ASU 2016-13 that included certain targeted improvements to the accounting for available-for-sale debt securities. The new guidance resulted in certain policy changes related to the process used by the Company to review declines in fair value from a security’s amortized cost basis to determine whether a credit loss exists. For example, the length of time that a debt security has been impaired is no longer a criterion for this review. In addition, under this new guidance, the Company recognizes an allowance for credit loss with a corresponding charge to credit loss expense, presented in Realized investment gains and losses in the Company’s income statement. Prior to this new guidance, the Company recorded a direct write-down of the instrument’s amortized cost basis. The allowance for credit loss represents the excess of amortized cost over the greater of its fair value or the net present value of the debt security's projected future cash flows (based on

qualitative and quantitative factors, including the probability of default, and the estimated timing and amount of recovery). Each period, the allowance for credit loss is adjusted through credit loss expense.

The Company elected the expedient to not measure an allowance for credit losses for accrued interest receivables. Consistent with prior practice, when interest payments are delinquent based on contractual terms or when certain terms (interest rate or maturity date) of the investment have been restructured, accrued interest, reported in Other current assets, is written off through a charge to Net investment income, and interest income is recognized on a cash basis.

~~Debt securities are classified as either Current or Long-term investments based on their contractual maturities.~~

The amortized cost and fair value by contractual maturity periods for debt securities were as follows at ~~September 30, 2020:~~March 31, 2021:

(In millions) Amortized
Cost Fair
Value
Due in one year or less $ 1,133 $ 1,143
Due after one year through five years 7,403 7,789
Due after five years through ten years 9,011 10,015
Due after ten years 4,212 5,211
Mortgage and other asset-backed securities 514 515
Total $ 22,273 $ 24,673


(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	930	$	938
Due after one year through five years	5,394		5,635
Due after five years through ten years	5,769		6,110
Due after ten years	3,869		4,507
Mortgage and other asset-backed securities	461		459
Total	$	16,423	$	17,649

Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepay obligations, with or without penalties.

2919

Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below.


(In millions)	(In millions)	Amortized Cost		Allowance for Credit Loss		Unrealized Appreciation		Unrealized Depreciation		Fair Value		(In millions)	Amortized Cost		Allowance for Credit Loss		Unrealized Appreciation		Unrealized Depreciation		Fair Value
September 30, 2020
March 31, 2021												March 31, 2021
Federal government and agency	Federal government and agency	$	411	$	0	$	223	$	0	$	634	Federal government and agency	$	298	$	0	$	99	$	(3)	$	394
State and local government	State and local government	628		0		85		0		713		State and local government	149		0		14		(1)		162
Foreign government	Foreign government	2,091		0		317		(6)		2,402		Foreign government	2,206		0		237		(23)		2,420
Corporate	Corporate	18,629		(31)		1,890		(79)		20,409		Corporate	13,309		(24)		1,037		(108)		14,214
Mortgage and other asset-backed	Mortgage and other asset-backed	514		(9)		32		(22)		515		Mortgage and other asset-backed	461		(11)		20		(11)		459
Total	Total	$	22,273	$	(40)	$	2,547	$	(107)	$	24,673	Total	$	16,423	$	(35)	$	1,407	$	(146)	$	17,649
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,147	$	(9)	$	828	$	(13)	$	2,953	Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,355	$	(4)	$	590	$	(18)	$	2,923
December 31, 2019
December 31, 2020												December 31, 2020
Federal government and agency	Federal government and agency	$	498	$	0	$	235	$	0	$	733	Federal government and agency	$	334	$	0	$	122	$	0	$	456
State and local government	State and local government	729		0		81		0		810		State and local government	150		0		17		0		167
Foreign government	Foreign government	2,027		0		230		(1)		2,256		Foreign government	2,201		0		318		(8)		2,511
Corporate	Corporate	18,149		0		1,299		(28)		19,420		Corporate	13,108		(19)		1,506		(33)		14,562
Mortgage and other asset-backed	Mortgage and other asset-backed	506		0		31		(1)		536		Mortgage and other asset-backed	427		(7)		27		(12)		435
Total	Total	$	21,909	$	0	$	1,876	$	(30)	$	23,755	Total	$	16,220	$	(26)	$	1,990	$	(53)	$	18,131
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,229	$	0	$	740	$	(4)	$	2,965	Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,282	$	(5)	$	838	$	(3)	$	3,112

(1)Net unrealized appreciation for these investments is excluded from accumulated other comprehensive income.

Review of declines in fair value. Management reviews impaired debt securities to determine whether a credit loss allowance is needed based on criteria that include:

•severity of decline;

•financial health and specific prospects of the issuer; and

•changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region.

The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded, by investment grade and the length of time these securities have been in an unrealized loss position. These debt securities are primarily corporate securities with a decline in fair value that reflects an increase in market yields since purchase. See discussion of Realized Investment Gains and Losses below for further information on the credit loss expense recorded for the Company's investments.


		September 30, 2020							December 31, 2019								March 31, 2021							December 31, 2020
(Dollars in millions)	(Dollars in millions)	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues	(Dollars in millions)	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues
One year or less	One year or less															One year or less
Investment grade	Investment grade	$	1,193	$	1,224	$	(31)	356	$	723	$	729	$	(6)	267	Investment grade	$	2,225	$	2,333	$	(108)	815	$	1,026	$	1,045	$	(19)	300
Below investment grade	Below investment grade	$	713	$	774	$	(61)	536	$	340	$	348	$	(8)	355	Below investment grade	$	463	$	485	$	(22)	567	$	381	$	405	$	(24)	232
More than one year	More than one year															More than one year
Investment grade	Investment grade	$	107	$	111	$	(4)	19	$	366	$	378	$	(12)	118	Investment grade	$	66	$	70	$	(4)	15	$	18	$	18	$	0	6
Below investment grade	Below investment grade	$	76	$	87	$	(11)	36	$	84	$	88	$	(4)	93	Below investment grade	$	179	$	191	$	(12)	51	$	90	$	100	$	(10)	33
Total	Total	$	2,089	$	2,196	$	(107)	947	$	1,513	$	1,543	$	(30)	833	Total	$	2,933	$	3,079	$	(146)	1,448	$	1,515	$	1,568	$	(53)	571

3020

The table below presents a roll-forward of the allowance for credit losses on debt securities for the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31:



	Three Months Ended March 31,		Three Months Ended March 31,
(In millions)	2021		2020
Beginning balance	$	26	$	0
Additions for debt securities where no credit loss has previously been recognized	11		55
Reductions for securities sold during the period	0		0
Decrease for debt securities where credit losses have previously been recorded	(2)		0
Ending balance	$	35	$	55

Three Months Ended
September 30, Nine Months Ended
September 30,
(Dollars in millions) 2020 2020
Balance at beginning of period $ 48 $ 0
Additions for debt securities where no credit loss has previously been recognized 2 82
Reductions for securities sold during the period (6) (15)
Decrease for debt securities where credit losses have previously been recorded (4) (27)
Balance September 30, $ 40 $ 40

Equity Securities

Equity securities with a readily determinable fair value consist primarily of mutual funds that invest in fixed income debt securities. Equity securities without a readily determinable fair value consist of private equity investments and are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes. The amount of impairments or value changes resulting from observable price changes was not material as of September 30, 2020 and December 31, 2019. Hybrid equity securities consist of preferred stock investments that have call features.

The following table provides the values of the Company's equity security investments as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The amount of impairments or value changes resulting from observable price changes on equity securities still held was not material to the financial statements as of March 31, 2021 or December 31, 2020.


	March 31, 2021				December 31, 2020
(In millions)	Cost		Carrying Value		Cost		Carrying Value
Equity securities with readily determinable fair values	$	192	$	211	$	180	$	202
Equity securities with no readily determinable fair value	$	231	$	298	$	225	$	255
Hybrid equity securities	$	58	$	41	$	58	$	44
Total	$	481	$	550	$	463	$	501

September 30, 2020 December 31, 2019
(Dollars in millions) Amortized Cost Carrying Value Amortized Cost Carrying Value
Equity securities with readily determinable fair values $ 126 $ 124 $ 61 $ 64
Equity securities with no readily determinable fair value $ 203 $ 212 $ 183 $ 192
Hybrid equity securities $ 57 $ 43 $ 58 $ 47
Total $ 386 $ 379 $ 302 $ 303

Commercial Mortgage Loans

~~Accounting policy.~~Commercial mortgage loans are carried at unpaid principal balances. Beginning January 1, 2020 with the adoption of ASU 2016-13, unpaid principal balances are presented net of an allowance for expected credit losses. Changes in the allowance for expected credit losses are recognized as credit loss expense and presented in Realized investment gains and losses in the Company’s income statement. Each period, the Company establishes (or adjusts) its allowance for expected credit losses for commercial mortgage loans. The allowance for expected credit losses is based on a credit risk category that is assigned to each loan at origination using key credit quality indicators, including debt service coverage and loan-to-value ratios. Credit risk categories are updated as key credit quality indicators change. An expected loss rate, assigned based on the credit risk category, is applied to each loan's unpaid principal balance to develop an aggregate allowance for expected credit losses. Prior to adoption, impaired commercial mortgage loans were written down to the lower of unpaid principal or fair value of the underlying collateral when it became probable that the Company would not collect all amounts due under its promissory note. The Company recorded an allowance of $7 million through a cumulative effect adjustment to retained earnings to reflect expected credit losses at adoption. The credit loss allowance for the Company’s commercial mortgage loan investments was $9 million as of September 30, 2020.

Commercial mortgage loans are considered impaired and written off against the allowance when it is probable that the Company will not collect all amounts due per the terms of the promissory note. The Company elected the expedient to not measure an allowance for credit losses for accrued interest receivables. Consistent with our prior practice, accrued interest, reported in other current assets, is written off through a charge to net investment income; interest income on impaired loans is only recognized when a payment is received.

~~In the event of a foreclosure, the allowance for credit losses is based on the excess of the carrying value of the mortgage loan over the fair value of its underlying collateral.~~

Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are generally issued at fixed rates of interest and are secured by high quality, primarily completed and substantially leased operating properties. Commercial mortgage loans are classified as either current or long-term investments based on their contractual maturities.

Credit quality. The Company regularly evaluates and monitors credit risk, beginning with the initial underwriting of a mortgage loan and continuing throughout the investment holding period. Mortgage origination professionals employ an internal credit quality rating system designed to evaluate the relative risk of the transaction at origination that is then updated each year as part of the annual portfolio loan review. The Company evaluates and monitors credit quality on a consistent and ongoing basis.

Quality ratings are based on our evaluation of a number of key inputs related to the loan, including real estate market-related factors such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However, the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios. The debt service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on debt, with a ratio below 1.0 indicating that there is not enough cash flow to cover the required loan payments. The loan-to-value ratio, commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the loan.

The following table summarizes the credit risk profile of the Company’s commercial mortgage loan portfolio based on loan-to-value and debt service coverage ratios as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020.


(Dollars in millions)	(Dollars in millions)	September 30, 2020					December 31, 2019					(Dollars in millions)	March 31, 2021					December 31, 2020
Loan-to-Value Ratio	Loan-to-Value Ratio	Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Loan-to-Value Ratio	Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio
Below 60%	Below 60%	$	861	2.20			$	1,136	2.19			Below 60%	$	513	2.25			$	533	2.28
60% to 79%	60% to 79%	985		1.93			723		1.98			60% to 79%	699		2.11			751		2.08
80% to 100%	80% to 100%	142		1.33			88		1.62			80% to 100%	141		1.33			141		1.33
Allowance for credit losses	Allowance for credit losses	(9)										Allowance for credit losses	(6)					(6)
Total	Total	$	1,979	2.01	60	%	$	1,947	2.09	58	%	Total	$	1,347	2.08	61	%	$	1,419	2.08	61	%

The Company’s annual in-depth review of its commercial mortgage loan investments is the primary mechanism for identifying emerging risks in the portfolio. The Company’s investment professionals completed the annual in-depth review in the second quarter of 2020 that included an analysis of each underlying property’s most recent annual financial statements, rent rolls, operating plans, budgets, a physical inspection of the property and other pertinent factors. Based on historical results, current leases, lease expirations and rental conditions in each market, the Company estimated the current year and future stabilized property income and fair value for each loan. The average loan to value increased slightly from last year and remains strong. The portfolio's average debt service coverage ratio decreased slightly at September 30, 2020 compared with December 31, 2019 but remains at a high level.

The Company re-evaluates a loan’s credit quality between annual reviews if new property information is received or an event such as delinquency or a borrower’s request for restructure causes management to believe that the Company’s estimate of financial performance, fair value or the risk profile of the underlying property has been impacted.

All commercial mortgage loans in the Company's portfolio are current as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Other Long-Term Investments

Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.

Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicate that the carrying value may not be recoverable. Additionally, statutory and other restricted deposits, healthcare related investment partnerships and foreign currency swaps ~~and statutory and other deposits.~~carried at fair value are reported in the table below as Other. The following table provides the carrying value information for these investments.


	Carrying value as of
(In millions)	March 31, 2021		December 31, 2020
Real estate investments	$	999	$	951
Securities partnerships	1,712		1,683
Other	186		198
Total	$	2,897	$	2,832

Carrying value as of
(In millions) September 30, 2020 December 31, 2019
Real estate investments $ 888 $ 788
Securities partnerships 1,591 1,409
Other 219 206
Total $ 2,698 $ 2,403

Short-Term Investments and Cash Equivalents

Short-term investments and cash equivalents included the following types of ~~issuers:~~issuers. The decrease in Money market funds is primarily due to the deployment of proceeds received on December 31, 2020 from the U.S. Group Disability and Life business divestiture for Corporate purposes.

(In millions) September 30, 2020 December 31, 2019
Corporate securities $ 2,729 $ 1,985
Federal government securities $ 1,139 $ 472
Foreign government securities $ 89 $ 65
Money market funds $ 313 $ 631

B.~~Realized Investment Gains and Losses~~

~~Accounting policy.~~ Realized investment gains and losses are based on specifically identified assets and result from sales, investment asset write-downs, change in the fair value of certain derivatives and equity securities, and changes in valuation reserves on commercial mortgage loans. Commencing January 1, 2020, realized gains and losses also


(In millions)	March 31, 2021		December 31, 2020
Corporate securities	$	2,953	$	2,669
Federal government securities	$	113	$	158
Foreign government securities	$	42	$	90
Money market funds	$	960	$	5,134

3322

~~include credit loss expense resulting from the impact of changes in the allowances for credit losses on debt securities and commercial mortgage loan investments under ASU 2016-13.~~

The following realized gains and losses on investments exclude amounts required to adjust future policy benefits for the run-off settlement annuity business (consistent with accounting for a premium deficiency), as well as realized gains and losses attributed to the Company’s separate accounts because those gains and losses generally accrue directly to separate account policyholders.

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2020 2019 2020 2019
Net realized investment gains, excluding credit loss expense and asset write-downs $ 24 $ 60 $ 33 $ 96
Credit loss (expense) recoveries on invested assets 8 0 (41) 0
Other investment asset write-downs 0 (9) (10) (12)
Net realized investment gains (losses), before income taxes $ 32 $ 51 $ (18) $ 84

Net realized investment gains, excluding credit loss expense and asset write-downs, for the nine months ended September 30, 2020 primarily represent gains on the sales of debt securities, partially offset by mark-to-market losses on equity securities and foreign exchange derivatives. Net realized investment gains, excluding credit loss expense and asset write-downs, for the nine months ended September 30, 2019 represent gains on the sales of real estate partnerships and debt securities. Credit loss (expense) recoveries on invested assets for the nine months ended September 30, 2020 reflects credit losses incurred primarily on debt securities due to uncertainty around issuers in certain industries that are particularly impacted by the global COVID-19 pandemic. Realized gains and losses on equity securities still held at September 30, 2020 and 2019 were not material.

The following table presents sales information for available-for-sale debt securities. Gross gains on sales and gross losses on sales exclude amounts required to adjust future policy benefits for the run-off settlement annuity business.

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2020 2019 2020 2019
Proceeds from sales $ 380 $ 591 $ 2,003 $ 2,242
Gross gains on sales $ 15 $ 18 $ 81 $ 41
Gross losses on sales $ 0 $ (5) $ (21) $ (17)

C.B.Derivative Financial Instruments

The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contract holder liabilities. The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates. The Company has written and purchased GMIB reinsurance contracts in its run-off reinsurance business that are accounted for as freestanding derivatives as discussed in Note ~~10.~~8. Derivatives in the Company’s separate accounts are excluded from the following discussion because associated gains and losses generally accrue directly to separate account policyholders.

Derivative instruments used by the Company typically include foreign currency swap contracts and foreign currency forward contracts. Foreign currency swap contracts periodically exchange cash flows between two currencies for principal and interest. Foreign currency forward contracts require the Company to purchase a foreign currency in exchange for the functional currency of its operating unit at a future date.

The Company manages the credit risk of these derivative instruments by diversifying its portfolio among approved dealers of high credit quality and through routine monitoring of credit risk exposures. Certain of the Company’s over-the-counter derivative instruments require either the Company or the counterparty to post collateral or demand immediate payment depending on the amount of the net liability position of the derivative instrument and predefined financial strength or credit rating thresholds. These collateral posting requirements vary by counterparty. The Company ~~would~~may incur a loss if dealers ~~completely~~ failed to perform under derivative contracts, however collateral has been posted by dealers to cover substantially all of the net fair values owed ~~by dealers~~ at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The fair value of collateral posted by the Company was not significant as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020.

The gross fair values of our derivative financial instruments are presented in Note ~~12.~~10. The following table summarizes the types and notional quantity of derivative instruments held by the Company. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the effects of these individual hedging strategies were not material to the Consolidated Financial Statements, including gains or losses reclassified from accumulated other comprehensive income into shareholders' net income, as well as amounts excluded from the assessment of hedge effectiveness.


		(In millions)		Notional Value as of											Notional Value as of
			September 30, 2020			December 31, 2019
(In millions)							(In millions)								March 31, 2021			December 31, 2020
Purpose	Purpose			Type of Instrument			September 30, 2020				December 31, 2019		Purpose
Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.	Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.	Foreign currency swap contracts				Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.				Foreign currency swap contracts			$	956						$	925
Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won, and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.		Foreign currency swap contracts		$	526				$	438
		Foreign currency forward contracts		$	636		$	406
Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.										Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.		Foreign currency swap contracts				$	526		$	526
											Foreign currency forward contracts				$	706		$	636
Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.	Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.	Foreign currency forward contracts		$	495		$	410		Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.	Foreign currency forward contracts				$	630		$	538

~~The Company’s~~

As there has been no material change in the types of derivative financial instruments ~~are presented as follows:~~ the Company uses, refer to the Company’s 2020 Form 10-K for a discussion of our accounting policy.

•~~Fair value hedges of the foreign exchange-related changes in fair values of certain foreign-denominated bonds~~: Swap fair values are reported in Long-term investments or Other non-current liabilities. Changes in fair values attributable to foreign exchange risk of the swap contracts and the hedged bonds are reported in Realized investment gains and losses. The portion of the swap contracts’ changes in fair value excluded from the assessment of hedge effectiveness is recorded in Other comprehensive income and recognized in Net investment income as swap coupon payments are accrued, offsetting the foreign-denominated coupons received on the designated bonds. Net cash flows are reported in Operating activities, while exchanges of notional principal amounts are reported in Investing activities.

•~~Net investment hedges of certain foreign subsidiaries that conduct their business principally in currencies other than the U.S. dollar~~: The fair values of the foreign currency swap and forward contracts are reported in Other assets or Other liabilities. The changes in fair values of these instruments are reported in Other comprehensive income, specifically in translation of foreign currencies. The portion of the change in fair values relating to foreign exchange spot rates will be recognized in earnings upon deconsolidation of the hedged foreign subsidiaries. The remaining changes in fair value of these instruments are excluded from our effectiveness assessment and recognized in interest expense when coupon payments are accrued or

3523

~~ratably over~~C.Realized Investment Gains and Losses

The following realized gains and losses on investments exclude amounts required to adjust future policy benefits for the ~~term~~run-off settlement annuity business (consistent with accounting for a premium deficiency), as well as realized gains and losses attributed to the Company’s separate accounts because those gains and losses generally accrue directly to separate account policyholders.


	Three Months Ended March 31,
(In millions)		2021		2020
Net realized investment gains (losses), excluding credit loss expense and asset write-downs		$	10	$	(24)
Credit loss (expense) on invested assets		(9)		(55)
Other investment asset write-downs		0		(9)
Net realized investment gains (losses), before income taxes		$	1	$	(88)

Net realized investment gains, excluding credit loss expense and asset write-downs for the three months ended March 31, 2021 was primarily driven by mark-to-market gains on equity securities, partially offset by mark-to-market losses on derivatives. This activity for the three months ended March 31, 2020 was primarily driven by mark-to-market losses on equity securities and derivatives, partially offset by gains on sales of ~~the instrument. The notional value of hedging instruments matches the hedged amount of subsidiary net assets. Cash flows~~debt securities. Credit loss (expense) recoveries on invested assetsreflect credit losses incurred on debt securities primarily relating to ~~these contracts are reported~~issuers in ~~Investing activities.~~

•~~Economic hedges for derivatives not designated as accounting hedges: Fair values of forward contracts are reported in current Investments or Accrued expenses and other liabilities. The changes in fair values are reported in~~certain industries that have been impacted by the global COVID-19 pandemic. Realized ~~investment~~ gains and ~~losses. Cash flows relating~~losses on equity securities still held at March 31, 2021 and 2020 were not material.

The following table presents sales information for available-for-sale debt securities. Gross gains on sales and gross losses on sales exclude amounts required to ~~these contracts are reported in Investing activities.~~adjust future policy benefits for the run-off settlement annuity business.


	Three Months Ended March 31,
(In millions)		2021		2020
Proceeds from sales		$	377	$	743
Gross gains on sales		$	9	$	39
Gross losses on sales		$	(3)	$	(7)

Note 1210 – Fair Value Measurements

The Company carries certain financial instruments at fair value in the financial statements including debt securities, certain equity securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions, such as when impaired or when there are observable price changes for equity securities with no readily determinable fair value.

Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor.

The Company’s financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level of input that is significant to its measurement. For example, a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significant to the instrument’s fair value, even though the measurement may be derived using inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).

The Company estimates fair values using prices from third parties or internal pricing methods. Fair value estimates received from third-party pricing services are based on reported trade activity and quoted market prices when available, and other market information that a market participant would use to estimate fair value. The internal pricing methods are performed by the Company’s investment professionals and generally involve using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality as well as other qualitative factors. In instances where there is little or no market activity for the same or similar instruments, fair value is estimated using methods, models and assumptions that the Company believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of estimation and judgment that becomes significant with increasingly complex instruments or pricing models.

The Company is responsible for determining fair value and for assigning the appropriate level within the fair value hierarchy based on the significance of unobservable inputs. The Company reviews methodologies, processes and controls of third-party pricing services

and compares prices on a test basis to those obtained from other external pricing sources or internal estimates. The Company performs ongoing analyses of both prices received from third-party pricing services and those developed internally to determine that they represent appropriate estimates of fair value. The controls executed by the Company include evaluating changes in prices and monitoring for potentially stale valuations. The Company also performs sample testing of sales values to confirm the accuracy of prior fair value estimates. The minimal exceptions identified during these processes indicate that adjustments to prices are infrequent and do not significantly impact valuations. An annual due-diligence review of the most significant pricing

service is conducted to review their processes, methodologies and controls. This review includes a walk-through of inputs for a sample of securities held across various asset types to validate the documented pricing process.

A.Financial Assets and Financial Liabilities Carried at Fair Value

The following table provides information as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 about the Company’s financial assets and liabilities carried at fair value. Separate account assets are also recorded at fair value on the Company’s Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generally accrue directly to policyholders.


(In millions)	(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total				(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
		As of September 30, 2020		As of December 31, 2019		As of September 30, 2020		As of December 31, 2019		As of September 30, 2020		As of December 31, 2019		As of September 30, 2020		As of December 31, 2019			As of March 31, 2021		As of December 31, 2020		As of March 31, 2021		As of December 31, 2020		As of March 31, 2021		As of December 31, 2020		As of March 31, 2021		As of December 31, 2020
Financial assets at fair value	Financial assets at fair value																	Financial assets at fair value
Debt securities	Debt securities																	Debt securities
Federal government and agency	Federal government and agency	$	183	$	197	$	451	$	536	$	0	$	0	$	634	$	733	Federal government and agency	$	164	$	207	$	230	$	249	$	0	$	0	$	394	$	456
State and local government	State and local government	0		0		713		810		0		0		713		810		State and local government	0		0		162		167		0		0		162		167
Foreign government	Foreign government	0		0		2,381		2,228		21		28		2,402		2,256		Foreign government	0		0		2,407		2,498		13		13		2,420		2,511
Corporate	Corporate	0		0		19,662		19,063		747		357		20,409		19,420		Corporate	0		0		13,504		13,878		710		684		14,214		14,562
Mortgage and other asset-backed	Mortgage and other asset-backed	0		0		368		398		147		138		515		536		Mortgage and other asset-backed	0		0		310		309		149		126		459		435
Total debt securities	Total debt securities	183		197		23,575		23,035		915		523		24,673		23,755		Total debt securities	164		207		16,613		17,101		872		823		17,649		18,131
Equity securities (1)	Equity securities (1)	1		7		135		72		31		32		167		111		Equity securities (1)	56		50		165		165		31		31		252		246
Short-term investments	Short-term investments	0		0		458		423		0		0		458		423		Short-term investments	0		0		505		325		0		0		505		325
Derivative assets(3)	Derivative assets(3)	0		0		104		83		0		0		104		83		Derivative assets(3)	0		0		62		72		0		0		62		72
Real estate funds priced at NAV as a practical expedient (2)	Real estate funds priced at NAV as a practical expedient (2)													165		184		Real estate funds priced at NAV as a practical expedient (2)													146		156
Financial liabilities at fair value	Financial liabilities at fair value																	Financial liabilities at fair value
Derivative liabilities	Derivative liabilities	$	0	$	0	$	21	$	18	$	0	$	0	$	21	$	18	Derivative liabilities	$	0	$	0	$	74	$	108	$	0	$	0	$	74	$	108

(1)Excludes certain equity securities that have no readily determinable fair value.

(2)As a practical expedient, certain real estate funds are carried at fair value based on the Company’s ownership share of the equity of the investee (Net Asset Value (“~~NAV“~~NAV”)) including changes in the fair value of its underlying investments. The Company has ~~$50~~$46 million in unfunded commitments in these funds as of ~~September 30, 2020.~~March 31, 2021.

(3)Derivative assets above include $6 million that are presented in the Short-term investments category that is disclosed in Note 9. See Note 9 for more information on our Derivative Financial Instruments.

Level 1 Financial Assets

Inputs for instruments classified in Level 1 include unadjusted quoted prices for identical assets in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.

Assets in Level 1 include actively-traded U.S. government bonds and exchange-listed equity securities. A relatively small portion of the Company’s investment assets are classified in this category given the narrow definition of Level 1 and the Company’s investment asset strategy to maximize investment returns.

3725

Level 2 Financial Assets and Financial Liabilities

Inputs for instruments classified in Level 2 include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active or other inputs that are market observable or can be corroborated by market data for the term of the instrument. Such other inputs include market interest rates and volatilities, spreads and yield curves. An instrument is classified in Level 2 if the Company determines that unobservable inputs are insignificant.

Debt and equity securities. Approximately ~~95%~~94% of the Company’s investments in debt and equity securities are classified in Level 2 including most public and private corporate debt and hybrid equity securities, federal agency and municipal bonds, non-government mortgage-backed securities and preferred stocks. Third-party pricing services and internal methods often use recent trades of securities with similar features and characteristics because many debt securities do not trade daily. Pricing models are used to determine these prices when recent trades are not available. These models calculate fair values by discounting future cash flows at estimated market interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities based on the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data and industry and economic events. For mortgage-backed securities, inputs and assumptions may also include characteristics of the issuer, collateral attributes, prepayment speeds and credit rating.

Nearly all of these instruments are valued using recent trades or pricing models. Less than 1% of the fair value of investments classified in Level 2 represents foreign bonds that are valued using a single, unadjusted market-observable input derived by averaging multiple broker-dealer quotes, consistent with local market practice.

Short-term investments are carried at fair value that approximates cost. The Company compares market prices for these securities to recorded amounts on a regular basis to validate that current carrying amounts approximate exit prices. The short-term nature of the investments and corroboration of the reported amounts over the holding period support their classification in Level 2.

Derivative assets and liabilities classified in Level 2 represent over-the-counter instruments such as foreign currency forward and swap contracts. Fair values for these instruments are determined using market observable inputs including forward currency and interest rate curves and widely published market observable indices. Credit risk related to the counterparty and the Company is considered when estimating the fair values of these derivatives. However, the Company is largely protected by collateral arrangements with counterparties and determined that 0 adjustments for credit risk were required as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020. The nature and use of these derivative financial instruments are described in Note ~~11.~~9.

Level 3 Financial Assets and Financial Liabilities

Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

The Company classifies certain newly-issued, privately-placed, complex or illiquid securities in Level 3. Approximately 4%5% of debt and equity securities are priced using significant unobservable inputs and classified in this category.

Fair values of mortgage and other asset-backed securities, as well as corporate and government debt securities, are primarily determined using pricing models that incorporate the specific characteristics of each asset and related assumptions including the investment type and structure, credit quality, industry and maturity date in comparison to current market indices, spreads and liquidity of assets with similar characteristics. Inputs and assumptions for pricing may also include characteristics of the issuer, collateral attributes and prepayment speeds for mortgage and other asset-backed securities. Recent trades in the subject security or similar securities are assessed when available, and the Company may also review published research in its evaluation, as well as the issuer’s financial statements.

Quantitative Information about Unobservable Inputs

The following table summarizes the fair value and significant unobservable inputs used in pricing the following debt securities that were developed directly by the Company as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The range and weighted average basis point (“bps”) amounts for liquidity and credit spreads (adjustment to discount rates) reflect the Company’s best estimates of the unobservable adjustments a market participant would make to calculate these fair values. ~~These liquidity and credit spreads have increased over the reported periods, resulting from continued uncertainty over the economic impacts related to COVID-19.~~

Corporate and government debt securities. The significant unobservable input used to value the following corporate and government debt securities is an adjustment for liquidity. This adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security.

Mortgage and other asset-backed securities. The significant unobservable inputs used to value the following mortgage and other asset-backed securities are liquidity and weighting of credit spreads. An adjustment for liquidity is made as of the measurement date that considers current market conditions, issuer circumstances and complexity of the security structure when there is limited trading activity for the security. An adjustment to weight credit spreads is needed to value a more complex bond structure with multiple underlying collateral and no standard market valuation technique. The weighting of credit spreads is primarily based on the underlying collateral’s characteristics and their proportional cash flows supporting the bond obligations.

Fair Value as of

Unobservable Adjustment Range
(Weighted Average by Quantity)
as of

Fair Value as of

Unobservable Adjustment Range (Weighted Average by Quantity) as of

(Fair value in millions )

September 30, 2020

December 31, 2019

Unobservable input September 30, 2020

September 30, 2020

December 31, 2019

(Fair value in millions )

March 31, 2021

December 31, 2020

Unobservable input March 31, 2021

March 31, 2021

December 31, 2020

Debt securities

Corporate and government debt securities

765

385

Liquidity

60 - 1570 (410) bps

70 - 930 (280) bps

Corporate and government debt securities

722

696

Liquidity

60 - 1560 (480)

bps

60 - 1370 (470)

bps

Mortgage and other asset-backed securities

147

138

Liquidity

60 - 370 (80) bps

60 - 370 (70) bps

Mortgage and other asset-backed securities

149

126

Liquidity

60 - 380 (90)

bps

60 - 380 (80)

bps

Weighting of credit spreads

320 - 650 (460) bps

240 - 460 (330) bps

Weighting of credit spreads

250 - 660 (450)

bps

300 - 670 (480)

bps

Securities not priced by the Company (1)

Total Level 3 debt securities

915

523

Total Level 3 debt securities

872

823

(1)The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.

Significant increases in liquidity or credit spreads would result in lower fair value measurements while decreases in these inputs would result in higher fair value measurements. The unobservable inputs are generally not interrelated and a change in the assumption used for one unobservable input is not accompanied by a change in the other unobservable input.

Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value

The following tables summarize the changes in financial assets and financial liabilities classified in Level 3 for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. Gains and losses reported in these tables may include net changes in fair value that are attributable to both observable and unobservable inputs.



	For the Three Months Ended March 31,
(In millions)		2021		2020
Debt and Equity Securities
Beginning balance		$	854	$	555
Total gains (losses) included in shareholders’ net income		(10)		(12)
Gains (losses) included in other comprehensive income		(16)		(71)
Gains (losses) required to adjust future policy benefits for settlement annuities (1)		(8)		(10)
Purchases, sales and settlements
Purchases		29		62
Sales		0		(12)
Settlements		(16)		(2)
Total purchases, sales and settlements		$	13	$	48
Transfers into/(out of) Level 3
Transfers into Level 3		86		348
Transfers out of Level 3		(16)		(92)
Total transfers into/(out of) Level 3		$	70	$	256
Ending balance		$	903	$	766
Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date		$	(11)	$	(18)
Change in unrealized gains or losses included in other comprehensive income for assets held at the end of the reporting period		$	(16)	$	(66)

(1)Amounts do not accrue to shareholders.

Debt and Equity Securities
For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
(In millions) 2020 2019 2020 2019
Balance at beginning of period $ 860 $ 431 $ 555 $ 410
Total gains (losses) included in shareholders’ net income (1) (6) 4 (7)
Gains (losses) included in other comprehensive income 17 4 (42) 16
Gains (losses) required to adjust future policy benefits for settlement annuities (1)
7 1 4 3
Purchases, sales and settlements
Purchases 3 10 67 53
Sales (1) 0 (13) 0
Settlements (8) (6) (15) (16)
Total purchases, sales and settlements $ (6) $ 4 $ 39 $ 37
Transfers into/(out of) Level 3
Transfers into Level 3 102 80 629 113
Transfers out of Level 3 (33) 0 (243) (58)
Total transfers into/(out of) Level 3 $ 69 $ 80 $ 386 $ 55
Balance at September 30, $ 946 $ 514 $ 946 $ 514
Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date $ 0 $ (6) $ (2) $ (8)
Change in unrealized gains or losses included in other comprehensive income for assets held at the end of the reporting period $ 17 N/A $ (37) N/A

Total gains and losses included in Shareholders’ net income in the tables above are reflected in the Consolidated Statements of Income as Net realized investment gains (losses) and Net investment income.

Gains and losses included in Other comprehensive income in the tables above are reflected in Net unrealized appreciation (depreciation) on securities and derivatives in the Consolidated Statements of Comprehensive Income.

Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company’s best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Market activity typically decreases during periods of economic uncertainty, and this decrease in activity reduces the availability of market observable data. As a result, the level of unobservable judgement that must be applied to the pricing of certain instruments increases, and is typically observed through the widening of liquidity and credit spreads. Transfers between Level 2 and Level 3 during ~~2020~~2021 and ~~2019~~2020 primarily reflected changes in liquidity and credit risk estimates for certain private placement issuers across several sectors. Transfers into and out of Level 3 were higher in 2020 due to significant fluctuations in liquidity and credit spreads experienced as a result of the uncertainty over the economic impacts related to COVID-19. See discussion under Quantitative Information about Unobservable Inputs above for more information.

Separate Accounts

The investment income and fair value gains and losses of separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company’s Consolidated Statements of Income and Cash Flows.

Fair values of separate account assets at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


(In millions)	(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total				(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Guaranteed separate accounts (See Note 18)		$	208	$	219	$	302	$	271	$	0	$	0	$	510	$	490
Guaranteed separate accounts (See Note 15)																		Guaranteed separate accounts (See Note 15)	$	222	$	226	$	282	$	297	$	0	$	0	$	504	$	523
Non-guaranteed separate accounts (1)	Non-guaranteed separate accounts (1)	1,541		1,450		5,508		5,522		335		263		7,384		7,235		Non-guaranteed separate accounts (1)	2,071		1,925		5,417		5,600		378		355		7,866		7,880
Subtotal	Subtotal	$	1,749	$	1,669	$	5,810	$	5,793	$	335	$	263	$	7,894	$	7,725	Subtotal	$	2,293	$	2,151	$	5,699	$	5,897	$	378	$	355	8,370		8,403
Non-guaranteed separate accounts priced at NAV as a practical expedient (1)	Non-guaranteed separate accounts priced at NAV as a practical expedient (1)													736		756		Non-guaranteed separate accounts priced at NAV as a practical expedient (1)													718		683
Total														$	8,630	$	8,481
Separate account assets of business classified as held for sale														(14)		(16)

Separate account assets per Consolidated Balance Sheets	Separate account assets per Consolidated Balance Sheets													$	8,616	$	8,465	Separate account assets per Consolidated Balance Sheets													$	9,088	$	9,086

(1)Non-guaranteed separate accounts included ~~$3.9~~$4.2 billion as of ~~September 30, 2020~~March 31, 2021 and ~~$4.0 billion as of~~ December 31, ~~2019~~2020 in assets supporting the Company’s pension plans, including $0.3 billion classified in Level 3 as of ~~September 30, 2020~~March 31, 2021 and ~~$0.2 billion classified in Level 3 as of~~ December 31, ~~2019.~~2020.

Separate account assets classified as Level 1 primarily include exchange-listed equity securities. Level 2 assets primarily include:

•corporate and structured bonds valued using recent trades of similar securities or pricing models that discount future cash flows at estimated market interest rates as described above; and

•actively-traded institutional and retail mutual fund investments.

Separate account assets classified in Level 3 primarily support Cigna’s pension plans and include certain newly-issued, privately-placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans. Activity, including transfers into and out of Level 3, was not material for the three ~~and nine~~ months ended ~~September 30, 2020 and 2019.~~March 31, 2021 or 2020.

Separate account investments in securities partnerships, real estate and hedge funds are generally valued based on the separate account’s ownership share of the equity of the investee (NAV as a practical expedient) including changes in the fair values of its underlying investments. Substantially all of these assets support the Cigna Pension Plans. The following table provides additional information on these investments.


		Fair Value as of				Unfunded Commitment as of September 30, 2020				Redemption Frequency (if currently eligible)		Redemption Notice Period			Fair Value as of						Unfunded Commitment as of March 31, 2021		Redemption Frequency (if currently eligible)		Redemption Notice Period
(In millions)	(In millions)	September 30, 2020		December 31, 2019							(In millions)		March 31, 2021			December 31, 2020
Securities partnerships	Securities partnerships	$	511	$	531			$	283		Not applicable			Not applicable	Securities partnerships		$	463		$		463	$	274	Not applicable	Not applicable
Real estate funds	Real estate funds	221		220		0				Quarterly		30 - 90 days	Real estate funds		251			215			45		Quarterly		30 - 90 days
Hedge funds	Hedge funds	4		5		0				Up to annually, varying by fund		30 - 90 days	Hedge funds		4			5			0		Up to annually, varying by fund		30 - 90 days
Total	Total	$	736	$	756	$	283						Total		$	718		$	683		$	319

As of ~~September 30, 2020,~~March 31, 2021, the Company does not have plans to sell any of these assets at less than fair value. These investments are structured to satisfy longer-term investment objectives. Securities partnerships are contractually

non-redeemable, and the underlying investment assets are expected to be liquidated by the fund managers within ten years after inception.

B.Assets and Liabilities Measured at Fair Value under Certain Conditions

Some financial assets and liabilities are not carried at fair value each reporting period, but may be measured using fair value only under certain conditions such as when investments become impaired, including investment real estate and commercial mortgage loans and certain equity securities with no readily determinable fair value. For the three months ended March 31, 2021 and 2020, there were 0 such impairments. Equity securities with no readily determinable fair value are also measured at fair value when there are observable price changes from orderly transactions with the same issuer. ~~For the nine months ended September 30, 2020~~Realized investment gains and ~~2019, there were immaterial gains relating to~~losses from these observable price changes for ~~equity securities with no readily determinable fair value~~the three months ended March 31, 2021 and ~~0 impaired investments written down to their fair values.~~March 31, 2020 were not material. Carrying values represented less than 1% of total investments as of both ~~September 30, 2020~~March 31, 2021 and ~~September 30, 2019.~~March 31, 2020.

C.Fair Value Disclosures for Financial Instruments Not Carried at Fair Value

The following table includes the Company’s financial instruments not recorded at fair value that are subject to fair value disclosure requirements at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. In addition to universal life products and finance leases, financial instruments that are carried in the Company’s Consolidated Financial Statements at amounts that approximate fair value are excluded from the following table.

September 30, 2020 December 31, 2019
(In millions) Classification in Fair Value Hierarchy Fair Value Carrying Value Fair Value Carrying Value
Commercial mortgage loans Level 3 $ 2,033 $ 1,979 $ 1,989 $ 1,947
Long-term debt, including current maturities, excluding finance leases Level 2 $ 37,976 $ 32,972 $ 39,439 $ 36,375

~~Fair values of off-balance sheet financial instruments were not material as of September 30, 2020 and December 31, 2019.~~


	Classification in Fair Value Hierarchy	March 31, 2021				December 31, 2020
(In millions)		Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,373	$	1,347	$	1,456	$	1,419
Long-term debt, including current maturities, excluding finance leases	Level 2	$	35,649	$	31,912	$	37,676	$	31,835

Note 1311 – Variable Interest Entities

~~When the Company becomes involved~~We perform ongoing qualitative analyses of our involvement with a variable interest ~~entity and when there is a change in the Company’s involvement with an entity, the Company must~~entities to determine if itconsolidation is the primary beneficiary and must consolidate the entity. The Company is considered the primary beneficiary if it has the power to direct the entity’s most significant economic activities and has the right to receive benefits or obligation to absorb losses that could be significant to the entity. The Company evaluates the following criteria:

•~~the structure and purpose of the entity;~~

•~~the risks and rewards created by, and shared through, the entity; and~~

•the Company’s ability to direct its activities, receive its benefits and absorb its losses relative to the other parties involved with the entity including its sponsors, equity holders, guarantors, creditors and servicers.

required. The Company determined it was not a primary beneficiary in any material variable interest ~~entities~~entity as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020. The Company’s involvement inwith variable interest entities for which it is not the primary beneficiary ~~is described below.~~

~~Securities limited partnerships and real estate limited partnerships.~~ The Company owns interests in securities limited partnerships and real estate limited partnerships that are defined as variable interest entities. These partnerships invest in the equity or mezzanine debthas not changed materially from December 31, 2020. For details of privately-held companies and real estate properties. General partners unaffiliated with the Company control decisions that most significantly impact the partnership’s operations and the limited partners do not have substantive kick-out or participating rights. The Company’s maximum exposure to loss from these entities of $3.9 billion across approximately 150 limited partnerships as of September 30, 2020, included $2.0 billion reported in Long-term investments and commitments to contribute an additional $1.9 billion. The Company’s noncontrolling interest in each of these limited partnerships is generally less than 15% of the partnership ownership interests.

~~Other asset-backed and corporate securities.~~ ~~In the normal course of its investing activities, the Company also makes passive investments in certain asset-backed and corporate securities that are issued by~~our accounting policy for variable interest entities ~~whose sponsors or issuers are unaffiliated with the Company. The Company receives fixed-rate cash flows from these investments~~ and the ~~maximum potential exposure to loss is limited to our carrying amount~~composition of $0.7 billion as of September 30, 2020 that is reported in debt securities. The Company’s combined ownership interests are insignificant relative to the total principal amounts issued by these entities.

~~The Company is involved with various other~~ variable interest entities with ~~immaterial carrying values and maximum exposures~~which the Company is involved, refer to ~~loss.~~

Note 13 in our 2020 Form 10-K. The Company has not provided, and does not intend to provide, financial support to any of ~~the variable interest entities beyond what it is contractually required to provide. The Company performs ongoing qualitative analyses of its involvement with~~ these variable interest entities ~~to determine if consolidation is required.~~in excess of its maximum exposure.

4329

Note 1412 – Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI includes unrealized appreciation on securities and derivatives (excluding appreciation on investments supporting future policy benefit liabilities of the run-off settlement annuity business) (See Note ~~11)~~9), foreign currency translation and the net postretirement benefits liability adjustment. AOCI includes the Company’s share from unconsolidated entities reported on the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCI reclassifications are recognized. Changes in the components of AOCI were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2020 2019 2020 2019
Securities and Derivatives
Beginning balance $ 1,256 $ 803 $ 975 $ 18
Appreciation on securities and derivatives 159 298 499 1,305
Tax (expense) (27) (68) (96) (284)
Net appreciation on securities and derivatives 132 230 403 1,021
Reclassification adjustment for (gains) included in shareholders' net income (net realized investment (gains)) (16) (10) (3) (17)
Tax benefit 4 3 1 4
Net (gains) reclassified from AOCI to net income (12) (7) (2) (13)
Other comprehensive income, net of tax 120 223 401 1,008
Ending balance $ 1,376 $ 1,026 $ 1,376 $ 1,026
Translation of foreign currencies
Beginning balance $ (374) $ (285) $ (275) $ (221)
Translation of foreign currencies 102 (124) 7 (191)
Tax (expense) benefit 7 (3) (3) (4)
Net translation of foreign currencies 109 (127) 4 (195)
Less: Net translation of foreign currencies attributable to noncontrolling interests (4) 1 (10) (3)
Shareholders' net translation of foreign currencies 113 (128) 14 (192)
Ending balance $ (261) $ (413) $ (261) $ (413)
Postretirement benefits liability
Beginning balance $ (1,670) $ (1,483) $ (1,641) $ (1,508)
Reclassification adjustment for amortization of net losses from past experience and prior service costs (interest expense and other) 18 16 54 47
Reclassification adjustment for settlement (interest expense and other) 0 0 0 10
Tax (expense) (4) (3) (13) (12)
Net adjustments reclassified from AOCI to net income 14 13 41 45
Valuation update 0 (1) (73) (9)
Tax benefit 0 0 17�� 1
Net change due to valuation update 0 (1) (56) (8)
Other comprehensive (loss) income, net of tax 14 12 (15) 37
Ending balance $ (1,656) $ (1,471) $ (1,656) $ (1,471)


	Three Months Ended March 31,
(In millions)		2021		2020
Securities and Derivatives
Beginning balance		$	900	$	975
Appreciation (depreciation) on securities and derivatives		(342)		(580)
Tax (expense) benefit		65		127
Net appreciation (depreciation) on securities and derivatives		(277)		(453)

Reclassification adjustment for (gains) losses included in shareholders' net income (net realized investment (gains) losses)		5		32
Reclassification adjustment for tax expense (benefit) included in shareholders’ net income		(1)		(7)
Net (gains) losses reclassified from AOCI to net income		4		25
Other comprehensive (loss), net of tax		(273)		(428)
Ending balance		$	627	$	547

Translation of foreign currencies
Beginning balance		$	(15)	$	(275)
Translation of foreign currencies		(114)		(160)
Tax (expense) benefit		(5)		(15)
Net translation of foreign currencies		(119)		(175)






Less: Net translation gain (loss) on foreign currencies attributable to noncontrolling interests		(4)		(4)
Shareholders' other comprehensive (loss), net of tax		(115)		(171)
Ending balance		$	(130)	$	(446)

Postretirement benefits liability
Beginning balance		$	(1,746)	$	(1,641)
Reclassification adjustment for amortization of net prior actuarial losses and prior service costs (interest expense and other)		20		18
Reclassification adjustment for settlement (interest expense and other)		3		0
Reclassification adjustment for tax expense (benefit) included in shareholders’ net income		(5)		(5)
Net adjustments reclassified from AOCI to net income		18		13



Other comprehensive income, net of tax		18		13
Ending balance		$	(1,728)	$	(1,628)

4430

Note ~~15 - Organizational Efficiency Plan~~

The Company is continuously evaluating ways to deliver our products and services more efficiently and at a lower cost. During the fourth quarter of 2019, we committed to a plan to increase our organizational alignment and operational efficiency and reduce costs. As a result, we recognized a charge in Selling, general and administrative expenses of $207 million pre-tax ($162 million after-tax) in the fourth quarter of 2019 and an additional $31 million pre-tax ($24 million after-tax) in the first quarter 2020, primarily for severance costs related to headcount reductions. As of September 30, 2020, we expect most of the severance to be paid by the end of 2021.

~~Note 16~~13 – Leases

Operating and finance lease ~~right of use ("ROU"~~Right-of-Use (“ROU”) assets and lease liabilities were as follows:


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Operating leases:	Operating leases:					Operating leases:
Operating lease ROU assets	Operating lease ROU assets	$	530	$	536	Operating lease ROU assets	$	534	$	552

Accrued expenses and other current liabilities		$	160	$	166
Accrued expenses and other liabilities						Accrued expenses and other liabilities	$	152	$	152
Other non-current liabilities	Other non-current liabilities	461		465		Other non-current liabilities	480		491
Total operating lease liabilities	Total operating lease liabilities	$	621	$	631	Total operating lease liabilities	$	632	$	643

Finance leases:	Finance leases:					Finance leases:
Property and equipment, gross	Property and equipment, gross	$	99	$	110	Property and equipment, gross	$	103	$	98
Accumulated depreciation	Accumulated depreciation	(42)		(23)		Accumulated depreciation	(51)		(46)
Property and equipment, net	Property and equipment, net	$	57	$	87	Property and equipment, net	$	52	$	52

Short-term debt	Short-term debt	$	20	$	27	Short-term debt	$	20	$	18
Long-term debt	Long-term debt	40		61		Long-term debt	35		36
Total finance lease liabilities	Total finance lease liabilities	$	60	$	88	Total finance lease liabilities	$	55	$	54

Note 1714 – Income Taxes

Income Tax Expense

The ~~20.8%~~22.6% effective tax rate for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~lower~~higher than the ~~22.1%~~14.9% rate for the same period in ~~2019.~~2020. This ~~decrease~~increase is primarily attributable to ~~incremental~~the absence of favorable items which reduced the rate in 2020, including settlements of uncertain tax ~~benefits including~~positions and the remeasurement of deferred state income ~~taxes and the settlement of uncertain tax positions. This decrease was~~taxes; partially offset by ~~return~~the elimination of the nondeductible health insurer ~~tax.~~

tax in 2021.

Note 1815 – Contingencies and Other Matters

The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.

A.Financial Guarantees: Retiree and Life Insurance Benefits

The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of Prudential Retirement Insurance and Annuity, the buyer of the retirement benefits business (see Note 8 for further information) has the right to redirect the management of the related assets to provide for benefit payments. As of ~~September 30, 2020,~~March 31, 2021, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately ~~$455~~$445 million. An additional liability is established if management believes that the Company will be required to make payments under the guarantees; there were 0 additional liabilities required for these guarantees, net of reinsurance, as of ~~September 30, 2020.~~March 31, 2021. Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy.

The Company does not expect that these financial guarantees will have a material effect on the Company’s consolidated results of operations, liquidity or financial condition.

B.Certain Other Guarantees

The Company had indemnification obligations as of ~~September 30, 2020~~March 31, 2021 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, filing of tax returns, compliance with law or identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is

possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were 0 liabilities for these indemnification obligations as of ~~September 30, 2020.~~March 31, 2021.

C.Guaranty Fund Assessments

The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws. The Company’s exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.

There were no material effects for existing or new guaranty fund assessments for the ~~nine~~three months ended ~~September 30, 2020.~~

March 31, 2021.

D.Legal and Regulatory Matters

The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator’s filing of a complaint under court seal, and other legal matters arising, for the most part, in the ordinary course of managing a global health service business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions.

Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss and certain other material litigation matters are described below. For those matters that the Company has identified with a reasonably possible material loss, the Company provides disclosure in the aggregate of accruals and range of loss, or a statement that such information cannot be estimated. The Company’s accruals for the matters discussed below under “Litigation Matters” and “Regulatory Matters” are not material. Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if any) for these matters at this time. In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company. An adverse outcome in one or more of these matters could be material to the Company’s results of operations, financial condition or liquidity for any particular period. The outcomes of lawsuits are inherently unpredictable and we may be unsuccessful in these ongoing litigation matters or any future claims or litigation.

Litigation Matters

Risk Corridors and CSR Litigation with the Federal Government. As a result of a Supreme Court decision in April 2020, the Company filed suit in early May 2020 against the United States in the U.S. Court of Federal Claims seeking to recover two types of payments the Federal Government owes Cigna under the risk corridors and cost-sharing reduction (“CSR”) programs of The Patient Protection and Affordable Care ~~Act (“ACA”).~~Act. In aggregate, the complaint ~~seeks~~sought to recover more than $315 million: $120 million in risk corridors payments and more than $195 million in CSR payments. We received $120 million in payments in September 2020, which resolved our risk corridors claim. Our claim seeking recovery for CSR payments is stayed ~~pending resolution of a consolidated set of appeals currently before the Court of Appeals for~~until either the Federal ~~Circuit.~~

Circuit’s judgments in the CSR appeals become final and non-appealable or the Supreme Court resolves any petition for writ of certiorari.

Cigna Litigation with Anthem. In February 2017, the Company delivered a notice to Anthem terminating the 2015 merger agreement and notifying Anthem that it must pay the Company the $1.85 billion reverse termination fee pursuant to the terms of the merger agreement. Also in February 2017, the Company filed suit against Anthem, Inc. in the Delaware Court of Chancery (the “Chancery Court”) seeking, ~~declaratory judgments that the Company’s termination of the merger agreement was valid and that Anthem was not permitted to extend the termination date. The complaint also sought~~among other relief, payment of the $1.85 billion reverse termination fee under the parties’ 2015 merger agreement and ~~additional damages in an amount exceeding $13 billion, including the lost premium value to the Company’s shareholders caused by Anthem’s willful breaches of the merger agreement.~~damages. Anthem countersued, alleging its own claims for damages.

On February 15, 2017, the Chancery Court granted Anthem’s motion for a temporary restraining order and temporarily enjoined the Company from terminating the merger agreement. In May 2017, the Chancery Court denied Anthem’s motion for a preliminary injunction to enjoin Cigna from terminating the merger agreement but stayed its ruling pending Anthem’s determination as to whether to seek an appeal. Anthem subsequently notified Cigna and the Chancery Court that it did not intend to appeal the Chancery Court’s decision. As a result, the merger agreement was terminated.

~~The litigation continued over the next three years.~~ A trial was held during the first quarter of ~~2019, oral arguments on post-trial briefs were held on November 26, 2019, and in early 2020, supplemental post-trial briefing was completed.~~2019. In August 2020, the Chancery Court i~~ssued~~issued an opinion finding that, although Cigna breached its contractual obligation to use reasonable best efforts to support the Anthem/Cigna merger, ~~agreement,~~ its actions did not cause the merger to fail. The Court denied claims by both parties for damages and further denied Cigna’s claim for athe reverse termination fee. The Company filed a Notice of Appeal with the Delaware Supreme Court on October 30, ~~2020. The Company's opening brief is due~~2020, and sought reversal of the portion of the Chancery Court’s decision denying Cigna the reverse termination fee. Briefing on ~~or before December 15, 2020 with Anthem's answering brief due thirty days following~~ the ~~Company's brief filing. We believe in~~appeal was completed on January 29, 2021 and oral arguments were held on April 14, 2021. On May 3, 2021, the ~~merits~~Delaware Supreme Court issued an order affirming the decision of ~~our case and intend to vigorously pursue our positions.~~

the Chancery Court.

Express Scripts Litigation with Anthem. In March 2016, Anthem filed a lawsuit in the United States District Court for the Southern District of New York alleging various breach of contract claims against Express Scripts relating to the parties’ rights and obligations under the periodic pricing review section of the pharmacy benefit management agreement between the parties including allegations that Express Scripts failed to negotiate new pricing concessions in good faith, as well as various alleged service issues. Anthem also requested that the court enter declaratory judgment that Express Scripts is required to provide Anthem competitive benchmark pricing, that Anthem can terminate the agreement and that Express Scripts is required to provide Anthem with post-termination services at competitive benchmark pricing for one year following any termination by Anthem. Anthem claims it is entitled to $13 billion in

additional pricing concessions over the remaining term of the agreement, as well as $1.8 billion for one year following any contract termination by Anthem and $150 million damages for service issues (“Anthem’s Allegations”). On April 19, 2016, in response to Anthem’s complaint, Express Scripts filed its answer denying Anthem’s Allegations in their entirety and asserting affirmative defenses and counterclaims against Anthem. The court subsequently granted Anthem’s motion to dismiss ~~two~~2 of ~~six~~6 counts of Express Scripts’ amended counterclaims. The current scheduling order runs through the completion of summary judgment briefing in ~~April~~October 2021. There is no tentative trial date. ~~We believe in the merits of our claims and dispute Anthem’s claims, and we intend to vigorously defend ourselves and pursue our claims.~~

Regulatory Matters

Civil Investigative Demand. The U.S. Department of Justice (“DOJ”) is conducting an industry-wide ~~investigation~~investigations of Medicare Advantage organizations’ risk adjustment practices under Medicare Parts C and D including medical chart reviews and health exams. For certain ~~other~~ Medicare Advantage organizations, ~~the investigation has~~those investigations have resulted in litigation. The Company ~~is currently responding to~~has received information requests (civil investigative demands) ~~received~~ from the DOJ (U.S. Attorney’s Offices for the Eastern District of Pennsylvania and the Southern District of New York ("SDNY")). We are continuing to cooperate with the DOJ and have responded and continue to respond to its requests. Additionally, in relation to the SDNY’s ~~pending~~ investigation, a qui tam action that was filed by a relator in the United States District Court for the Southern District of New York in 2017 was unsealed on August 6, 2020. The action asserts claims related to risk adjustment practices arising from certain ~~home~~ health ~~assessments~~exams conducted as part of Cigna’s Medicare Advantage business. The DOJ has not intervened in the case at this time. ~~We intend to vigorously defend ourselves against relator’s claims and will continue to cooperate with the DOJ’s investigations.~~

4833

Note 1916 – Segment Information

See Note 1 for a description of our segments. A description of our basis for reporting segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy related transactions between the Evernorth and U.S. Medical segments.

The Company uses “pre-tax adjusted income from operations” and “adjusted revenues” as its principal financial measures of segment operating performance because management believes they best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability. ~~Pre-tax~~We define pre-tax adjusted income from operations ~~is defined~~ as income before taxes excluding net realized investment ~~results,~~gains and losses, amortization of acquired intangible assets and special ~~items and, for periods prior to 2020, earnings contribution from transitioning clients Anthem Inc. and Coventry Health Care, Inc. (the “transitioning clients”). As~~items. Cigna’s share of ~~December 31, 2019, the transition of these clients was substantially complete; therefore, beginning in 2020, we no longer exclude~~certain realized investment results of ~~transitioning clients from our adjusted revenues and adjusted income from operations.~~its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded. Income or expense amounts ~~that are~~ excluded from adjusted income from operations because they are not indicative of underlying performance or the responsibility of operating segment management include:

•Realized investment gains (losses) including changes in market values of certain financial instruments between balance sheet dates, as well as gains and losses associated with invested asset sales. Cigna's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded.

•Amortization of acquired intangible assets because these relate to costs incurred for acquisitions.

•~~Results of transitioning clients, for periods prior to 2020, because those results were not indicative of ongoing results.~~

•Special items, if any, that management believes are not representative of the underlying results of operations due to the nature or size of these matters.

The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance.

~~Adjusted~~The term adjusted revenues is defined as total revenues ~~excluding: 1) revenue contribution from transitioning clients for periods prior to 2020; 2)~~excluding the ~~Company’s~~following adjustments: special items and Cigna's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of ~~accounting; and 3) special~~accounting. We exclude these items ~~if any.~~

from this measure because management believes they are not indicative of past or future underlying performance of the business.

The following tables present the special items recorded by the Company for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020.


		Three Months Ended									Three Months Ended
(In millions)	(In millions)	September 30, 2020				September 30, 2019				(In millions)	March 31, 2021				March 31, 2020
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s)	Description of Special Item Charges (Benefits) and Financial Statement Line Item(s)	After-tax		Before-tax		After-tax		Before-tax		Description of Special Item Charges (Benefits) and Financial Statement Line Item(s)	After-tax		Before-tax		After-tax		Before-tax
Debt extinguishment costs										Debt extinguishment costs	$	101	$	131	$	140	$	185
Integration and transaction-related costs (Selling, general and administrative expenses)	Integration and transaction-related costs (Selling, general and administrative expenses)	$	83	$	112	$	88	$	114	Integration and transaction-related costs (Selling, general and administrative expenses)	22		29		74		97
Charges associated with litigation matters (Selling, general and administrative expenses)										Charges associated with litigation matters (Selling, general and administrative expenses)	(21)		(27)		19		25
Charge for organizational efficiency plan (Selling, general and administrative expenses)										Charge for organizational efficiency plan (Selling, general and administrative expenses)	0		0		24		31

Contractual adjustment for a former client (Pharmacy revenues)										Contractual adjustment for a former client (Pharmacy revenues)	0		0		(66)		(87)

(Benefits) charges associated with litigation matters (Selling, general and administrative expenses)		0		0		(23)		(30)
Risk corridors recovery (Selling, general and administrative expenses)		$	(76)	$	(101)	$	0	$	0
Contractual adjustment for a former client (Pharmacy revenues)		(89)		(117)		0		0

Total impact from special items	Total impact from special items	$	(82)	$	(106)	$	65	$	84	Total impact from special items	$	102	$	133	$	191	$	251

Nine Months Ended
(In millions) September 30, 2020 September 30, 2019
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s) After-tax Before-tax After-tax Before-tax
Integration and transaction-related costs (Selling, general and administrative expenses) $ 256 $ 339 $ 311 $ 405
Debt extinguishment costs (Debt extinguishment costs) 151 199 0 0
Charge for organizational efficiency plan (Selling, general and administrative expenses) 24 31 0 0
(Benefits) charges associated with litigation matters (Selling, general and administrative expenses) 19 25 41 51
Risk corridors recovery (Selling, general and administrative expenses) (76) (101) 0 0
Contractual adjustment for a former client (Pharmacy revenues) $ (155) $ (204) $ 0 $ 0
Total impact from special items $ 219 $ 289 $ 352 $ 456

Summarized segment financial information ~~for the three and nine months ended September 30~~ was as follows:

(In millions) Evernorth U.S. Medical International Markets Group Disability and Other Corporate and Eliminations Total
Three months ended September 30, 2020
Revenues from external customers $ 29,016 $ 9,047 $ 1,439 $ 1,156 $ 0 $ 40,658
Inter-segment revenues 926 478 0 6 (1,410)
Net investment income 2 104 38 152 1 297
Total revenues 29,944 9,629 1,477 1,314 (1,409) 40,955
Net realized investment results from certain equity method investments 0 0 (37) 0 0 (37)
Special item related to contractual adjustment for a former client (117) 0 0 0 0 (117)
Adjusted revenues $ 29,827 $ 9,629 $ 1,440 $ 1,314 $ (1,409) $ 40,801
Income (loss) before taxes $ 1,086 $ 846 $ 253 $ 97 $ (478) $ 1,804
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (5) 0 (5) 0 0 (10)
Net realized investment (gains) losses 0 6 (48) (27) 0 (69)
Amortization of acquired intangible assets 479 6 8 0 0 493
Special items
Integration and transaction-related costs 0 0 0 0 112 112
Risk corridors recovery 0 (101) 0 0 0 (101)
Contractual adjustment for a former client (117) 0 0 0 0 (117)
Pre-tax adjusted income (loss) from operations $ 1,443 $ 757 $ 208 $ 70 $ (366) $ 2,112
(In millions) Evernorth U.S. Medical International Markets Group Disability and Other Corporate and Eliminations Total
Three months ended September 30, 2019
Revenues from external customers $ 27,084 $ 8,648 $ 1,368 $ 1,107 $ 0 $ 38,207
Inter-segment revenues 499 376 0 7 (882)
Net investment income 15 124 39 170 1 349
Total revenues 27,598 9,148 1,407 1,284 (881) 38,556
Revenue contributions from transitioning clients (2,718) 0 0 0 0 (2,718)
Net realized investment results from certain equity method investments 0 0 (5) 0 0 (5)
Adjusted revenues $ 24,880 $ 9,148 $ 1,402 $ 1,284 $ (881) $ 35,833
Income (loss) before taxes $ 965 $ 1,011 $ 184 $ 159 $ (556) $ 1,763
Pre-tax adjustments to reconcile to adjusted income from operations
Adjustment for transitioning clients (274) 0 0 0 0 (274)
(Income) attributable to noncontrolling interests 0 0 (4) 0 0 (4)
Net realized investment (gains) losses 0 (43) 5 (18) 0 (56)
Amortization of acquired intangible assets 708 15 9 2 0 734
Special items
Integration and transaction-related costs 0 0 0 0 114 114
(Benefits) charges associated with litigation matters 0 (30) 0 0 0 (30)
Pre-tax adjusted income (loss) from operations $ 1,399 $ 953 $ 194 $ 143 $ (442) $ 2,247


(In millions)	(In millions)	Evernorth		U.S. Medical		International Markets		Group Disability and Other		Corporate and Eliminations		Total		(In millions)	Evernorth		U.S. Medical		International Markets		Other Operations		Corporate and Eliminations		Total
Nine months ended September 30, 2020
Three months ended March 31, 2021														Three months ended March 31, 2021
Revenues from external customers	Revenues from external customers	$	82,986	$	26,999	$	4,325	$	3,506	$	0	$	117,816	Revenues from external customers	$	29,419	$	9,602	$	1,499	$	60	$	0	$	40,580
Inter-segment revenues	Inter-segment revenues	2,785		1,448		0		17		(4,250)		—		Inter-segment revenues	1,198		510		0		0		(1,708)
Net investment income	Net investment income	30		279		104		458		2		873		Net investment income	3		250		59		79		0		391
Total revenues	Total revenues	85,801		28,726		4,429		3,981		(4,248)		118,689		Total revenues	$	30,620	$	10,362	$	1,558	$	139	$	(1,708)	$	40,971
Net realized investment results from certain equity method investments	Net realized investment results from certain equity method investments	0		0		(87)		0		0		(87)		Net realized investment results from certain equity method investments	0		0		14		0		0		14
Special item related to contractual adjustment for a former client		(204)		0		0		0		0		(204)

Adjusted revenues	Adjusted revenues	$	85,597	$	28,726	$	4,342	$	3,981	$	(4,248)	$	118,398	Adjusted revenues	$	30,620	$	10,362	$	1,572	$	139	$	(1,708)	$	40,985

Income (loss) before taxes	Income (loss) before taxes	$	2,551	$	3,529	$	877	$	298	$	(1,765)	$	5,490	Income (loss) before taxes	$	749	$	1,009	$	226	$	16	$	(487)	$	1,513
Pre-tax adjustments to reconcile to adjusted income from operations	Pre-tax adjustments to reconcile to adjusted income from operations													Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests	(Income) attributable to noncontrolling interests	(12)		0		(15)		0		0		(27)		(Income) attributable to noncontrolling interests	(5)		0		(7)		0		0		(12)
Net realized investment (gains) losses		0		28		(75)		(22)		0		(69)
Net realized investment (gains) losses (1)														Net realized investment (gains) losses (1)	2		(30)		33		8		0		13
Amortization of acquired intangible assets	Amortization of acquired intangible assets	1,439		23		22		3		0		1,487		Amortization of acquired intangible assets	477		8		10		0		0		495
Special items	Special items													Special items
Debt extinguishment costs														Debt extinguishment costs	0		0		0		0		131		131
Integration and transaction-related costs	Integration and transaction-related costs	0		0		0		0		339		339		Integration and transaction-related costs	0		0		0		0		29		29
Debt extinguishment costs		0		0		0		0		199		199
Charge for organizational efficiency plan		0		0		0		0		31		31
(Benefits) charges associated with litigation matters		0		0		0		0		25		25
Risk corridors recovery		0		(101)		0		0		0		(101)
Contractual adjustment for a former client		(204)		0		0		0		0		(204)

Pre-tax adjusted income (loss) from operations		$	3,774	$	3,479	$	809	$	279	$	(1,171)	$	7,170

(In millions)		Evernorth		U.S. Medical		International Markets		Group Disability and Other		Corporate and Eliminations		Total
Nine months ended September 30, 2019
Revenues from external customers		$	80,618	$	26,226	$	4,095	$	3,347	$	0	$	114,286
Inter-segment revenues		1,869		727		0		21		(2,617)
Net investment income (loss)		47		358		117		521		(8)		1,035
Total revenues		82,534		27,311		4,212		3,889		(2,625)		115,321
Revenue contribution from transitioning clients		(11,657)		0		0		0		0		(11,657)
Net realized investment results from certain equity method investments		0		0		(27)		0		0		(27)
Adjusted revenues		$	70,877	$	27,311	$	4,185	$	3,889	$	(2,625)	$	103,637
Income (loss) before taxes		$	3,015	$	3,157	$	601	$	407	$	(1,871)	$	5,309
Pre-tax adjustments to reconcile to adjusted income from operations
Adjustment for transitioning clients		(1,589)		0		0		0		0		(1,589)
(Income) attributable to noncontrolling interests		(1)		0		(12)		0		0		(13)
Net realized investment (gains) losses		0		(65)		(10)		(36)		0		(111)
Amortization of acquired intangible assets		2,130		51		28		5		0		2,214
Special items
Integration and transaction-related costs		0		0		0		0		405		405
Charges associated with litigation matters														Charges associated with litigation matters	0		0		0		0		(27)		(27)

(Benefits) charges associated with litigation matters		0		(30)		0		0		81		51

Pre-tax adjusted income (loss) from operations	Pre-tax adjusted income (loss) from operations	$	3,555	$	3,113	$	607	$	376	$	(1,385)	$	6,266	Pre-tax adjusted income (loss) from operations	$	1,223	$	987	$	262	$	24	$	(354)	$	2,142

(In millions)														(In millions)	Evernorth		U.S. Medical		International Markets		Other Operations		Corporate and Eliminations		Total
Three months ended March 31, 2020														Three months ended March 31, 2020
Revenues from external customers														Revenues from external customers	$	26,256	$	9,268	$	1,420	$	1,172	$	0	$	38,116
Inter-segment revenues														Inter-segment revenues	974		466		0		5		(1,445)
Net investment income														Net investment income	25		126		40		162		0		353
Total revenues														Total revenues	$	27,255	$	9,860	$	1,460	$	1,339	$	(1,445)	$	38,469

Net realized investment results from certain equity method investments														Net realized investment results from certain equity method investments	0		0		10		0		0		10
Special item related to contractual adjustment for a former client														Special item related to contractual adjustment for a former client	(87)		0		0		0		0		(87)
Adjusted revenues														Adjusted revenues	$	27,168	$	9,860	$	1,470	$	1,339	$	(1,445)	$	38,392

Income (loss) before taxes														Income (loss) before taxes	$	694	$	1,140	$	234	$	72	$	(743)	$	1,397
Pre-tax adjustments to reconcile to adjusted income from operations														Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests														(Income) attributable to noncontrolling interests	(4)		0		(5)		0		0		(9)
Net realized investment (gains) losses (1)														Net realized investment (gains) losses (1)	0		48		46		4		0		98
Amortization of acquired intangible assets														Amortization of acquired intangible assets	479		11		7		1		0		498
Special items														Special items
Debt extinguishment costs														Debt extinguishment costs	0		0		0		0		185		185
Integration and transaction-related costs														Integration and transaction-related costs	0		0		0		0		97		97
Charges associated with litigation matters														Charges associated with litigation matters	0		0		0		0		25		25
Charge for organizational efficiency plan														Charge for organizational efficiency plan	0		0		0		0		31		31

Contractual adjustment for a former client														Contractual adjustment for a former client	(87)		0		0		0		0		(87)

Pre-tax adjusted income (loss) from operations														Pre-tax adjusted income (loss) from operations	$	1,082	$	1,199	$	282	$	77	$	(405)	$	2,235

(1)

Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.

5235

Revenue from external customers includes pharmacy revenues, premiums and fees and other revenues. The following table presents these revenues by product, premium and service type for the three ~~and nine~~ months ended ~~September 30:~~March 31:


	Three Months Ended March 31,
(In millions)		2021		2020
Products (Pharmacy revenues) (ASC 606)
Network revenues		$	14,179	$	12,142
Home delivery and specialty revenues		12,458		11,714
Other		1,388		1,242
Total pharmacy revenues		$	28,025	$	25,098
Insurance premiums (ASC 944)
U.S. Medical premiums
U.S. Commercial
Health Insurance		3,523		3,461
Stop loss		1,194		1,161
Other		310		289
U.S. Government
Medicare Advantage		2,092		1,881
Medicare Part D		450		462
Other		1,138		1,066
Total U.S. Medical premiums		8,707		8,320
International Markets premiums		1,450		1,375
Domestic disability, life and accident premiums		0		1,116
Other premiums		57		29
Total premiums		10,214		10,840
Services (ASC 606)
Fees		2,327		2,154
Other external revenues		14		24
Total services		2,341		2,178
Total revenues from external customers		$	40,580	$	38,116

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2020 2019 2020 2019
Products (Pharmacy revenues) (ASC 606)
Network revenues $ 13,968 $ 12,923 $ 39,200 $ 37,954
Home delivery and specialty revenues 12,422 11,837 36,319 35,893
Other 1,412 1,227 3,945 3,607
Total pharmacy revenues 27,802 25,987 79,464 77,454
Insurance premiums (ASC 944)
U.S. Medical premiums
U.S. Commercial
Health Insurance 3,397 3,174 9,948 9,278
Stop loss 1,146 1,085 3,459 3,221
Other 281 260 853 779
U.S. Government
Medicare Advantage 1,895 1,562 5,680 4,779
Medicare Part D 360 404 1,242 1,329
Other 1,117 1,059 3,246 3,137
Total U.S. Medical premiums 8,196 7,544 24,428 22,523
International Markets premiums 1,360 1,309 4,079 3,914
Domestic disability, life and accident premiums 1,106 1,049 3,346 3,165
Other premiums 20 33 75 107
Total premiums 10,682 9,935 31,928 29,709
Services (ASC 606)
Fees 2,120 2,249 6,253 7,015
Other external revenues 54 36 171 108
Total services 2,174 2,285 6,424 7,123
Total revenues from external customers $ 40,658 $ 38,207 $ 117,816 $ 114,286

Evernorth may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive compensation if we fail to meet ~~these~~the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue for any estimated payouts within Accrued expenses and other liabilities (current). These estimates are adjusted at the end of the guarantee period. Historically, adjustments to original estimates have not been material. The performance guarantee liability was ~~$1.0~~$1.3 billion as of ~~September 30, 2020~~March 31, 2021 and $1.1 billion as of December 31, ~~2019.~~

2020.

5336

~~Signature page~~

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition as of ~~September 30, 2020~~March 31, 2021 compared with December 31, ~~2019~~2020 and our results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021, compared with the same ~~periods~~period last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2019 (“2019~~ 2020 ("Form ~~10-K”~~10-K")~~, in~~. In particular, we encourage you to refer to the “Risk Factors” contained in Part I, Item 1A of ~~that form as such Risk Factors are supplemented by~~ the ~~information contained in Part II, Item 1A of our~~2020 Form ~~10-Q for the quarter ended March 31, 2020.~~10-K.

Unless otherwise indicated, financial information in ~~the~~this MD&A is presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 2 to the Consolidated Financial Statements in our ~~2019~~2020 Form 10-K for additional information regarding the ~~Company’s~~Company's significant accounting policies and see Note 32 to the Consolidated Financial Statements in this Form 10-Q for updates to those ~~accounting~~ policies resulting from adopting new accounting ~~guidance.~~guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors call for caution in estimating full-year results based on interim results of operations.In some of our financial tables in this MD&A, we present either percentage changes or “N/M” when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points (“bps”).

In this MD&A, our consolidated measures “adjusted income from operations,” earnings per share on that same basis and “adjusted revenues” are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of “shareholders’ net income,” “earnings per share” and “total revenues.” We also use pre-tax adjusted income from operations and adjusted revenues to measure the results of our segments.

We use adjusted income from operations as our principal financial measure of operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as shareholders’ net income (or income before taxes for the segment metric) excluding net realized investment gains and losses, amortization of acquired intangible assets and special items, and for periods prior to 2020, results of Anthem, Inc. and Coventry Health Care Inc. (“Coventry”) (collectively, the “transitioning clients”) (see the “Key Transactions and Business Developments” section of the MD&A for further discussion of transitioning clients).items. Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded. Income or expense amounts excluded from adjusted income from operations because they are not indicative of underlying performance or the responsibility of operating segment management include:

•Amortization of acquired intangible assets because these relate to costs incurred for acquisitions.

•~~Resultsof transitioning clients, for periods prior to 2020,because those results are not indicative of ongoing results~~.

•Special items, if any, that management believes are not representative of the underlying results of operations due to the nature or size of these matters.

The term ~~"Adjusted revenues"~~adjusted revenues is defined as total revenues excluding the following adjustments: ~~revenue contribution from transitioning clients for periods prior to 2020,~~ special items and Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of

accounting. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna’s current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning future financial or operating performance, including our ability to deliver affordable, personalized and innovative solutions for our customers and clients, including in light of the challenges presented by the COVID-19 pandemic; future growth, business strategy, strategic or operational ~~initiatives, including our organizational efficiency plan;~~initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; strategic transactions, including the merger (“Merger”) with Express Scripts Holding Company and the sale of our U.S. Group Disability and Life business; our ongoing operational response to the COVID-19 pandemic;transactions; and other statements regarding Cigna’s future beliefs, expectations, plans, intentions, liquidity, cash flows, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our ~~financial,~~ strategic and operational ~~plans or~~ initiatives; ~~our ability to predict and manage medical and pharmacy costs and price effectively;~~ our ability to adapt to changes ~~or trends~~ in an evolving and rapidly changing industry; the scale, scope and duration of the COVID-19 pandemic and its potential impact on our business, operating results, cash flows or financial condition, our ability to compete effectively, differentiate our

products and services from those of our competitors and maintain or increase market share; price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain ~~good~~satisfactory relationships with physicians, hospitals, other health ~~care~~service providers and with producers ~~consultants~~ and consultants; our ability to maintain relationships with one or more key pharmaceutical ~~manufacturers;~~manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug ~~pricing;~~pricing or industry pricing benchmarks; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations; risks related to strategic transactions and realization of the ~~impact~~expected benefits of ~~modifications~~such transactions, as well as integration difficulties or underperformance relative to expectations; dependence on success of relationships with third parties; risk of significant disruption within our operations ~~and processes;~~or among key suppliers or third parties; our ability to ~~identify potential strategic transactions~~invest in and ~~realize the expected benefits (including anticipated synergies) of such transactions in full or within the anticipated time frame, including with respect to the Merger~~properly maintain our information technology and ~~the sale of our Group Disability and Life~~other business ~~as well as~~systems; our ability to ~~integrate~~prevent or ~~separate operations, resources~~contain effects of a potential cyberattack or other privacy or data security incident; potential liability in connection with managing medical practices and ~~systems;~~operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; ~~the outcome of litigation, regulatory audits, investigations, actions or guaranty fund assessments;~~ uncertainties surrounding participation in government-sponsored programs such as Medicare; the ~~effectiveness~~outcome of litigation, regulatory audits, investigations; compliance with applicable privacy, security and ~~security~~data laws, regulations and standards; potential failure of our ~~information technology~~prevention, detection and ~~other business systems~~control systems; unfavorable economic and ~~those~~market conditions, stock market or interest rate declines, risks related to a downgrade in financial strength ratings of our ~~key suppliers or other third parties;~~insurance subsidiaries; the impact of our ~~debt service obligations on~~significant indebtedness and the ~~availability of funds~~potential for ~~other business purposes;~~further indebtedness in the future; unfavorable industry, economic or political ~~conditions, including foreign currency movements; acts of civil unrest, war, terrorism, natural disasters or pandemics; reinsurance~~conditions; credit risk ~~the scale and scope of the COVID-19 pandemic and its potential impact on~~related to our ~~business, operating results, cash flows and financial condition, as well as on our employees, clients, customers, suppliers and partners and on the U.S. and global economies,~~reinsurers; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors of our ~~2019~~2020 Form 10-K, ~~as such Risk Factors are supplemented by information contained in Part II, Item 1A of the Form 10-Q for the quarter ended March 31, 2020,~~ Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our ~~2019~~2020 Form 10-K, ~~and~~ this MD&A and as described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

EXECUTIVE OVERVIEW

Financial Highlights

See Note 1 to the Consolidated Financial Statements for a description of our segments. The commentary provided below describes our results for the three months ended March 31, 2021 compared with the same period in 2020.

Summarized below are certain key measures of our performance by segment for the three months ended March 31, 2021 and 2020:


Financial highlights by segment
	Three Months Ended March 31,
(Dollars in millions, except per share amounts)		2021		2020		% Change


Revenues
Adjusted revenues by segment
Evernorth		$	30,620	$	27,168	13	%
U.S. Medical		10,362		9,860		5
International Markets		1,572		1,470		7
Other Operations		139		1,339		(90)
Corporate, net of eliminations		(1,708)		(1,445)		(18)
Adjusted revenues		40,985		38,392		7

Net realized investment results from certain equity method investments		(14)		(10)		(40)
Special items		—		87		N/M
Total revenues		$	40,971	$	38,469	7	%
Shareholders’ net income		$	1,161	$	1,181	(2)	%
Adjusted income from operations		$	1,664	$	1,758	(5)	%
Earnings per share (diluted)
Shareholders’ net income		$	3.30	$	3.15	5	%
Adjusted income from operations		$	4.73	$	4.69	1	%
Pre-tax adjusted income (loss) from operations by segment
Evernorth		$	1,223	$	1,082	13	%
U.S. Medical		987		1,199		(18)
International Markets		262		282		(7)
Other Operations		24		77		(69)
Corporate, net of eliminations		(354)		(405)		13
Consolidated pre-tax adjusted income from operations		2,142		2,235		(4)

Income attributable to noncontrolling interests		12		9		33
Net realized investment (gains) losses (1)		(13)		(98)		87
Amortization of acquired intangible assets		(495)		(498)		1
Special items		(133)		(251)		47
Income before income taxes		$	1,513	$	1,397	8	%

(1)Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.

For further analysis and explanation of each segment’s results, see the “Segment Reporting” section of this MD&A.


Consolidated Results of Operations (GAAP basis)
	Three Months Ended March 31,
(Dollars in millions)		2021			2020			% Change


Pharmacy revenues		$	28,025		$	25,098		12	%
Premiums		10,214			10,840			(6)
Fees and other revenues		2,341			2,178			7
Net investment income		391			353			11
Total revenues		40,971			38,469			7
Pharmacy and other service costs		27,235			24,190			13
Medical costs and other benefit expenses		8,005			8,322			(4)
Selling, general and administrative expenses		3,279			3,398			(4)
Amortization of acquired intangible assets		495			498			(1)
Total benefits and expenses		39,014			36,408			7
Income from operations		1,957			2,061			(5)
Interest expense and other		(314)			(391)			20
Debt extinguishment costs		(131)			(185)			29


Net realized investment gains (losses)		1			(88)			N/M
Income before income taxes		1,513			1,397			8
Total income taxes		342			208			64
Net income		1,171			1,189			(2)
Less: Net income attributable to noncontrolling interests		10			8			25
Shareholders' net income		$	1,161		$	1,181		(2)	%
Consolidated effective tax rate		22.6		%	14.9		%	770	bps
Medical customers (in thousands)
U.S. Medical		15,016			15,552			(3)	%
International Markets		1,687			1,666			1
Total		16,703			17,218			(3)	%


Reconciliation of Shareholders’ Net Income (GAAP) to Adjusted Income from Operations
		Dollars in Millions						Diluted Earnings Per Share
	Three Months Ended March 31,						Three Months Ended March 31,

			2021		2020				2021		2020
Shareholders’ net income			$	1,161	$	1,181			$	3.30	$	3.15
After-tax adjustments required to reconcile to adjusted income from operations
Net realized investment (gains) losses (1)			13		77				0.04		0.21
Amortization of acquired intangible assets			388		309				1.10		0.82

Special items
Debt extinguishment costs			101		140				0.29		0.38
Integration and transaction-related costs			22		74				0.06		0.20
Charges associated with litigation matters			(21)		19				(0.06)		0.05
Charge for organizational efficiency plan			—		24				—		0.06

Contractual adjustment for a former client			—		(66)				—		(0.18)


Total special items			102		191				0.29		0.51
Adjusted income from operations			$	1,664	$	1,758			$	4.73	$	4.69

(1)Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.

COVID-19 Update

~~The novel strain of coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March 2020 because the virus had surfaced in nearly all regions around the world.~~ From the onset of the COVID-19 pandemic ~~Cigna has~~in 2020, we have focused on ~~continuing to deliver~~delivering peace of mind for the people and businesses we serve, and our employees and their families. ~~We have~~We’ve taken actions to ~~drive~~improve affordability ~~reduce uncertainty,~~and predictability for our customers and patients, and make health care easier. ~~For customers, these actions include~~Cigna led the way since the start of COVID-19 ~~related~~by working to remove cost ~~share waivers, expanded~~as a barrier, expanding access to ~~virtual~~ care ~~support~~and helping employers keep their workforce safe and supported. Most recently, we are conducting direct outreach to customers most at-risk for ~~access~~COVID-19 in key communities to ~~medication,~~provide them with resources about how to get vaccinated and ~~advocating for whole person health through various behavioral health initiatives.~~help them make appointments. We ~~have supported the medical community by simplifying processes~~also began providing transportation to and donating medications for a COVID-19 clinical trial. Cigna and the Cigna Foundation have assisted our communities through several initiatives including the launch of the Brave of Heart Fund that provides financial assistancefrom vaccine sites at no extra cost to ~~survivors of front-line U.S. healthcare workers who gave their lives~~customers in the ~~fight against COVID-19. Cigna also provides emotional support services to their families.~~

majority of our Medicare Advantage plans.

We ~~have continued~~continue to execute our business continuity plans over our operations such as optimizing purchasing volume across the pharmaceutical supply chain in order to mitigate risk associated with prescription drug supply and continuing to support our workforce by enabling remote work where appropriate, and implementing enhanced safety protocols and programs that support the health and mental well-being of our employees. ~~We have continued~~Recent employee programs include expanding benefits-eligible employee use of emergency time off for COVID-19 related reasons as well as offering an incentive award to ~~execute~~those enrolled in our business continuity plans over our operations such as leveraging purchasing volume across the pharmaceutical supply chain in order to mitigate risk associated with prescription drug supply. We did not incur significant disruptions to our operations during the three and nine months ended September 30, 2020 frommedical plan for being fully vaccinated against COVID-19.

~~We will continue to work with our clients, customers, providers and employees to provide support during the pandemic.~~

The COVID-19 pandemic has pervasively impacted the economy, financial markets and the global health care delivery systems. ~~The effects of the COVID-19 pandemic on the Company began to emerge in the U.S. at the end of~~For the first quarter ~~and were not material to the Company's results~~ of ~~operations or financial condition for that period. Beginning~~2021, COVID-19 impacts are most notable in ~~April, we experienced a significant deferral of care by~~ our customers. The deferral of care moderated over the course of the second quarter with utilization levels eventually returning to nearly normal levels by the end of June. As expected, in the third quarter we experienced medical utilization at more typical levels as we observed a reduction to the level of deferred care and our customers sought care for COVID-19 testing and treatment. These impacts were most prevalent in the U.S. Medical segment ~~where quarterly earnings reflect~~with net unfavorable COVID-19 related impacts as compared with the same period in 2020. COVID-19 related impacts ~~of COVID-19 including the return of medical utilization to more typical levels,~~include direct costs of COVID-19 ~~care as well as the costs of actions we have taken to support customers~~testing, treatment and ~~providers,~~vaccines, lower risk adjusted revenues in our Medicare Advantage business, decreased contributions from our specialty products and ~~lower net investment income. Higher year to date U.S. Medical results reflect~~disenrollment resulting from the economic impacts of the pandemic, partially offset by deferral of care by our ~~customers in April and May that exceeded~~customers. As compared with the ~~cost~~three months ended December 31, 2020 the net unfavorable impacts of COVID-19 ~~testing and treatment, the cost of COVID-19 related actions including premium relief programs for employer clients as well as cost share waivers for customers, and~~decreased reflecting lower net investment income. Our Group Disability and Other results reflect significantly elevated life insurance claims related to the COVID-19 pandemic and its effects in the third quarter. Quarterly and year to date earnings in our Evernorth segment also reflected effects of the pandemic, specifically, a favorable mix of claims as a result of both the type of drugs dispensed as well as the distribution method used for dispensing and fulfilling,direct costs, partially offset by ~~lower non-specialty, 30-day retail script volume.~~ less deferral of care.

Segment results are discussed further in the ~~Segment Reporting~~"Segment Reporting" section of this MD&A and discussion of the impact of COVID-19 on our investment portfolio and related considerations regarding our investment outlook can be found in Note 119 to the Consolidated Financial Statements and in the "Investment Assets" discussion of this MD~~&A, respectively.~~&A.

~~While it~~It is difficult to ~~quantify~~predict the ~~impact~~pace, duration and extent of the COVID-19 pandemic and its related impacts including the vaccination efforts on our results for the remainder of ~~2020~~2021 and ~~beyond, we~~beyond. We believe that such results may continue to be impacted by, among other things, ~~lower customer volumes due to rising unemployment levels,~~vaccine related costs, higher medical costs to treat those affected by the virus, ~~or those who defer care, the return of costs related~~lower customer volumes due to ~~previously deferred care, the potential for continued deferral of care, higher life insurance claims,~~elevated unemployment, lower ~~investment returns, or lower future~~ risk adjustment revenue due to disrupted care impeding appropriate documentation of customer risk ~~profiles.~~profiles in our Medicare Advantage business, the return of costs for those who had previously deferred care, the potential for future deferral of care, or volatility in the economic markets.

~~The Company~~Cigna has taken actions to enhance our liquidity that, combined with our other sources of liquidity described in the "Liquidity and Capital Resources Outlook" section below, and our current projections for operating cash flows, we believe are sufficient to support our operations and meet our obligations.

The situation surrounding COVID-19 remains fluid, and we are actively managing our response and assessing impacts to our financial position and operating results, as well as adverse developments in our business.

For further information regarding the potential impact of COVID-19 on the Company, ~~please~~ see “Risk Factors” contained in Part I, Item 1A of ~~the 2019~~our 2020 Form ~~10-K as such Risk Factors are supplemented in Part II, Item 1A of the Form 10-Q for the quarter ended March 31, 2020.~~10-K.

See Note 1 to the Consolidated Financial Statements for a description of our segments. Unless otherwise specified, the commentary provided below describes our results for the three and nine months ended September 30, 2020 compared with the same periods in 2019.

~~Summarized below are certain key measures of our performance by segment for the three and nine months ended September 30, 2020 and 2019:~~

Financial highlights by segment
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts) 2020 2019 % Change 2020 2019 % Change
Revenues
Adjusted revenues by segment
Evernorth $ 29,827 $ 24,880 20 % $ 85,597 $ 70,877 21 %
U.S. Medical 9,629 9,148 5 28,726 27,311 5
International Markets 1,440 1,402 3 4,342 4,185 4
Group Disability and Other 1,314 1,284 2 3,981 3,889 2
Corporate, net of eliminations (1,409) (881) (60) (4,248) (2,625) (62)
Adjusted revenues 40,801 35,833 14 118,398 103,637 14
Revenue contribution from transitioning clients — 2,718 N/M — 11,657 N/M
Net realized investment results from certain equity method investments 37 5 N/M 87 27 222
Special items 117 — N/M 204 — N/M
Total revenues $ 40,955 $ 38,556 6 % $ 118,689 $ 115,321 3 %
Shareholders’ net income $ 1,388 $ 1,351 3 % $ 4,323 $ 4,127 5 %
Adjusted income from operations $ 1,618 $ 1,718 (6) % $ 5,528 $ 4,856 14 %
Earnings per share (diluted)
Shareholders’ net income $ 3.78 $ 3.57 6 % $ 11.66 $ 10.83 8 %
Adjusted income from operations $ 4.41 $ 4.54 (3) % $ 14.91 $ 12.74 17 %
Pre-tax adjusted income from operations by segment
Evernorth $ 1,443 $ 1,399 3 % $ 3,774 $ 3,555 6 %
U.S. Medical 757 953 (21) 3,479 3,113 12
International Markets 208 194 7 809 607 33
Group Disability and Other 70 143 (51) 279 376 (26)
Corporate, net of eliminations (366) (442) 17 (1,171) (1,385) 15
Consolidated pre-tax adjusted income from operations 2,112 2,247 (6) 7,170 6,266 14
Adjustment for transitioning clients — 274 N/M — 1,589 N/M
Income attributable to noncontrolling interests 10 4 150 27 13 108
Net realized investment gains (losses) 69 56 23 69 111 (38)
Amortization of acquired intangible assets (493) (734) 33 (1,487) (2,214) 33
Special items 106 (84) N/M (289) (456) 37
Income before income taxes $ 1,804 $ 1,763 2 % $ 5,490 $ 5,309 3 %

~~For further analysis and explanation of each segment’s results, see the “Segment Reporting” section of this MD&A.~~

Consolidated Results of Operations (GAAP basis)
Three Months Ended
September 30, Nine Months Ended
September 30,
(Dollars in millions) 2020 2019 % Change 2020 2019 % Change
Pharmacy revenues $ 27,802 $ 25,987 7 % $ 79,464 $ 77,454 3 %
Premiums 10,682 9,935 8 31,928 29,709 7
Fees and other revenues 2,174 2,285 (5) 6,424 7,123 (10)
Net investment income 297 349 (15) 873 1,035 (16)
Total revenues 40,955 38,556 6 118,689 115,321 3
Pharmacy and other service costs 26,624 24,552 8 76,425 73,565 4
Medical costs and other benefit expenses 8,429 7,734 9 23,863 22,930 4
Selling, general and administrative expenses 3,301 3,413 (3) 10,106 10,096 —
Amortization of acquired intangible assets 493 734 (33) 1,487 2,214 (33)
Total benefits and expenses 38,847 36,433 7 111,881 108,805 3
Income from operations 2,108 2,123 (1) 6,808 6,516 4
Interest expense and other (336) (411) 18 (1,101) (1,291) 15
Debt extinguishment costs — — N/M (199) — N/M
Net realized investment gains (losses) 32 51 (37) (18) 84 N/M
Income before income taxes 1,804 1,763 2 5,490 5,309 3
Total income taxes 406 409 (1) 1,143 1,173 (3)
Net income 1,398 1,354 3 4,347 4,136 5
Less: Net income attributable to noncontrolling interests 10 3 233 24 9 167
Shareholders’ net income $ 1,388 $ 1,351 3 % $ 4,323 $ 4,127 5 %
Consolidated effective tax rate 22.5 % 23.2 % (70) bps 20.8 % 22.1 % (130) bps
Medical customers (in thousands)
U.S. Medical 15,314 15,495 (1) %
International Markets 1,668 1,576 6
Total 16,982 17,071 (1) %

Reconciliation of Shareholders’ Net Income (GAAP) to Adjusted Income from Operations
$ in millions Diluted Earnings Per Share
Three Months Ended
September 30, Nine Months Ended
September 30, Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019 2020 2019 2020 2019
Shareholders’ net income $ 1,388 $ 1,351 $ 4,323 $ 4,127 $ 3.78 $ 3.57 $ 11.66 $ 10.83
After-tax adjustments required to reconcile to adjusted income from operations
Net realized investment (gains) losses (64) (49) (75) (100) (0.17) (0.13) (0.20) (0.26)
Amortization of acquired intangible assets 376 558 1,061 1,694 1.02 1.47 2.86 4.43
Adjustment for transitioning clients — (207) — (1,217) — (0.55) — (3.19)
Special items
Integration and transaction-related costs 83 88 256 311 0.23 0.24 0.69 0.82
Debt extinguishment costs — — 151 — — — 0.41 —
Charge for organizational efficiency plan — — 24 — — — 0.06 —
(Benefits) charges associated with litigation matters — (23) 19 41 — (0.06) 0.05 0.11
Risk corridors recovery (76) — (76) — (0.21) — (0.20) —
Contractual adjustment for a former client (89) — (155) — (0.24) — (0.42) —
Total special items (82) 65 219 352 (0.22) 0.18 0.59 0.93
Adjusted income from operations $ 1,618 $ 1,718 $ 5,528 $ 4,856 $ 4.41 $ 4.54 $ 14.91 $ 12.74

Commentary: Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 versus Three Months Ended March 31, 2020 ~~versus the same periods in 2019~~

~~Unless indicated otherwise, the~~The commentary presented below, and in the segment discussions that follow, compare results for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 with results for the three ~~and nine~~ months ended ~~September 30, 2019.~~

~~Earnings and Revenue~~March 31, 2020.

Shareholders’ net ~~income.~~income ~~The increase for the three months ended September 30, 2020 compared with the same period in 2019 was~~decreased slightly, driven by lower amortization for customer-related intangibles associated with transitioning clients and the risk corridors claim recovery (see Risk Mitigation Programs - Individual ACA Business section of this MD&A and Note 18 to the Consolidated Financial Statements for further discussion), partially offset by the absence of earnings from transitioning clients and lower adjusted income from ~~operations. For~~operations (see below) and the ~~nine months ended September 30, 2020,~~absence of certain favorable tax benefits reported in the first quarter of 2020. These unfavorable effects were mostly offset by lower realized investment losses and lower net special item charges. On a per-share basis, the increase in shareholders' net income ~~increased compared with~~reflects the ~~same period in 2019, primarily due to higher adjusted income from operations and lower amortization, partially offset by the absence~~favorable effect of ~~earnings from transitioning clients.~~our share repurchase program.

Adjusted income from ~~operations.~~operations ~~The decrease for the three months ended September 30, 2020 compared with the same period in 2019 reflects impacts of COVID-19~~decreased, primarily resulting from lower earnings in the U.S. Medical segment reflecting the unfavorable impact of COVID-related items and ~~unfavorable life claims experience in~~the loss of earnings due to the sale of the Group Disability and ~~Other segment. Adjusted income from operations~~Life business. These unfavorable effects were partially offset by increased ~~for the nine months ended September 30, 2020 compared with the same period in 2019, driven in part by higher~~ earnings in the ~~U.S. Medical and International segments resulting from the deferral of care in April and May due to the COVID-19 pandemic. Also contributing to the increase were higher~~ Evernorth segment ~~earnings reflecting customer~~ primarily attributable to continued business

growth ~~and increased script volumes,~~ and lower interest costs in Corporate ~~driven by~~resulting from debt ~~repayments.~~

repayment and restructuring actions in 2020 and 2021. On a per-share basis, the increase in adjusted income from operations reflects the favorable effect of our share repurchase program.

Medical customers ~~decreased slightly as of September 30, 2020 compared with the same period last year primarily as~~declined, reflecting a ~~result of declines~~lower customer base in ~~the~~our Middle Markets and National Accounts market ~~segment and increased~~segments including disenrollment ~~driven by~~resulting from the economic impacts of ~~COVID-19. Those decreases were~~the COVID-19 pandemic; partially offset by growth in ~~the~~our Select ~~International~~ and our Medicare ~~Advantage~~ market segments.

Pharmacy revenues increased ~~primarily~~ reflecting ~~the transition of U.S. Medical's customers to Evernorth, higher claims volumes, primarily driven by the Evernorth collaboration with Prime Therapeutics,~~strong business and an increase in pricing, primarily due to inflation on branded drugs. These factors were substantially offset by the absence of revenues from the transitioning clients and, to a lesser extent, an increase in generic fill rate.customer growth. See the ~~Evernorth segment~~"Evernorth segment" section of this MD&A for further discussion of pharmacy revenues.

Premiums ~~increased,~~were lower, primarily reflecting the effect of the sale of the Group Disability and Life business, partially offset by an increase in U.S. Medical premiums resulting from ~~customer growth~~increased customers in our insured ~~products~~businesses and rate increases ~~reflecting expected~~in line with underlying medical cost inflation and the return of the health insurance industry tax. These factors were partially offset by the impact of premium relief programs implemented in response to significantly lower than historical utilization as individuals deferred care in April and May due to the COVID-19 pandemic.trend.

Fees and other revenues ~~decreased,~~increased, primarily ~~reflecting the transition of U.S. Medical's commercial customers to~~driven by growth in Evernorth's ~~retail~~ pharmacy ~~network beginning in the third quarter of 2019 (see Note 2(K) to the Consolidated Financial Statements included in our 2019 Form 10-K for further information).~~

and health services businesses.

Net investment income ~~decreased, primarily driven by lower yields, including lower income from~~increased due to strong returns on our partnership investments, ~~due to current economic conditions. These effects were~~ partially offset by ~~higher~~lower average ~~assets.~~assets due to the sale of the Group Disability and Life business. See the ~~Investment Asset~~"Investment Assets" section of this MD&A for further discussion.

~~Other Components of Consolidated Results of Operations~~

•Pharmacy and other service costs increased, ~~primarily~~ reflecting ~~the transition of U.S. Medical's customers to Evernorth, higher claims volumes, primarily driven by the Evernorth collaboration with Prime Therapeutics,~~strong business and an increase in pricing, primarily due to inflation on branded drugs. These factors were substantially offset by the impact of the absence of the transitioning clients and, to a lesser extent, effective management of supply chain and the favorable impact of the mix of claims.customer growth.

•Medical costs and other benefit expenses ~~increased,~~decreased, reflecting ~~both medical cost trend~~the effect of the sale of the Group Disability and ~~customer growth in insured products~~Life business, partially offset by an increase in U.S. Medical driven by an increase in medical trend, including COVID-related impacts, and ~~higher life claims~~increased customers in ~~Group Disability and Other due to the effects of the COVID-19 pandemic.~~our insured businesses.

•Selling, general and administrative expenses decreased, ~~slightly for~~primarily resulting from the ~~three months~~sale of the Group Disability and ~~were essentially flat for~~Life business, lower special item charges and the nine months ended September 30, 2020, compared with the same periods in 2019. These results primarily reflected the risk corridors claim recovery recognized in the third quarter of 2020 (see Risk Mitigation Programs - Individual ACA Business section of this MD&A and Note 18 to the Consolidated Financial Statements for further discussion) and lower costs associated with operations-related litigation and compliance costs (see the U.S. Medical section of this MD&A), offset by the returnelimination of the health insurance industry tax.

•~~Amortization of acquired intangible assets~~Interest expense and other decreased due to debt restructuring and repayment actions during 2020 and the first quarter of 2021.

Debt extinguishment costs were lower because the debt repaid in the first quarter of 2021 had lower interest rates than the debt repaid in the first quarter of 2020.

Realized investment results improved significantly, primarily reflecting ~~lower amortization~~favorable market value adjustments on equity securities in 2021 compared with unfavorable equity markets in the first quarter of ~~customer-related intangibles associated with the transitioning clients.~~2020.

•The ~~Consolidated~~ effective tax rate~~decreased,~~ was higher, driven by recognition of certain incremental federal and state tax benefits in the first quarter of 2020, partially offset by the ~~return~~repeal of the nondeductible health insurance industry ~~tax.~~tax in 2021.

6142

~~Key Transactions and Business~~ Developments

~~Merger with Express Scripts~~

As discussed in more detail in our 2019 Form 10-K, Cigna acquired Express Scripts on December 20, 2018 in a cash and stock transaction valued at $52.8 billion. Costs related to this transaction are reported in “integration and transaction-related costs” as a special item and excluded from adjusted income from operations because they are not indicativePurchase of ~~future underlying performance of the business.~~

On January 30, 2019, Anthem exercised its early termination right and terminated its pharmacy benefit management services agreement with us, effective March 1, 2019. There was a twelve-month transition period that ended March 1, 2020. We excluded the results of Express Scripts’ contract with Anthem (and also Coventry) from our non-GAAP reporting metrics “adjusted revenues” and “adjusted income from operations” for 2019 and refer to these clients as “transitioning clients.” As of December 31, 2019, the transition was substantially complete; therefore, beginning in 2020, we no longer exclude results of transitioning clients from our reported adjusted revenues and adjusted income from operations.MDLIVE

~~Agreement~~In April 2021, Cigna's Evernorth segment completed the 100% acquisition of MDLIVE, Inc., a 24/7 virtual care platform. The acquisition of MDLIVE will enable Evernorth to ~~sell~~continue expanding access to virtual care and delivering a more affordable, convenient and connected care experience for consumers.

Sale of Group Disability and Life ~~business~~Business

As discussed in Note 64 to the Consolidated Financial Statements, Cigna ~~entered into a definitive agreement in December 2019 to sell the~~sold its U.S. Group Disability and Life business to New York Life Insurance Company for ~~$6.3 billion.~~$6.2 billion on December 31, 2020. The ~~“Liquidity”~~“Liquidity and Capital Resources” section of this MD&A provides ~~further~~ discussion of the ~~impact~~use of proceeds from this ~~pending divestiture on our liquidity and capital resources.~~divestiture.

~~Organizational Efficiency Plan~~Regulation

~~Consistent with~~The "Business - Regulation" section of our commitment to affordability for our customers and clients, during the fourth quarter of 2019 the Company committed to a plan to increase our organizational alignment and operational efficiency and reduce costs. As a result, we recognized a charge in Selling, general and administrative expenses of $207 million, pre-tax ($162 million, after-tax) in the fourth quarter of 2019 and an additional charge of $31 million pre-tax ($24 million, after-tax) in the first quarter of 2020. We expect to realize annualized after-tax savings of approximately $200 million. A substantial portion of the savings will be realized in 2020. See Note 15 to the Consolidated Financial Statements for discussion.

~~Industry Developments and Other Matters~~

~~Our 2019~~2020 Form 10-K provides a detailed description of The Patient Protection and Affordable Care Act (“ACA”) provisions and other legislative initiatives that impact our ~~health care and pharmacy services~~ businesses, including regulations issued by the Centers for Medicare & Medicaid Services (“CMS”) and the Departments of the Treasury and Health and Human Services. ~~The health care and pharmacy services~~Our businesses continue to operate in a dynamic environment, and the laws and regulations applicable to ~~these businesses,~~us, including the ACA, continue to be subject to legislative, regulatory and judicial challenges.

Corporate Tax Reform. Recent proposals related to corporate tax reform propose raising corporate tax rates, among other things. While it is unclear whether recent proposals will be enacted in their current form, the proposed increases in corporate tax rates could have a material impact on our future results of operations and, in the period of enactment, both our results of operations and financial condition. We will continue to monitor developments.

Medicare Part D Rebate Rule. As disclosed in the “Regulation” section of our 2020 Form 10-K, the United States Department of Health and Human Services (“HHS”) and the HHS Office of Inspector General (“HHS-OIG”) released a final rule in November 2020 which eliminated an anti-kickback regulatory safe harbor protection for price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors or pharmacy benefit managers under the Medicare Part D program and created two new safe harbors. The ~~following table provides an update on~~two new safe harbors cover (i) price reductions by manufacturers to plan sponsors under Medicare Part D and Medicaid managed care organizations that are reflected at the ~~expected impact~~time of ~~these items~~dispense and ~~other matters:~~(ii) fixed-fee service arrangements between manufacturers and pharmacy benefit managers. HHS previously delayed the elimination of the aforementioned regulatory safe harbor to January 1, 2023 and, in March 2021, HHS-OIG delayed the effective date for the two new safe harbors to January 1, 2023.

6243


~~Item~~			~~Description~~
~~Executive Orders Regarding Drug Pricing~~			On July 24, 2020, President Trump signed four Executive Orders addressing prescription drug importation; affordability of insulin and epinephrine purchased at federally qualified health centers through the Public Health Service Act Section 340B drug pricing program; drug rebates and most favored-nation international pricing. The release of the most favored-nation international pricing order, an approach to international reference pricing, was delayed and a revised order was issued on September 13, 2020. All four orders call for subsequent policy action by the Department of Health and Human Services (HHS). They do not contain any policy changes that take effect immediately. The order covering rebate policy directs HHS to complete prior rulemaking which proposed changes to the federal anti-kickback safe harbor to exclude regulatory protection for rebates between drug manufacturers and Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers. This order also requires that prior to taking such action, the Secretary of HHS confirm that the action is not projected to increase federal spending, Medicare beneficiary premiums or customers’ total out-of-pocket costs. In late September 2020, HHS released a rule intended to allow importation of certain prescription drugs from Canada under the Federal Food, Drug and Cosmetic Act, effective November 30, 2020, as well as guidance to pharmaceutical manufacturers related to importation or reimportation of certain products. Also in late September, HHS released a proposed rule that would implement the program to make insulin and epinephrine available at Section 340B pricing at participating federally qualified health centers. Comments on the proposed rule were due in late October. President Trump signed an additional Executive Order on September 24, 2020 directing HHS to take various actions to expand upon existing actions to provide Americans more choice, lower costs, and better healthcare. The September 24 Order specifically calls on HHS, in coordination with the Commissioner of Food and Drugs, to continue to expand access to affordable medications, including accelerating approvals of new generic and biosimilar drugs and facilitating safe importation of prescription drugs. ~~The Company is continuing to monitor actions related to the Executive Orders and expects any final regulations, in the aggregate, will not have a material impact on our business.~~
~~Transparency in Coverage~~			On October 29, 2020, the HHS, the Department of Labor and the Department of the Treasury issued a final rule which requires most group health plans and health insurance issuers in the individual and group markets to disclose price and cost-sharing information for all items and services to participants and enrollees. The cost-sharing information requirements under the rule take effect in a phased approach beginning January 1, 2023. In addition to providing personalized cost-sharing information, health plans and health insurers must also publicly disclose in-network provider negotiated rates and historical out-of-network allowed amounts beginning January 1, 2022. Beginning in 2021, insurers will be able to receive credit in their medical loss ratio calculations for certain savings they share with enrollees. ~~We will continue to work with policymakers and our clients and customers on the implications of the rule.~~
~~COVID-19-related Regulatory Actions~~			In response to the COVID-19 public health emergency, U.S. federal and state governments have increasingly enacted new regulatory requirements, as well as provided additional flexibility to industry participants. These regulatory actions primarily provide for: •~~client and customer premium relief to avoid the cancellation or non-renewal of policies;~~ •mandating or requesting waiver of customer cost-sharing and other associated costs related to COVID-19 testing or treatment, as well as establishing provider reimbursement and future vaccine immunizations coverage requirements; •~~extending claims filing deadlines for providers, customers and facilities;~~ •~~mandating or encouraging waiver of customer cost-share related to telemedicine services, as well as requiring certain reimbursement levels for telemedicine providers to encourage its utilization;~~ •~~enacting coverage and reimbursement requirements at in-network levels for certain services received from out-of-network providers;~~ •~~revising or suspending the use of certain medical management procedures; and~~ •~~mandating prescription drug benefit administration requirements primarily related to formulary exceptions and restrictions, and prior authorization and prescription drug refill limits.~~ ~~We are diligently working with federal, state and local governments to deliver access to simple, affordable and predictable health care and continue to monitor developments.~~


~~Medicare Advantage ("MA")~~			~~Medicare Star Quality Ratings ("Star Ratings")~~: CMS uses a Star Rating system to measure how well MA plans perform and scores performance in several categories, including quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits. Approximately 77% of our MA customers were in four star or greater plans for bonus payments received in 2020 and 87% for bonus payments to be received in 2021. In October 2020, CMS announced the Star Ratings for bonus payments to be received in 2022. We expect the percentage of our MA customers in four star or greater plans will increase to 88% for bonus payments to be received in 2022.
			~~MA Rates~~: ~~Final MA reimbursement rates for 2021 were published by CMS in April 2020. We do not expect the new rates to have a material impact on our consolidated results of operations in 2021.~~
			~~Risk Adjustment~~: As discussed in the “Regulation” and “Risk Factors” sections of our 2019 Form 10-K, our MA business is subject to reviews, including risk adjustment data validation (“RADV”) audits by CMS and the Office of the Inspector General (“OIG”). We expect that CMS, OIG and other federal agencies will continue to closely scrutinize components of the Medicare program.
			The “Regulation” section of the 2019 Form 10-K also discusses a proposed rule issued by CMS in 2018 for RADV audits of contract year 2011 and all subsequent years that included, among other things, extrapolation of the error rate related to RADV audit findings without applying the adjustment for underlying fee-for-service data errors as currently contemplated by CMS’ RADV audit methodology. RADV audits for our contract years 2011 through 2015 are currently in process. CMS has announced its intent to use third-party auditors to audit all Medicare Advantage contracts by either a comprehensive or a targeted RADV review for each contract year. If the proposed rule is adopted in its current form, it could result in some combination of degraded plan benefits, higher monthly premiums and reduced choice for the population served by all MA insurers. The Company, along with other MA organizations and additional interested parties, submitted comments to CMS on the proposed rule as part of the notice-and-comment rulemaking process. The comment period concluded on August 28, 2019. If CMS adopts the rule as proposed, there could be a material impact on the Company’s future results of operations, though we expect the rule would be subject to legal challenges. In addition, the Company is subject to OIG RADV audits that are in process. Previously suspended CMS and OIG audit activities have resumed.
			Also, as described in Note 18 to the Consolidated Financial Statements, the U.S. Department of Justice is currently conducting an industry-wide investigation of risk adjustment data submission practices and business processes, which in the case of certain other MA organizations has resulted in litigation.


~~Item~~			~~Description~~
~~Affordable Care Act~~			~~Cost-Sharing Reduction Subsidies~~: The ACA provides for cost-sharing reductions that offset the amount that qualifying customers pay for deductibles, copays and coinsurance. The federal government stopped funding insurers for the cost-sharing reduction subsidies in 2017. Certain insurers have sued the federal government for failure to pay cost-sharing reduction subsidies and the matter remains unresolved. In the first set of consolidated appeals, the Court of Appeals for the Federal Circuit issued a decision on August 14, 2020, finding that (i) the CSR reimbursement provision of the ACA imposes an obligation on the government to pay, and (ii) the government’s payments must be reduced by the amount of additional premium tax credit payments that each insurer received as a result of the government’s termination of CSR payments. On September 28, 2020, the insurers filed a petition for rehearing en banc in the Federal Circuit and that petition remains pending before the court. As described in Note 18 to the Consolidated Financial Statements, we filed a lawsuit in May 2020 against the federal government seeking payment of these subsidies and our case is stayed pending the outcome of the consolidated appeals currently pending in the Federal Circuit. Our premium rates for the 2018, 2019 and 2020 plan years reflected a lack of government funding for cost-sharing reduction subsidies.
			~~ACA Litigation:~~As described in the “Business - Regulation” section of our 2019 Form 10-K, a federal district court ruled that the “individual mandate” in the ACA is unconstitutional. On appeal, the Court of Appeals for the Fifth Circuit agreed that the “individual mandate” is unconstitutional but ordered the district court to reexamine whether the other provisions of the ACA can remain in effect, thereby leaving in doubt whether the entire ACA is unconstitutional until there is a final judicial determination on appeal. The California-led states and the U.S. House of Representatives filed petitions seeking to appeal the Fifth Circuit's ruling to the U.S. Supreme Court. On March 2, 2020, the Supreme Court agreed to hear the appeals and the case is scheduled to be argued before the Supreme Court on November 10, 2020.

~~Risk Mitigation Programs – Individual ACA Business~~

~~Risk Corridors.~~ In 2016, we recorded an allowance for the balance of our ACA risk corridors receivable based on court decisions and the large program deficit. On April 27, 2020, the U.S. Supreme Court ruled that insurers are entitled to the full amount due under the risk corridors program. The Supreme Court remanded the cases before it to the lower courts for further proceedings consistent with its opinion. We filed a lawsuit in May 2020 seeking payment of these funds. We received $120 million in payments in September 2020, which resolved our risk corridors claim. See Note 18 to the Consolidated Financial Statements for further information.

~~Risk Adjustment.~~ Following each program year, risk adjustment balances are subject to audit adjustment by CMS through the RADV program. RADV audits commenced with the 2017 benefit year. CMS published the final RADV transfers for the 2017 benefit year in 2019 along with guidance that the settlement will not take place until 2021. The 2018 benefit year data validation error rates were released by CMS in June 2020 and the RADV transfers were published by CMS in August 2020, subject to an appeals period with final settlement expected in 2022. Based on the information currently available, we adjusted our risk adjustment balance to reflect the expected outcome of the RADV program.

~~The following table presents our balances associated with the risk adjustment program and RADV audit adjustments as of September 30, 2020 and December 31, 2019.~~

Receivable (Payable) Balances
(In millions) September 30,
2020 December 31,
2019
Risk Adjustment
Receivables (1)
$ 110 $ 47
Payables (2)
$ (121) $ (213)

~~(1)Receivables, net of allowances, are reported in Accounts receivable, net in the Consolidated Balance Sheets.~~

~~(2)Payables are reported in Accrued expenses and other liabilities (current) in the Consolidated Balance Sheets.~~

Risk adjustment program activity, including any RADV adjustments, was favorable by $7 million pre-tax ($5 million after tax) for the three months and $21 million pre-tax ($17 million after tax) for the nine months ended September 30, 2020 compared with charges of $18 million pre-tax ($14 million after-tax) and $134 million pre-tax ($103 million after-tax) for the same periods in 2019.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We maintain liquidity at two levels: the subsidiary level and the parent company level.

~~Liquidity~~Cash requirements at the subsidiary level generally consist of:

•pharmacy, medical costs and other benefit payments;

•expense requirements, primarily for employee compensation and benefits, information technology and facilities costs;

•income taxes; and

•debt service.

Our subsidiaries normally meet their liquidity requirements by:

•maintaining appropriate levels of cash, cash equivalents and short-term investments;

•using cash flows from operating activities;

•matching investment durations to those estimated for the related insurance and contractholder liabilities;

•selling investments; and

•borrowing from affiliates, subject to applicable regulatory limits.

~~Liquidity~~Cash requirements at the parent company level generally consist of:

•debt ~~service and dividend payments~~service;

•payment of declared dividends to shareholders;

•lending to subsidiaries as needed; and

•pension plan funding.

The parent company normally meets its liquidity requirements by:

•maintaining appropriate levels of cash and various types of marketable investments;

•collecting dividends from its subsidiaries;

•using proceeds from issuing debt and common stock; and

•borrowing from its subsidiaries, subject to applicable regulatory limits.

Dividends from our insurance, Health Maintenance Organization (“HMO”) and foreign subsidiaries are subject to regulatory restrictions. See Note 2019 to the Consolidated Financial Statements in our ~~2019~~2020 Form 10-K for additional information regarding these restrictions. Most of ~~Express Scripts'~~Evernorth's subsidiaries are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to Cigna.

Cash flows for the ~~nine~~three months ended ~~September 30~~March 31 were as follows:


		Nine Months Ended September 30,					Three Months Ended March 31,
(In millions)	(In millions)	2020		2019		(In millions)	2021		2020
Operating activities	Operating activities	$	6,056	$	6,692	Operating activities	$	1,093	$	1,887
Investing activities	Investing activities	$	(1,444)	$	(463)	Investing activities	$	(717)	$	(269)
Financing activities	Financing activities	$	(3,812)	$	(5,480)	Financing activities	$	(4,051)	$	(1,818)

The following discussion explains variances in the various categories of cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared with the same period in ~~2019.~~2020.

Operating activities

Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs, premiums, fees, investment income, taxes, benefit costs and other expenses.

Cash flows from operating activities decreased, primarily driven by ~~an increase~~increases in accounts receivable due to the timing of certain client billing cycles and business growth ~~higher~~as well as the timing of payable and accrued liability payments including inventory ~~purchases and resumption of the health insurance industry tax payment, offset by higher pharmacy and services costs payable due to business growth.~~purchases.

Investing and Financing activities

Cash flows used in investing activities increased, primarily due to ~~higher net~~lower investment ~~purchases.~~sale activity.

Cash used in ~~finance~~financing activities ~~decreased,~~increased, primarily due to higher stock repurchases and an increase in dividends paid. Cash used in financing activities also includes proceeds from ~~issuance of~~ debt ~~partially~~issuances offset by ~~higher~~the repayment of long-term debt ~~repayments~~ and ~~stock repurchases.~~commercial paper borrowings.

We maintain a share repurchase program authorized by our Board of Directors. Under this program, we may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through open market purchases ~~or privately negotiated transactions~~ in compliance with Rule 10b-18 under the Securities Exchange Act of

1934, as amended, including through Rule 10b5-1 trading ~~plans.~~plans or privately negotiated transactions. The program may be suspended or discontinued at any time.

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we repurchased ~~13.2~~12.7 million shares for approximately ~~$2.4~~$2.8 billion. From ~~October~~April 1, ~~2020~~2021 through ~~November 4, 2020~~May 6, 2021, we repurchased ~~2.8~~1.7 million shares for approximately ~~$500~~$400 million. Share repurchase authority was ~~$3.1~~$2.7 billion as of ~~November 4, 2020.~~May 6, 2021.

Capital Resources

Our capital resources ~~(primarily~~consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and ~~proceeds from~~ the issuance of long-term debt and equity ~~securities) provide protection for policyholders, furnish the financial strength to underwrite insurance risks and facilitate continued business growth.~~

~~In December 2019, Cigna entered into a definitive agreement to sell the U.S. Group Disability and Life business to New York Life Insurance Company for $6.3 billion. The sale~~securities. Our businesses generate significant cash flow from operations, some of which is ~~expected to close in the fourth quarter of 2020~~ subject to ~~applicable~~ regulatory approvals and other customary closing conditions. Cigna estimates approximately $5.3 billion of net after-tax proceeds from this transaction and expects to use these proceeds primarily for share repurchase and repayment of debt.

In 2018, Cigna entered into a $3.25 billion five-year revolving credit agreement and a $3.0 billion term loan credit agreement in financing the Express Scripts acquisition. The term loan was repaid in full and the term loan credit agreement was terminated in the fourth quarter of 2019.

In 2019, Cigna entered into an additional $1 billion 364-day revolving credit agreement that expired in October 2020. In October 2020, Cigna replaced the revolving credit agreement with a new $1.0 billion 364-day revolving credit agreement which will expire in October 2021.

~~As of September 30, 2020, there were no outstanding balances under either of the revolving credit agreements.~~

On April 1, 2020, the Company borrowed an aggregate principal amount of $1.4 billion under a new 364-day term loan credit agreement. The Company entered into this agreement to further enhance its liquidity position in light of disruption in the commercial paper market and used a portion of the proceeds to pay down amounts outstanding under its commercial paper facility. See Note 8restrictions relative to the ~~Consolidated Financial Statements~~amount and timing of dividend payments to parent. Dividends from U.S. regulated subsidiaries were $625 million and $507 million for ~~further information on our credit agreements.~~

~~At September 30,~~the three months ended March 31, 2021 and 2020, ~~our debt-to-capitalization ratio was 42.8%, a decline from 45.2% at December 31, 2019. We have a near-term focus on accelerated debt repayment and expect to continue to deleverage to below 40% using~~respectively. Nonregulated subsidiaries also generate significant cash ~~flows~~flow from operating activities, ~~and a portion of the proceeds from the sale of the Group Disability and Life business.~~

~~Management, guided by regulatory requirements and rating agency capital guidelines, determines the amount of capital resources that we maintain. Management allocates resources~~which is typically available immediately to ~~new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate.~~parent for general corporate purposes.

We prioritize our use of capital resources to:

•Invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide the capital necessary to ~~support growth and~~ maintain or improve the financial strength ratings of subsidiaries and to repay debt and fund pension ~~obligations;~~obligations if necessary;

•

pay dividends to shareholders;

•consider acquisitions that are strategically and economically advantageous; and

•return capital to ~~investors primarily~~shareholders through share repurchases.

At March 31, 2021, our debt-to-capitalization ratio was 39.9%, an increase from 39.5% at December 31, 2020.

Group Disability and Life Sale. In connection with the sale of this business that closed on December 31, 2020, we deployed approximately $3.0 billion to debt repayment by: (i) repaying in full our $1.4 billion 364-Day Term Loan Credit Agreement entered into on April 1, 2020, on December 31, 2020; (ii) redeeming in full the $1.0 billion aggregate principal amount of Cigna’s Senior Floating Rate Notes due 2021 on January 15, 2021 at a redemption price calculated in accordance with the terms and conditions of the indenture governing the Notes; and (iii) repaying certain balances of our outstanding commercial paper in January 2021.

Commercial Paper Program. Cigna also maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time not to exceed $4.25 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had an immaterial outstanding balance as of March 31, 2021.

In 2018, Cigna entered into a $3.25 billion five-year revolving credit agreement. In 2019, Cigna entered into an additional $1.0 billion 364-day revolving credit agreement that expired in October 2020, at which point we replaced the 364-day revolving credit agreement with a new $1.0 billion 364-day revolving credit agreement which was scheduled to expire in October 2021. As of March 31, 2021, there were no outstanding balances under either of the revolving credit agreements.

In April 2021, Cigna entered into a $3.0 billion five-year revolving credit and letter of credit agreement and a $1.0 billion three-year revolving credit agreement, which replaced the revolving credit agreement that was entered into in 2018. Also in April 2021, Cigna entered into an additional $1.0 billion 364-day revolving credit agreement that will expire in April 2022, and replaced the existing 364-day revolving credit agreement which was scheduled to expire in October 2021.

See Note 6 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.

Our capital management strategy to support the liquidity and regulatory capital requirements of our foreign operations and certain international growth initiatives is to retain overseas a significant portion of the earnings generated by our foreign operations. This strategy does not materially limit our ability to meet our liquidity and capital needs in the United States.

Liquidity and Capital Resources Outlook

We maintain sufficient liquidity to meet our cash needs through our cash and cash equivalents balances, cash flows from operations, commercial paper program, credit agreements and the issuance of long-term ~~debt.~~debt and equity securities. As of ~~September 30, 2020,~~March 31, 2021, we had $4.25 billion of undrawn committed capacity under our revolving credit agreements ~~$1.7~~(these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $4.25 billion of remaining capacity under our commercial paper program and ~~approximately $5.8~~$7.0 billion in cash and short-term investments, approximately ~~$1.2~~$2.5 billion of which was held by the parent company or certain nonregulated subsidiaries. We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy. A description of our outstanding debt can be found in Note 86 to the Consolidated Financial Statements. Updates made to our revolving credit agreements in April 2021 are discussed above in the Capital Resources section of this MD&A.

In the first quarter of 2021 Cigna declared and paid a quarterly cash dividend of $1.00 per share of Cigna common stock. On April 28, 2021 the Board of Directors declared a quarterly cash dividend of $1.00 per share of Cigna common stock to be paid on June 23, 2021 to shareholders of record on June 8, 2021. Cigna currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of Cigna and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board of Directors may deem relevant.

In April 2021, Cigna completed its acquisition of MDLIVE, Inc. We funded this acquisition with cash on hand and commercial paper borrowings.

~~During~~As noted in Note 16 to the ~~nine months ended September 30,~~Consolidated Financial Statements in our 2020 Form 10-K, we ~~made an immaterial~~fund our qualified pension ~~contribution as~~plans at least at the minimum amount required ~~under~~by the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006. We currently expect the required contributions for 2021 under the Pension Protection Act of 2006 to be immaterial.

~~Our~~Risks to our liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the ~~Risk Factors~~"Risk Factors" section of our ~~2019~~2020 Form ~~10-K and Part II, Item 1A of the Form 10-Q for the quarter ended March 31, 2020.~~10-K. Though we believe we have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase costs. In addition to the sources of liquidity discussed above, the parent company can borrow an additional ~~$0.9~~$1.9 billion from its subsidiaries without further approvals as of ~~September 30, 2020.~~March 31, 2021.

Guarantees and Contractual Obligations

We are contingently liable for various contractual obligations entered into in the ordinary course of business. See Note 1815 to the Consolidated Financial Statements for discussion of various guarantees.

We have updated long-term debt obligations and purchase obligations as of ~~September 30, 2020~~March 31, 2021 which were previously provided in our ~~2019~~2020 Form 10-K. Investment commitments are described in Note 139 to the Consolidated Financial Statements. There have been no material changes to ~~the~~ other information presented in our table of guarantees and contractual obligations as set forth in our ~~2019~~2020 Form 10-K.


(In millions, on an undiscounted basis)	(In millions, on an undiscounted basis)	Total	2020	2021 to 2022	2023 to 2024	Thereafter	(In millions, on an undiscounted basis)	Total		2021		2022 to 2023		2024 to 2025		Thereafter
On-Balance Sheet	On-Balance Sheet						On-Balance Sheet
Long-term debt(1)		50,954	1,503	7,953	7,106	34,392

Long-term debt (1)							Long-term debt (1)	$	49,597	$	1,316	$	5,898	$	6,757	$	35,626

Off-Balance Sheet							Off-Balance Sheet
Purchase Obligations							Purchase Obligations	$	3,593	$	1,313	$	1,462	$	522	$	296

(1)Amounts include scheduled interest payments, current maturities of long-term debt and term loan borrowing. Finance leases are included in long-term debt and primarily represent obligations for information technology network storage, servers and equipment. See Note 16 to the Consolidated Financial Statements for information regarding finance leases. ~~See Note 8 to the Consolidated Financial Statements for information regarding our long-term debt.~~

CRITICAL ACCOUNTING ESTIMATES

The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements. Management considers an accounting estimate to be critical if:

•it requires assumptions to be made that were uncertain at the time the estimate was made; and

•changes in the estimate or different estimates that could have been selected could have a material effect on our consolidated results of operations or financial condition.

Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosures presented in ~~our 2019~~the 2020 Form 10-K. We regularly evaluate items that may impact critical accounting estimates.

Our most critical accounting estimates, as well as the effect of hypothetical changes in material assumptions used to develop each estimate, are described in the ~~2019~~2020 Form 10-K. As of ~~September 30, 2020~~March 31, 2021, there were no significant changes to the critical accounting estimates from what was reported in our ~~2019~~2020 Form 10-K.

~~Goodwill and Other Intangible Assets~~

Our annual evaluations of goodwill and other intangible assets for impairments were completed during the third quarter of 2020. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses or market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations, and in certain situations, could have a material adverse effect on liquidity and our financial condition.

As discussed in the executive overview of this MD&A, the COVID-19 pandemic has pervasively impacted the economy, financial markets and the global health care delivery systems. If the impact of the COVID-19 pandemic over the remainder of 2020 and beyond is worse than management's current projections, these adverse effects to our business could impact the estimated fair value of our reporting units.

SEGMENT REPORTING

The following section of this MD&A discusses the results of each of our segments. See Note 1 to the Consolidated Financial Statements for a description of our segments.

In segment discussions, we present adjusted revenues and “pre-tax adjusted income from operations,” defined as income before taxes excluding realized investment gains (losses), amortization of acquired intangible assets and special ~~items and, for periods prior to 2020, results of transitioning clients.~~items. Ratios presented in this segment discussion exclude the same items as pre-tax adjusted income from operations. See Note 1916 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income before income taxes to pre-tax adjusted income from operations, as well as a reconciliation of total revenues to adjusted revenues. Note 1916 to the

Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

In these segment discussions, we also present “pre-tax adjusted margin,” defined as pre-tax adjusted income from operations divided by adjusted revenues.

As of the third quarter 2020, the segment previously reported as Health Services is reported as Evernorth, and the segment previously reported as Integrated Medical is reported as U.S. Medical. There are no changes to the underlying business reported in either segment.

Evernorth Segment

Evernorth includes a broad range of coordinated and point solution health services, including pharmacy ~~services,~~solutions, benefits management solutions, care solutions and ~~data and analytics.~~intelligence solutions. As described in the introduction to Segment Reporting, Evernorth performance is measured using the below metrics:

•Adjusted gross profit and pre-tax adjusted income from ~~operations.~~operations, which exclude the impact of special items.

•Adjusted pharmacy script volume is calculated by multiplying the total non-specialty network scripts filled through 90-day programs and home delivery scripts by three and counting all other network and specialty scripts as one script.

•Generic fill rate is defined as the total number of generic scripts divided by the total overall scripts filled. Generally, higher generic fill rates reduce revenues, as generic drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic drugs is incrementally lower than the price charged to our clients, higher generic fill rates generally have a favorable impact on our gross profit. The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (such as therapies for chronic conditions) commonly dispensed from home delivery pharmacies as compared to acute medications that are primarily dispensed by pharmacies in our retail networks.

The key factors that impact Evernorth revenues and costs of revenues are volume, mix of claims and price. These key factors are discussed further below. See Note 23 to the Consolidated Financial Statements included in our ~~2019~~2020 Form 10-K for additional information on revenue and cost recognition policies for this segment.

•As our clients’ claim volumes increase or decrease, our resulting revenues and cost of revenues correspondingly increase or decrease. Our gross profit could also increase or decrease as a result of changes in purchasing discounts.

•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. Types of drugs can have an impact on our pharmacy revenues, pharmacy and other service costs and gross profit, including amounts payable under certain financial and performance guarantees with our clients. In addition to the types of drugs, the mix of generic claims (i.e., generic fill rate) also impacts our gross profit. Generally, higher generic fill rates reduce revenues, as generic drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic drugs is incrementally lower than the price charged to our clients, higher generic fill rates generally have a favorable impact on our gross profit. The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (such as therapies for chronic conditions) commonly dispensed from home delivery pharmacies as compared to acute medications that are primarily dispensed by pharmacies in our retail networks. Furthermore, our gross profit differs among network, home delivery and specialty distribution methods and can impact our profitability.

•Our client contract pricing is impacted by our ongoing ability to negotiate supply chain contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates. As we seek to improve the effectiveness of our integrated solutions for the benefit of our clients, we are continuously innovating and optimizing the supply chain. Our gross profit could also increase or decrease as a result of supply chain initiatives implemented. Inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients can affect our revenues and cost of revenues.

In this MD&A, we present revenues and gross profit, as well as adjusted revenues and adjusted gross profit, consistent with our segment reporting metrics, which exclude special items and, for periods prior to 2020, contributions from transitioning clients. As of December 31, 2019, the transition of these clients was substantially complete; therefore, beginning in 2020, we no longer exclude results of transitioning clients from our adjusted metrics. See the “Key Transactions and Business Developments” section of our 2019 Form 10-K MD&A for further discussion of transitioning clients and why we present this information.items.

Results of Operations


Financial Summary	Financial Summary	Three Months Ended September 30,						Change Favorable (Unfavorable)				Nine Months Ended September 30,										Change Favorable (Unfavorable)		Financial Summary					Three Months Ended March 31,										Change Favorable (Unfavorable)
(In millions)	(In millions)	2020			2019					2020					2019					(In millions)								2021		2020

Total revenues	Total revenues	$	29,944		$	27,598				9	%				$	85,801				$	82,534				4	%	Total revenues							$	30,620		$	27,255				12	%
Less: Transitioning clients		—			(2,718)			N/M				—					(11,657)					N/M

Less: Contractual adjustment for a former client	Less: Contractual adjustment for a former client	(117)			—			N/M				(204)					—					N/M		Less: Contractual adjustment for a former client							—			(87)						N/M
Adjusted revenues(1)	Adjusted revenues(1)	$	29,827		$	24,880		20	%			$	85,597				$	70,877				21	%	Adjusted revenues(1)							$	30,620		$	27,168					13
Gross profit	Gross profit	$	2,107		$	2,192		(4)	%			$	5,589				$	6,631				(16)	%	Gross profit							$	1,843		$	1,701					8
Adjusted gross profit(1)	Adjusted gross profit(1)	$	1,990		$	1,880		6	%			$	5,385				$	4,887				10	%	Adjusted gross profit(1)							$	1,843		$	1,614					14
Pre-tax adjusted income from operations	Pre-tax adjusted income from operations	$	1,443		$	1,399		3	%			$	3,774				$	3,555				6	%	Pre-tax adjusted income from operations							$	1,223		$	1,082					13	%
Pre-tax adjusted margin	Pre-tax adjusted margin	4.8		%	5.6		%	(80)	bps			4.4		%			5.0		%			(60)	bps	Pre-tax adjusted margin							4.0		%	4.0		%


		Three Months Ended September 30,						Change Favorable (Unfavorable)				Nine Months Ended September 30,										Change Favorable (Unfavorable)							Three Months Ended March 31,					Change Favorable (Unfavorable)
(Dollars and adjusted scripts in millions)	(Dollars and adjusted scripts in millions)	2020			2019					2020					2019					(Dollars and adjusted scripts in millions)								2021		2020
Selected Financial Information(1)	Selected Financial Information(1)																							Selected Financial Information(1)
Pharmacy revenue by distribution channel	Pharmacy revenue by distribution channel																							Pharmacy revenue by distribution channel
Adjusted network revenues	Adjusted network revenues	$	14,522		$	10,911				33	%				$	41,179				$	29,937				38	%	Adjusted network revenues							$	15,138		$	12,791		18	%
Adjusted home delivery and specialty revenues	Adjusted home delivery and specialty revenues	12,699			11,650			9	%			37,111					34,198					9	%	Adjusted home delivery and specialty revenues							12,774			12,005			6
Other revenues	Other revenues	1,412			1,228			15	%			3,946					3,608					9	%	Other revenues							1,388			1,242			12
Total adjusted pharmacy revenues	Total adjusted pharmacy revenues	$	28,633		$	23,789		20	%			$	82,236				$	67,743				21	%	Total adjusted pharmacy revenues							$	29,300		$	26,038		13		%
Pharmacy script volume	Pharmacy script volume																							Pharmacy script volume
Adjusted network scripts(2)	Adjusted network scripts(2)	309			242			28	%			890					687					30	%	Adjusted network scripts(2)							323			288			12		%
Adjusted home delivery and specialty scripts(2)	Adjusted home delivery and specialty scripts(2)	72			70			3	%			215					211					2	%	Adjusted home delivery and specialty scripts(2)							70			72			(3)
Total adjusted scripts(2)	Total adjusted scripts(2)	381			312			22	%			1,105					898					23	%	Total adjusted scripts(2)							393			360			9		%
Generic fill rate	Generic fill rate																							Generic fill rate
Network	Network	87.0		%	87.1		%	(10)	bps			87.9		%			87.5		%			40	bps	Network							87.3		%	88.2		%	(90)		bps
Home delivery	Home delivery	85.3		%	84.2		%	110	bps			85.1		%			84.2		%			90	bps	Home delivery							86.0		%	84.8		%	120		bps
Overall generic fill rate	Overall generic fill rate	86.9		%	86.7		%	20	bps			87.6		%			87.1		%			50	bps	Overall generic fill rate							87.2		%	87.9		%	(70)		bps

(1)Amounts exclude special ~~items and, for periods prior to 2020, contributions from transitioning clients.~~items.

(2)Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted as one script.

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~

~~In the third quarter of 2019, U.S. Commercial operating segment customers transitioned to Express Scripts’ retail pharmacy network. In the first quarter of~~March 31, 2020 ~~U.S. Government operating segment customers transitioned to Express Scripts’ retail pharmacy network.~~

Adjusted network revenues. The increase reflected ~~the transition of U.S. Medical’s customers and~~ higher claims volume, primarily due to our collaboration with Prime ~~Therapeutics. For the nine months ended September 30, 2020, the increase was further driven by~~Therapeutics, increased prices due to inflation on branded drugs ~~partially offset by~~and claims mix due to ~~the increase~~a decrease in the generic fill ~~rate.~~

rate as a result of the COVID-19 vaccine.

Adjusted home delivery and specialty revenues. The increase reflected higher prices, primarily due to inflation on branded drugs, ~~and~~as well as higher specialty claims volume due in part to our collaboration with Prime Therapeutics. This increase was partially offset by lower home delivery claims volume, primarily due to client mix and ~~specialty claims volume. These increases were partially offset by~~increased script volume in the first quarter of 2020 due to customers requesting advance prescriptions related to COVID-19 supply concerns, and claims mix due to an increase in the generic fill rate.

Adjusted gross profit. The increase reflected ~~customer growth, higher adjusted pharmacy script volumes,~~ benefits from the effective management of supply chain, strong performance in specialty pharmacy services, customer growth and ~~the favorable impact of claims mix as a result of the types of drugs dispensed, the distribution method used for dispensing and fulfilling, and an increase in the generic fill rate.~~

higher adjusted pharmacy script volumes, primarily due to our collaboration with Prime Therapeutics.

Pre-tax adjusted income from operations. The increase reflected ~~customer growth, higher adjusted pharmacy scripts volumes,~~ benefits from the effective management of supply chain, strong performance in specialty pharmacy services, customer growth and the favorable impact of claims mix as a result of the types of drugs dispensed, the distribution method used for dispensing and fulfilling, and an increase in the generic fill rate, partially offset by an increase in operating expenseshigher adjusted pharmacy script volumes, primarily due to ~~client transitions.~~

our collaboration with Prime Therapeutics.

U.S. Medical Segment

U.S. Medical ~~consists of a~~includes Cigna’s U.S. Commercial ~~operating segment that includes our employer-sponsored medical coverage~~ and a U.S. Government ~~operating segment~~businesses that ~~includes~~provide comprehensive medical and coordinated solutions to clients and customers. U.S. Commercial products and services include medical, pharmacy, behavioral health,

dental, vision, health advocacy programs and other products and services for insured and administrative services only ("ASO") clients. U.S. Government solutions include Medicare ~~offerings~~Advantage, Medicare Supplement and Medicare Part D plans for seniors, Medicaid plans and individual health insurance ~~offerings~~plans both on and off the public ~~health insurance~~ exchanges. As described in the introduction to Segment Reporting, performance of the U.S. Medical segment is measured using pre-tax adjusted income from operations. Key factors affecting profitability for this segment include:

•customer growth;

•revenues from integrated specialty products, including pharmacy services sold to clients and customers across all funding solutions;

•percentage of Medicare Advantage customers in plans eligible for quality bonus payments;

•benefit expenses as a percentage of premiums (medical care ratio or “MCR”) for our insured commercial and government businesses; and

•selling, general and administrative expense as a percentage of adjusted revenues (expense ratio).

Results of Operations


Financial Summary	Financial Summary	Three Months Ended September 30,						Change Favorable (Unfavorable)				Nine Months Ended September 30,										Change Favorable (Unfavorable)		Financial Summary					Three Months Ended March 31,											Change Favorable (Unfavorable)
(In millions)	(In millions)	2020			2019					2020					2019					(In millions)								2021		2020

Adjusted revenues	Adjusted revenues	$	9,629		$	9,148				5	%				$	28,726				$	27,311				5	%	Adjusted revenues							$	10,362			$	9,860				5	%
Pre-tax adjusted income from operations	Pre-tax adjusted income from operations	$	757		$	953		(21)	%			$	3,479				$	3,113				12	%	Pre-tax adjusted income from operations							$	987			$	1,199					(18)	%
Pre-tax adjusted margin	Pre-tax adjusted margin	7.9		%	10.4		%	(250)	bps			12.1		%			11.4		%			70	bps	Pre-tax adjusted margin							9.5		%		12.2		%				(270)	bps
Medical care ratio	Medical care ratio	82.6		%	80.5		%	(210)	bps			77.2		%			80.3		%			310	bps	Medical care ratio							81.8		%		78.3		%				(350)	bps
Expense ratio	Expense ratio	21.8		%	23.2		%	140	bps			22.2		%			22.3		%			10	bps	Expense ratio							21.7		%		21.8		%				10	bps

As of September 30,
(In thousands) 2020 2019 % Change
U.S. Medical Customers
U.S. Commercial 2,120 2,078 2 %
U.S. Government 1,413 1,374 3 %
Insured 3,533 3,452 2 %
Service 11,781 12,043 (2) %
Total 15,314 15,495 (1) %

(In millions) As of September 30, 2020 As of December 31, 2019 % Change
Unpaid claims and claim expenses – U.S. Medical $ 3,200 $ 2,892 11 %

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020

Adjusted ~~revenues.~~revenues ~~The increase~~increased for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared with the same ~~periods~~period in ~~2019~~2020 reflects customer growth in our ~~U.S. Commercial insured and~~ Medicare Advantage ~~businesses, as well as~~business, higher premium rates due to anticipated underlying medical cost trend and higher net investment income.

Pre-tax adjusted income from operations decreased for the ~~resumption~~three months ended March 31, 2021 compared with the same period in 2020. The decrease reflects net unfavorable COVID-19 related impacts and the net effect of non-recurring items; partially offset by higher net investment income and the repeal of the health insurance industry tax. The ~~increase for~~unfavorable COVID-19 related impacts include direct costs of COVID-19 testing, treatment and vaccines, lower risk adjusted revenues in our Medicare Advantage business, decreased contributions from our specialty products and increased disenrollment resulting from the ~~nine months ended September 30, 2020~~economic effects of the pandemic. These impacts were partially offset by deferral of care.

The medical care ratio increased reflecting COVID-19 related impacts and the repeal of the health insurance industry tax; partially offset by the effect of one less calendar day in the first quarter of 2021. COVID-19 related impacts include direct costs of COVID-19 testing, treatment and vaccines costs and lower risk adjusted revenues in our Medicare Advantage business; partially offset by deferral of care.

The expense ratio was flat due to the repeal of the health insurance industry tax offset by non-recurring items.

Medical Customers


	As of March 31,
(In thousands)	2021	2020	% Change



U.S. Commercial	2,133	2,133	—	%
U.S. Government	1,464	1,412	4	%
Insured	3,597	3,545	1	%
Service	11,419	12,007	(5)	%
Total	15,016	15,552	(3)	%

Our medical customer base decreased at March 31, 2021 compared with the same period in ~~2019 includes the impact of premium relief programs for clients implemented in the second quarter of~~ 2020, ~~in response to significantly lower than historical utilization as individuals deferred care due to the COVID-19 pandemic.~~

~~Pre-tax adjusted income from operations.~~The decrease for the three months ended September 30, 2020 compared with the same period in 2019 reflects unfavorable prior period development primarily related to the second quarter of 2020, COVID-19 related impacts, and the return of the health insurance industry tax. COVID-19 related impacts include the net impact of the return of medical utilization to more typical levels, direct COVID-19 costs, as well as the costs of actions we have taken to support customers and providers, decreased specialty contributions, and lower net investment income. The increase for the nine months ended September 30, 2020 compared with the same period in 2019 reflects increased earnings from the U.S. Commercial and U.S. Government insured businesses due to deferral of care by our customers in response to the COVID-19 pandemic exceeding the cost of COVID-19 related care, partially offset by premium relief programs extended to employer clients and lower net investment income.

~~Medical care ratio.~~ The medical care ratio increased for the three months ended September 30, 2020 compared with the same period in 2019 reflecting unfavorable prior period development primarily related to the second quarter of 2020 and COVID-19 related impacts, partially offset by the pricing effect of the health insurance industry tax. The decrease for the nine months ended September 30, 2020 compared with the same period in 2019 is due to the COVID-19 pandemic effects of significant deferred utilization experienced in April and May exceeding incremental costs of care, partially offset by premium relief programs extended to employer clients.

~~Expense ratio.~~ The expense ratio decreased for the three months ended September 30, 2020 and was essentially flat for the nine months ended September 30, 2020 compared with the same periods in 2019 reflecting higher insured revenues and lower costs associated with operations-related litigation and compliance matters, partially offset by the resumption of the health insurance industry tax.

~~Other Items Affecting U.S. Medical Results~~

~~Unpaid Claims and Claim Expenses~~

Our unpaid claims and claim expenses liability was higher as of September 30, 2020 compared with December 31, 2019, primarily due to seasonality in our stop-loss products and membership growth in our Medicare Advantage business.

~~Medical Customers~~

~~Our medical customer base decreased at September 30, 2020 compared with the same period in 2019,~~ reflecting a lower customer base in our Middle Markets and National Accounts ~~segment and increased~~segments including disenrollment resulting from the economic impacts of the COVID-19 ~~pandemic~~pandemic; partially offset by growth in our Select segment and our Medicare Advantage business.

A medical customer is defined as a person meeting any one of the following criteria:

•is covered under a medical insurance policy, managed care arrangement or service agreement issued by us;

•has access to our provider network for covered services under their medical plan; or

•has medical claims that are administered by us.

Unpaid Claims and Claim Expenses


(In millions)	As of March 31, 2021		As of December 31, 2020		% Change


Unpaid claims and claim expenses – U.S. Medical	$	3,549	$	3,184	11	%

Our unpaid claims and claim expenses liability was higher as of March 31, 2021 compared with December 31, 2020, primarily due to stop loss seasonality.

International Markets Segment

As described in the introduction to Segment Reporting, performance of the International Markets segment is measured using pre-tax adjusted income from operations. Key factors affecting pre-tax adjusted income from operations for this segment are:

•premium growth, including new business and customer retention;

•benefit expenses as a percentage of premiums (loss ratio);

•selling, general and administrative expense ~~and acquisition expense~~ as a percentage of revenues (expense ratio and acquisition cost ratio); and

•the impact of foreign currency movements.

Results of Operations

Financial Summary Three Months Ended September 30, Change
Favorable
(Unfavorable) Nine Months Ended September 30, Change
Favorable
(Unfavorable)
(In millions) 2020 2019 2020 2019
Adjusted revenues $ 1,440 $ 1,402 3 % $ 4,342 $ 4,185 4 %
Pre-tax adjusted income from operations $ 208 $ 194 7 % $ 809 $ 607 33 %
Pre-tax adjusted margin 14.4 % 13.8 % 60 bps 18.6 % 14.5 % 410 bps
Loss ratio 57.4 % 57.6 % 20 bps 55.1 % 56.8 % 170 bps
Acquisition cost ratio 11.8 % 13.0 % 120 bps 10.9 % 13.0 % 210 bps
Expense ratio (excluding acquisition costs) 19.5 % 19.0 % (50) bps 18.7 % 19.0 % 30 bps


Financial Summary	Three Months Ended March 31,								Change Favorable (Unfavorable)
(In millions)		2021			2020


Adjusted revenues			$	1,572		$	1,470			7	%
Pre-tax adjusted income from operations			$	262		$	282			(7)	%
Pre-tax adjusted margin			16.7		%	19.2		%		(250)	bps
Loss ratio			59.0		%	57.8		%		(120)	bps
Acquisition cost ratio			11.0		%	9.1		%		(190)	bps
Expense ratio (excluding acquisition costs)			17.7		%	17.4		%		(30)	bps

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020

Adjusted revenues increased ~~mainly~~primarily due to ~~business growth in Asia and Europe, partially offset by premium relief programs, primarily in Europe. The increase in adjusted revenues was also partially offset by unfavorable~~favorable foreign currency movements ~~for the nine months ended September 30, 2020.~~and business growth.

Pre-tax adjusted income from operations ~~increased for the three months ended September 30, 2020 due to lower~~decreased reflecting higher acquisition cost, loss and ~~loss~~expense ratios, ~~as well as business growth,~~ partially offset by higher ~~expense ratios. For the nine months ended September 30, 2020, the increase in pre-tax adjusted~~net investment income, ~~from operations reflects lower acquisition, loss and expense ratios and business growth, primarily in Asia, partially offset by unfavorable~~favorable foreign currency movements and ~~lower net investment income. The ratios for both the three and nine months ended September 30, 2020 reflect the unfavorable impact of premium relief programs.~~business growth.

The segment’s loss ratio ~~decreased~~increased reflecting lower medical utilization due to the COVID-19 pandemic, partially offset by premium relief programs. For the nine months ended September 30, 2020, the decrease in the loss ratio was also partially offset by the absence of 2019 reserve ~~updates.~~updates and higher claims.

The acquisition cost ratio ~~decreased~~increased reflecting ~~an update~~the absence of the favorable impact from a refinement to ~~our commission deferral process and lower~~the accounting for acquisition ~~expenses~~costs in ~~Asia,~~the first quarter of 2020, partially offset by ~~premium relief programs.~~lower amortization expenses in Asia.

The expense ratio (excluding acquisition costs) increased ~~for the three months ended September 30, 2020~~ reflecting ~~premium relief programs. For the nine months ended September 30, 2020, the decrease~~a change in ~~the expense ratio was mainly driven by lower spend across markets.~~business mix.

Other Items Related to International Markets Results

South Korea is the single largest geographic market for our International Markets segment. For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, South Korea generated ~~37%~~39% of the segment’s adjusted revenues and ~~53%~~59% of the segment’s pre-tax adjusted income from operations.

7651

Other Operations

Prior to the sale of the Group Disability and Life business on December 31, 2020, Other

Operations included Cigna’s Group Disability and Life business which offered group long-term and short-term disability, and group life, accident, voluntary and specialty insurance products and services. Additionally, for 2021 and 2020, this segment includes Corporate Owned Life Insurance (“COLI”) and the Company’s run-off operations. As described in the introduction of Segment Reporting, performance of ~~Group Disability and~~ Other Operations is measured using pre-tax adjusted income from operations. Key factors affecting pre-tax adjusted income from operations are:

•~~premium growth, including new business and customer retention;~~premiums;

•net investment income;

•benefit expenses as a percentage of premiums (loss ratio); and

•selling, general and administrative expense as a percentage of revenues excluding net investment income (expense ratio).

Results of Operations


Financial Summary	Financial Summary	Three Months Ended September 30,						Change Favorable (Unfavorable)				Nine Months Ended September 30,										Change Favorable (Unfavorable)		Financial Summary					Three Months Ended March 31,											Change Favorable (Unfavorable)
(In millions)	(In millions)	2020			2019					2020					2019					(In millions)								2021		2020

Adjusted revenues	Adjusted revenues	$	1,314		$	1,284				2	%				$	3,981				$	3,889				2	%	Adjusted revenues							$	139			$	1,339				(90)	%
Pre-tax adjusted income from operations	Pre-tax adjusted income from operations	$	70		$	143		(51)	%			$	279				$	376				(26)	%	Pre-tax adjusted income from operations							$	24			$	77					(69)	%
Pre-tax adjusted margin	Pre-tax adjusted margin	5.3		%	11.1		%	(580)	bps			7.0		%			9.7		%			(270)	bps	Pre-tax adjusted margin							17.3		%		5.8		%				1,150	bps

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020

Sale of U.S. Group Disability and Life Business. As discussed further in the Executive Overview section of this MD&A, we sold our U.S. Group Disability and Life business on December 31, 2020. Because this business constituted the vast majority of the segment, going forward, we expect a substantial decline in adjusted revenues and adjusted income from operations in this segment in 2021 as compared to 2020.

Adjusted revenues ~~increased primarily due to growth in disability, life~~ and ~~voluntary products, partially offset by lower investment income.~~

~~Pre-tax~~pre-tax adjusted income from operations ~~and margin~~decreased due to ~~unfavorable life claims experience related to~~ the ~~COVID-19 pandemic, lower investment income~~sale of the Group Disability and ~~lower interest rates, partially offset by favorable results in our voluntary products.~~

Life business.

Corporate

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, severance, certain overhead and project costs and intersegment eliminations for products and services sold between segments.


Financial Summary	Three Months Ended March 31,							Change Favorable (Unfavorable)
(In millions)		2021			2020



Pre-tax adjusted income (loss) from operations			$	(354)		$	(405)		13	%

Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 31, 2021 versus Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2020

Pre-tax adjusted loss from operations was lower, ~~primarily~~ reflecting lower interest ~~expense.~~

expense due to lower levels of outstanding debt.

INVESTMENT ASSETS

The following table presents our investment asset portfolio excluding separate account assets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Additional information regarding our investment assets is included in Notes 9, 10, 11 ~~12, 13~~ and 1412 to the Consolidated Financial Statements.


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Debt securities	Debt securities	$	24,673	$	23,755	Debt securities	$	17,649	$	18,131
Equity securities	Equity securities	379		303		Equity securities	550		501
Commercial mortgage loans	Commercial mortgage loans	1,979		1,947		Commercial mortgage loans	1,347		1,419
Policy loans	Policy loans	1,347		1,357		Policy loans	1,344		1,351
Other long-term investments	Other long-term investments	2,698		2,403		Other long-term investments	2,897		2,832
Short-term investments	Short-term investments	458		423		Short-term investments	511		359
Total	Total	$	31,534	$	30,188	Total	$	24,298	$	24,593
Investments classified as assets of business held for sale (1)		$	(8,258)	$	(7,709)
Investments per Consolidated Balance Sheets		$	23,276	$	22,479

~~(1)~~ The table above includes $8.3 billion as of September 30, 2020 and $7.7 billion as of December 31, 2019 of investments associated with the U.S. Group Disability and Life business that are held for sale to New York Life. Under the terms of the definitive agreement, some of the assets currently associated with the Group Disability and Life business can be substituted for other assets. The assets that will transfer to New York Life will be primarily debt securities and, to a lesser extent, commercial mortgage loans and short-term investments.

Debt Securities

Investments in debt securities include publicly-traded and privately-placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value on our balance sheet. Additional information regarding valuation methodologies, key inputs and controls is included in Note 1210 to the Consolidated Financial Statements. More detailed information about debt securities by type of issuer and maturity dates is included in Note 119 to the Consolidated Financial Statements.

The following table reflects our portfolio of debt securities by type of issuer as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.


(In millions)	(In millions)	September 30, 2020		December 31, 2019		(In millions)	March 31, 2021		December 31, 2020
Federal government and agency	Federal government and agency	$	634	$	733	Federal government and agency	$	394	$	456
State and local government	State and local government	713		810		State and local government	162		167
Foreign government	Foreign government	2,402		2,256		Foreign government	2,420		2,511
Corporate	Corporate	20,409		19,420		Corporate	14,214		14,562
Mortgage and other asset-backed	Mortgage and other asset-backed	515		536		Mortgage and other asset-backed	459		435
Total	Total	$	24,673	$	23,755	Total	$	17,649	$	18,131

Our debt securities portfolio ~~increased~~decreased during the first ~~nine~~three months of ~~2020~~2021 reflecting ~~an increase~~a decrease in valuations due to ~~decreasing~~increasing yields, ~~and~~which was partially offset by net ~~purchase activity.~~ purchases during the quarter.

As of ~~September 30, 2020, $22.1~~March 31, 2021, $15.1 billion, or ~~90%~~86% of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining ~~$2.6~~$2.5 billion were below investment grade. The majority of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum. These quality characteristics have not materially changed ~~from~~since the prior year, and ~~are~~remain consistent with our investment strategy.

Investments in debt securities are diversified by issuer, geography and ~~industry as appropriate.~~industry. On an aggregate basis, the debt securities portfolio continues to perform according to original investment expectations. However, due to the economic impacts of the COVID-19 pandemic, there are certain issuers, particularly within the aviation, energy and hospitality sectors, that are showing signs of distress, primarily in the form of requests for temporary covenant relief. There were no material unrealized losses in any of these sectors as of the reporting date. We continue to monitor the economic environment and its effect on our portfolio, and consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 119 to the Consolidated Financial Statements.

Foreign government obligations are concentrated in Asia, primarily South Korea, consistent with our risk management practice and local regulatory requirements of our international business operations. Corporate debt securities include private placement assets of ~~$7.9~~$5.9 billion. These investments are generally less marketable than publicly-traded bonds; however, yields on these investments tend to be higher than yields on publicly-traded bonds with comparable credit risk. We perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.

In addition to amounts classified as debt securities in our Consolidated Balance Sheets, we participate in an insurance joint venture in China with a 50% ownership interest. This entity had an investment portfolio of approximately $10.3 billion supporting its business that is primarily invested in Chinese corporate and government debt securities. We account for this joint venture on the equity method of accounting and report it in Other assets. There were no investments with a material unrealized loss as of September 30, 2020.

Commercial Mortgage Loans

As of March 31, 2021, the $1.3 billion commercial mortgage loan portfolio consisted of approximately 45 loans that are in good standing. Our commercial mortgage loans are fixed rate loans, diversified by property type, location and borrower. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested in the property generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 9 to the Consolidated Financial Statements.

Loans are secured by high quality commercial properties, located in strong institutional markets, and are generally made at less than 65% of the property’s value at origination of the loan. Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations. We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.

~~Overall,~~COVID-19 has negatively impacted commercial real estate fundamentals and capital market activity ~~has been negatively impacted by COVID-19~~ with concentrated weakness in hotels and regional malls. Our mortgage loan portfolio is well diversified by property type and geography with no material exposure to

hotels and no exposure to regional shopping malls.

~~As of September 30, 2020,~~ We continue to monitor the ~~$2.0 billion commercial~~long-term impacts on the office sector due to growing headwinds: expanded remote working flexibility, shorter term leases and corporate migration to lower cost states. Our mortgage ~~loan portfolio consisted of approximately 65~~ loans ~~that~~secured by office properties are in good standing. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 11 to the Consolidated Financial Statements.

Other Long-term Investments

Other long-term investments of ~~$2.7~~$2.9 billion as of ~~September 30, 2020~~March 31, 2021 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses. The increase in other long-term

investments is primarily driven by net ~~new~~additional funding activity. ~~Our approximately $2 billion of~~These limited partnership entities typically invest in mezzanine debt or equity of privately-held companies ~~(securities partnerships)~~ and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified across approximately ~~175~~180 separate partnerships and approximately 9095 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 4% of our securities and real estate partnership portfolio.

Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. ~~Accordingly, our~~Our net investment income increased significantly versus the first three months of 2020 driven by the performance of assets underlying our limited partnership investments through December 31, 2020. We expect that income for these investments will remain volatile in the ~~third quarter largely reflects the underlying financial information from the second quarter of 2020. We~~coming quarters, and it is possible that we could experience losses ~~during the remainder of 2020 and~~ into future periods, but the magnitude of these losses will depend in part on the length and extent of the economic disruption, the speed of the recovery and the overall economic impacts.

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture on the equity method of accounting and report our share of the net assets of $0.8 billion in Other assets. Our 50% share of the investment portfolio supporting the joint venture's business is approximately $6.0 billion, primarily invested in Chinese corporate and government debt securities diversified by issuer, industry and geography, as appropriate. To a lesser extent and consistent with its investment strategy, the joint venture is invested in Chinese equity investments comprised of approximately 50% equity mutual funds, with the remainder invested in equity securities and private equity partnerships. We participate in the approval of the joint venture's investment strategy and continuously review its execution. There were no investments with a material unrealized loss as of March 31, 2021.

Investment Outlook

~~The~~Expectations regarding the impact of ~~COVID-19 on~~ the ~~economy, despite~~vaccine rollout and the pace of relaxing restrictions continues to dominate financial markets. The general optimism for this rollout combined with unprecedented monetary and fiscal support ~~and~~from the uncertainty as to the strength and sustainability of the recovery prior to a widely available vaccine continue to dominate financial markets. Net investment income was positively impacted by third quarter valuations of mezzanine, private equity, and real estate fund asset holdings based on improvinggovernment has raised expectations for improved economic ~~prospects, as also reflected in public equity valuations. However, the low interest rate environment continues to pressure income from both short-term and longer-term investments.~~growth. Although U.S. treasury rates have increased during the quarter from their historic lows during 2020, they remain ~~near all-time lows and~~well below long-term historical averages. In addition, the wider market credit spreads experienced during ~~the beginning of the second quarter~~2020 have narrowed meaningfully, ~~narrowed,~~ resulting in ~~historically low~~ yields for investment grade ~~assets.~~assets that also remain well below historical averages, and this continues to pressure the income we earn on our fixed income investments. We continue to actively monitor the economic impact of the pandemic, as well as fiscal and monetary responses, and their potential impact on the portfolio. ~~Our full year~~We expect net investment income ~~projections~~during 2021 will reflect ~~continued~~both the improved optimism within public and private markets for economic recovery, along with the potential for additional market volatility and portfolio impacts, particularly in certain sectors such as ~~retail,~~aviation, hospitality ~~aviation~~ and energy, as well as other areas most severely impacted by COVID-19. Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date. These future conditions are not reasonably predictable; however, we believe that the vast majority of our investments will continue to perform under their contractual terms. Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the ~~long term.~~long-term. Although future ~~impairment losses~~declines in investment fair values resulting from interest rate movements and credit deterioration due to both investment-specific and the global economic uncertainties discussed above remain possible, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.

MARKET RISK

Financial Instruments

Our assets and liabilities include ~~certain~~ financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Our primary market risk exposures are interest rate risk and foreign currency exchange rate risk. We encourage you to read this in conjunction with “Market Risk – Financial Instruments” included in the MD&A section of our ~~2019~~2020 Form 10-K. ~~Given the transactions in our long-term debt further described in Note 8 to the Consolidated Financial Statements, in the event~~As of a 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $2.9 billion at September 30, 2020, compared to approximately $2.5 billion at DecemberMarch 31, ~~2019. Other than this,~~2021 there were no material changes in our risk exposures from those reported in our ~~2019~~2020 Form 10-K.

8054

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responsive to this item is contained under the caption “Market Risk” in Item 2 above, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and is incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

Based on an evaluation of the effectiveness of Cigna’s disclosure controls and procedures conducted under the supervision and with the participation of Cigna’s management (including Cigna’s Chief Executive Officer and Chief Financial Officer), Cigna's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, Cigna’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Cigna in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to Cigna’s management, including Cigna’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~During the period covered by this report, there~~

There have been no changes in ~~Cigna’s~~our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, ~~Cigna’s~~Cigna's internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information contained under “Litigation Matters” and “Regulatory Matters” in Note 1815 to the Consolidated Financial Statements is incorporated herein by reference.

Item 1A. RISK FACTORS

For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2019 as such Risk Factors are supplemented by the information contained in Part II, Item 1A of our Form 10-Q for the quarter ended March 31,~~ 2020. ~~There have been no material changes to our previously reported Risk Factors.~~

~~ITEM~~Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information about Cigna’s share repurchase activity for the quarter ended ~~September 30, 2020~~March 31, 2021:

Period
Total # of shares purchased (1)
Average price paid per share
Total # of shares purchased as part of
publicly announced program (2)
Approximate dollar value of shares
that may yet be purchased as part
of publicly announced program (3)
July 1-31, 2020 1,181,665 $ 179.88 1,180,578 $ 4,425,497,842
August 1-31, 2020 2,352,958 $ 178.78 2,349,942 $ 4,005,359,665
September 1-30, 2020 2,440,490 $ 169.35 2,438,383 $ 3,592,431,915
Total 5,975,113 $ 175.15 5,968,903 N/A


Period	Total # of shares purchased (1)	Average price paid per share		Total # of shares purchased as part of publicly announced program (2)	Approximate dollar value of shares that may yet be purchased as part of publicly announced program (3)
January 1-31, 2021	3,639,296	$	217.79	3,638,504	$	3,080,714,000
February 1-28, 2021	5,508,484	$	209.68	5,114,482	$	2,008,520,487
March 1-31, 2021	4,014,992	$	236.10	3,993,044	$	1,065,659,301
Total	13,162,772	$	219.98	12,746,030	N/A

(1)Includes shares tendered by employees under the Company’s equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered ~~1,087~~792 shares in ~~July, 3,016~~January, 394,002 shares in ~~August~~February and ~~2,107~~21,948 shares in ~~September2020.~~March 2021.

(2)Additionally, the Company maintains a share repurchase program authorized by the Board of Directors. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, ~~or privately negotiated transactions,~~ each in compliance with Rule 10b-18 under the Exchange ~~Act.~~Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. In ~~July 2020,~~April 2021, the Board increased repurchase authority by an additional $2 billion. From ~~October~~April 1, ~~2020~~2021 through ~~November 4, 2020,~~May 6, 2021, the Company repurchased ~~2.8~~1.7 million shares for approximately ~~$500~~$400 million, leaving repurchase authority at ~~$3.1~~$2.7 billion as of ~~November 4, 2020.~~May 6, 2021.

(3)Approximate dollar value of shares is as of the last date of the applicable month.

8255

ITEM 6. EXHIBITS

INDEX TO EXHIBITS


Number	Description	Method of Filing
4.1	Supplemental Indenture No. 5, dated as of March 3, 2021, between Cigna Corporation and U.S. Bank National Association, as trustee.	Filed by registrant as Exhibit 4.1 to the Current Report on Form 8-K on March 3, 2021 and incorporated herein by reference.
10.1*	Form of Cigna Long-Term Incentive Plan: Strategic Performance Share Grant Agreement	Filed herewith.
10.2*	Form of Cigna Long-Term Incentive Plan: Nonqualified Stock Option Grant Agreement	Filed herewith.
10.3*	Form of Cigna Long-Term Incentive Plan: Restricted Stock Grant Agreement	Filed herewith.
10.4*	Form of Cigna Long-Term Incentive Plan: Restricted Stock Unit Grant Agreement	Filed herewith.
10.5*	Cigna Long-Term Incentive Plan, amended and restated effective April 28, 2021	Filed by registrant as Exhibit 10.1 to the Current Report on Form 8-K on May 3, 2021 and incorporated herein by reference.
10.6	Revolving Credit and Letter of Credit Agreement, dated as of April 29, 2021, with the banks named therein, JPMorgan Chase Bank, N.A.,as administrative agent, BofA Securities, Inc., Citibank, N.A., Morgan Stanley Senior Funding, Inc., MUFG Bank, LTD and Wells FargoSecurities, LLC, as joint lead arrangers and joint bookrunners	Filed by registrant as Exhibit 10.1 to the Current Report on Form 8-K on April 30, 2021 and incorporated herein by reference.
31.1	Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	Filed herewith.
31.2	Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	Filed herewith.
32.1	Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350	Furnished herewith.
32.2	Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350	Furnished herewith.
101	Financial statements from the quarterly report on Form 10-Q of Cigna Corporation for the quarter ended ~~September 30, 2020~~March 31, 2021 formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Total Equity; (v) the Consolidated Statements of Cash Flow; and (vi) the Notes to the Consolidated Financial Statements	Filed herewith.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Filed herewith.

* Management contracts and compensatory plans or arrangements.

SIGNATURE

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.

Date: ~~November 5, 2020~~May 7, 2021


CIGNA CORPORATION


			/s/ ~~Eric P. Palmer~~Brian C. Evanko
~~Eric P. Palmer~~Brian C. Evanko
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and Authorized Signatory)

8457


		Page
PART I	FINANCIAL INFORMATION

	Item 1. Financial Statements (Unaudited)	3
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Changes in Total Equity	6
	Consolidated Statements of Cash Flows	87
	Notes to the Consolidated Financial Statements	109

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5437

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	8155

	Item 4. Controls and Procedures	8155

PART II	OTHER INFORMATION

	Item 1. Legal Proceedings	8155

	Item 1.A. Risk Factors	8155

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8155

	Item 6. Exhibits	8356
SIGNATURE		8457


	Unaudited
	As of September 30,
	2020		2019
Cash and cash equivalents	$	5,344	$	4,577
Restricted cash and cash equivalents, included in other long-term investments	62		0
Total cash, cash equivalents, and restricted cash and cash equivalents	$	5,406	$	4,577


Debt and Equity Securities
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Balance at beginning of period	$	860	$	431	$	555	$	410
Total gains (losses) included in shareholders’ net income	(1)		(6)		4		(7)
Gains (losses) included in other comprehensive income	17		4		(42)		16
Gains (losses) required to adjust future policy benefits for settlement annuities (1)	7		1		4		3
Purchases, sales and settlements
Purchases	3		10		67		53
Sales	(1)		0		(13)		0
Settlements	(8)		(6)		(15)		(16)
Total purchases, sales and settlements	$	(6)	$	4	$	39	$	37
Transfers into/(out of) Level 3
Transfers into Level 3	102		80		629		113
Transfers out of Level 3	(33)		0		(243)		(58)
Total transfers into/(out of) Level 3	$	69	$	80	$	386	$	55
Balance at September 30,	$	946	$	514	$	946	$	514
Total gains (losses) included in shareholders’ net income attributable to instruments held at the reporting date	$	0	$	(6)	$	(2)	$	(8)
Change in unrealized gains or losses included in other comprehensive income for assets held at the end of the reporting period	$	17	N/A		$	(37)	N/A



			PAGE

Executive Overview			5638
Liquidity and Capital Resources			6644
Critical Accounting Estimates			7047
Segment Reporting			7048
Evernorth			7148
U.S. Medical			7349
International Markets			7551
~~Group Disability and~~ Other Operations			7752
Corporate			7752
Investment Assets			7852


Reconciliation of Shareholders’ Net Income (GAAP) to Adjusted Income from Operations
	$ in millions								Diluted Earnings Per Share
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Shareholders’ net income	$	1,388	$	1,351	$	4,323	$	4,127	$	3.78	$	3.57	$	11.66	$	10.83
After-tax adjustments required to reconcile to adjusted income from operations
Net realized investment (gains) losses	(64)		(49)		(75)		(100)		(0.17)		(0.13)		(0.20)		(0.26)
Amortization of acquired intangible assets	376		558		1,061		1,694		1.02		1.47		2.86		4.43
Adjustment for transitioning clients	—		(207)		—		(1,217)		—		(0.55)		—		(3.19)
Special items
Integration and transaction-related costs	83		88		256		311		0.23		0.24		0.69		0.82
Debt extinguishment costs	—		—		151		—		—		—		0.41		—
Charge for organizational efficiency plan	—		—		24		—		—		—		0.06		—
(Benefits) charges associated with litigation matters	—		(23)		19		41		—		(0.06)		0.05		0.11
Risk corridors recovery	(76)		—		(76)		—		(0.21)		—		(0.20)		—
Contractual adjustment for a former client	(89)		—		(155)		—		(0.24)		—		(0.42)		—
Total special items	(82)		65		219		352		(0.22)		0.18		0.59		0.93
Adjusted income from operations	$	1,618	$	1,718	$	5,528	$	4,856	$	4.41	$	4.54	$	14.91	$	12.74


	Receivable (Payable) Balances
(In millions)	September 30, 2020		December 31, 2019
Risk Adjustment
Receivables (1)	$	110	$	47
Payables (2)	$	(121)	$	(213)