UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022

☐ 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: 001-01011

CVS HEALTH CORPORATION

(Exact name of registrant as specified in its charter)


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

One CVS Drive,

Woonsocket,

Rhode Island

02895

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(401)

765-1500

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

N/A

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 per share	CVS	New York Stock Exchange

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 ☐ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ 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 the 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.			☐

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 July ~~28, 2021,~~27, 2022, the registrant had ~~1,319,574,744~~1,312,828,807 shares of common stock issued and outstanding.


TABLE OF CONTENTS
		Page
Part I	Financial Information

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3638
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5760
Item 4.	Controls and Procedures	5760

Part II	Other Information

Item 1.	Legal Proceedings	5760
Item 1A.	Risk Factors	5760
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5861
Item 3	Defaults Upon Senior Securities	5862
Item 4.	Mine Safety Disclosures	5862
Item 5.	Other Information	5862
Item 6.	Exhibits	5963

Signatures		6064

Form 10-Q Table of Contents

Part I.Financial Information

Item 1.Financial Statements

Index to Condensed Consolidated Financial Statements


			Page
Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			2

Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021			3

Condensed Consolidated Balance Sheets (Unaudited) as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021			4

Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021			5

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the three months ended June 30, ~~2021~~2022 and ~~2020~~2021 and the three months ended March 31, ~~2021~~2022 and ~~2020~~2021			7

Notes to Condensed Consolidated Financial Statements (Unaudited)			9

Report of Independent Registered Public Accounting Firm			3537

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Statements of Operations

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions, except per share amounts	In millions, except per share amounts	2021		2020		2021		2020		In millions, except per share amounts	2022		2021		2022		2021
Revenues:	Revenues:									Revenues:
Products	Products	$	50,525	$	46,355	$	97,912	$	93,358	Products	$	56,794	$	50,525	$	109,316	$	97,912
Premiums	Premiums	18,983		16,927		37,943		34,567		Premiums	21,260		18,983		42,891		37,943
Services	Services	2,819		1,875		5,272		3,825		Services	2,436		2,819		4,941		5,272
Net investment income	Net investment income	289		184		586		346		Net investment income	146		289		314		586
Total revenues	Total revenues	72,616		65,341		141,713		132,096		Total revenues	80,636		72,616		157,462		141,713
Operating costs:	Operating costs:									Operating costs:
Cost of products sold	Cost of products sold	43,520		40,242		84,414		80,589		Cost of products sold	49,290		43,520		94,799		84,414
Benefit costs	Benefit costs	15,901		11,751		31,605		26,138		Benefit costs	17,606		15,901		35,557		31,605

Operating expenses	Operating expenses	8,869		8,668		17,791		17,231		Operating expenses	9,171		8,869		19,047		17,791
Total operating costs	Total operating costs	68,290		60,661		133,810		123,958		Total operating costs	76,067		68,290		149,403		133,810
Operating income	Operating income	4,326		4,680		7,903		8,138		Operating income	4,569		4,326		8,059		7,903
Interest expense	Interest expense	636		765		1,293		1,498		Interest expense	583		636		1,169		1,293

Other income	Other income	(45)		(45)		(95)		(99)		Other income	(43)		(45)		(85)		(95)
Income before income tax provision	Income before income tax provision	3,735		3,960		6,705		6,739		Income before income tax provision	4,029		3,735		6,975		6,705
Income tax provision	Income tax provision	944		974		1,690		1,741		Income tax provision	1,068		944		1,701		1,690

Net income	Net income	2,791		2,986		5,015		4,998		Net income	2,961		2,791		5,274		5,015
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(8)		(11)		(9)		(16)		Net income attributable to noncontrolling interests	(10)		(8)		(11)		(9)
Net income attributable to CVS Health	Net income attributable to CVS Health	$	2,783	$	2,975	$	5,006	$	4,982	Net income attributable to CVS Health	$	2,951	$	2,783	$	5,263	$	5,006

Net income per share attributable to CVS Health:	Net income per share attributable to CVS Health:									Net income per share attributable to CVS Health:
Basic	Basic	$	2.11	$	2.27	$	3.80	$	3.81	Basic	$	2.25	$	2.11	$	4.01	$	3.80
Diluted	Diluted	$	2.10	$	2.26	$	3.78	$	3.79	Diluted	$	2.23	$	2.10	$	3.97	$	3.78
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	1,319		1,309		1,316		1,307		Basic	1,313		1,319		1,312		1,316
Diluted	Diluted	1,327		1,314		1,325		1,313		Diluted	1,321		1,327		1,325		1,325

Dividends declared per share	Dividends declared per share	$	0.50	$	0.50	$	1.00	$	1.00	Dividends declared per share	$	0.55	$	0.50	$	1.10	$	1.00

See accompanying notes to condensed consolidated financial statements (unaudited).

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Net income	Net income	$	2,791	$	2,986	$	5,015	$	4,998	Net income	$	2,961	$	2,791	$	5,274	$	5,015
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Net unrealized investment gains (losses)	Net unrealized investment gains (losses)	149		524		(237)		213		Net unrealized investment gains (losses)	(813)		149		(1,968)		(237)
Foreign currency translation adjustments	Foreign currency translation adjustments	1		6		(1)		(6)		Foreign currency translation adjustments	(1)		1		2		(1)
Net cash flow hedges	Net cash flow hedges	(3)		(3)		(7)		(12)		Net cash flow hedges	15		(3)		12		(7)
Pension and other postretirement benefits	Pension and other postretirement benefits	1		(1)		1		(1)		Pension and other postretirement benefits	1		1		1		1
Other comprehensive income (loss)	Other comprehensive income (loss)	148		526		(244)		194		Other comprehensive income (loss)	(798)		148		(1,953)		(244)
Comprehensive income	Comprehensive income	2,939		3,512		4,771		5,192		Comprehensive income	2,163		2,939		3,321		4,771
Comprehensive income attributable to noncontrolling interests	Comprehensive income attributable to noncontrolling interests	(8)		(11)		(9)		(16)		Comprehensive income attributable to noncontrolling interests	(10)		(8)		(11)		(9)
Comprehensive income attributable to CVS Health	Comprehensive income attributable to CVS Health	$	2,931	$	3,501	$	4,762	$	5,176	Comprehensive income attributable to CVS Health	$	2,153	$	2,931	$	3,310	$	4,762

See accompanying notes to condensed consolidated financial statements (unaudited).

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Balance Sheets

(Unaudited)


In millions, except per share amounts	In millions, except per share amounts	June 30, 2021		December 31, 2020		In millions, except per share amounts	June 30, 2022		December 31, 2021
Assets:	Assets:					Assets:
Cash and cash equivalents	Cash and cash equivalents	$	7,119	$	7,854	Cash and cash equivalents	$	12,116	$	9,408
Investments	Investments	3,006		3,000		Investments	2,877		3,117
Accounts receivable, net	Accounts receivable, net	24,164		21,742		Accounts receivable, net	27,233		24,431
Inventories	Inventories	16,979		18,496		Inventories	17,375		17,760
Other current assets	Other current assets	5,291		5,277		Other current assets	2,541		5,292
Total current assets	Total current assets	56,559		56,369		Total current assets	62,142		60,008
Long-term investments	Long-term investments	22,136		20,812		Long-term investments	21,124		23,025
Property and equipment, net	Property and equipment, net	12,664		12,606		Property and equipment, net	12,764		12,896
Operating lease right-of-use assets	Operating lease right-of-use assets	20,476		20,729		Operating lease right-of-use assets	18,562		19,122
Goodwill	Goodwill	79,552		79,552		Goodwill	78,560		79,121
Intangible assets, net	Intangible assets, net	30,080		31,142		Intangible assets, net	28,135		29,026
Separate accounts assets	Separate accounts assets	4,880		4,881		Separate accounts assets	4,140		5,087
Other assets	Other assets	4,817		4,624		Other assets	4,852		4,714
Total assets	Total assets	$	231,164	$	230,715	Total assets	$	230,279	$	232,999

Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	11,052	$	11,138	Accounts payable	$	13,238	$	12,544
Pharmacy claims and discounts payable	Pharmacy claims and discounts payable	17,225		15,795		Pharmacy claims and discounts payable	18,393		17,330
Health care costs payable	Health care costs payable	8,414		7,936		Health care costs payable	10,400		8,808
Policyholders’ funds	Policyholders’ funds	4,567		4,270		Policyholders’ funds	1,628		4,301
Accrued expenses	Accrued expenses	14,827		14,243		Accrued expenses	17,728		17,670
Other insurance liabilities	Other insurance liabilities	1,375		1,557		Other insurance liabilities	1,197		1,303
Current portion of operating lease liabilities	Current portion of operating lease liabilities	1,791		1,638		Current portion of operating lease liabilities	1,854		1,646

Current portion of long-term debt	Current portion of long-term debt	60		5,440		Current portion of long-term debt	4,019		4,205
Total current liabilities	Total current liabilities	59,311		62,017		Total current liabilities	68,457		67,807
Long-term operating lease liabilities	Long-term operating lease liabilities	18,509		18,757		Long-term operating lease liabilities	17,502		18,177
Long-term debt	Long-term debt	59,294		59,207		Long-term debt	50,797		51,971
Deferred income taxes	Deferred income taxes	6,557		6,794		Deferred income taxes	5,450		6,270
Separate accounts liabilities	Separate accounts liabilities	4,880		4,881		Separate accounts liabilities	4,140		5,087
Other long-term insurance liabilities	Other long-term insurance liabilities	6,734		7,007		Other long-term insurance liabilities	6,287		6,402
Other long-term liabilities	Other long-term liabilities	2,314		2,351		Other long-term liabilities	2,140		1,904
Total liabilities	Total liabilities	157,599		161,014		Total liabilities	154,773		157,618

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; 0ne issued or outstanding	Preferred stock, par value $0.01: 0.1 shares authorized; 0ne issued or outstanding	0		0		Preferred stock, par value $0.01: 0.1 shares authorized; 0ne issued or outstanding	—		—
Common stock, par value $0.01: 3,200 shares authorized; 1,742 shares issued and 1,318 shares outstanding at June 30, 2021 and 1,733 shares issued and 1,310 shares outstanding at December 31, 2020 and capital surplus		46,995		46,513
Treasury stock, at cost: 424 shares at June 30, 2021 and 423 shares at December 31, 2020		(28,252)		(28,178)
Common stock, par value $0.01: 3,200 shares authorized; 1,755 shares issued and 1,312 shares outstanding at June 30, 2022 and 1,744 shares issued and 1,322 shares outstanding at December 31, 2021 and capital surplus						Common stock, par value $0.01: 3,200 shares authorized; 1,755 shares issued and 1,312 shares outstanding at June 30, 2022 and 1,744 shares issued and 1,322 shares outstanding at December 31, 2021 and capital surplus	47,874		47,377
Treasury stock, at cost: 443 shares at June 30, 2022 and 422 shares at December 31, 2021						Treasury stock, at cost: 443 shares at June 30, 2022 and 422 shares at December 31, 2021	(30,412)		(28,173)
Retained earnings	Retained earnings	53,331		49,640		Retained earnings	58,710		54,906
Accumulated other comprehensive income		1,170		1,414
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	(988)		965
Total CVS Health shareholders’ equity	Total CVS Health shareholders’ equity	73,244		69,389		Total CVS Health shareholders’ equity	75,184		75,075
Noncontrolling interests	Noncontrolling interests	321		312		Noncontrolling interests	322		306
Total shareholders’ equity	Total shareholders’ equity	73,565		69,701		Total shareholders’ equity	75,506		75,381
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	231,164	$	230,715	Total liabilities and shareholders’ equity	$	230,279	$	232,999

See accompanying notes to condensed consolidated financial statements (unaudited).

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
In millions	In millions	2021		2020		In millions	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Cash receipts from customers	Cash receipts from customers	$	136,621	$	129,218	Cash receipts from customers	$	151,769	$	136,621
Cash paid for inventory and prescriptions dispensed by retail network pharmacies	Cash paid for inventory and prescriptions dispensed by retail network pharmacies	(79,316)		(76,381)		Cash paid for inventory and prescriptions dispensed by retail network pharmacies	(90,887)		(79,316)
Insurance benefits paid	Insurance benefits paid	(31,245)		(26,483)		Insurance benefits paid	(33,920)		(31,245)
Cash paid to other suppliers and employees	Cash paid to other suppliers and employees	(14,900)		(14,688)		Cash paid to other suppliers and employees	(15,119)		(14,900)
Interest and investment income received	Interest and investment income received	394		395		Interest and investment income received	200		394
Interest paid	Interest paid	(1,263)		(1,407)		Interest paid	(1,150)		(1,263)
Income taxes paid	Income taxes paid	(1,552)		(230)		Income taxes paid	(1,887)		(1,552)
Net cash provided by operating activities	Net cash provided by operating activities	8,739		10,424		Net cash provided by operating activities	9,006		8,739

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sales and maturities of investments	Proceeds from sales and maturities of investments	3,947		2,710		Proceeds from sales and maturities of investments	4,360		3,947
Purchases of investments	Purchases of investments	(5,570)		(3,688)		Purchases of investments	(5,010)		(5,570)
Purchases of property and equipment	Purchases of property and equipment	(1,315)		(1,190)		Purchases of property and equipment	(1,459)		(1,315)
Acquisitions (net of cash acquired)	Acquisitions (net of cash acquired)	(108)		(768)		Acquisitions (net of cash acquired)	(125)		(108)

Proceeds from sale of subsidiaries (net of cash and restricted cash sold of $2,807)						Proceeds from sale of subsidiaries (net of cash and restricted cash sold of $2,807)	(1,943)		—
Other	Other	72		6		Other	54		72
Net cash used in investing activities	Net cash used in investing activities	(2,974)		(2,930)		Net cash used in investing activities	(4,123)		(2,974)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from issuance of long-term debt		0		3,946

Repayments of long-term debt	Repayments of long-term debt	(5,423)		(1,016)		Repayments of long-term debt	(1,529)		(5,423)
Repurchase of common stock						Repurchase of common stock	(2,000)		—

Dividends paid	Dividends paid	(1,306)		(1,315)		Dividends paid	(1,462)		(1,306)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	330		166		Proceeds from exercise of stock options	348		330
Payments for taxes related to net share settlement of equity awards	Payments for taxes related to net share settlement of equity awards	(159)		(68)		Payments for taxes related to net share settlement of equity awards	(329)		(159)
Other	Other	0		(16)		Other	(139)		46
Net cash provided by (used in) financing activities		(6,558)		1,697
Net increase (decrease) in cash, cash equivalents and restricted cash		(793)		9,191
Net cash used in financing activities						Net cash used in financing activities	(5,111)		(6,512)
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(228)		(747)
Cash, cash equivalents and restricted cash at the beginning of the period	Cash, cash equivalents and restricted cash at the beginning of the period	8,130		5,954		Cash, cash equivalents and restricted cash at the beginning of the period	12,691		11,043
Cash, cash equivalents and restricted cash at the end of the period	Cash, cash equivalents and restricted cash at the end of the period	$	7,337	$	15,145	Cash, cash equivalents and restricted cash at the end of the period	$	12,463	$	10,296

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
In millions	In millions	2021		2020		In millions	2022		2021
Reconciliation of net income to net cash provided by operating activities:	Reconciliation of net income to net cash provided by operating activities:					Reconciliation of net income to net cash provided by operating activities:
Net income	Net income	$	5,015	$	4,998	Net income	$	5,274	$	5,015
Adjustments required to reconcile net income to net cash provided by operating activities:	Adjustments required to reconcile net income to net cash provided by operating activities:					Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	2,263		2,188		Depreciation and amortization	2,142		2,263

Stock-based compensation	Stock-based compensation	232		179		Stock-based compensation	236		232

Gain on sale of subsidiary						Gain on sale of subsidiary	(225)		—

Deferred income taxes and other noncash items	Deferred income taxes and other noncash items	(370)		(101)		Deferred income taxes and other noncash items	(281)		(370)
Change in operating assets and liabilities, net of effects from acquisitions:	Change in operating assets and liabilities, net of effects from acquisitions:					Change in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	Accounts receivable, net	(2,384)		(2,233)		Accounts receivable, net	(2,687)		(2,384)
Inventories	Inventories	1,517		1,003		Inventories	469		1,517
Other assets	Other assets	(145)		(560)		Other assets	(325)		(219)
Accounts payable and pharmacy claims and discounts payable	Accounts payable and pharmacy claims and discounts payable	1,702		1,671		Accounts payable and pharmacy claims and discounts payable	2,033		1,702
Health care costs payable and other insurance liabilities	Health care costs payable and other insurance liabilities	104		(415)		Health care costs payable and other insurance liabilities	1,467		104
Other liabilities	Other liabilities	805		3,694		Other liabilities	903		879
Net cash provided by operating activities	Net cash provided by operating activities	$	8,739	$	10,424	Net cash provided by operating activities	$	9,006	$	8,739

See accompanying notes to condensed consolidated financial statements (unaudited).

Index to Condensed Consolidated Financial Statements

CVS Health Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)


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

				Common Shares																						Treasury Shares (1)			Common Shares															Treasury Shares (1)
In millions	In millions		In millions
Balance at December 31, 2020		1,733	(423)				$	46,513		$	(28,178)		$	49,640		$	1,414		$	69,389		$	312		$	69,701
Balance at December 31, 2021																										Balance at December 31, 2021	1,744	(422)		$	47,377	$	(28,173)	$	54,906	$	965	$	75,075	$	306	$	75,381
Net income	Net income	—	—		—			—			2,223			—			2,223			1			2,224			Net income	—	—		—		—		2,312		—		2,312		1		2,313
Other comprehensive loss	Other comprehensive loss	—	—		—			—			—			(392)			(392)			—			(392)			Other comprehensive loss	—	—		—		—		—		(1,155)		(1,155)		—		(1,155)
Stock option activity, stock awards and other	Stock option activity, stock awards and other	2	—		214			—			—			—			214			—			214			Stock option activity, stock awards and other	3	—		300		—		—		—		300		—		300
ESPP issuances, net of purchase of treasury shares		—	1		—			76			—			—			76			—			76
Purchase of treasury shares, net of ESPP issuances																										Purchase of treasury shares, net of ESPP issuances	—	(19)		—		(1,972)		—		—		(1,972)		—		(1,972)
Common stock dividends	Common stock dividends	—	—		—			—			(660)			—			(660)			—			(660)			Common stock dividends	—	—		—		—		(730)		—		(730)		—		(730)
Other increases in noncontrolling interests	Other increases in noncontrolling interests	—	—		—			—			—			—			—			1			1			Other increases in noncontrolling interests	—	—		—		—		—		—		—		3		3
Balance at March 31, 2021		1,735	(422)		46,727			(28,102)			51,203			1,022			70,850			314			71,164
Balance at March 31, 2022																										Balance at March 31, 2022	1,747	(441)		47,677		(30,145)		56,488		(190)		73,830		310		74,140
Net income	Net income	—	—		—			—			2,783			—			2,783			8			2,791			Net income	—	—		—		—		2,951		—		2,951		10		2,961
Other comprehensive income (Note 6)		—	—		—			—			—			148			148			—			148
Other comprehensive loss (Note 8)																										Other comprehensive loss (Note 8)	—	—		—		—		—		(798)		(798)		—		(798)
Stock option activity, stock awards and other	Stock option activity, stock awards and other	7	—		268			—			—			—			268			—			268			Stock option activity, stock awards and other	8	—		197		—		—		—		197		—		197
Purchase of treasury shares, net of ESPP issuances	Purchase of treasury shares, net of ESPP issuances	—	(2)		—			(150)			—			—			(150)			—			(150)			Purchase of treasury shares, net of ESPP issuances	—	(2)		—		(267)		—		—		(267)		—		(267)
Common stock dividends	Common stock dividends	—	—		—			—			(655)			—			(655)			—			(655)			Common stock dividends	—	—		—		—		(729)		—		(729)		—		(729)
Other decreases in noncontrolling interests		—	—		—			—			—			—			—			(1)			(1)
Balance at June 30, 2021		1,742	(424)		$	46,995		$	(28,252)		$	53,331		$	1,170		$	73,244		$	321		$	73,565
Other increases in noncontrolling interests																										Other increases in noncontrolling interests	—	—		—		—		—		—		—		2		2
Balance at June 30, 2022																										Balance at June 30, 2022	1,755	(443)		$	47,874	$	(30,412)	$	58,710	$	(988)	$	75,184	$	322	$	75,506

(1)Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of June 30, 2022, March 31, 2022 and December 31, 2021.

(2)Common stock and capital surplus includes the par value of common stock of $18 million as of June 30, 2022 and $17 million as of March 31, 2022 and December 31, 2021.

Index to Condensed Consolidated Financial Statements


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

	Common Shares	Treasury Shares (1)
In millions
Balance at December 31, 2020	1,733	(423)	$	46,513	$	(28,178)	$	49,640	$	1,414	$	69,389	$	312	$	69,701
Net income	—	—	—		—		2,223		—		2,223		1		2,224
Other comprehensive loss	—	—	—		—		—		(392)		(392)		—		(392)
Stock option activity, stock awards and other	2	—	214		—		—		—		214		—		214
ESPP issuances, net of purchase of treasury shares	—	1	—		76		—		—		76		—		76
Common stock dividends	—	—	—		—		(660)		—		(660)		—		(660)
Other increases in noncontrolling interests	—	—	—		—		—		—		—		1		1
Balance at March 31, 2021	1,735	(422)	46,727		(28,102)		51,203		1,022		70,850		314		71,164
Net income	—	—	—		—		2,783		—		2,783		8		2,791
Other comprehensive income (Note 8)	—	—	—		—		—		148		148		—		148
Stock option activity, stock awards and other	7	—	268		—		—		—		268		—		268
Purchase of treasury shares, net of ESPP issuances	—	(2)	—		(150)		—		—		(150)		—		(150)
Common stock dividends	—	—	—		—		(655)		—		(655)		—		(655)
Other decreases in noncontrolling interests	—	—	—		—		—		—		—		(1)		(1)
Balance at June 30, 2021	1,742	(424)	$	46,995	$	(28,252)	$	53,331	$	1,170	$	73,244	$	321	$	73,565

(1)Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of June 30, 2021, March 31, 2021 and December 31, 2020.

(2)Common stock and capital surplus includes the par value of common stock of $17 million as of June 30, 2021, March 31, 2021 and December 31, 2020.

~~Index to Condensed Consolidated Financial Statements~~

Attributable to CVS Health
Number of shares
outstanding
Common
Stock and
Capital
Surplus (2)
Treasury
Stock (1)
Retained
Earnings Accumulated
Other
Comprehensive
Income Total
CVS Health
Shareholders’
Equity Noncontrolling
Interests Total
Shareholders’
Equity
Common
Shares
Treasury
Shares (1)
In millions
Balance at December 31, 2019 1,727 (425) $ 45,972 $ (28,235) $ 45,108 $ 1,019 $ 63,864 $ 306 $ 64,170
Adoption of new accounting standard (3)
— — — — (3) — (3) — (3)
Net income — — — — 2,007 — 2,007 5 2,012
Other comprehensive loss — — — — — (332) (332) — (332)
Stock option activity, stock awards and other 2 — 208 — — — 208 — 208
ESPP issuances, net of purchase of treasury shares — 1 — 53 — — 53 — 53
Common stock dividends — — — — (657) — (657) — (657)
Other increases in noncontrolling interests — — — — — — — 23 23
Balance at March 31, 2020 1,729 (424) 46,180 (28,182) 46,455 687 65,140 334 65,474
Net income — — — — 2,975 — 2,975 11 2,986
Other comprehensive income (Note 6) — — — — — 526 526 — 526
Stock option activity, stock awards and other 3 — 96 — — — 96 — 96
Purchase of treasury shares, net of ESPP issuances — (1) — (53) — — (53) — (53)
Common stock dividends — — — — (662) — (662) — (662)
Other decreases in noncontrolling interests — — — — — — — (12) (12)
Balance at June 30, 2020 1,732 (425) $ 46,276 $ (28,235) $ 48,768 $ 1,213 $ 68,022 $ 333 $ 68,355

~~(1)Treasury shares include 1 million shares held in trust and treasury stock includes $29 million related to shares held in trust as of June 30, 2020, March 31, 2020 and December 31, 2019.~~

~~(2)Common stock and capital surplus includes the par value of common stock of $17 million as of June 30, 2020, March 31, 2020 and December 31, 2019.~~

~~(3)Reflects the adoption of Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments - Credit Losses~~ ~~(Topic 326), which resulted in a decrease to retained earnings of $3 million during the three months ended March 31, 2020.~~

See accompanying notes to condensed consolidated financial statements (unaudited).

Index to Condensed Consolidated Financial Statements

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Significant Accounting Policies

Description of Business

CVS Health Corporation, ~~(“CVS Health”),~~ together with its subsidiaries (collectively, “CVS Health” or the “Company”), has more than ~~9,900~~9,000 retail locations, ~~approximately~~more than 1,100 walk-in medical clinics, a leading pharmacy benefits manager with ~~approximately 108~~over 110 million plan members with expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than 1000000 patients per ~~year and expanding specialty pharmacy services.~~year. The Company also serves an estimated 3435 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

The coronavirus disease 2019 (“COVID-19”) ~~continues~~and its emerging new variants continue to impact the economies of the U.S. and other countries around the world. The impact of COVID-19 on the Company’s businesses, operating results, cash flows and financial condition, as well as information regarding certain expected impacts of COVID-19 on the Company, is discussed throughout this Quarterly Report on Form 10-Q.

The Company has 4 reportable segments: Health Care Benefits, Pharmacy Services, Retail/LTC and Corporate/Other, which are described below.

Health Care Benefits Segment

The Health Care Benefits segment isoperates as one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” In addition, effective January 2022, the Company entered the individual public health insurance exchanges (“Public Exchanges”) in 8 states through which it sells Insured plans directly to individual consumers. The Company has submitted regulatory filings to remain on the Public Exchanges in 2023 in each of those 8 states, and has submitted regulatory filings to enter the Public Exchanges in 4 additional states effective January 2023.

Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services and mail order ~~pharmacy,~~pharmacy. In addition, through the Pharmacy Services segment, the Company provides specialty pharmacy and infusion services, clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants. The Company also provides various administrative, management and reporting services to pharmaceutical manufacturers. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on ~~public health insurance exchanges (“~~Public ~~Exchanges”)~~Exchanges and private health insurance exchanges, other sponsors of health benefit plans throughout the United States and Covered Entities. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of health and wellness products and general merchandise, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing, administers vaccinations for illnesses such as influenza, COVID-19 and shingles and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of June 30, ~~2021,~~2022, the Retail/LTC segment operated more than ~~9,900~~9,000 retail

locations, ~~approximately~~more than 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies.

Corporate/Other Segment

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

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

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CVS Health and its subsidiaries have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Because of the influence of various factors on the Company’s operations, including business combinations, certain holidays and other seasonal influences, net income for any interim period may not be comparable to the same interim period in previous years or necessarily indicative of income for the full year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

The Company continually evaluates its investments to determine if they represent variable interests in a VIE. If the Company determines that it has a variable interest in a VIE, the Company then evaluates if it is the primary beneficiary of the VIE. The evaluation is a qualitative assessment as to whether the Company has the ability to direct the activities of a VIE that most significantly impact the entity’s economic performance. The Company consolidates a VIE if it is considered to be the primary beneficiary.

Assets and liabilities of VIEs for which the Company is the primary beneficiary were not significant to the Company’s unaudited condensed consolidated financial statements. VIE creditors do not have recourse against the general credit of the Company.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Restricted Cash

Restricted cash included in other current assets on the unaudited condensed consolidated balance sheets represents funds held on behalf of members, including health savings account funds associated with high deductible health plans. Restricted cash included in other assets on the unaudited condensed consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance policies. All restricted cash is invested in time deposits and money market ~~funds or commercial paper.~~funds.

The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:


In millions	In millions	June 30, 2021		December 31, 2020		In millions	June 30, 2022		December 31, 2021		June 30, 2021
Cash and cash equivalents	Cash and cash equivalents	$	7,119	$	7,854	Cash and cash equivalents	$	12,116	$	9,408	$	7,119
Restricted cash (included in other current assets)						Restricted cash (included in other current assets)	131		3,065		2,959
Restricted cash (included in other assets)	Restricted cash (included in other assets)	218		276		Restricted cash (included in other assets)	216		218		218
Total cash, cash equivalents and restricted cash in the statements of cash flows	Total cash, cash equivalents and restricted cash in the statements of cash flows	$	7,337	$	8,130	Total cash, cash equivalents and restricted cash in the statements of cash flows	$	12,463	$	12,691	$	10,296

The decrease in restricted cash included in other current assets as of June 30, 2022 compared to December 31, 2021 was primarily due to a decrease in health savings account funds held on behalf of customers as a result of the sale of PayFlex Holdings, Inc. (“PayFlex”). See Note 2 ‘‘Divestitures and Asset Sales’’ for additional information on the Company’s sale of PayFlex.

Accounts Receivable

Accounts receivable are stated net of allowances for credit losses, customer credit allowances, contractual allowances and estimated terminations. Accounts receivable, net is composed of the following:


In millions	In millions	June 30, 2021		December 31, 2020		In millions	June 30, 2022		December 31, 2021
Trade receivables	Trade receivables	$	8,021	$	7,101	Trade receivables	$	9,084	$	7,932
Vendor and manufacturer receivables	Vendor and manufacturer receivables	10,955		9,815		Vendor and manufacturer receivables	12,242		10,573
Premium receivables	Premium receivables	2,942		2,628		Premium receivables	3,399		2,537
Other receivables	Other receivables	2,246		2,198		Other receivables	2,508		3,389
Total accounts receivable, net	Total accounts receivable, net	$	24,164	$	21,742	Total accounts receivable, net	$	27,233	$	24,431

The Company’s allowance for credit losses was ~~$367~~$340 million and ~~$358~~$339 million as of June 30, ~~2021~~2022 and December 31,
~~2020,~~ 2021, respectively. When developing an estimate of the Company’s expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The Company’s accounts receivable are short duration in nature and typically settle in less than 30 days.

Revenue Recognition

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by major source in each segment for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended June 30, 2022														Three Months Ended June 30, 2022
Major goods/services lines:														Major goods/services lines:
Pharmacy														Pharmacy	$	—	$	42,567	$	20,017	$	—	$	(11,258)	$	51,326
Front Store														Front Store	—		—		5,736		—		—		5,736
Premiums														Premiums	21,245		—		—		15		—		21,260
Net investment income (loss)														Net investment income (loss)	88		—		(18)		76		—		146
Other														Other	1,423		245		551		19		(70)		2,168
Total														Total	$	22,756	$	42,812	$	26,286	$	110	$	(11,328)	$	80,636

Pharmacy Services distribution channel:														Pharmacy Services distribution channel:
Pharmacy network (1)														Pharmacy network (1)			$	24,537
Mail choice (2)														Mail choice (2)			18,030
Other														Other			245
Total														Total			$	42,812

Three Months Ended June 30, 2021	Three Months Ended June 30, 2021													Three Months Ended June 30, 2021
Major goods/services lines:	Major goods/services lines:													Major goods/services lines:
Pharmacy	Pharmacy	$	0	$	38,153	$	18,873	$	0	$	(11,094)	$	45,932	Pharmacy	$	—	$	38,153	$	18,873	$	—	$	(11,094)	$	45,932
Front Store	Front Store	0		0		5,254		0		0		5,254		Front Store	—		—		5,254		—		—		5,254
Premiums	Premiums	18,968		0		0		15		0		18,983		Premiums	18,968		—		—		15		—		18,983
Net investment income	Net investment income	137		0		0		152		0		289		Net investment income	137		—		—		152		—		289
Other	Other	1,420		161		601		15		(39)		2,158		Other	1,420		161		601		15		(39)		2,158
Total	Total	$	20,525	$	38,314	$	24,728	$	182	$	(11,133)	$	72,616	Total	$	20,525	$	38,314	$	24,728	$	182	$	(11,133)	$	72,616

Pharmacy Services distribution channel:	Pharmacy Services distribution channel:													Pharmacy Services distribution channel:
Pharmacy network (1)	Pharmacy network (1)			$	22,918									Pharmacy network (1)			$	22,918
Mail choice (2)	Mail choice (2)			15,235										Mail choice (2)			15,235
Other	Other			161										Other			161
Total	Total			$	38,314									Total			$	38,314

Three Months Ended June 30, 2020
Major goods/services lines:
Pharmacy		$	0	$	34,645	$	16,870	$	0	$	(9,741)	$	41,774
Front Store		0		0		4,653		0		0		4,653
Premiums		16,913		0		0		14		0		16,927
Net investment income		127		0		0		57		0		184
Other		1,428		244		139		15		(23)		1,803
Total		$	18,468	$	34,889	$	21,662	$	86	$	(9,764)	$	65,341

Pharmacy Services distribution channel:
Pharmacy network (1)				$	20,536
Mail choice (2)				14,109
Other				244
Total				$	34,889


In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Six Months Ended June 30, 2022														Six Months Ended June 30, 2022
Major goods/services lines:														Major goods/services lines:
Pharmacy														Pharmacy	$	—	$	81,765	$	39,549	$	—	$	(22,498)	$	98,816
Front Store														Front Store	—		—		11,049		—		—		11,049
Premiums														Premiums	42,859		—		—		32		—		42,891
Net investment income (loss)														Net investment income (loss)	177		—		(34)		171		—		314
Other														Other	2,829		508		1,140		33		(118)		4,392
Total														Total	$	45,865	$	82,273	$	51,704	$	236	$	(22,616)	$	157,462

Pharmacy Services distribution channel:														Pharmacy Services distribution channel:
Pharmacy network (1)														Pharmacy network (1)			$	47,361
Mail choice (2)														Mail choice (2)			34,404
Other														Other			508
Total														Total			$	82,273

Six Months Ended June 30, 2021	Six Months Ended June 30, 2021													Six Months Ended June 30, 2021
Major goods/services lines:	Major goods/services lines:													Major goods/services lines:
Pharmacy	Pharmacy	$	0	$	74,294	$	36,758	$	0	$	(22,168)	$	88,884	Pharmacy	$	—	$	74,294	$	36,758	$	—	$	(22,168)	$	88,884
Front Store	Front Store	0		0		9,896		0		0		9,896		Front Store	—		—		9,896		—		—		9,896
Premiums	Premiums	37,910		0		0		33		0		37,943		Premiums	37,910		—		—		33		—		37,943
Net investment income	Net investment income	285		0		46		255		0		586		Net investment income	285		—		46		255		—		586
Other	Other	2,813		341		1,302		29		(81)		4,404		Other	2,813		341		1,302		29		(81)		4,404
Total	Total	$	41,008	$	74,635	$	48,002	$	317	$	(22,249)	$	141,713	Total	$	41,008	$	74,635	$	48,002	$	317	$	(22,249)	$	141,713

Pharmacy Services distribution channel:	Pharmacy Services distribution channel:													Pharmacy Services distribution channel:
Pharmacy network (1)	Pharmacy network (1)			$	44,811									Pharmacy network (1)			$	44,811
Mail choice (2)	Mail choice (2)			29,483										Mail choice (2)			29,483
Other	Other			341										Other			341
Total	Total			$	74,635									Total			$	74,635

Six Months Ended June 30, 2020
Major goods/services lines:
Pharmacy		$	0	$	69,419	$	34,225	$	0	$	(19,998)	$	83,646
Front Store		0		0		9,861		0		0		9,861
Premiums		34,534		0		0		33		0		34,567
Net investment income		220		0		0		126		0		346
Other		2,912		453		325		17		(31)		3,676
Total		$	37,666	$	69,872	$	44,411	$	176	$	(20,029)	$	132,096

Pharmacy Services distribution channel:
Pharmacy network (1)				$	41,636
Mail choice (2)				27,783
Other				453
Total				$	69,872

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

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

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, and include ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

The following table provides information about receivables and contract liabilities from contracts with customers:


In millions	In millions	June 30, 2021		December 31, 2020		In millions	June 30, 2022		December 31, 2021
Trade receivables (included in accounts receivable, net)	Trade receivables (included in accounts receivable, net)	$	8,021	$	7,101	Trade receivables (included in accounts receivable, net)	$	9,084	$	7,932
Contract liabilities (included in accrued expenses)	Contract liabilities (included in accrued expenses)	79		71		Contract liabilities (included in accrued expenses)	80		87

During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. Below is a summary of such changes:

Six Months Ended
June 30,
In millions 2021 2020
Contract liabilities, beginning of the period $ 71 $ 73
Rewards earnings and gift card issuances 183 179
Redemption and breakage (175) (174)
Contract liabilities, end of the period $ 79 $ 78

~~Health Insurer Fee~~

Since January 1, 2014, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) has imposed an annual premium-based health insurer fee (the “HIF”). The HIF, which is payable each September, is not deductible for federal income tax purposes. In December 2019, the HIF was repealed for calendar years after 2020, therefore there was 0 expense related to the HIF in the three and six months ended June 30, 2021. In the three and six months ended June 30, 2020, operating expenses included $248 million and $519 million, respectively, related to the Company’s estimated share of the 2020 HIF.


	Six Months Ended June 30,
In millions	2022		2021
Contract liabilities, beginning of the period	$	87	$	71
Rewards earnings and gift card issuances	175		183
Redemption and breakage	(182)		(175)
Contract liabilities, end of the period	$	80	$	79

Related Party Transactions

The Company has an equity method investment in SureScripts, LLC (“SureScripts”), which operates a clinical health information network. The Company utilizes this clinical health information network in providing services to its client plan members and retail customers. The Company expensed fees for the use of this network of ~~$10~~$16 million and $3$10 million in the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and expensed fees for the use of this network of approximately ~~$19~~$31 million and ~~$23~~$19 million in the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company’s investment in and equity in the earnings of SureScripts for all periods presented is immaterial.

The Company has an equity method investment in Heartland Healthcare Services, LLC (“Heartland”). Heartland operates several LTC pharmacies in 4 states. Heartland paid the Company ~~$19~~$23 million and ~~$22~~$19 million for pharmaceutical inventory purchases during the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$37~~$44 million and ~~$43~~$37 million for pharmaceutical inventory purchases during the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Additionally, the Company performs certain collection functions for Heartland and then transfers those customer cash collections to Heartland. The Company’s investment in and equity in the earnings of Heartland for all periods presented is immaterial.

New Accounting Pronouncements ~~Recently Adopted~~

~~Simplifying the Accounting for Income Taxes~~

~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~ (Topic 740). This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Accounting Standards Codification (“ASC”) 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted this new accounting standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated operating results, cash flows, financial condition or related disclosures.

~~New Accounting Pronouncements~~ Not Yet Adopted

Targeted Improvements to the Accounting for Long-Duration Insurance Contracts

In August 2018, the ~~FASB~~Financial Accounting Standards Board issued ~~ASU~~Accounting Standards Update 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts (Topic 944). This standard requires the Company to review cash flow assumptions for its long-duration insurance contracts at least annually and recognize the effect of changes in future cash flow assumptions in net income. This standard also requires the Company to update discount rate assumptions quarterly and recognize the effect of changes in these assumptions in other

comprehensive income. The rate used to discount the Company’s liability for future policy benefits will be based on an estimate of the yield for an upper-medium grade fixed-income instrument with a duration profile matching that of the Company’s liabilities. In addition, this standard changes the amortization method for deferred acquisition costs and requires additional disclosures regarding the long duration insurance contract liabilities in the Company’s interim and annual financial statements. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The Company will adopt the new standard on January 1, 2023, using the modified retrospective transition method as of the earliest period presented for changes to the liability for future policy benefits and deferred acquisition costs. While the Company is still evaluating the impact of the new standard on its financial statements, the Company anticipates an increase to its liability for future policy benefits with a corresponding change in accumulated other comprehensive income as a result of updating the rate used to discount the liabilities to reflect the yield for an upper-medium grade fixed-income instrument compared to the Company’s expected investment yield under the existing guidance.

1514

2.Divestitures and Asset Sales

Divestiture of PayFlex

On June 1, 2022, the Company sold PayFlex for approximately $775 million. PayFlex provides services to employers, their employees, and their former employees in the areas of tax-advantaged account reimbursement administration (flexible spending, health reimbursement, health savings, transit and parking), Consolidated Omnibus Budget Reconciliation Act (“COBRA”) administration and special-member billing administration. The results of this business have historically been reported within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $225 million in the three and six months ended June 30, 2022, which is reflected as a reduction in operating expenses in the Company’s unaudited condensed consolidated statements of operations within the Health Care Benefits segment.

Divestiture of Thailand Health Care Business

In March 2022, the Company reached an agreement to sell its international health care business domiciled in Thailand (“Thailand business”), comprised of approximately 266,000 medical members, which was included in the Commercial Business reporting unit within the Health Care Benefits segment. At that time, a portion of the Commercial Business goodwill was specifically allocated to the Thailand business. The net assets of the Thailand business were accounted for as assets held for sale at March 31, 2022. The carrying value of the Thailand business was determined to be greater than its fair value and, accordingly, the Company recorded a $41 million loss on assets held for sale within the Health Care Benefits segment during the first quarter of 2022. The sale closed in the second quarter of 2022, and the consideration received and ultimate loss on the sale were not material.

International Health Care Benefits Renewal Rights Asset Sale

In May 2022, the Company sold the renewal rights of approximately 200,000 international medical members outside of the Americas, Thailand and India in connection with an Asset Purchase Agreement. As part of this agreement, the Company will introduce and help migrate these existing international medical members to the purchaser upon renewal. The Company expects the migration process to occur over a 16-month period between July 2022 and October 2023. The Company expects to cease writing any new or renewal business for international medical members outside of the Americas after October 31, 2022. The consideration received related to this agreement was not material.

3.Investments

Total investments at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
In millions	In millions	Current		Long-term		Total		Current		Long-term		Total		In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	Debt securities available for sale	$	2,878	$	19,468	$	22,346	$	2,774	$	18,414	$	21,188	Debt securities available for sale	$	2,775	$	17,976	$	20,751	$	3,009	$	20,231	$	23,240
Mortgage loans	Mortgage loans	128		848		976		226		821		1,047		Mortgage loans	88		905		993		58		844		902
Other investments	Other investments	0		1,820		1,820		0		1,577		1,577		Other investments	14		2,243		2,257		50		1,950		2,000
Total investments	Total investments	$	3,006	$	22,136	$	25,142	$	3,000	$	20,812	$	23,812	Total investments	$	2,877	$	21,124	$	24,001	$	3,117	$	23,025	$	26,142

Debt Securities

Debt securities available for sale at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


In millions	In millions	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		In millions	Gross Amortized Cost		Allowance for Credit Losses		Net Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2021
June 30, 2022										June 30, 2022
Debt securities:	Debt securities:									Debt securities:
U.S. government securities	U.S. government securities	$	2,320	$	91	$	(1)	$	2,410	U.S. government securities	$	2,194	$	—	$	2,194	$	2	$	(118)	$	2,078
States, municipalities and political subdivisions	States, municipalities and political subdivisions	2,978		168		(2)		3,144		States, municipalities and political subdivisions	2,472		—		2,472		11		(110)		2,373
U.S. corporate securities	U.S. corporate securities	8,754		822		(14)		9,562		U.S. corporate securities	9,910		—		9,910		29		(740)		9,199
Foreign securities	Foreign securities	2,652		247		(6)		2,893		Foreign securities	2,857		(8)		2,849		18		(236)		2,631
Residential mortgage-backed securities	Residential mortgage-backed securities	812		20		(3)		829		Residential mortgage-backed securities	808		—		808		—		(61)		747
Commercial mortgage-backed securities	Commercial mortgage-backed securities	1,023		63		(5)		1,081		Commercial mortgage-backed securities	1,222		—		1,222		—		(114)		1,108
Other asset-backed securities	Other asset-backed securities	2,372		26		(1)		2,397		Other asset-backed securities	2,721		—		2,721		5		(135)		2,591
Redeemable preferred securities	Redeemable preferred securities	27		3		0		30		Redeemable preferred securities	25		—		25		—		(1)		24
Total debt securities (2)		$	20,938	$	1,440	$	(32)	$	22,346
Total debt securities (1)										Total debt securities (1)	$	22,209	$	(8)	$	22,201	$	65	$	(1,515)	$	20,751

December 31, 2020
December 31, 2021										December 31, 2021
Debt securities:	Debt securities:									Debt securities:
U.S. government securities	U.S. government securities	$	2,341	$	128	$	0	$	2,469	U.S. government securities	$	2,349	$	—	$	2,349	$	70	$	(3)	$	2,416
States, municipalities and political subdivisions	States, municipalities and political subdivisions	2,556		172		0		2,728		States, municipalities and political subdivisions	2,947		—		2,947		148		(4)		3,091
U.S. corporate securities	U.S. corporate securities	7,879		1,023		(8)		8,894		U.S. corporate securities	9,093		—		9,093		682		(40)		9,735
Foreign securities	Foreign securities	2,595		324		(1)		2,918		Foreign securities	2,821		—		2,821		196		(24)		2,993
Residential mortgage-backed securities	Residential mortgage-backed securities	673		32		0		705		Residential mortgage-backed securities	870		—		870		15		(10)		875
Commercial mortgage-backed securities	Commercial mortgage-backed securities	962		84		0		1,046		Commercial mortgage-backed securities	1,278		—		1,278		44		(12)		1,310
Other asset-backed securities	Other asset-backed securities	2,369		36		(2)		2,403		Other asset-backed securities	2,791		—		2,791		14		(13)		2,792
Redeemable preferred securities	Redeemable preferred securities	21		4		0		25		Redeemable preferred securities	25		—		25		3		—		28
Total debt securities (2)		$	19,396	$	1,803	$	(11)	$	21,188
Total debt securities (1)										Total debt securities (1)	$	22,174	$	—	$	22,174	$	1,172	$	(106)	$	23,240

(1)~~There was 0 allowance for expected credit losses recorded on available-for-sale debt securities at June 30, 2021 or December 31, 2020.~~

~~(2)~~Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At June 30, 2022, debt securities with a fair value of $658 million, gross unrealized capital gains of $5 million and gross unrealized capital losses of $39 million and at December 31, 2021, debt securities with a fair value of ~~$886~~$864 million, gross unrealized capital gains of ~~$110~~$94 million and gross unrealized capital losses of $1$2 million ~~and at December 31, 2020, debt securities with a fair value of $919 million, gross unrealized capital gains of $135 million and 0 gross unrealized capital losses~~ were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive ~~income.~~income (loss).

The net amortized cost and fair value of debt securities at June 30, ~~2021~~2022 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.


In millions	In millions	Amortized Cost		Fair Value		In millions	Net Amortized Cost		Fair Value
Due to mature:	Due to mature:					Due to mature:
Less than one year	Less than one year	$	1,168	$	1,183	Less than one year	$	1,221	$	1,221
One year through five years	One year through five years	7,095		7,397		One year through five years	6,807		6,503
After five years through ten years	After five years through ten years	4,418		4,682		After five years through ten years	5,031		4,559
Greater than ten years	Greater than ten years	4,050		4,777		Greater than ten years	4,391		4,022
Residential mortgage-backed securities	Residential mortgage-backed securities	812		829		Residential mortgage-backed securities	808		747
Commercial mortgage-backed securities	Commercial mortgage-backed securities	1,023		1,081		Commercial mortgage-backed securities	1,222		1,108
Other asset-backed securities	Other asset-backed securities	2,372		2,397		Other asset-backed securities	2,721		2,591
Total	Total	$	20,938	$	22,346	Total	$	22,201	$	20,751

Summarized below are the debt securities the Company held at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:


		Less than 12 months					Greater than 12 months					Total						Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
June 30, 2021
June 30, 2022																	June 30, 2022
Debt securities:	Debt securities:																Debt securities:
U.S. government securities	U.S. government securities	15	$	76	$	1	0	$	0	$	0	15	$	76	$	1	U.S. government securities	464	$	1,616	$	115	12	$	58	$	3	476	$	1,674	$	118
States, municipalities and political subdivisions	States, municipalities and political subdivisions	146	302		2		1	4		0		147	306		2		States, municipalities and political subdivisions	875	1,372		104		27	55		6		902	1,427		110
U.S. corporate securities	U.S. corporate securities	807	1,125		13		8	9		1		815	1,134		14		U.S. corporate securities	5,583	6,989		674		364	508		66		5,947	7,497		740
Foreign securities	Foreign securities	237	374		6		2	2		0		239	376		6		Foreign securities	1,304	1,872		206		119	172		30		1,423	2,044		236
Residential mortgage-backed securities	Residential mortgage-backed securities	100	398		3		5	0		0		105	398		3		Residential mortgage-backed securities	388	644		50		23	65		11		411	709		61
Commercial mortgage-backed securities	Commercial mortgage-backed securities	85	241		5		0	0		0		85	241		5		Commercial mortgage-backed securities	436	955		91		53	118		23		489	1,073		114
Other asset-backed securities	Other asset-backed securities	272	505		1		24	28		0		296	533		1		Other asset-backed securities	1,324	2,358		126		91	114		9		1,415	2,472		135
Redeemable preferred securities	Redeemable preferred securities	1	3		0		0	0		0		1	3		0		Redeemable preferred securities	10	19		1		1	3		—		11	22		1
Total debt securities	Total debt securities	1,663	$	3,024	$	31	40	$	43	$	1	1,703	$	3,067	$	32	Total debt securities	10,384	$	15,825	$	1,367	690	$	1,093	$	148	11,074	$	16,918	$	1,515

December 31, 2020
December 31, 2021																	December 31, 2021
Debt securities:	Debt securities:																Debt securities:
U.S. government securities	U.S. government securities	32	$	205	$	0	0	$	0	$	0	32	$	205	$	0	U.S. government securities	43	$	242	$	2	10	$	40	$	1	53	$	282	$	3
States, municipalities and political subdivisions	States, municipalities and political subdivisions	49	83		0		0	0		0		49	83		0		States, municipalities and political subdivisions	233	428		3		13	33		1		246	461		4
U.S. corporate securities	U.S. corporate securities	145	155		8		2	0		0		147	155		8		U.S. corporate securities	1,610	2,296		31		165	238		9		1,775	2,534		40
Foreign securities	Foreign securities	41	69		1		5	5		0		46	74		1		Foreign securities	449	747		20		57	91		4		506	838		24
Residential mortgage-backed securities	Residential mortgage-backed securities	23	26		0		3	0		0		26	26		0		Residential mortgage-backed securities	165	593		9		10	36		1		175	629		10
Commercial mortgage-backed securities	Commercial mortgage-backed securities	22	75		0		0	0		0		22	75		0		Commercial mortgage-backed securities	188	462		7		35	112		5		223	574		12
Other asset-backed securities	Other asset-backed securities	156	256		1		49	41		1		205	297		2		Other asset-backed securities	1,011	2,030		12		26	31		1		1,037	2,061		13
Redeemable preferred securities																	Redeemable preferred securities	1	2		—		1	3		—		2	5		—
Total debt securities	Total debt securities	468	$	869	$	10	59	$	46	$	1	527	$	915	$	11	Total debt securities	3,700	$	6,800	$	84	317	$	584	$	22	4,017	$	7,384	$	106

The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. Unrealized capital losses at June 30, ~~2021~~2022 were generally caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. As of June 30, ~~2021,~~2022, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis.

The maturity dates for debt securities in an unrealized capital loss position at June 30, ~~2021~~2022 were as follows:


		Supporting experience-rated products				Supporting remaining products				Total					Supporting experience-rated products				Supporting remaining products				Total
In millions	In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:	Due to mature:													Due to mature:
Less than one year	Less than one year	$	0	$	0	$	23	$	0	$	23	$	0	Less than one year	$	7	$	—	$	438	$	5	$	445	$	5
One year through five years	One year through five years	1		0		1,005		7		1,006		7		One year through five years	54		2		5,062		320		5,116		322
After five years through ten years	After five years through ten years	15		0		613		11		628		11		After five years through ten years	151		15		3,713		471		3,864		486
Greater than ten years	Greater than ten years	2		1		236		4		238		5		Greater than ten years	196		18		3,043		374		3,239		392
Residential mortgage-backed securities	Residential mortgage-backed securities	0		0		398		3		398		3		Residential mortgage-backed securities	11		1		698		60		709		61
Commercial mortgage-backed securities	Commercial mortgage-backed securities	6		0		235		5		241		5		Commercial mortgage-backed securities	33		2		1,040		112		1,073		114
Other asset-backed securities	Other asset-backed securities	1		0		532		1		533		1		Other asset-backed securities	16		1		2,456		134		2,472		135
Total	Total	$	25	$	1	$	3,042	$	31	$	3,067	$	32	Total	$	468	$	39	$	16,450	$	1,476	$	16,918	$	1,515

Mortgage Loans

The Company’s mortgage loans are collateralized by commercial real estate. During the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company had the following activity in its mortgage loan portfolio:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
New mortgage loans	New mortgage loans	$	73	$	16	$	120	$	24	New mortgage loans	$	121	$	73	$	180	$	120
Mortgage loans fully repaid	Mortgage loans fully repaid	82		33		172		77		Mortgage loans fully repaid	39		82		74		172
Mortgage loans foreclosed	Mortgage loans foreclosed	0		0		0		0		Mortgage loans foreclosed	—		—		—		—

The Company assesses mortgage loans on a regular basis for credit impairments, and assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes each loan in its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, current and future property cash flow, property condition, market trends, creditworthiness of the borrower and deal structure.

•Category 1 - Represents loans of superior quality.

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

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

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

Based on the Company’s assessments at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the amortized cost basis of the Company's mortgage loans within each credit quality indicator by year of origination was as follows:


		Amortized Cost Basis by Year of Origination															Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	In millions, except credit quality indicator	2021		2020		2019		2018		2017		Prior		Total		In millions, except credit quality indicator	2022		2021		2020		2019		2018		Prior		Total
June 30, 2021
June 30, 2022																June 30, 2022
1	1	$	0	$	0	$	0	$	0	$	23	$	30	$	53	1	$	—	$	—	$	—	$	—	$	—	$	17	$	17
2 to 4	2 to 4	118		57		88		73		71		490		897		2 to 4	162		250		48		20		65		418		963
5 and 6	5 and 6	0		0		0		3		4		11		18		5 and 6	—		—		—		—		3		10		13
7	7	0		0		0		0		0		8		8		7	—		—		—		—		—		—		—
Total	Total	$	118	$	57	$	88	$	76	$	98	$	539	$	976	Total	$	162	$	250	$	48	$	20	$	68	$	445	$	993

December 31, 2020
December 31, 2021																December 31, 2021
1	1			$	0	$	0	$	0	$	22	$	37	$	59	1			$	—	$	—	$	—	$	—	$	28	$	28
2 to 4	2 to 4			46		96		91		124		595		952		2 to 4			255		48		40		72		446		861
5 and 6	5 and 6			0		0		3		4		29		36		5 and 6			—		—		—		3		10		13
7	7			0		0		0		0		0		0		7			—		—		—		—		—		—
Total	Total			$	46	$	96	$	94	$	150	$	661	$	1,047	Total			$	255	$	48	$	40	$	75	$	484	$	902

Net Investment Income

Sources of net investment income for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Debt securities	Debt securities	$	160	$	146	$	317	$	290	Debt securities	$	172	$	160	$	336	$	317
Mortgage loans	Mortgage loans	13		15		28		30		Mortgage loans	13		13		24		28
Other investments	Other investments	112		(20)		198		27		Other investments	68		112		145		198
Gross investment income	Gross investment income	285		141		543		347		Gross investment income	253		285		505		543
Investment expenses	Investment expenses	(9)		(9)		(17)		(17)		Investment expenses	(9)		(9)		(18)		(17)
Net investment income (excluding net realized capital gains or losses)	Net investment income (excluding net realized capital gains or losses)	276		132		526		330		Net investment income (excluding net realized capital gains or losses)	244		276		487		526
Net realized capital gains (1)		13		52		60		16
Net realized capital gains (losses) (1)										Net realized capital gains (losses) (1)	(98)		13		(173)		60
Net investment income (2)	Net investment income (2)	$	289	$	184	$	586	$	346	Net investment income (2)	$	146	$	289	$	314	$	586

(1)Net realized capital losses include yield-related impairment losses on debt securities of $30 million and are shown net of the reversal of previously recorded credit-related impairment losses on debt securities of $22 million in the three months ended June 30, 2022. Net realized capital losses include credit-related and yield-related impairment losses on debt securities of $16 million and $48 million, respectively, in the six months ended June 30, 2022. Net realized capital gains are net of yield-related impairment losses on debt securities of $2 million and $32 million, respectively, in the three and six months ended June 30, 2021. There were 0no credit-related losses on debt securities in the three and six months ended June 30, 2021. Net realized capital gains include the reversal of previously recorded credit-related impairment losses on debt securities of $42 million and yield-related impairment losses on debt securities of $1 million in the three months ended June 30, 2020. Net realized capital gains are net of credit-related and yield-related impairment losses on debt securities of $3 million and $42 million, respectively, in the six months ended June 30, 2020.

(2)Net investment income includes $9 million and $18 million for the three and six months ended June 30, 2022, respectively, and $10 million and $19 million for the three and six months ended June 30, 2021, ~~respectively, and $10 million and $21 million for the three and six months ended June 30, 2020,~~ respectively, related to investments supporting experience-rated products.

Excluding amounts related to experience-rated products, proceeds from the sale of available-for-sale debt securities and the related gross realized capital gains and losses for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Proceeds from sales	Proceeds from sales	$	919	$	1,419	$	2,267	$	2,142	Proceeds from sales	$	1,052	$	919	$	2,963	$	2,267
Gross realized capital gains	Gross realized capital gains	20		23		42		43		Gross realized capital gains	3		20		17		42
Gross realized capital losses	Gross realized capital losses	1		21		10		56		Gross realized capital losses	72		1		107		10

3.4.Fair Value

The preparation of the Company’s unaudited condensed consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. The Company’s assets and liabilities carried at fair value have been classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:

•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.

•Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.

•Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 “Fair Value” in the ~~2020~~2021 Form 10-K.

There were 0no financial liabilities measured at fair value on a recurring basis on the unaudited condensed consolidated balance sheets at June 30, ~~2021~~2022 or December 31, ~~2020.~~2021. Financial assets measured at fair value on a recurring basis on the unaudited condensed consolidated balance sheets at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


In millions	In millions	Level 1		Level 2		Level 3		Total		In millions	Level 1		Level 2		Level 3		Total
June 30, 2021
June 30, 2022										June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	3,538	$	3,581	$	0	$	7,119	Cash and cash equivalents	$	7,335	$	4,781	$	—	$	12,116
Debt securities:	Debt securities:									Debt securities:
U.S. government securities	U.S. government securities	2,365		45		0		2,410		U.S. government securities	2,045		33		—		2,078
States, municipalities and political subdivisions	States, municipalities and political subdivisions	0		3,144		0		3,144		States, municipalities and political subdivisions	—		2,373		—		2,373
U.S. corporate securities	U.S. corporate securities	0		9,521		41		9,562		U.S. corporate securities	—		9,169		30		9,199
Foreign securities	Foreign securities	0		2,893		0		2,893		Foreign securities	—		2,623		8		2,631
Residential mortgage-backed securities	Residential mortgage-backed securities	0		829		0		829		Residential mortgage-backed securities	—		747		—		747
Commercial mortgage-backed securities	Commercial mortgage-backed securities	0		1,081		0		1,081		Commercial mortgage-backed securities	—		1,108		—		1,108
Other asset-backed securities	Other asset-backed securities	0		2,397		0		2,397		Other asset-backed securities	—		2,591		—		2,591
Redeemable preferred securities	Redeemable preferred securities	0		29		1		30		Redeemable preferred securities	—		24		—		24
Total debt securities	Total debt securities	2,365		19,939		42		22,346		Total debt securities	2,045		18,668		38		20,751
Equity securities	Equity securities	30		0		30		60		Equity securities	121		—		68		189
Total	Total	$	5,933	$	23,520	$	72	$	29,525	Total	$	9,501	$	23,449	$	106	$	33,056

December 31, 2020
December 31, 2021										December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	3,985	$	3,869	$	0	$	7,854	Cash and cash equivalents	$	4,954	$	4,454	$	—	$	9,408
Debt securities:	Debt securities:									Debt securities:
U.S. government securities	U.S. government securities	2,370		99		0		2,469		U.S. government securities	2,372		44		—		2,416
States, municipalities and political subdivisions	States, municipalities and political subdivisions	0		2,727		1		2,728		States, municipalities and political subdivisions	—		3,086		5		3,091
U.S. corporate securities	U.S. corporate securities	0		8,842		52		8,894		U.S. corporate securities	—		9,697		38		9,735
Foreign securities	Foreign securities	0		2,918		0		2,918		Foreign securities	—		2,983		10		2,993
Residential mortgage-backed securities	Residential mortgage-backed securities	0		705		0		705		Residential mortgage-backed securities	—		875		—		875
Commercial mortgage-backed securities	Commercial mortgage-backed securities	0		1,046		0		1,046		Commercial mortgage-backed securities	—		1,310		—		1,310
Other asset-backed securities	Other asset-backed securities	0		2,403		0		2,403		Other asset-backed securities	—		2,789		3		2,792
Redeemable preferred securities	Redeemable preferred securities	0		24		1		25		Redeemable preferred securities	—		28		—		28
Total debt securities	Total debt securities	2,370		18,764		54		21,188		Total debt securities	2,372		20,812		56		23,240
Equity securities	Equity securities	17		0		30		47		Equity securities	114		—		55		169
Total	Total	$	6,372	$	22,633	$	84	$	29,089	Total	$	7,440	$	25,266	$	111	$	32,817

During the three and six months ended June 30, ~~2021~~2022 there were $26 million and ~~2020,~~$29 million of transfers out of Level 3. During the three and six months ended June 30, 2021, there were no transfers into or out of Level 3.

The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the unaudited condensed consolidated balance sheets at adjusted cost or contract value at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


		Carrying Value		Estimated Fair Value									Carrying Value		Estimated Fair Value
In millions	In millions			Level 1		Level 2		Level 3		Total		In millions			Level 1		Level 2		Level 3		Total
June 30, 2021
June 30, 2022												June 30, 2022
Assets:	Assets:											Assets:
Mortgage loans	Mortgage loans	$	976	$	0	$	0	$	992	$	992	Mortgage loans	$	993	$	—	$	—	$	940	$	940
Equity securities (1)	Equity securities (1)	129		N/A		N/A		N/A		N/A		Equity securities (1)	183		N/A		N/A		N/A		N/A
Liabilities:	Liabilities:											Liabilities:
Investment contract liabilities:	Investment contract liabilities:											Investment contract liabilities:
With a fixed maturity	With a fixed maturity	5		0		0		5		5		With a fixed maturity	4		—		—		4		4
Without a fixed maturity	Without a fixed maturity	324		0		0		363		363		Without a fixed maturity	333		—		—		317		317
Long-term debt	Long-term debt	59,354		68,364		0		0		68,364		Long-term debt	54,816		51,825		—		—		51,825

December 31, 2020
December 31, 2021												December 31, 2021
Assets:	Assets:											Assets:
Mortgage loans	Mortgage loans	$	1,047	$	0	$	0	$	1,070	$	1,070	Mortgage loans	$	902	$	—	$	—	$	907	$	907
Equity securities (1)	Equity securities (1)	145		N/A		N/A		N/A		N/A		Equity securities (1)	126		N/A		N/A		N/A		N/A
Liabilities:	Liabilities:											Liabilities:
Investment contract liabilities:	Investment contract liabilities:											Investment contract liabilities:
With a fixed maturity	With a fixed maturity	5		0		0		5		5		With a fixed maturity	5		—		—		5		5
Without a fixed maturity	Without a fixed maturity	322		0		0		371		371		Without a fixed maturity	336		—		—		373		373
Long-term debt	Long-term debt	64,647		75,940		0		0		75,940		Long-term debt	56,176		64,157		—		—		64,157

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

Separate Accounts assets relate to the Company’s large case pensions products which represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Separate Accounts financial assets as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


		June 30, 2021								December 31, 2020									June 30, 2022								December 31, 2021
In millions	In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	Cash and cash equivalents	$	2	$	227	$	0	$	229	$	2	$	186	$	0	$	188	Cash and cash equivalents	$	4	$	178	$	—	$	182	$	2	$	186	$	—	$	188
Debt securities	Debt securities	1,075		2,961		0		4,036		1,465		2,634		0		4,099		Debt securities	913		2,535		—		3,448		1,233		3,048		—		4,281
Equity securities	Equity securities	0		2		0		2		0		2		0		2		Equity securities	—		1		—		1		—		1		—		1
Common/collective trusts	Common/collective trusts	0		513		0		513		0		563		0		563		Common/collective trusts	—		421		—		421		—		547		—		547
Total (1)	Total (1)	$	1,077	$	3,703	$	0	$	4,780	$	1,467	$	3,385	$	0	$	4,852	Total (1)	$	917	$	3,135	$	—	$	4,052	$	1,235	$	3,782	$	—	$	5,017

(1)Excludes ~~$100~~$88 million and ~~$29~~$70 million of other receivables at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

4.5.Health Care Costs Payable

The following table shows the components of the change in health care costs payable during the six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Six Months Ended June 30,					Six Months Ended June 30,
In millions	In millions	2021		2020		In millions	2022		2021
Health care costs payable, beginning of the period	Health care costs payable, beginning of the period	$	7,936	$	6,879	Health care costs payable, beginning of the period	$	8,808	$	7,936
Less: Reinsurance recoverables	Less: Reinsurance recoverables	10		5		Less: Reinsurance recoverables	8		10
Health care costs payable, beginning of the period, net	Health care costs payable, beginning of the period, net	7,926		6,874		Health care costs payable, beginning of the period, net	8,800		7,926
Acquisition		0		412

Add: Components of incurred health care costs	Add: Components of incurred health care costs					Add: Components of incurred health care costs
Current year	Current year	32,183		26,390		Current year	35,960		32,183
Prior years	Prior years	(709)		(420)		Prior years	(666)		(709)
Total incurred health care costs (1)	Total incurred health care costs (1)	31,474		25,970		Total incurred health care costs (1)	35,294		31,474
Less: Claims paid	Less: Claims paid					Less: Claims paid
Current year	Current year	24,600		20,223		Current year	26,971		24,600
Prior years	Prior years	6,409		5,704		Prior years	6,732		6,409
Total claims paid	Total claims paid	31,009		25,927		Total claims paid	33,703		31,009
Add: Premium deficiency reserve	Add: Premium deficiency reserve	5		29		Add: Premium deficiency reserve	5		5

Health care costs payable, end of the period, net	Health care costs payable, end of the period, net	8,396		7,358		Health care costs payable, end of the period, net	10,396		8,396
Add: Reinsurance recoverables	Add: Reinsurance recoverables	18		4		Add: Reinsurance recoverables	4		18
Health care costs payable, end of the period	Health care costs payable, end of the period	$	8,414	$	7,362	Health care costs payable, end of the period	$	10,400	$	8,414

(1)Total incurred health care costs for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 in the table above exclude (i) $5 million and ~~$29~~$5 million, respectively, ~~related to a~~for premium deficiency ~~reserve~~reserves related to the Company’s Medicaid products, (ii) ~~$27~~$37 million and ~~$20~~$27 million, respectively, of benefit costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the ~~Company’s~~ unaudited condensed consolidated balance sheets and (iii) ~~$99~~$221 million and ~~$119~~$99 million, respectively, of benefit costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the ~~Company’s~~ unaudited condensed consolidated balance sheets.

The Company’s estimates of prior years’ health care costs payable decreased by ~~$709~~$666 million and ~~$420~~$709 million, respectively, in the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, because claims were settled for amounts less than originally estimated (i.e., the amount of claims incurred was lower than originally estimated), primarily due to lower health care cost trends as well as the actual claim submission time being faster than originally assumed (i.e., the Company’s completion factors were higher than originally assumed) in estimating health care costs payable at the end of the prior year.

At June 30, ~~2021,~~2022, the Company’s liabilities for the ultimate cost of (i) services rendered to the Company’s Insured members but not yet reported to the Company and (ii) claims which have been reported to the Company but not yet paid (collectively, “IBNR”) plus expected development on reported claims totaled approximately ~~$6.4~~$8.0 billion. Substantially all of the Company’s liabilities for IBNR plus expected development on reported claims at June 30, ~~2021~~2022 related to the current year.

6.Borrowings

The following table is a summary of the Company’s borrowings at June 30, 2022 and December 31, 2021:


In millions	June 30, 2022		December 31, 2021



Long-term debt
3.5% senior notes due July 2022	$	—	$	1,500
2.75% senior notes due November 2022	1,000		1,000
2.75% senior notes due December 2022	1,250		1,250
4.75% senior notes due December 2022	399		399
2.8% senior notes due June 2023	1,300		1,300
4% senior notes due December 2023	414		414
3.375% senior notes due August 2024	650		650
2.625% senior notes due August 2024	1,000		1,000
3.5% senior notes due November 2024	750		750
5% senior notes due December 2024	299		299
4.1% senior notes due March 2025	950		950
3.875% senior notes due July 2025	2,828		2,828
2.875% senior notes due June 2026	1,750		1,750
3% senior notes due August 2026	750		750
3.625% senior notes due April 2027	750		750
6.25% senior notes due June 2027	372		372
1.3% senior notes due August 2027	2,250		2,250
4.3% senior notes due March 2028	5,000		5,000
3.25% senior notes due August 2029	1,750		1,750
3.75% senior notes due April 2030	1,500		1,500
1.75% senior notes due August 2030	1,250		1,250
1.875% senior notes due February 2031	1,250		1,250
2.125% senior notes due September 2031	1,000		1,000
4.875% senior notes due July 2035	652		652
6.625% senior notes due June 2036	771		771
6.75% senior notes due December 2037	533		533
4.78% senior notes due March 2038	5,000		5,000
6.125% senior notes due September 2039	447		447
4.125% senior notes due April 2040	1,000		1,000
2.7% senior notes due August 2040	1,250		1,250
5.75% senior notes due May 2041	133		133
4.5% senior notes due May 2042	500		500
4.125% senior notes due November 2042	500		500
5.3% senior notes due December 2043	750		750
4.75% senior notes due March 2044	375		375
5.125% senior notes due July 2045	3,500		3,500
3.875% senior notes due August 2047	1,000		1,000
5.05% senior notes due March 2048	8,000		8,000
4.25% senior notes due April 2050	750		750
Finance lease liabilities	1,407		1,300
Other	316		320
Total debt principal	55,346		56,743
Debt premiums	210		219
Debt discounts and deferred financing costs	(740)		(786)
	54,816		56,176
Less:

Current portion of long-term debt	(4,019)		(4,205)
Long-term debt	$	50,797	$	51,971

Long-term Borrowings

In May 2022, the Company exercised the par call option on its outstanding 3.5% senior notes due July 2022 and redeemed for cash on hand the entire $1.5 billion aggregate principal amount.

On July 15, 2022, the Company announced that it will exercise the par call option on its outstanding 2.75% senior notes due November 2022 (issued by Aetna Inc.) and will redeem for cash on hand the entire $1.0 billion aggregate principal amount. The redemption is expected to occur on or about August 15, 2022.

On August 2, 2022, the Company announced that it will exercise the par call options on its outstanding 2.75% senior notes due December 2022 and 4.75% senior notes due December 2022 (including the unexchanged notes issued by Omnicare, Inc.) and will redeem for cash on hand the entire $1.25 billion and $399 million aggregate principal amounts, respectively. The redemptions are expected to occur on or about September 1, 2022.

5.7.Shareholders’ Equity

Share Repurchases

~~On November 2, 2016,~~The following share repurchase program has been authorized by CVS ~~Health’s~~Health Corporation’s Board of Directors (the “Board”) ~~authorized the 2016 share repurchase program (“2016 Repurchase Program”) for up to $15.0 billion of the Company’s common shares.~~ :


In billions Authorization Date	Authorized		Remaining as of June 30, 2022
December 9, 2021 (“2021 Repurchase Program”)	$	10.0	$	8.0

The ~~2016~~2021 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. The ~~2016~~2021 Repurchase Program can be modified or terminated by the Board at any time.

During the six months ended June 30, 2022, the Company repurchased approximately 19.1 million shares of common stock for approximately $2.0 billion pursuant to the 2021 ~~and 2020,~~Repurchase Program, including share repurchases under the ASR transaction described below. During the six months ended June 30, 2021, the Company did 0tnot repurchase any shares of its common stock. ~~At June 30,~~

Pursuant to the authorization under the 2021 Repurchase Program, the Company ~~had~~entered into a $1.5 billion fixed dollar ASR with Barclays Bank PLC (“Barclays”). Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares at a price of $103.34 per share, which were placed into treasury stock in January 2022. The ASR was accounted for as an initial treasury stock transaction for $1.2 billion and a forward contract for $0.3 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus. In February 2022, the Company received approximately 2.7 million shares of CVS Health Corporation’s common stock, representing the remaining ~~authorization~~20% of the $1.5 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to ~~repurchase~~treasury stock in February 2022.

At the time they were received, the initial and final receipt of shares resulted in an ~~aggregate~~immediate reduction of upthe outstanding shares used to ~~approximately $13.9 billion of its~~calculate the weighted average common shares ~~under the 2016 Repurchase Program.~~outstanding for basic and diluted earnings per share.

Dividends

The quarterly cash dividend declared by the Board was $0.55 and $0.50 per share in ~~each of~~ the ~~three-month periods~~three months ended June 30, 2022 and 2021, ~~and 2020.~~respectively. Cash dividends declared by the Board were $1.10 and $1.00 per share in ~~each of~~ the ~~six-month periods~~six months ended June 30, 2022 and 2021, ~~and 2020.~~respectively. CVS Health Corporation has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.

2526

6.8.Other Comprehensive Income

Shareholders’ equity included the following activity in accumulated other comprehensive income (loss) for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Net unrealized investment gains (losses):	Net unrealized investment gains (losses):									Net unrealized investment gains (losses):
Beginning of period balance	Beginning of period balance	$	828	$	463	$	1,214	$	774	Beginning of period balance	$	(377)	$	828	$	778	$	1,214
Other comprehensive income (loss) before reclassifications ($214, $681, $(273), $195 pretax)		164		560		(236)		166
Amounts reclassified from accumulated other comprehensive income ($(18), $(44), $(1), $57 pretax) (1)		(15)		(36)		(1)		47
Other comprehensive income (loss) before reclassifications ($(1,105), $214, $(2,510), $(273) pretax)										Other comprehensive income (loss) before reclassifications ($(1,105), $214, $(2,510), $(273) pretax)	(868)		164		(2,098)		(236)
Amounts reclassified from accumulated other comprehensive income (loss) ($77, $(18), $154, $(1) pretax) (1)										Amounts reclassified from accumulated other comprehensive income (loss) ($77, $(18), $154, $(1) pretax) (1)	55		(15)		130		(1)
Other comprehensive income (loss)	Other comprehensive income (loss)	149		524		(237)		213		Other comprehensive income (loss)	(813)		149		(1,968)		(237)
End of period balance	End of period balance	977		987		977		987		End of period balance	(1,190)		977		(1,190)		977

Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Beginning of period balance	Beginning of period balance	5		(8)		7		4		Beginning of period balance	3		5		—		7
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	1		6		(1)		(6)		Other comprehensive income (loss) before reclassifications	(1)		1		2		(1)

Other comprehensive income (loss)	Other comprehensive income (loss)	1		6		(1)		(6)		Other comprehensive income (loss)	(1)		1		2		(1)
End of period balance	End of period balance	6		(2)		6		(2)		End of period balance	2		6		2		6

Net cash flow hedges:	Net cash flow hedges:									Net cash flow hedges:
Beginning of period balance	Beginning of period balance	244		270		248		279		Beginning of period balance	219		244		222		248
Other comprehensive loss before reclassifications ($0, $0, $0, $(7) pretax)		0		0		0		(5)
Amounts reclassified from accumulated other comprehensive income ($(4), $(4), $(9), $(10) pretax) (2)		(3)		(3)		(7)		(7)
Other comprehensive loss		(3)		(3)		(7)		(12)
Other comprehensive income before reclassifications ($24, $0, $24, $0 pretax)										Other comprehensive income before reclassifications ($24, $0, $24, $0 pretax)	18		—		18		—
Amounts reclassified from accumulated other comprehensive income ($(4), $(4), $(8), $(9) pretax) (2)										Amounts reclassified from accumulated other comprehensive income ($(4), $(4), $(8), $(9) pretax) (2)	(3)		(3)		(6)		(7)
Other comprehensive income (loss)										Other comprehensive income (loss)	15		(3)		12		(7)
End of period balance	End of period balance	241		267		241		267		End of period balance	234		241		234		241

Pension and other postretirement benefits:	Pension and other postretirement benefits:									Pension and other postretirement benefits:
Beginning of period balance	Beginning of period balance	(55)		(38)		(55)		(38)		Beginning of period balance	(35)		(55)		(35)		(55)
Other comprehensive loss before reclassifications ($0, $(8), $0, and $(8) pretax)		0		(6)		0		(6)
Amounts reclassified from accumulated other comprehensive loss ($1, $7, $1 and $7 pretax) (3)		1		5		1		5
Other comprehensive income (loss)		1		(1)		1		(1)

Amounts reclassified from accumulated other comprehensive loss ($1, $1, $1, $1 pretax) (3)										Amounts reclassified from accumulated other comprehensive loss ($1, $1, $1, $1 pretax) (3)	1		1		1		1
Other comprehensive income										Other comprehensive income	1		1		1		1
End of period balance	End of period balance	(54)		(39)		(54)		(39)		End of period balance	(34)		(54)		(34)		(54)

Total beginning of period accumulated other comprehensive income		1,022		687		1,414		1,019
Total beginning of period accumulated other comprehensive income (loss)										Total beginning of period accumulated other comprehensive income (loss)	(190)		1,022		965		1,414
Total other comprehensive income (loss)	Total other comprehensive income (loss)	148		526		(244)		194		Total other comprehensive income (loss)	(798)		148		(1,953)		(244)
Total end of period accumulated other comprehensive income		$	1,170	$	1,213	$	1,170	$	1,213
Total end of period accumulated other comprehensive income (loss)										Total end of period accumulated other comprehensive income (loss)	$	(988)	$	1,170	$	(988)	$	1,170

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

(2)Amounts reclassified from accumulated other comprehensive income for specifically identified cash flow hedges are included in interest expense in the unaudited condensed consolidated statements of operations. The Company expects to reclassify approximately ~~$13~~$11 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.

(3)Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other income in the unaudited condensed consolidated statements of operations.

2627

7.9.Earnings Per Share

Earnings per share is computed using the ~~two-class~~treasury stock method. Stock options and stock appreciation rights to purchase 4 million and 3 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2022, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, stock options and stock appreciation rights to purchase 8 million and 9 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2021, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. For the same reason, stock appreciation rights and options to purchase 17 million and 15 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2020, respectively.

The following is a reconciliation of basic and diluted earnings per share for the respective periods:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions, except per share amounts	In millions, except per share amounts	2021		2020		2021		2020		In millions, except per share amounts	2022		2021		2022		2021
Numerator for earnings per share calculation:	Numerator for earnings per share calculation:									Numerator for earnings per share calculation:

Net income attributable to CVS Health	Net income attributable to CVS Health	$	2,783	$	2,975	$	5,006	$	4,982	Net income attributable to CVS Health	$	2,951	$	2,783	$	5,263	$	5,006

Denominator for earnings per share calculation:	Denominator for earnings per share calculation:									Denominator for earnings per share calculation:
Weighted average shares, basic	Weighted average shares, basic	1,319		1,309		1,316		1,307		Weighted average shares, basic	1,313		1,319		1,312		1,316
Effect of dilutive securities		8		5		9		6
Restricted stock units and performance stock units										Restricted stock units and performance stock units	4		4		8		6
Stock options and stock appreciation rights										Stock options and stock appreciation rights	4		4		5		3
Weighted average shares, diluted	Weighted average shares, diluted	1,327		1,314		1,325		1,313		Weighted average shares, diluted	1,321		1,327		1,325		1,325

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	2.11	$	2.27	$	3.80	$	3.81	Basic	$	2.25	$	2.11	$	4.01	$	3.80
Diluted	Diluted	$	2.10	$	2.26	$	3.78	$	3.79	Diluted	$	2.23	$	2.10	$	3.97	$	3.78

8.10.Commitments and Contingencies

COVID-19

The COVID-19 pandemic continues to evolve. ~~We believe~~The Company believes COVID-19’s impact on ~~our~~its businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local governmental responses to the pandemic. Those primary drivers are beyond ~~our~~the Company’s knowledge and control. As a result, the impact COVID-19 will have on ~~our~~the Company’s businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. COVID-19 also may result in legal and regulatory proceedings, investigations and claims against ~~us.~~the Company.

Lease Guarantees

Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores and Linens ‘n Things, each of which subsequently filed for bankruptcy, and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser agreed to indemnify the Company for any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries fail to make the required payments under a store lease, the Company could be required to satisfy those obligations, and any significant adverse impact of COVID-19 on such purchasers and/or former subsidiaries increases the risk that the Company will be required to satisfy those obligations. As of June 30, ~~2021,~~2022, the Company guaranteed 7368 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the unaudited condensed consolidated balance sheets), with the maximum remaining lease term extending through 2030.

Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools

Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (in most states up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The life and health

insurance guaranty associations in which the Company participates that operate under these laws respond to insolvencies of long-term care insurers and life insurers as well as health insurers. The Company’s assessments generally are based on a formula relating to the Company’s health care premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be recovered over time as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as not-for-profit consumer-governed health plans established under the ~~ACA.~~Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.

In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. Penn Treaty was placed in liquidation in March 2017. The Company has recorded a liability for its estimated share of future assessments by applicable life and health insurance guaranty associations. It is reasonably possible that in the future the Company may record a liability and expense relating to other insolvencies which could have a material adverse effect on the Company’s operating results, financial condition and cash flows, and the risk is heightened by any significant adverse impact of the COVID-19 pandemic on the solvency of other insurers, including long-term care and life insurers. While historically the Company has ultimately recovered more than half of guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to legislative and/or regulatory actions that limit future offsets.

HMOs in certain states in which the Company does business are subject to assessments, including market stabilization and other risk-sharing pools, for which the Company is assessed charges based on incurred claims, demographic membership mix and other factors. The Company establishes liabilities for these assessments based on applicable laws and regulations. In certain states, the ultimate assessments the Company pays are dependent upon the Company’s experience relative to other entities subject to the assessment, and the ultimate liability is not known at the financial statement date. While the ultimate amount of the assessment is dependent upon the experience of all pool participants, the Company believes it has adequate reserves to cover such assessments.

Litigation and Regulatory Proceedings

The Company has been involved or is currently involved in numerous legal proceedings, including litigation, arbitration, government investigations, audits, reviews and claims. These include routine, regular and special investigations, audits and reviews by the U.S. Centers for Medicare & Medicaid Services (“CMS”), state insurance and health and welfare departments, the U.S. Department of Justice (the “DOJ”), state attorneys general, the U.S. Drug Enforcement Administration (the “DEA”), the Federal Trade Commission (the “FTC”) and other governmental authorities.

Legal proceedings, in general, and securities, class action and multi-district litigation, in particular, and governmental special investigations, audits and reviews can be expensive and disruptive. Some of the litigation matters may purport or be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. The Company also may be named from time to time in qui tam actions initiated by private third parties that could also be separately pursued by a governmental body. The results of legal proceedings, including government investigations, are often uncertain and difficult to predict, and the costs incurred in these matters can be substantial, regardless of the outcome.

The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. None of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s financial condition.

Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and the Company is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. The Company believes that its defenses and assertions in pending legal proceedings have merit and does not believe that any of these pending matters, after consideration of applicable reserves and rights to indemnification, will

have a material adverse effect on the Company’s financial position. Substantial unanticipated verdicts, fines and rulings, however, do sometimes occur, which could result in judgments against the Company, entry into settlements or a revision to its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on its results of operations. In addition, as a result of governmental investigations or proceedings, the Company may be subject to damages, civil or criminal fines or penalties, or other sanctions including possible suspension or loss of licensure and/or exclusion from participating in government programs. The outcome of such governmental investigations of proceedings could be material to the Company.

Usual and Customary Pricing Litigation

The Company and certain current and former directors and officers are named as a defendant in a number of lawsuits that allege that the Company’s retail pharmacies overcharged for prescription drugs by not submitting the correct usual and customary price during the claims adjudication process. These actions are brought by a number of different types of plaintiffs, including plan members, private payors, government payors, and shareholders based on different legal theories. Some of these cases are brought as putative class actions, and in some instances, classes have been certified. The Company is defending itself against these claims.

PBM Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its PBM practices.

The Company is facing multiple lawsuits, including by a State Attorney General, governmental subdivisions and several putative class actions, regarding drug pricing and its rebate arrangements with drug manufacturers. These complaints, brought by a number of different types of plaintiffs under a variety of legal theories, generally allege that rebate agreements between the drug manufacturers and PBMs caused inflated prices for certain drug products. The Company is defending itself against these claims. The Company has also received subpoenas, civil investigative demands (“CIDs”) and other requests for documents and information from, and is being investigated by, the FTC and Attorneys General of several states and the District of Columbia regarding its PBM practices, including pricing and rebates. The Company has been providing documents and information in response to these subpoenas, CIDs and requests for information.

United States ex rel. Behnke v. CVS Caremark Corporation, et al. (U.S. District Court for the Eastern District of Pennsylvania). In April 2018, the Court unsealed a complaint filed in February 2014. The government has declined to intervene in this case. The relator alleges that the Company submitted, or caused to be submitted, to Part D of the Medicare program Prescription Drug Event data and/or Direct and Indirect Remuneration reports that misrepresented true prices paid by the Company’s PBM to pharmacies for drugs dispensed to Part D beneficiaries with prescription benefits administered by the Company’s PBM. The Company is defending itself against these claims.

Controlled Substances Litigation, Audits and Subpoenas

In December 2017, the U.S. Judicial Panel on Multidistrict Litigation consolidated numerous cases filed against various defendants by plaintiffs such as counties, cities, hospitals, Indian tribes and third-party payors, alleging claims generally concerning the impacts of widespread prescription opioid abuse. The consolidated multidistrict litigation captioned In re National Prescription Opiate Litigation (MDL No. 2804) is pending in the U.S. District Court for the Northern District of Ohio. This multidistrict litigation presumptively includes hundreds of relevant federal court cases that name the Company as a defendant. A significant number of similar cases that name the Company as a defendant in some capacity are pending in state courts.

In addition, the Company has been named as a defendant in similar cases brought by certain state Attorneys General. The Company is defending itself against all such claims. Additionally, the Company has received subpoenas, CIDs and/or other requests for information regarding opioids from state Attorneys General and insurance and other regulators of several U.S. jurisdictions. The Company has been cooperating with the government with respect to these subpoenas, CIDs and other requests for information.In ~~June~~November 2021, ~~prior~~the Company was among the chain pharmacies found liable by a jury in a trial in federal court in Ohio; the remedy pursuant to that verdict has not been determined and the ~~start~~Company plans to appeal.

In March 2022, CVS Health Corporation and CVS Pharmacy, Inc. entered into a settlement agreement with the State of Florida to resolve claims related to opioid medications dating back more than a decade. Under the terms of the ~~New York~~settlement agreement, CVS Health Corporation settled all opioid claims against it and its subsidiaries by the State ~~Court bellwether trial,~~of Florida for $484 million, which is

to be paid over a period of 18 years. During the three months ended March 31, 2022, the Company ~~reached~~recorded a ~~settlement~~$484 million liability associated with ~~Nassau and Suffolk Counties for an immaterial amount.~~this legal settlement.

In January 2020, the ~~U.S. Department of Justice (the “DOJ”)~~DOJ served the Company with a DEA administrative subpoena. The subpoena seeks documents relating to practices with respect to prescription opioids and other controlled substances at CVS ~~Pharmacy~~pharmacy locations ~~in connection with an investigation~~ concerning potential violations of the federal Controlled Substances Act and the federal False Claims Act. In January 2022, the DOJ served the Company with a CID regarding similar subjects. The Company ~~has been~~is providing documents and information in response to ~~this subpoena.~~these matters.

Prescription Processing Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its prescription processing practices, including the following:

U.S. ex rel. Bassan et al. v. Omnicare, Inc. and CVS Health Corp. (U.S. District Court for the Southern District of New York). In December 2019, the U.S. Attorney’s Office for the Southern District of New York (the “SDNY”) filed a ~~complaint-in-~~

~~intervention~~complaint-in-intervention in this previously sealed qui tam case. The complaint alleges that for certain non-skilled nursing facilities, Omnicare improperly filled prescriptions beyond one year where a valid prescription did not exist and that these dispensing events violated the federal False Claims Act. The Company is defending itself against these claims.

U.S. ex rel. Gill et al. v. CVS Health Corp. et al. (U.S. District Court for the Northern District of Illinois). In July 2022, the Delaware Attorney General’s Office moved for partial intervention as to allegations under the Delaware false claims act related to not escheating alleged overpayments in this previously sealed qui tam case. The federal government and the remaining states declined to intervene on other additional theories in the relator’s complaint. The Company is defending itself against all of the claims.

In July 2017, the Company also received a subpoena from the California Department of Insurance requesting documents concerning the Company’s Omnicare pharmacies’ cycle fill process for assisted living facilities. The Company has been cooperating with the California Department of Insurance and providing documents and information in response to this subpoena.

In December 2016, the Company received a CID from the U.S. Attorney’s Office for the Northern District of New York requesting documents and information in connection with a federal False Claims Act investigation concerning whether the Company’s retail pharmacies improperly submitted certain insulin claims to Part D of the Medicare program rather than Part B of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to this CID.

Provider Proceedings

The Company is named as a defendant in purported class actions and individual lawsuits arising out of its practices related to the payment of claims for services rendered to its members by providers with whom the Company has a contract and with whom the Company does not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that the Company paid too little to its health plan members and/or providers for out-of-network services (including COVID-19 testing) and/or otherwise allege that the Company failed to timely or appropriately pay or administer out-of-network claims and benefits (including the Company’s post payment audit and collection practices and reductions in payments to providers due to sequestration). Other major health insurers are the subject of similar litigation or have settled similar litigation.

The Company also has received subpoenas and/or requests for documents and other information from, and been investigated by, state Attorneys General and other state and/or federal regulators, legislators and agencies relating to, and the Company is involved in other litigation regarding, its out-of-network benefit payment and administration practices. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to its out-of-network benefit payment and/or administration practices.

CMS Actions

CMS regularly audits the Company’s performance to determine its compliance with CMS’s regulations and its contracts with CMS and to assess the quality of services it provides to Medicare beneficiaries. CMS uses various payment mechanisms to allocate and adjust premium payments to the Company’s and other companies’ Medicare plans by considering the applicable

health status of Medicare members as supported by information prepared, maintained and provided by providers. The Company collects claim and encounter data from providers and generally relies on providers to appropriately code their submissions to the Company and document their medical records, including the diagnosis data submitted to the Company with claims. CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes. Federal regulators review and audit the providers’ medical records to determine whether those records support the related diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to the Company. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical record documentation maintained by providers and the resulting ~~risk adjusted~~risk-adjusted premium payments to the plans. CMS may require the Company to refund premium payments if the Company’s ~~risk adjusted~~risk-adjusted premiums are not properly supported by medical record data. The Office of the Inspector General of the U.S. Department of Health and Human Services (“~~HHS-OIG”~~OIG”) also is auditing the Company’s risk adjustment-related data and that of other companies. The Company expects CMS and the OIG to continue these types of audits.

In 2012, CMS revised its audit methodology for RADV audits to determine refunds payable by Medicare Advantage plans for contract year 2011 and forward. Under the revised methodology, among other things, CMS will extrapolate the error rate identified in the audit sample of approximately 200 members to all ~~risk adjusted~~risk-adjusted premium payments made under the contract being audited. For contract years prior to 2011, CMS did not extrapolate sample error rates to the entire contract. As a result, the revised methodology may increase the Company’s exposure to premium refunds to CMS based on incomplete medical records maintained by providers. Since 2013, CMS has selected certain of the Company’s Medicare Advantage contracts for various contract years for RADV audit, and the number of RADV audits continues to increase. The Company is currently unable to predict which of its Medicare Advantage contracts will be selected for future audit, the amounts of any retroactive

refunds of, or prospective adjustments to, Medicare Advantage premium payments made to the Company, the effect of any such refunds or adjustments on the actuarial soundness of the Company’s Medicare Advantage bids, or whether any RADV audit findings would require the Company to change its method of estimating future premium revenue in future bid submissions to CMS or compromise premium assumptions made in the Company’s bids for prior contract years, the current contract year or future contract years. Any premium or fee refunds or adjustments resulting from regulatory audits, whether as a result of RADV, Public Exchange related or other audits by CMS, ~~HHS-OIG~~the OIG or otherwise, including audits of the Company’s minimum medical loss ratio ~~(“MLR”)~~ rebates, methodology and/or reports, could be material and could adversely affect the Company’s operating results, cash flows and/or financial condition.

Medicare and Medicaid CIDs

The Company has received CIDs from the Civil Division of the DOJ in connection with a current investigation of the Company’s patient chart review processes in connection with risk adjustment data submissions under Parts C and D of the Medicare program. The Company has been cooperating with the government and providing documents and information in response to these CIDs.

In May 2017, the Company received a CID from the SDNY requesting documents and information concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to this CID.

In April 2020, the Company received a CID from the Office of the Washington Attorney General, Medicaid Fraud Control Division, on behalf of the State of Washington and all other states, as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The investigation involved, among other things, possible retention of overpayments and possible submission of false claims for Medicaid reimbursement relating to drugs prescribed by providers who were excluded by the applicable federal and/or state Medicaid programs. In June 2021, the government withdrew this CID and indicated that no further action is required from the Company with respect to the April 2020 CID.

Stockholder Matters

Beginning in February 2019, multiple class action complaints, as well as a derivative complaint, were filed by putative plaintiffs against the Company and certain current and former officers and directors. The plaintiffs in these cases assert a variety of causes of action under federal securities laws that are premised on allegations that the defendants made certain omissions and misrepresentations relating to the performance of the Company’s LTC business unit. The Company and its current and former officers and directors are defending themselves against these claims. Since filing, several of the cases have been consolidated, and the first-filed federal case, City of Miami Fire Fighters’ and Police Officers’ Retirement Trust, et al. (formerly known as Anarkat), was dismissed with prejudice in February 2021. Plaintiffs ~~filed a notice of appeal with~~have appealed that decision to the First Circuit after their motion for reconsideration was denied. ~~The Company has moved to dismiss the other federal case,~~ In re CVS Health Corp. Securities Act Litigation (formerly known as Waterford). and In ~~March 2021, the New York Supreme Court, Appellate Division (First Department) dismissed the consolidated~~ ~~Labourers’ Pension Fund of Central & Eastern Canada~~re CVS Health Corp. Securities Litigation ~~case; plaintiffs’ motion for reargument was denied~~(formerly known as City of Warren and ~~this matter is now concluded.~~Freundlich) have been stayed pending the outcome of the First Circuit appeal.

In August and September 2020, 2 ~~ERISA~~ class actions under the Employee Retirement Income Security Act of 1974 (“ERISA”)were filed in the U.S. District Court for the District of Connecticut against CVS Health, Aetna Inc. (“Aetna”), and several current and former executives, directors and/or members of Aetna’s Compensation and Talent Management Committee:

Radcliffe v. Aetna Inc., et al. and Flaim v. Aetna Inc., et al. The plaintiffs in these cases assert a variety of causes of action premised on allegations that the defendants breached fiduciary duties and engaged in prohibited transactions relating to participants in the Aetna 401(k) Plan’s investment in company stock between December 3, 2017 and February 20, 2019, claiming losses related to the performance of the Company’s LTC business unit. The district court consolidated the actions, and in October 2021, dismissed the consolidated action without prejudice. Plaintiffs filed an amended consolidated complaint, which the Company ~~is defending itself against these claims.~~has moved to dismiss. The Company also received a related document request pursuant to ERISA § 104(b), to which the Company has responded. The Company and its current and former officers and directors are defending themselves against these claims.

In December 2021, the Company received a demand for inspection of books and records pursuant to Delaware Corporation Law Section 220 (the “Demand”). The Demand purports to be related to potential breaches of fiduciary duties by the Board in relation to certain matters concerning opioids.

Other Legal and Regulatory Proceedings

The Company is also a party to other legal proceedings and is subject to government investigations, inquiries and audits and has received and is cooperating with the government in response to CIDs, subpoenas or similar process from various governmental agencies requesting information. These other legal proceedings and government actions include claims of or relating to bad faith, medical or professional malpractice, breach of fiduciary duty, claims processing, dispensing of medications, non-compliance with state and federal regulatory regimes, marketing misconduct, denial of or failure to timely or appropriately pay or administer claims and benefits, provider network structure (including the use of performance-based networks and termination of provider contracts), rescission of insurance coverage, improper disclosure or use of personal information, anticompetitive practices, general contractual matters,

product liability, intellectual property litigation and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

Awards to the Company and others of certain government contracts, particularly Medicaid contracts and other contracts with government customers in the Company’s Health Care Benefits segment, frequently are subject to protests by unsuccessful bidders. These protests may result in awards to the Company being reversed, delayed or modified. The loss or delay in implementation of any government contract could adversely affect the Company’s operating results. The Company will continue to defend contract awards it receives.

There also continues to be a heightened level of review and/or audit by regulatory authorities and legislators of, and increased litigation regarding, the Company’s and the rest of the health care and related benefits industry’s business and reporting practices, including premium rate increases, utilization management, development and application of medical policies, complaint, grievance and appeal processing, information privacy, provider network structure (including provider network adequacy, the use of performance-based networks and termination of provider contracts), provider directory accuracy, calculation of minimum medical loss ratios and/or payment of related rebates, delegated arrangements, rescission of insurance coverage, limited benefit health products, student health products, pharmacy benefit management practices (including manufacturers’ rebates, pricing, the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer service practices, vendor oversight and claim payment practices (including payments to out-of-network providers).

As a leading national health ~~care~~solutions company, the Company regularly is the subject of government actions of the types described above. These government actions may prevent or delay the Company from implementing planned premium rate increases and may result, and have resulted, in restrictions on the Company’s businesses, changes to or clarifications of the Company’s business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states or the federal government, withholding of premium payments to the Company by government agencies, assessments of damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs.

The Company can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iii) pending or future federal or state government investigations of one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iv) pending or future government audits, investigations or enforcement actions against the Company; (v) adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui

tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting one or more of the industries in which the Company competes and/or the health care industry generally.

9.11.Segment Reporting

The Company has 3 operating segments, Health Care Benefits, Pharmacy Services and Retail/LTC, as well as a Corporate/Other segment. The Company’s segments maintain separate financial information, and the Company’s chief operating decision maker (the “CODM”) evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income, which is defined as operating income (GAAP measure) excluding the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. See the reconciliations of consolidated operating income (GAAP measure) to consolidated adjusted operating income below for further context regarding the items excluded from operating income in determining adjusted operating income. The Company uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

3234

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


In millions	In millions	Health Care Benefits		Pharmacy Services (1)		Retail/ LTC		Corporate/ Other		Intersegment Eliminations (2)		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services (1)		Retail/ LTC		Corporate/ Other		Intersegment Eliminations (2)		Consolidated Totals
Three Months Ended	Three Months Ended													Three Months Ended
June 30, 2022														June 30, 2022
Revenues from external customers														Revenues from external customers	$	22,645	$	39,859	$	17,952	$	34	$	—	$	80,490
Intersegment revenues														Intersegment revenues	23		2,953		8,352		—		(11,328)		—
Net investment income (loss)														Net investment income (loss)	88		—		(18)		76		—		146
Total revenues														Total revenues	22,756		42,812		26,286		110		(11,328)		80,636
Adjusted operating income (loss)														Adjusted operating income (loss)	1,831		1,855		1,862		(555)		(183)		4,810

June 30, 2021	June 30, 2021													June 30, 2021
Revenues from external customers	Revenues from external customers	$	20,367	$	35,745	$	16,185	$	30	$	—	$	72,327	Revenues from external customers	$	20,367	$	35,745	$	16,185	$	30	$	—	$	72,327
Intersegment revenues	Intersegment revenues	21		2,569		8,543		—		(11,133)		—		Intersegment revenues	21		2,569		8,543		—		(11,133)		—
Net investment income	Net investment income	137		0		0		152		0		289		Net investment income	137		—		—		152		—		289
Total revenues	Total revenues	20,525		38,314		24,728		182		(11,133)		72,616		Total revenues	20,525		38,314		24,728		182		(11,133)		72,616
Adjusted operating income (loss)	Adjusted operating income (loss)	1,614		1,755		2,049		(369)		(162)		4,887		Adjusted operating income (loss)	1,614		1,755		2,049		(369)		(162)		4,887

June 30, 2020
Six Months Ended														Six Months Ended
June 30, 2022														June 30, 2022
Revenues from external customers	Revenues from external customers	$	18,318	$	32,623	$	14,187	$	29	$	—	$	65,157	Revenues from external customers	$	45,642	$	76,055	$	35,386	$	65	$	—	$	157,148
Intersegment revenues	Intersegment revenues	23		2,266		7,475		—		(9,764)		—		Intersegment revenues	46		6,218		16,352		—		(22,616)		—
Net investment income		127		0		0		57		0		184
Net investment income (loss)														Net investment income (loss)	177		—		(34)		171		—		314
Total revenues	Total revenues	18,468		34,889		21,662		86		(9,764)		65,341		Total revenues	45,865		82,273		51,704		236		(22,616)		157,462
Adjusted operating income (loss)	Adjusted operating income (loss)	3,464		1,327		1,057		(343)		(177)		5,328		Adjusted operating income (loss)	3,582		3,491		3,467		(860)		(387)		9,293

Six Months Ended
June 30, 2021	June 30, 2021													June 30, 2021
Revenues from external customers	Revenues from external customers	$	40,682	$	69,058	$	31,325	$	62	$	—	$	141,127	Revenues from external customers	$	40,682	$	69,058	$	31,325	$	62	$	—	$	141,127
Intersegment revenues	Intersegment revenues	41		5,577		16,631		—		(22,249)		—		Intersegment revenues	41		5,577		16,631		—		(22,249)		—
Net investment income	Net investment income	285		0		46		255		0		586		Net investment income	285		—		46		255		—		586
Total revenues	Total revenues	41,008		74,635		48,002		317		(22,249)		141,713		Total revenues	41,008		74,635		48,002		317		(22,249)		141,713
Adjusted operating income (loss)	Adjusted operating income (loss)	3,396		3,262		3,443		(672)		(337)		9,092		Adjusted operating income (loss)	3,396		3,262		3,443		(672)		(337)		9,092

June 30, 2020
Revenues from external customers		$	37,415	$	64,741	$	29,544	$	50	$	—	$	131,750
Intersegment revenues		31		5,131		14,867		—		(20,029)		—
Net investment income		220		0		0		126		0		346
Total revenues		37,666		69,872		44,411		176		(20,029)		132,096
Adjusted operating income (loss)		4,955		2,508		2,959		(628)		(353)		9,441

(1)Total revenues of the Pharmacy Services segment include approximately ~~$2.8~~$3.1 billion and ~~$2.6~~$2.8 billion of retail co-payments for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$6.2~~$6.9 billion and ~~$6.0~~$6.2 billion of retail co-payments for the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(2)Intersegment revenue eliminations relate to intersegment revenue generating activities that occur between the Health Care Benefits segment, the Pharmacy Services segment, and/or the Retail/LTC segment. Intersegment adjusted operating income eliminations occur when members of Pharmacy Services Segment clients (“PSS members”) enrolled in Maintenance Choice® elect to pick up maintenance prescriptions at one of the Company’s retail pharmacies instead of receiving them through the mail. When this occurs, both the Pharmacy Services and Retail/LTC segments record the adjusted operating income on a stand-alone basis.

The following are reconciliations of consolidated operating income to adjusted operating income for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Operating income (GAAP measure)	Operating income (GAAP measure)	$	4,326	$	4,680	$	7,903	$	8,138	Operating income (GAAP measure)	$	4,569	$	4,326	$	8,059	$	7,903
Amortization of intangible assets (1)	Amortization of intangible assets (1)	582		578		1,169		1,164		Amortization of intangible assets (1)	466		582		934		1,169
Acquisition-related integration costs (2)		40		70		81		139
Acquisition purchase price adjustment outside of measurement period (3)		(61)		0		(61)		0
Gain on divestiture of subsidiary (2)										Gain on divestiture of subsidiary (2)	(225)		—		(225)		—
Legal settlement (3)										Legal settlement (3)	—		—		484		—
Loss on assets held for sale (4)										Loss on assets held for sale (4)	—		—		41		—
Acquisition-related integration costs (5)										Acquisition-related integration costs (5)	—		40		—		81
Acquisition purchase price adjustment outside of measurement period (6)										Acquisition purchase price adjustment outside of measurement period (6)	—		(61)		—		(61)

Adjusted operating income	Adjusted operating income	$	4,887	$	5,328	$	9,092	$	9,441	Adjusted operating income	$	4,810	$	4,887	$	9,293	$	9,092

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

(2)During the three and six months ended June 30, ~~2021~~2022, the gain on divestiture of subsidiary represents the pre-tax gain on the sale of PayFlex, which the Company sold on June 1, 2022, for approximately $775 million. The gain on divestiture is reflected as a reduction in operating expenses in the Company’s unaudited condensed consolidated statements of operations within the Health Care Benefits segment.

(3)During the six months ended June 30, 2022, the legal settlement relates to the agreement with the State of Florida, entered into in March 2022, to resolve claims dating back more than a decade related to opioid medications. Under this agreement, CVS Health Corporation settled all opioid claims against it and ~~2020,~~its subsidiaries by the State of Florida for $484 million, inclusive of certain legal fees, to be paid over a period of 18 years. The legal settlement is reflected in the unaudited condensed consolidated statement of operations in operating expenses within the Corporate/Other segment.

(4)During the six months ended June 30, 2022, the loss on assets held for sale relates to the Commercial Business reporting unit within the Health Care Benefits segment. In March 2022, the Company reached an agreement to sell its Thailand business, which was included in the Commercial Business reporting unit. At that time, a portion of the Commercial Business goodwill was specifically allocated to the Thailand business. The net assets of the Thailand business were accounted for as assets held for sale at March 31, 2022. The carrying value of the Thailand business was determined to be greater than its fair value and a loss on assets held for sale was recorded during the first quarter of 2022. The sale closed in the second quarter of 2022, and the ultimate loss on the sale was not material. The loss on assets held for sale is reflected in the unaudited condensed consolidated statement of operations in operating expenses within the Health Care Benefits segment.

(5)During the three and six months ended June 30, 2021, acquisition-related integration costs relate to the acquisition of Aetna. The acquisition-related integration costs are reflected in the ~~Company’s~~ unaudited ~~GAAP~~ condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

~~(3)~~(6)In June 2021, the Company received $61 million related to a purchase price working capital adjustment for an acquisition completed during the first quarter of 2020. The resolution of this matter occurred subsequent to the acquisition accounting measurement period and is reflected in the Company’s unaudited ~~GAAP~~ condensed consolidated statements of operations for the three and six months ended June 30, 2021 as a reduction of operating expenses within the Health Care Benefits segment.

3436

Index to Condensed Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of CVS Health Corporation (the Company) as of June 30, ~~2021,~~2022, the related condensed consolidated statements of operations and comprehensive income for the three-month and six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the related condensed consolidated statements of shareholders’ equity for the three-month periods ended March 31, ~~2021~~2022 and ~~2020~~2021 and June 30, ~~2021~~2022 and ~~2020,~~2021, the related condensed consolidated statements of cash flows for the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2020,~~2021, the related consolidated statements of operations, comprehensive income, ~~(loss),~~ shareholders’ equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February ~~16, 2021,~~9, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2020,~~2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

/s/ Ernst & Young LLP

Boston, Massachusetts

August ~~4, 2021~~3, 2022

3537

Form 10-Q Table of Contents

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

Overview of Business

CVS Health Corporation, ~~(“CVS Health”),~~ together with its subsidiaries (collectively, “CVS Health,” the “Company,” “we,” “our” or “us”), is a diversified health ~~services~~solutions company united around a common purpose of helping people on their path to better health. In an increasingly connected and digital world, we are meeting people wherever they are and changing health care to meet their needs. The Company has more than ~~9,900~~9,000 retail locations, ~~approximately~~more than 1,100 walk-in medical clinics, a leading pharmacy benefits manager with ~~approximately 108~~over 110 million plan members with expanding specialty pharmacy solutions and a dedicated senior pharmacy care business serving more than one million patients per ~~year and expanding specialty pharmacy services.~~year. The Company also serves an estimated 3435 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company believes its innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs.

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

Overview of the Health Care Benefits Segment

The Health Care Benefits segment isoperates as one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs, Medicaid health care management services, and health information technology products and services. The Health Care Benefits segment also provided workers’ compensation administrative services through its Coventry Health Care Workers’ Compensation business (“Workers’ Compensation business”) prior to the sale of this business on July 31, 2020. The Health Care Benefits segment’s customers include employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers (“providers”), governmental units, government-sponsored plans, labor groups and expatriates. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” In addition, effective January 2022, the Company entered the individual public health insurance exchanges (“Public Exchanges”) in eight states through which it sells Insured plans directly to individual consumers. The Company has submitted regulatory filings to remain on the Public Exchanges in 2023 in each of those eight states, and has submitted regulatory filings to enter the Public Exchanges in four additional states effective January 2023.

Overview of the Pharmacy Services Segment

The Pharmacy Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, including plan design offerings and administration, formulary management, retail pharmacy network management services and mail order ~~pharmacy,~~pharmacy. In addition, through the Pharmacy Services segment, the Company provides specialty pharmacy and infusion services, clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered ~~Entities.~~Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants. The Company also provides various administrative, management and reporting services to pharmaceutical manufacturers. The Pharmacy Services segment’s clients are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, plans offered on ~~public health insurance exchanges~~Public Exchanges and private health insurance exchanges, other sponsors of health benefit plans throughout the United States and Covered Entities. The Pharmacy Services segment operates retail specialty pharmacy stores, specialty mail order pharmacies, mail order dispensing pharmacies, compounding pharmacies and branches for infusion and enteral nutrition services.

Overview of the Retail/LTC Segment

The Retail/LTC segment sells prescription drugs and a wide assortment of health and wellness products and general merchandise, provides health care services through its MinuteClinic® walk-in medical clinics, provides medical diagnostic testing, administers vaccinations for illnesses such as influenza, coronavirus disease 2019 (“COVID-19”) and shingles and conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy consulting and other ancillary services to long-term care facilities and other care settings. As of June 30, ~~2021,~~2022, the Retail/LTC

segment operated more than ~~9,900~~9,000 retail locations, ~~approximately~~more than 1,100 MinuteClinic locations as well as online retail pharmacy websites, LTC pharmacies and ~~onsite~~on-site pharmacies.

Overview of the Corporate/Other Segment

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

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

Overview of Current Trends

We also face trends and uncertainties specific to our reportable segments, certain of which are summarized below and also discussed in the review of our segment results. For the remainder of the year, the Company believes you should consider the following important information:

•The Health Care Benefits segment is expected to continue to benefit from Medicare and Commercial membership growth, partially offset by the impact of the International Health Care Benefits Renewal Rights Asset sale as described in Note 2 ‘‘Divestitures and Asset Sales’’ to the unaudited condensed consolidated financial statements. We now expect the public health emergency to extend through the end of fiscal year 2022. The projected MBR is expected to decrease compared to 2021, reflecting pricing and a reduction in COVID-19 related medical costs. While the Company still expects a net negative impact from COVID-19 in 2022 within the Health Care Benefits segment, including the impact of the assumption that a fourth COVID-19 booster will be administered to adults aged 50 and older and to certain immunocompromised individuals as per the guidelines set forth by the CDC, the expectation is the impact will be less adverse than what was experienced in 2021.

•The Pharmacy Services segment is expected to continue to benefit from the Company’s ability to drive further improvements in purchasing economics and strong pharmacy network volume. These increases are expected to be partially offset by continued client price improvements, decreased contributions from pharmacy and/or other administrative services for Covered Entities and regulation of pharmacy pricing.

•The Retail/LTC segment is expected to continue to benefit from increased prescription volume and improved generic drug purchasing, partially offset by continued pharmacy reimbursement pressure and incremental operating expenses associated with the Company’s minimum wage investment. As noted above, the Company now expects the public health emergency to extend through the end of fiscal year 2022. The Company expects that COVID-19 vaccinations, including the impact of the assumption of a fourth COVID-19 booster as described above, and diagnostic testing will continue in 2022, albeit at lower levels than those experienced during 2021. The Company expects to see continued strength in front store sales, including sales of over-the-counter (“OTC”) test kits, in 2022. The extent of COVID-19 vaccinations, diagnostic testing and OTC test kit sales will be dependent upon various factors including vaccine hesitancy, the emergence of new variants, government testing initiatives and the availability and administration of pediatric and booster vaccinations.

•The Company is expected to benefit from the continuation of its enterprise-wide cost savings initiatives, which aim to reduce the Company’s operating cost structure in a way that improves the consumer experience and is sustainable. Key drivers include:

•Investments in digital, technology and analytics capabilities that will streamline processes and improve outcomes,

•Implementing workforce and workplace strategies, and

•Deploying vendor and procurement strategies.

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

•The COVID-19 pandemic continues to impact the economies of the U.S. and other countries around the world. ~~We believe~~The Company believes COVID-19’s impact on ~~our~~its businesses, operating results, cash flows and/or financial condition primarily will be driven by the geographies impacted and the severity and duration of the pandemic, as well as the pandemic’s impact on the U.S. and global economies, global supply chain, consumer behavior, and health care utilization patterns. In addition, as described in the “Government Regulation” section of the ~~2020~~Company’s Annual Report on Form 10-K for the year ended

December 31, 2021 (the “2021 Form 10-K”), federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 and emerging new variants may not effectively combat the severity and/or duration of the COVID-19 pandemic, and have resulted in a myriad of impacts on ~~our~~the Company’s businesses. Those primary drivers are beyond ~~our~~the Company’s knowledge and control. As a result, the impact COVID-19 will have on ~~our~~the Company’s businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. ~~Specific COVID-19 related impacts on~~

The Company’s current expectations described above are forward-looking statements. Please see the ~~Company during~~“Cautionary Statement Concerning Forward-Looking Statements” in this Form 10-Q for information regarding important factors that may cause the ~~three and six months ended June 30, 2021 and 2020 are further described below.~~Company’s actual results to differ from those currently projected and/or otherwise materially affect the Company.

•The Health Care Benefits segment is expected to experience lower Medicare risk adjustment revenue and modestly elevated medical costs for the remainder of the year, with non-COVID-19 related utilization returning towards baseline levels and continued COVID-19 related costs, largely related to treatment, testing and the administration of the vaccine. The Company also expects to incur higher operating expenses during the fourth quarter related to investments to support future growth and readiness for the start of the 2022 plan year.

•The Pharmacy Services segment is expected to continue to benefit from our ability to drive improvements in purchasing economics and growth in specialty pharmacy, albeit at a slower pace than experienced in the first half of the year, partially offset by continued price compression. We expect year-over-year growth to moderate in the remainder of the year due to operating results in the second half of 2020 reflecting the benefit of the launch of our group purchasing organization entity and specialty generic launches. The Company also expects to incur higher operating expenses during the fourth quarter related to investments to enhance operations, digital and clinical trials capabilities and readiness for the start of the 2022 plan year.

•The Retail/LTC segment is expected to continue to benefit from increased prescription volume and improved generic drug purchasing, partially offset by continued pharmacy reimbursement pressure. While COVID-19 diagnostic testing and vaccinations are expected to continue for the remainder of 2021, we expect vaccinations to slow in the second half of the year. The extent of COVID-19 vaccinations and diagnostic testing will be dependent upon various factors including vaccine hesitancy, the emergence of new variants and the availability and administration of pediatric and booster vaccinations.

•The Company is expected to continue to benefit from its cost savings initiatives, including ongoing digitalization and technology improvements, a reduction in non-retail real estate associated with workforce management changes and initiatives to increase productivity and operational efficiency. The Company also expects incremental investments in wages, including an increase in the minimum wage for store, warehouse and call center colleagues in support of its initiatives to retain and attract talent for its community health destinations.

3740

Operating Results

The following discussion explains the material changes in the Company’s operating results for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, and the significant developments affecting the Company’s financial condition since December 31, ~~2020.~~2021. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the ~~2020~~2021 Form 10-K.

Summary of Consolidated Financial Results


										Change																	Change
		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30, 2021 vs 2020				Six Months Ended June 30, 2021 vs 2020					Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30, 2022 vs 2021				Six Months Ended June 30, 2022 vs 2021
In millions	In millions	2021		2020		2021		2020		$		%		$		%		In millions	2022		2021		2022		2021		$		%		$		%
Revenues:	Revenues:																	Revenues:
Products	Products	$	50,525	$	46,355	$	97,912	$	93,358	$	4,170	9.0	%	$	4,554	4.9	%	Products	$	56,794	$	50,525	$	109,316	$	97,912	$	6,269	12.4	%	$	11,404	11.6	%
Premiums	Premiums	18,983		16,927		37,943		34,567		2,056		12.1	%	3,376		9.8	%	Premiums	21,260		18,983		42,891		37,943		2,277		12.0	%	4,948		13.0	%
Services	Services	2,819		1,875		5,272		3,825		944		50.3	%	1,447		37.8	%	Services	2,436		2,819		4,941		5,272		(383)		(13.6)	%	(331)		(6.3)	%
Net investment income	Net investment income	289		184		586		346		105		57.1	%	240		69.4	%	Net investment income	146		289		314		586		(143)		(49.5)	%	(272)		(46.4)	%
Total revenues	Total revenues	72,616		65,341		141,713		132,096		7,275		11.1	%	9,617		7.3	%	Total revenues	80,636		72,616		157,462		141,713		8,020		11.0	%	15,749		11.1	%
Operating costs:	Operating costs:																	Operating costs:
Cost of products sold	Cost of products sold	43,520		40,242		84,414		80,589		3,278		8.1	%	3,825		4.7	%	Cost of products sold	49,290		43,520		94,799		84,414		5,770		13.3	%	10,385		12.3	%
Benefit costs	Benefit costs	15,901		11,751		31,605		26,138		4,150		35.3	%	5,467		20.9	%	Benefit costs	17,606		15,901		35,557		31,605		1,705		10.7	%	3,952		12.5	%

Operating expenses	Operating expenses	8,869		8,668		17,791		17,231		201		2.3	%	560		3.2	%	Operating expenses	9,171		8,869		19,047		17,791		302		3.4	%	1,256		7.1	%
Total operating costs	Total operating costs	68,290		60,661		133,810		123,958		7,629		12.6	%	9,852		7.9	%	Total operating costs	76,067		68,290		149,403		133,810		7,777		11.4	%	15,593		11.7	%
Operating income	Operating income	4,326		4,680		7,903		8,138		(354)		(7.6)	%	(235)		(2.9)	%	Operating income	4,569		4,326		8,059		7,903		243		5.6	%	156		2.0	%
Interest expense	Interest expense	636		765		1,293		1,498		(129)		(16.9)	%	(205)		(13.7)	%	Interest expense	583		636		1,169		1,293		(53)		(8.3)	%	(124)		(9.6)	%

Other income	Other income	(45)		(45)		(95)		(99)		—		—	%	4		4.0	%	Other income	(43)		(45)		(85)		(95)		2		4.4	%	10		10.5	%
Income before income tax provision	Income before income tax provision	3,735		3,960		6,705		6,739		(225)		(5.7)	%	(34)		(0.5)	%	Income before income tax provision	4,029		3,735		6,975		6,705		294		7.9	%	270		4.0	%
Income tax provision	Income tax provision	944		974		1,690		1,741		(30)		(3.1)	%	(51)		(2.9)	%	Income tax provision	1,068		944		1,701		1,690		124		13.1	%	11		0.7	%

Net income	Net income	2,791		2,986		5,015		4,998		(195)		(6.5)	%	17		0.3	%	Net income	2,961		2,791		5,274		5,015		170		6.1	%	259		5.2	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(8)		(11)		(9)		(16)		3		27.3	%	7		43.8	%	Net income attributable to noncontrolling interests	(10)		(8)		(11)		(9)		(2)		(25.0)	%	(2)		(22.2)	%
Net income attributable to CVS Health	Net income attributable to CVS Health	$	2,783	$	2,975	$	5,006	$	4,982	$	(192)	(6.5)	%	$	24	0.5	%	Net income attributable to CVS Health	$	2,951	$	2,783	$	5,263	$	5,006	$	168	6.0	%	$	257	5.1	%

Commentary - Three Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$7.3~~$8.0 billion, or ~~11.1%~~11.0%, in the three months ended June 30, ~~2021~~2022 compared to the prior year driven by growth across all segments.

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

Operating expenses

•Operating expenses increased ~~$201~~$302 million, or ~~2.3%~~3.4%, in the three months ended June 30, ~~2021~~2022 compared to the prior year. The increase in operating expenses was primarily due to incremental costs associated with growth in the business ~~including costs associated with COVID-19 vaccinations~~ and ~~diagnostic testing in~~ the ~~Retail/LTC segment. The increase was partially offset by the repeal~~absence of the ~~HIF for 2021, the favorable impact of company-wide cost savings initiatives in 2021 and a~~ $137 million gain from an anti-trust legal settlement, of which $125 million was included in the Retail/LTC segment and $12 million was included in the Pharmacy Services segment, recorded in the three months ended June 30, 2021. These increases were partially offset by a $225 million pre-tax gain on the sale of PayFlex Holdings, Inc. (“PayFlex”), which was consummated on June 1, 2022.

•Operating expenses as a percentage of total revenues were ~~12.2%~~11.4% in the three months ended June 30, ~~2021,~~2022, a decrease of ~~110~~80 basis points compared to the prior year. The decrease in operating expenses as a percentage of total revenues was primarily due to the increases in total revenues described above.

3841

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

Operating income

•Operating income ~~decreased $354~~increased $243 million, or ~~7.6%~~5.6%, in the three months ended June 30, ~~2021~~2022 compared to the prior year primarily due to ~~the return of more normalized utilization levels~~increases in the Health Care Benefits segment, ~~following~~including the $225 million pre-tax gain on the sale of PayFlex and a ~~significant~~ decrease in ~~utilization during the three months ended June 30, 2020 due~~amortization of intangible assets compared to the COVID-19 pandemic. The decrease in operating income in the three months ended June 30, 2021 was partially offset by increased prescription and front store volume, COVID-19 vaccinations and diagnostic testing in the Retail/LTC segmentprior year, as well as ~~improved purchasing economics and increased pharmacy claims volume in~~ the Pharmacy Services segment, ~~during~~partially offset by declines in the ~~three months ended June 30, 2021.~~Retail/LTC and Corporate/Other segments.

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

Interest expense

•Interest expense decreased ~~$129~~$53 million, or ~~16.9%~~8.3%, in the three months ended June 30, ~~2021~~2022 compared to the prior year due to lower debt in the three months ended June 30, ~~2021.~~2022. See “Liquidity and Capital Resources” later in this report for additional information.

Income tax provision

•The ~~Company’s~~ effective income tax rate was 26.5% for the three months ended June 30, 2022 compared to 25.3% for the three months ended June 30, ~~2021 compared to 24.6% for the three months ended June 30, 2020.~~2021. The increase in the effective income tax rate was primarily due to basis differences on the sale of PayFlex in the three months ended June 30, 2021 was primarily due to the absence of the favorable impact associated with the resolution of several state and local income tax matters in the three months ended June 30, 2020, partially offset by the repeal of the non-deductible HIF for 2021.2022.

Commentary - Six Months EndedJune 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$9.6~~$15.7 billion, or ~~7.3%~~11.1%, in the six months ended June 30, ~~2021~~2022 compared to the prior year driven by growth across all segments.

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

Operating expenses

•Operating expenses increased ~~$560 million,~~$1.3 billion, or ~~3.2%~~7.1%, in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase in operating expenses was primarily due to a $484 million pretax ($370 million after-tax) legal settlement related to the agreement with the State of Florida to settle all opioid claims against the Company and incremental costs associated with growth in the business, ~~including costs associated with COVID-19 vaccinations and diagnostic testing in the Retail/LTC segment. The increase was~~ partially offset by the ~~repeal~~$225 million pre-tax gain on the sale of ~~the HIF for 2021 and the favorable impact of company-wide cost savings initiatives in 2021.~~PayFlex.

•Operating expenses as a percentage of total revenues were ~~12.6%~~12.1% in the six months ended June 30, ~~2021,~~2022, a decrease of 4050 basis points compared to the prior year. The decrease in operating expenses as a percentage of total revenues was primarily due to the increases in total revenues described above.

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

Operating income

•Operating income ~~decreased $235~~increased $156 million, or ~~2.9%~~2.0%, in the six months ended June 30, ~~2021~~2022 compared to the prior ~~year. The decrease in operating income was~~year primarily driven by ~~the deferral of elective procedures and other discretionary utilization in response to the COVID-19 pandemic during the six months ended June 30, 2020~~increases in the Health Care Benefits ~~segment. The~~segment, including the $225 million pre-tax gain on the sale of PayFlex and a decrease ~~was partially offset by improved purchasing economics~~ in amortization of intangible assets compared to the prior year, as well as the Pharmacy Services segment, ~~and COVID-19 vaccinations and diagnostic testing~~partially offset by a decline in the ~~Retail/LTC~~Corporate/Other segment, inincluding the ~~six months ended June 30, 2021.~~legal settlement related to the Company’s agreement with the State of Florida described above.

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

Interest expense

•Interest expense decreased ~~$205~~$124 million, or ~~13.7%~~9.6%, in the six months ended June 30, ~~2021~~2022 compared to the prior year due to lower debt in the six months ended June 30, ~~2021.~~2022. See “Liquidity and Capital Resources” later in this report for additional information.

Income tax provision

•The ~~Company’s~~ effective income tax rate was 24.4% for the six months ended June 30, 2022 compared to 25.2% for the six months ended June 30, ~~2021 compared to 25.8% for the six months ended June 30, 2020.~~2021. The decrease in the effective income tax rate was primarily due to the impact of certain discrete tax

items concluded in the first quarter of 2022, partially offset by basis differences on the sale of PayFlex in the six months ended June 30, 2021 was primarily due to the repeal of the non-deductible HIF for 2021, partially offset by the absence of the favorable impact associated with the resolution of several state and local income tax matters in the six months ended June 30, 2020.2022.

4043

Segment Analysis

The following discussion of segment operating results is presented based on the Company’s reportable segments in accordance with the accounting guidance for segment reporting and is consistent with the segment disclosure in Note 911 ‘‘Segment Reporting’’ to the unaudited condensed consolidated financial statements.

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

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


In millions	In millions	Health Care Benefits		Pharmacy Services (1)		Retail/ LTC		Corporate/ Other		Intersegment Eliminations (2)		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services (1)		Retail/ LTC		Corporate/ Other		Intersegment Eliminations (2)		Consolidated Totals
Three Months Ended	Three Months Ended													Three Months Ended
June 30, 2021
June 30, 2022														June 30, 2022
Total revenues	Total revenues	$	20,525	$	38,314	$	24,728	$	182	$	(11,133)	$	72,616	Total revenues	$	22,756	$	42,812	$	26,286	$	110	$	(11,328)	$	80,636
Adjusted operating income (loss)	Adjusted operating income (loss)	1,614		1,755		2,049		(369)		(162)		4,887		Adjusted operating income (loss)	1,831		1,855		1,862		(555)		(183)		4,810
June 30, 2020
June 30, 2021														June 30, 2021
Total revenues	Total revenues	18,468		34,889		21,662		86		(9,764)		65,341		Total revenues	20,525		38,314		24,728		182		(11,133)		72,616
Adjusted operating income (loss)	Adjusted operating income (loss)	3,464		1,327		1,057		(343)		(177)		5,328		Adjusted operating income (loss)	1,614		1,755		2,049		(369)		(162)		4,887

Six Months Ended	Six Months Ended													Six Months Ended
June 30, 2022														June 30, 2022
Total revenues														Total revenues	$	45,865	$	82,273	$	51,704	$	236	$	(22,616)	$	157,462
Adjusted operating income (loss)														Adjusted operating income (loss)	3,582		3,491		3,467		(860)		(387)		9,293
June 30, 2021	June 30, 2021													June 30, 2021
Total revenues	Total revenues	$	41,008	$	74,635	$	48,002	$	317	$	(22,249)	$	141,713	Total revenues	41,008		74,635		48,002		317		(22,249)		141,713
Adjusted operating income (loss)	Adjusted operating income (loss)	3,396		3,262		3,443		(672)		(337)		9,092		Adjusted operating income (loss)	3,396		3,262		3,443		(672)		(337)		9,092
June 30, 2020
Total revenues		37,666		69,872		44,411		176		(20,029)		132,096
Adjusted operating income (loss)		4,955		2,508		2,959		(628)		(353)		9,441

The following are reconciliations of consolidated operating income (GAAP measure) to consolidated adjusted operating income, as well as reconciliations of segment GAAP operating income to segment adjusted operating income:


		Three Months Ended June 30, 2021													Three Months Ended June 30, 2022
In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	Operating income (loss) (GAAP measure)	$	1,273	$	1,705	$	1,919	$	(409)	$	(162)	$	4,326	Operating income (loss) (GAAP measure)	$	1,754	$	1,814	$	1,740	$	(556)	$	(183)	$	4,569
Amortization of intangible assets (1)	Amortization of intangible assets (1)	402		50		130		—		—		582		Amortization of intangible assets (1)	302		41		122		1		—		466
Acquisition-related integration costs (2)		—		—		—		40		—		40
Acquisition purchase price adjustment outside of measurement period (3)		(61)		—		—		—		—		(61)
Gain on divestiture of subsidiary (2)														Gain on divestiture of subsidiary (2)	(225)		—		—		—		—		(225)

Adjusted operating income (loss)	Adjusted operating income (loss)	$	1,614	$	1,755	$	2,049	$	(369)	$	(162)	$	4,887	Adjusted operating income (loss)	$	1,831	$	1,855	$	1,862	$	(555)	$	(183)	$	4,810


		Three Months Ended June 30, 2020													Three Months Ended June 30, 2021
In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	Operating income (loss) (GAAP measure)	$	3,066	$	1,271	$	933	$	(413)	$	(177)	$	4,680	Operating income (loss) (GAAP measure)	$	1,273	$	1,705	$	1,919	$	(409)	$	(162)	$	4,326
Amortization of intangible assets (1)	Amortization of intangible assets (1)	398		56		124		—		—		578		Amortization of intangible assets (1)	402		50		130		—		—		582
Acquisition-related integration costs ~~(2)~~(3)	Acquisition-related integration costs ~~(2)~~(3)	—		—		—		70		—		70		Acquisition-related integration costs ~~(2)~~(3)	—		—		—		40		—		40

Acquisition purchase price adjustment outside of measurement period (4)														Acquisition purchase price adjustment outside of measurement period (4)	(61)		—		—		—		—		(61)

Adjusted operating income (loss)	Adjusted operating income (loss)	$	3,464	$	1,327	$	1,057	$	(343)	$	(177)	$	5,328	Adjusted operating income (loss)	$	1,614	$	1,755	$	2,049	$	(369)	$	(162)	$	4,887


		Six Months Ended June 30, 2021													Six Months Ended June 30, 2022
In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	Operating income (loss) (GAAP measure)	$	2,653	$	3,157	$	3,184	$	(754)	$	(337)	$	7,903	Operating income (loss) (GAAP measure)	$	3,163	$	3,406	$	3,223	$	(1,346)	$	(387)	$	8,059
Amortization of intangible assets (1)	Amortization of intangible assets (1)	804		105		259		1		—		1,169		Amortization of intangible assets (1)	603		85		244		2		—		934
Acquisition-related integration costs (2)		—		—		—		81		—		81
Acquisition purchase price adjustment outside of measurement period (3)		(61)		—		—		—		—		(61)
Gain on divestiture of subsidiary (2)														Gain on divestiture of subsidiary (2)	(225)		—		—		—		—		(225)
Legal settlement (5)														Legal settlement (5)	—		—		—		484		—		484
Loss on assets held for sale (6)														Loss on assets held for sale (6)	41		—		—		—		—		41

Adjusted operating income (loss)	Adjusted operating income (loss)	$	3,396	$	3,262	$	3,443	$	(672)	$	(337)	$	9,092	Adjusted operating income (loss)	$	3,582	$	3,491	$	3,467	$	(860)	$	(387)	$	9,293


		Six Months Ended June 30, 2020													Six Months Ended June 30, 2021
In millions	In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals		In millions	Health Care Benefits		Pharmacy Services		Retail/ LTC		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Operating income (loss) (GAAP measure)	Operating income (loss) (GAAP measure)	$	4,161	$	2,385	$	2,713	$	(768)	$	(353)	$	8,138	Operating income (loss) (GAAP measure)	$	2,653	$	3,157	$	3,184	$	(754)	$	(337)	$	7,903
Amortization of intangible assets (1)	Amortization of intangible assets (1)	794		123		246		1		—		1,164		Amortization of intangible assets (1)	804		105		259		1		—		1,169
Acquisition-related integration costs ~~(2)~~(3)	Acquisition-related integration costs ~~(2)~~(3)	—		—		—		139		—		139		Acquisition-related integration costs ~~(2)~~(3)	—		—		—		81		—		81

Acquisition purchase price adjustment outside of measurement period (4)														Acquisition purchase price adjustment outside of measurement period (4)	(61)		—		—		—		—		(61)

Adjusted operating income (loss)	Adjusted operating income (loss)	$	4,955	$	2,508	$	2,959	$	(628)	$	(353)	$	9,441	Adjusted operating income (loss)	$	3,396	$	3,262	$	3,443	$	(672)	$	(337)	$	9,092

measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(3)During the three and ~~2020,~~six months ended June 30, 2021, acquisition-related integration costs relate to the Company’s acquisition ~~(the “Aetna Acquisition”)~~ of Aetna Inc. ~~(“Aetna”).~~ The acquisition-related integration costs are reflected in the ~~Company’s~~ unaudited ~~GAAP~~ condensed consolidated statements of operations in operating expenses within the Corporate/Other segment.

~~(3)~~(4)In June 2021, the Company received $61 million related to a purchase price working capital adjustment for an acquisition completed during the first quarter of 2020. The resolution of this matter occurred subsequent to the acquisition accounting measurement period and is reflected in the Company’s unaudited ~~GAAP~~ condensed consolidated statements of operations for the three and six months ended June 30, 2021 as a reduction of operating expenses within the Health Care Benefits segment.

(5)During the six months ended June 30, 2022, the legal settlement relates to the agreement with the State of Florida, entered into in March 2022, to resolve claims dating back more than a decade related to opioid medications. Under this agreement, CVS Health Corporation settled all opioid claims against it and its subsidiaries by the State of Florida for $484 million, inclusive of certain legal fees, to be paid over a period of 18 years. The legal settlement is reflected in the unaudited condensed consolidated statement of operations in operating expenses within the Corporate/Other segment.

(6)During the six months ended June 30, 2022, the loss on assets held for sale relates to the Commercial Business reporting unit within the Health Care Benefits segment. In March 2022, the Company reached an agreement to sell its international health care business domiciled in Thailand (“Thailand business”), which was included in the Commercial Business reporting unit. At that time, a portion of the Commercial Business goodwill was specifically allocated to the Thailand business. The net assets of the Thailand business were accounted for as assets held for sale at March 31, 2022. The carrying value of the Thailand business was determined to be greater than its fair value and a loss on assets held for sale was recorded during the first quarter of 2022. The sale closed in the second quarter of 2022, and the ultimate loss on the sale was not material. The loss on assets held for sale is reflected in the unaudited condensed consolidated statement of operations in operating expenses within the Health Care Benefits segment.

4346

Health Care Benefits Segment

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


														Change																							Change
		Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2021 vs 2020					Six Months Ended June 30, 2021 vs 2020						Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2022 vs 2021					Six Months Ended June 30, 2022 vs 2021
In millions, except percentages and basis points (“bps”)	In millions, except percentages and basis points (“bps”)	2021			2020			2021			2020			$			%		$			%		In millions, except percentages and basis points (“bps”)	2022			2021			2022			2021			$			%		$			%
Revenues:	Revenues:																							Revenues:
Premiums	Premiums	$	18,968		$	16,913		$	37,910		$	34,534		$	2,055		12.2	%	$	3,376		9.8	%	Premiums	$	21,245		$	18,968		$	42,859		$	37,910		$	2,277		12.0	%	$	4,949		13.1	%
Services	Services	1,420			1,428			2,813			2,912			(8)			(0.6)	%	(99)			(3.4)	%	Services	1,423			1,420			2,829			2,813			3			0.2	%	16			0.6	%
Net investment income	Net investment income	137			127			285			220			10			7.9	%	65			29.5	%	Net investment income	88			137			177			285			(49)			(35.8)	%	(108)			(37.9)	%
Total revenues	Total revenues	20,525			18,468			41,008			37,666			2,057			11.1	%	3,342			8.9	%	Total revenues	22,756			20,525			45,865			41,008			2,231			10.9	%	4,857			11.8	%
Benefit costs	Benefit costs	15,954			11,884			31,711			26,400			4,070			34.2	%	5,311			20.1	%	Benefit costs	17,611			15,954			35,660			31,711			1,657			10.4	%	3,949			12.5	%
MBR	MBR	84.1		%	70.3		%	83.6		%	76.4		%	1,380		bps			720		bps			MBR	82.9		%	84.1		%	83.2		%	83.6		%	(120)		bps			(40)		bps
Operating expenses	Operating expenses	$	3,298		$	3,518		$	6,644		$	7,105		$	(220)		(6.3)	%	$	(461)		(6.5)	%	Operating expenses	$	3,391		$	3,298		$	7,042		$	6,644		$	93		2.8	%	$	398		6.0	%
Operating expenses as a % of total revenues	Operating expenses as a % of total revenues	16.1		%	19.0		%	16.2		%	18.9		%											Operating expenses as a % of total revenues	14.9		%	16.1		%	15.4		%	16.2		%
Operating income	Operating income	$	1,273		$	3,066		$	2,653		$	4,161		$	(1,793)		(58.5)	%	$	(1,508)		(36.2)	%	Operating income	$	1,754		$	1,273		$	3,163		$	2,653		$	481		37.8	%	$	510		19.2	%
Operating income as a % of total revenues	Operating income as a % of total revenues	6.2		%	16.6		%	6.5		%	11.0		%											Operating income as a % of total revenues	7.7		%	6.2		%	6.9		%	6.5		%
Adjusted operating income (1)	Adjusted operating income (1)	$	1,614		$	3,464		$	3,396		$	4,955		$	(1,850)		(53.4)	%	$	(1,559)		(31.5)	%	Adjusted operating income (1)	$	1,831		$	1,614		$	3,582		$	3,396		$	217		13.4	%	$	186		5.5	%
Adjusted operating income as a % of total revenues	Adjusted operating income as a % of total revenues	7.9		%	18.8		%	8.3		%	13.2		%											Adjusted operating income as a % of total revenues	8.0		%	7.9		%	7.8		%	8.3		%
Premium revenues (by business):	Premium revenues (by business):																							Premium revenues (by business):
Government	Government	$	13,897		$	11,976		$	27,814		$	24,445		$	1,921		16.0	%	$	3,369		13.8	%	Government	$	15,751		$	13,897		$	31,946		$	27,814		$	1,854		13.3	%	$	4,132		14.9	%
Commercial	Commercial	5,071			4,937			10,096			10,089			134			2.7	%	7			0.1	%	Commercial	5,494			5,071			10,913			10,096			423			8.3	%	817			8.1	%

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

Commentary - Three Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$2.1~~$2.2 billion, or ~~11.1%~~10.9%, to ~~$20.5~~$22.8 billion in the three months ended June 30, ~~2021~~2022 compared to the prior year ~~primarily~~ driven by growth ~~in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF for 2021.~~across all product lines.

Medical Benefit Ratio (“MBR”)

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

•The MBR ~~increased from 70.3%~~decreased to ~~84.1%~~82.9% in the three months ended June 30, ~~2021~~2022 compared to 84.1% in the prior year ~~primarily driven by the deferral~~reflective of ~~elective procedures and other discretionary utilization~~strong underlying performance, including higher favorable development of prior-periods’ health care cost estimates in ~~response to the COVID-19 pandemic during~~ the three months ended June 30, ~~2020 and~~2022 compared to the ~~repeal of the HIF for 2021.~~prior year.

Operating expenses

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

•Operating expenses ~~decreased $220~~increased $93 million, or ~~6.3%~~2.8%, in the three months ended June 30, ~~2021~~2022 compared to the prior ~~year. The decrease in operating expenses was~~year primarily due to the repeal of the HIF for 2021, the impact of cost savings initiatives in the three months ended June 30, 2021 and the receipt of a $61 million purchase price working capital adjustment subsequent to the acquisition accounting measurement period related to an acquisition completed during the

~~first quarter of 2020, which was recorded as a reduction in operating expenses in the three months ended June 30, 2021. These decreases were partially offset~~driven by ~~incremental~~increased operating expenses to support the growth across all product lines described above, as well as incremental investments in the ~~Government Services~~ business, ~~described above.~~partially offset by the $225 million pre-tax gain on the sale of PayFlex.

•Operating expenses as a percentage of total revenues decreased to ~~16.1%~~14.9% in the three months ended June 30, ~~2021~~2022 compared to ~~19.0%~~16.1% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily ~~due to~~driven by the ~~repeal of the HIF for 2021.~~increases in total revenues described above.

Adjusted operating income

•Adjusted operating income ~~decreased $1.9 billion,~~increased $217 million, or ~~53.4%~~13.4%, in the three months ended June 30, ~~2021~~2022 compared to the prior ~~year. The decrease in adjusted operating income was~~year primarily driven by ~~the deferral~~strong underlying performance, including higher favorable development of ~~elective procedures and other discretionary utilization~~prior-periods’ health care cost estimates in ~~response to the COVID-19 pandemic during~~ the three months ended June 30, ~~2020.~~2022 compared to the prior year, and membership growth across all product lines. These increases were partially offset by incremental investments to support growth in the business and net realized capital losses.

Commentary - Six Months EndedJune 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$3.3~~$4.9 billion, or ~~8.9%~~11.8%, to ~~$41.0~~$45.9 billion in the six months ended June 30, ~~2021~~2022 compared to the prior year ~~primarily~~ driven by growth ~~in the Government Services business, partially offset by the unfavorable impact of the repeal of the HIF for 2021.~~across all product lines.

Medical Benefit Ratio ~~(“MBR”)~~

•The MBR ~~increased from 76.4%~~decreased slightly to ~~83.6%~~83.2% in the six months ended June 30, ~~2021~~2022 compared to 83.6% in the prior year ~~primarily driven by the deferral~~reflective of elective procedures and other discretionary utilization in response to the COVID-19 pandemic during the six months ended June 30, 2020 and the repeal of the HIF for 2021. These increases were partially offset by higher favorable development of prior-years’ health care cost estimates in the six months ended June 30, 2021 compared to the prior year.strong underlying performance.

Operating expenses

•Operating expenses ~~decreased $461~~increased $398 million, or ~~6.5%~~6.0%, in the six months ended June 30, ~~2021~~2022 compared to the prior ~~year. The decrease in operating expenses was~~year primarily ~~due to the repeal of the HIF for 2021 and the impact of cost savings initiatives in the six months ended June 30, 2021, partially offset~~driven by ~~incremental~~increased operating expenses to support the growth across all product lines described above, as well as incremental investments in the ~~Government Services~~ business, ~~described above.~~partially offset by the $225 million pre-tax gain on the sale of PayFlex.

•Operating expenses as a percentage of total revenues decreased to ~~16.2%~~15.4% in the six months ended June 30, ~~2021~~2022 compared to ~~18.9%~~16.2% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily ~~due to~~driven by the ~~repeal of the HIF for 2021.~~increases in total revenues described above.

Adjusted operating income

•Adjusted operating income ~~decreased $1.6 billion,~~increased $186 million, or ~~31.5%~~5.5%, in the six months ended June 30, ~~2021~~2022 compared to the prior ~~year. The decrease in adjusted operating income was~~year primarily driven by the ~~deferral~~net favorable impact of ~~elective procedures and other discretionary utilization in response~~COVID-19 compared to the ~~COVID-19 pandemic during the six months ended June 30, 2020,~~prior year, membership growth across all product lines and strong underlying performance. These increases were partially offset by ~~improved performance~~incremental investments to support growth in the ~~Government Services business.~~business and net realized capital losses.

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


		June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020				June 30, 2022			March 31, 2022			December 31, 2021			June 30, 2021
In thousands	In thousands	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total	In thousands	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total	Insured	ASC	Total
Medical membership:	Medical membership:													Medical membership:
Commercial	Commercial	3,183	13,541	16,724	3,201	13,584	16,785	3,258	13,644	16,902	3,298	14,179	17,477	Commercial	3,158	13,835	16,993	3,285	13,924	17,209	3,258	13,530	16,788	3,183	13,541	16,724
Medicare Advantage	Medicare Advantage	2,911	—	2,911	2,874	—	2,874	2,705	—	2,705	2,651	—	2,651	Medicare Advantage	3,216	—	3,216	3,169	—	3,169	2,971	—	2,971	2,911	—	2,911
Medicare Supplement	Medicare Supplement	1,193	—	1,193	1,146	—	1,146	1,082	—	1,082	954	—	954	Medicare Supplement	1,314	—	1,314	1,292	—	1,292	1,285	—	1,285	1,193	—	1,193
Medicaid	Medicaid	2,231	451	2,682	2,184	637	2,821	2,100	623	2,723	1,918	586	2,504	Medicaid	2,425	484	2,909	2,375	477	2,852	2,333	471	2,804	2,231	451	2,682
Total medical membership	Total medical membership	9,518	13,992	23,510	9,405	14,221	23,626	9,145	14,267	23,412	8,821	14,765	23,586	Total medical membership	10,113	14,319	24,432	10,121	14,401	24,522	9,847	14,001	23,848	9,518	13,992	23,510

Supplemental membership information:	Supplemental membership information:													Supplemental membership information:
Medicare Prescription Drug Plan (standalone)	Medicare Prescription Drug Plan (standalone)			5,704			5,694			5,490			5,575	Medicare Prescription Drug Plan (standalone)			6,051			6,022			5,777			5,704

Medical Membership

•Medical membership represents the number of members covered by the Company’s Insured and ASC medical products and related services at a specified point in time. Management uses this metric to understand variances between actual medical

membership and expected amounts as well as trends in period-over-period results. This metric provides management and investors with information useful in understanding the impact of medical membership on segment total revenues and operating results.

•Medical membership as of June 30, ~~2021~~2022 of ~~23.5~~24.4 million decreased ~~116,000~~90,000 members compared with March 31, ~~2021,~~2022, primarily ~~reflecting declines~~due to the decrease of approximately 266,000 members in ~~Medicaid and Commercial products, partially offset by an increase in Medicare products. The decline in Medicaid membership reflects~~connection with the ~~loss~~divestiture of ~~a large ASC customer~~the Company’s Thailand business during the ~~three months ended June 30, 2021.~~second quarter of 2022. Excluding the impact of this divestiture, membership increased across all product lines compared with March 31, 2022.

•Medical membership as of June 30, ~~2021~~2022 of ~~23.5~~24.4 million ~~decreased 76,000~~increased 922,000 members compared with June 30, ~~2020 primarily~~2021, reflecting ~~a decline in Commercial products, partially offset by~~ increases ~~in Medicare and Medicaid products.~~across all product lines.

Medicare Update

On ~~January 15, 2021,~~April 4, 2022, the U.S. Centers for Medicare & Medicaid Services issued its final notice detailing final ~~2022~~2023 Medicare Advantage benchmark payment ~~rates (the “Final Notice”).~~rates. Final ~~2022~~2023 Medicare Advantage rates resulted in an increase in industry benchmark rates of approximately ~~4.1%~~5.0%.

4649

Pharmacy Services Segment

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


														Change																					Change
		Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2021 vs 2020				Six Months Ended June 30, 2021 vs 2020					Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2022 vs 2021				Six Months Ended June 30, 2022 vs 2021
In millions, except percentages	In millions, except percentages	2021			2020			2021			2020			$		%		$		%		In millions, except percentages	2022			2021			2022			2021			$		%		$		%
Revenues:	Revenues:																					Revenues:
Products	Products	$	38,010		$	34,595		$	74,077		$	69,341		$	3,415	9.9	%	$	4,736	6.8	%	Products	$	42,554		$	38,010		$	81,718		$	74,077		$	4,544	12.0	%	$	7,641	10.3	%
Services	Services	304			294			558			531			10		3.4	%	27		5.1	%	Services	258			304			555			558			(46)		(15.1)	%	(3)		(0.5)	%
Total revenues	Total revenues	38,314			34,889			74,635			69,872			3,425		9.8	%	4,763		6.8	%	Total revenues	42,812			38,314			82,273			74,635			4,498		11.7	%	7,638		10.2	%
Cost of products sold	Cost of products sold	36,266			33,271			70,789			66,774			2,995		9.0	%	4,015		6.0	%	Cost of products sold	40,540			36,266			78,030			70,789			4,274		11.8	%	7,241		10.2	%
Operating expenses	Operating expenses	343			347			689			713			(4)		(1.2)	%	(24)		(3.4)	%	Operating expenses	458			343			837			689			115		33.5	%	148		21.5	%
Operating expenses as a % of total revenues	Operating expenses as a % of total revenues	0.9		%	1.0		%	0.9		%	1.0		%									Operating expenses as a % of total revenues	1.1		%	0.9		%	1.0		%	0.9		%
Operating income	Operating income	$	1,705		$	1,271		$	3,157		$	2,385		$	434	34.1	%	$	772	32.4	%	Operating income	$	1,814		$	1,705		$	3,406		$	3,157		$	109	6.4	%	$	249	7.9	%
Operating income as a % of total revenues	Operating income as a % of total revenues	4.5		%	3.6		%	4.2		%	3.4		%									Operating income as a % of total revenues	4.2		%	4.5		%	4.1		%	4.2		%
Adjusted operating income (1)	Adjusted operating income (1)	$	1,755		$	1,327		$	3,262		$	2,508		$	428	32.3	%	$	754	30.1	%	Adjusted operating income (1)	$	1,855		$	1,755		$	3,491		$	3,262		$	100	5.7	%	$	229	7.0	%
Adjusted operating income as a % of total revenues	Adjusted operating income as a % of total revenues	4.6		%	3.8		%	4.4		%	3.6		%									Adjusted operating income as a % of total revenues	4.3		%	4.6		%	4.2		%	4.4		%
Revenues (by distribution channel):	Revenues (by distribution channel):																					Revenues (by distribution channel):
Pharmacy network (2)	Pharmacy network (2)	$	22,918		$	20,536		$	44,811		$	41,636		$	2,382	11.6	%	$	3,175	7.6	%	Pharmacy network (2)	$	24,537		$	22,918		$	47,361		$	44,811		$	1,619	7.1	%	$	2,550	5.7	%
Mail choice (3)	Mail choice (3)	15,235			14,109			29,483			27,783			1,126		8.0	%	1,700		6.1	%	Mail choice (3)	18,030			15,235			34,404			29,483			2,795		18.3	%	4,921		16.7	%
Other	Other	161			244			341			453			(83)		(34.0)	%	(112)		(24.7)	%	Other	245			161			508			341			84		52.2	%	167		49.0	%
Pharmacy claims processed: (4)	Pharmacy claims processed: (4)																					Pharmacy claims processed: (4)
Total	Total	562.2			505.4			1,098.1			1,046.8			56.8		11.2	%	51.3		4.9	%	Total	584.3			562.2			1,151.3			1,098.1			22.1		3.9	%	53.2		4.8	%
Pharmacy network (2)	Pharmacy network (2)	479.3			425.1			934.7			886.2			54.2		12.7	%	48.5		5.5	%	Pharmacy network (2)	499.1			479.3			983.4			934.7			19.8		4.1	%	48.7		5.2	%
Mail choice (3)	Mail choice (3)	82.9			80.3			163.4			160.6			2.6		3.2	%	2.8		1.7	%	Mail choice (3)	85.2			82.9			167.9			163.4			2.3		2.8	%	4.5		2.8	%
Generic dispensing rate: (4)	Generic dispensing rate: (4)																					Generic dispensing rate: (4)
Total	Total	86.7		%	88.7		%	87.4		%	88.8		%									Total	88.0		%	86.7		%	87.9		%	87.4		%
Pharmacy network (2)	Pharmacy network (2)	86.9		%	89.3		%	87.7		%	89.4		%									Pharmacy network (2)	88.4		%	86.9		%	88.3		%	87.7		%
Mail choice (3)	Mail choice (3)	85.5		%	85.7		%	85.6		%	85.7		%									Mail choice (3)	85.7		%	85.5		%	85.6		%	85.6		%

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

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

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

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

Commentary - Three Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$3.4~~$4.5 billion, or ~~9.8%~~11.7%, to ~~$38.3~~$42.8 billion in the three months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price ~~compression.~~

improvements.

4750

Operating expenses

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

•Operating expenses increased $115 million, or 33.5%, in the three months ended June 30, 2022 compared to the prior year primarily driven by increased restructuring and business integration costs in the three months ended June 30, 2022 compared to the prior year.

•Operating expenses as a percentage of total revenues remained relatively consistent at 1.1% and 0.9% ~~and 1.0%~~ in each of the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Adjusted operating income

•Adjusted operating income increased ~~$428~~$100 million, or ~~32.3%~~5.7%, in the three months ended June 30, ~~2021~~2022 compared to the prior year. The increase in adjusted operating income was primarily driven by improved purchasing economics, ~~that reflected~~including increased contributions from the products and services of ~~our~~the Company’s group purchasing organization that was launched in the second quarter of 2020 and specialty pharmacy (including pharmacy and/or administrative services for providers and Covered Entities), as well as increased pharmacy claims volume.organization. These increases were partially offset by continued client price ~~compression.~~improvements, decreased contributions from pharmacy and/or other administrative services for Covered Entities and increased restructuring and business integration costs in the three months ended June 30, 2022 compared to the prior year.

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

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

Pharmacy claims processed

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

•The Company’s pharmacy network claims processed on a 30-day equivalent basis increased ~~12.7% to 479.3 million claims~~4.1% in the three months ended June 30, ~~2021~~2022 compared to ~~425.1 million claims in~~ the prior year primarily driven by net new business, increased utilization and the impact of an extended cough, cold and flu season compared to the prior year, partially offset by decreased COVID-19 ~~vaccinations and increased new therapy prescriptions, which were adversely impacted by the COVID-19 pandemic during the three months ended June 30, 2020.~~vaccinations.

•The Company’s mail choice claims processed on a 30-day equivalent basis increased ~~3.2% to 82.9 million claims~~2.8% in the three months ended June 30, ~~2021~~2022 compared to ~~80.3 million claims in~~ the prior year primarily driven by net new business and the ~~continued adoption~~increased utilization of Maintenance Choice ~~offerings.~~prescriptions.

•Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased ~~8.4%~~5.7% on a 30-day equivalent basis for the three months ended June 30, ~~2021~~2022 compared to the prior year.

Generic dispensing rate

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

•The Pharmacy Services segment’s total generic dispensing rate ~~decreased~~increased to ~~86.7%~~88.0% in the three months ended June 30, ~~2021~~2022 compared to ~~88.7%~~86.7% in the prior year. The ~~decrease~~increase in the segment’s generic dispensing rate was primarily driven by ~~an increase~~a decrease in brand prescriptions, largely attributable to decreased COVID-19 vaccinations in the three months ended June 30, ~~2021.~~2022 compared to the prior year. Excluding the impact of COVID-19 vaccinations, the segment’s total generic dispensing rate ~~increased to~~was 88.8% and 89.0% in the three months ended June 30, ~~2021.~~

2022 and 2021, respectively.

4851

Commentary - Six Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$4.8~~$7.6 billion, or ~~6.8%~~10.2%, to ~~$74.6~~$82.3 billion in the six months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by increased pharmacy claims volume, growth in specialty pharmacy and brand inflation, partially offset by continued client price ~~compression.~~improvements.

Operating expenses

•Operating expenses increased $148 million, or 21.5%, in the six months ended June 30, 2022 compared to the prior year primarily driven by increased restructuring and business integration costs in the six months ended June 30, 2022 compared to the prior year.

•Operating expenses as a percentage of total revenues remained relatively consistent at ~~0.9%~~1.0% and ~~1.0%~~0.9% in the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Adjusted operating income

•Adjusted operating income increased ~~$754~~$229 million, or ~~30.1%~~7.0%, in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase in adjusted operating income was primarily driven by improved purchasing economics, ~~that reflected~~including increased contributions from the products and services of ~~our~~the Company’s group purchasing ~~organization that was launched in the second quarter of 2020 and specialty pharmacy (including pharmacy and/or administrative services for providers and Covered Entities),~~organization. These increases were partially offset by continued client price ~~compression.~~improvements, decreased contributions from pharmacy and/or other administrative services for Covered Entities and increased restructuring and business integration costs in the six months ended June 30, 2022 compared to the prior year.

Pharmacy claims processed

•The Company’s pharmacy network claims processed on a 30-day equivalent basis increased ~~5.5% to 934.7 million claims~~5.2% in the six months ended June 30, ~~2021~~2022 compared to ~~886.2 million claims in~~ the prior year primarily driven by net new business, increased utilization and the impact of a weaker cough, cold and flu season experienced in the prior year, partially offset by decreased COVID-19 vaccinations.

•The Company’s mail choice claims processed on a 30-day equivalent basis increased ~~1.7% to 163.4 million claims~~2.8% in the six months ended June 30, ~~2021~~2022 compared to ~~160.6 million claims in~~ the prior year primarily driven by net new business and the ~~continued adoption~~increased utilization of Maintenance Choice ~~offerings.~~prescriptions.

•Excluding the impact of COVID-19 vaccinations, total pharmacy claims processed increased ~~3.0%~~5.6% on a 30-day equivalent basis for the six months ended June 30, ~~2021~~2022 compared to the prior year.

Generic dispensing rate

•The Pharmacy Services segment’s total generic dispensing rate ~~decreased~~increased to ~~87.4%~~87.9% in the six months ended June 30, ~~2021~~2022 compared to ~~88.8%~~87.4% in the prior year. The ~~decrease~~increase in the segment’s generic dispensing rate was primarily driven by ~~an increase~~a decrease in brand prescriptions, largely attributable to decreased COVID-19 vaccinations in the six months ended June 30, ~~2021.~~2022 compared to the prior year. Excluding the impact of COVID-19 vaccinations, the segment’s total generic dispensing rate ~~increased to~~was 88.8% and 89.0% in the six months ended June 30, ~~2021.~~2022 and 2021, respectively.

4952

Retail/LTC Segment

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


														Change																					Change
		Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2021 vs 2020				Six Months Ended June 30, 2021 vs 2020					Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30, 2022 vs 2021				Six Months Ended June 30, 2022 vs 2021
In millions, except percentages	In millions, except percentages	2021			2020			2021			2020			$		%		$		%		In millions, except percentages	2022			2021			2022			2021			$		%		$		%
Revenues:	Revenues:																					Revenues:
Products	Products	$	23,609		$	21,476		$	46,003		$	43,998		$	2,133	9.9	%	$	2,005	4.6	%	Products	$	25,528		$	23,609		$	50,133		$	46,003		$	1,919	8.1	%	$	4,130	9.0	%
Services	Services	1,119			186			1,953			413			933		501.6	%	1,540		372.9	%	Services	776			1,119			1,605			1,953			(343)		(30.7)	%	(348)		(17.8)	%
Net investment income		—			—			46			—			—		—	%	46		100.0	%
Net investment income (loss)																						Net investment income (loss)	(18)			—			(34)			46			(18)		(100.0)	%	(80)		(173.9)	%
Total revenues	Total revenues	24,728			21,662			48,002			44,411			3,066		14.2	%	3,591		8.1	%	Total revenues	26,286			24,728			51,704			48,002			1,558		6.3	%	3,702		7.7	%
Cost of products sold	Cost of products sold	17,952			16,220			34,994			32,798			1,732		10.7	%	2,196		6.7	%	Cost of products sold	19,554			17,952			38,319			34,994			1,602		8.9	%	3,325		9.5	%

Operating expenses	Operating expenses	4,857			4,509			9,824			8,900			348		7.7	%	924		10.4	%	Operating expenses	4,992			4,857			10,162			9,824			135		2.8	%	338		3.4	%
Operating expenses as a % of total revenues	Operating expenses as a % of total revenues	19.6		%	20.8		%	20.5		%	20.0		%									Operating expenses as a % of total revenues	19.0		%	19.6		%	19.7		%	20.5		%
Operating income	Operating income	$	1,919		$	933		$	3,184		$	2,713		$	986	105.7	%	$	471	17.4	%	Operating income	$	1,740		$	1,919		$	3,223		$	3,184		$	(179)	(9.3)	%	$	39	1.2	%
Operating income as a % of total revenues	Operating income as a % of total revenues	7.8		%	4.3		%	6.6		%	6.1		%									Operating income as a % of total revenues	6.6		%	7.8		%	6.2		%	6.6		%
Adjusted operating income (1)	Adjusted operating income (1)	$	2,049		$	1,057		$	3,443		$	2,959		$	992	93.9	%	$	484	16.4	%	Adjusted operating income (1)	$	1,862		$	2,049		$	3,467		$	3,443		$	(187)	(9.1)	%	$	24	0.7	%
Adjusted operating income as a % of total revenues	Adjusted operating income as a % of total revenues	8.3		%	4.9		%	7.2		%	6.7		%									Adjusted operating income as a % of total revenues	7.1		%	8.3		%	6.7		%	7.2		%
Revenues (by major goods/service lines):	Revenues (by major goods/service lines):																					Revenues (by major goods/service lines):
Pharmacy	Pharmacy	$	18,873		$	16,870		$	36,758		$	34,225		$	2,003	11.9	%	$	2,533	7.4	%	Pharmacy	$	20,017		$	18,873		$	39,549		$	36,758		$	1,144	6.1	%	$	2,791	7.6	%
Front Store	Front Store	5,254			4,653			9,896			9,861			601		12.9	%	35		0.4	%	Front Store	5,736			5,254			11,049			9,896			482		9.2	%	1,153		11.7	%
Other	Other	601			139			1,302			325			462		332.4	%	977		300.6	%	Other	551			601			1,140			1,302			(50)		(8.3)	%	(162)		(12.4)	%
Net investment income		—			—			46			—			—		—	%	46		100.0	%
Net investment income (loss)																						Net investment income (loss)	(18)			—			(34)			46			(18)		(100.0)	%	(80)		(173.9)	%
Prescriptions filled (2)	Prescriptions filled (2)	394.4			345.4			769.8			720.5			49.0		14.2	%	49.3		6.8	%	Prescriptions filled (2)	400.8			394.4			795.4			769.8			6.4		1.6	%	25.6		3.3	%
Same store sales increase (decrease): (3)	Same store sales increase (decrease): (3)																					Same store sales increase (decrease): (3)
Total	Total	12.3		%	2.4		%	6.2		%	5.7		%									Total	8.0		%	12.3		%	9.3		%	6.2		%
Pharmacy	Pharmacy	12.4		%	4.6		%	8.2		%	6.9		%									Pharmacy	7.6		%	12.4		%	8.8		%	8.2		%
Front Store	Front Store	12.0		%	(4.5)		%	(0.4)		%	1.7		%									Front Store	9.4		%	12.0		%	11.2		%	(0.4)		%
Prescription volume (2)	Prescription volume (2)	14.8		%	0.6		%	7.6		%	5.2		%									Prescription volume (2)	3.1		%	14.8		%	4.5		%	7.6		%
Generic dispensing rate (2)	Generic dispensing rate (2)	85.7		%	89.1		%	86.5		%	89.2		%									Generic dispensing rate (2)	88.5		%	85.7		%	88.0		%	86.5		%

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

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

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

Commentary - Three Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$3.1~~$1.6 billion, or ~~14.2%~~6.3%, to ~~$24.7~~$26.3 billion in the three months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by increased prescription ~~volume, COVID-19 vaccinations~~ and ~~diagnostic testing and higher~~ front store ~~revenues.~~volume, including the sale of COVID-19 OTC test kits and the impact of an extended cough, cold and flu season compared to the prior year, as well as pharmacy brand inflation. These increases were partially offset by ~~continued pharmacy reimbursement pressure.~~decreased COVID-19 vaccinations and diagnostic testing, ~~contributed nearly a third~~the impact of ~~the increase in the segment’s revenues for the three months~~recent generic introductions and continued pharmacy reimbursement pressure.

5053

~~ended June 30, 2021 compared to the prior year, as the prior year included an immaterial impact from diagnostic testing and no COVID-19 vaccinations.~~

•Pharmacy same store sales increased ~~12.4%~~7.6% in the three months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily driven by the ~~14.8%~~3.1% increase in pharmacy same store prescription volume on a 30-day equivalent basis, including the impact of an extended cough, cold and flu season compared to the prior year, and pharmacy brand inflation. These increases were partially offset by ~~continued pharmacy reimbursement pressure and~~ the impact of recent generic ~~introductions.~~introductions and continued pharmacy reimbursement pressure.

•Front store same store sales increased ~~12.0%~~9.4% in the three months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily due to ~~reduced customer traffic~~strength in consumer health, including the ~~segment’s retail pharmacies due to shelter-in-place orders in response~~sale of COVID-19 OTC test kits and the impact of an extended cough, cold and flu season compared to the ~~COVID-19 pandemic~~prior year, in the three months ended June 30, ~~2020 as well as strength across all product categories in the three months ended June 30, 2021.~~2022.

•Other revenues ~~increased $462~~decreased $50 million in the three months ended June 30, ~~2021~~2022 compared to the prior year. The ~~increase~~decrease was primarily due to ~~increased~~decreased COVID-19 diagnostic testing in the three months ended June 30, ~~2021.~~2022 compared to the prior year.

Operating expenses

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

•Operating expenses increased ~~$348~~$135 million, or ~~7.7%~~2.8%, in the three months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily due to incremental costs associated with increased volume, ~~including COVID-19 vaccinations~~increased investments in the segment’s operations and ~~diagnostic testing, partially offset by a~~capabilities and the absence of the $125 million gain from an anti-trust legal settlement recorded in the three months ended June 30, ~~2021 and the absence of incremental~~2021. These increases were partially offset by lower expenses associated with COVID-19 vaccination administration compared to the ~~Company’s initial COVID-19 pandemic mitigation efforts incurred in the three months ended June 30, 2020.~~prior year.

•Operating expenses as a percentage of total revenues decreased to ~~19.6%~~19.0% in the three months ended June 30, ~~2021~~2022 compared to ~~20.8%~~19.6% in the prior year. The decrease in operating expenses as a percentage of total revenues was primarily driven by the increases in total revenues described above.

Adjusted operating income

•Adjusted operating income ~~increased $992~~decreased $187 million, or ~~93.9%~~9.1% in the three months ended June 30, ~~2021~~2022 compared to the prior year. The ~~increase~~decrease in adjusted operating income was primarily driven by ~~the increased prescription and front store volume described above,~~continued pharmacy reimbursement pressure, decreased COVID-19 vaccinations, increased investments in the segment’s operations and ~~diagnostic testing~~capabilities and athe absence of the $125 million gain from an anti-trust legal settlement recorded in the three months ended June 30, 2021. These ~~increases~~decreases were partially offset by ~~continued pharmacy reimbursement pressure.~~the increased prescription and front store volume described above, improved generic drug purchasing and the favorable impact of business initiatives in the three months ended June 30, 2022.

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

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

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

•The segment’s adjusted operating income benefited from the administration of COVID-19 vaccinations and diagnostic testing, which contributed approximately half of the increase in adjusted operating income for the three months ended June 30, 2021 compared to the prior year.

Prescriptions filled

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

•Prescriptions filled increased ~~14.2%~~1.6% on a 30-day equivalent basis in the three months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by increased utilization and the impact of an extended cough, cold and flu season compared to the prior year, partially offset by decreased COVID-19 vaccinations, as well as the continued adoption of patient care programs and increased new therapy prescriptions, both of which were adversely impacted by the COVID-19 pandemic during the three months ended June 30, 2020.vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased ~~9.3%~~4.6% on a 30-day equivalent basis for the three months ended June 30, ~~2021~~2022 compared to the prior year.

Generic dispensing rate

•Generic dispensing rate is calculated by dividing the Retail/LTC segment’s generic drug prescriptions filled by its total prescriptions filled. Management uses this metric to evaluate the effectiveness of the business at encouraging the use of generic drugs when they are available and clinically appropriate, which aids in decreasing costs for client members and

retail customers. This metric provides management and investors with information useful in understanding trends in segment total revenues and operating results.

•The Retail/LTC segment’s generic dispensing rate ~~decreased~~increased to ~~85.7%~~88.5% in the three months ended June 30, ~~2021~~2022 compared to ~~89.1%~~85.7% in the prior year. The ~~decrease~~increase in the segment’s generic dispensing rate was primarily driven by ~~an increase~~a decrease in brand prescriptions, largely attributable to decreased COVID-19 vaccinations in the three months ended June 30, ~~2021.~~2022 compared to the prior year. Excluding the impact of COVID-19 vaccinations, the segment’s total generic dispensing rate ~~increased to~~was 89.9% and 89.5% in the three months ended June 30, ~~2021.~~2022 and 2021, respectively.

Commentary - Six Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues increased ~~$3.6~~$3.7 billion, or ~~8.1%~~7.7%, to ~~$48.0~~$51.7 billion in the six months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by ~~COVID-19 vaccinations and diagnostic testing,~~ increased prescription and front store volume, including the sale of COVID-19 OTC test kits and the impact of a weaker cough, cold and flu season experienced in the prior year, as well as pharmacy brand inflation. These increases were partially offset by ~~continued pharmacy reimbursement pressure~~decreased COVID-19 vaccinations and diagnostic testing, the impact of recent generic ~~introductions. COVID-19 vaccinations~~introductions and diagnostic testing contributed nearly half of the increase in the segment’s revenues for the six months ended June 30, 2021, as the prior year included an immaterial impact from diagnostic testing and no COVID-19 vaccinations.continued pharmacy reimbursement pressure.

•Pharmacy same store sales increased ~~8.2%~~8.8% in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily driven by the ~~7.6%~~4.5% increase in pharmacy same store prescription volume on a 30-day equivalent basis, including the impact of a weaker cough, cold and flu season experienced in the prior year, and pharmacy brand inflation. These increases were partially offset by ~~continued pharmacy reimbursement pressure and~~ the impact of recent generic ~~introductions.~~introductions and continued pharmacy reimbursement pressure.

•Front store same store sales ~~decreased 0.4%~~increased 11.2% in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily due to strength in consumer health, including the sale of COVID-19 OTC test kits and the impact of a weaker cough, cold and flu season experienced in the prior year, in the six months ended June 30, 2022.

•Other revenues decreased $162 million in the six months ended June 30, 2022 compared to the prior year. The decrease was primarily due to ~~a weak cough, cold and flu season in the first quarter of 2021, partially offset by increased consumer health and beauty care sales in the six months ended June 30, 2021.~~

•~~Other revenues increased $977 million in the six months ended June 30, 2021 compared to the prior year. The increase was primarily due to increased~~decreased COVID-19 diagnostic testing in the six months ended June 30, ~~2021.~~2022 compared to the prior year.

Operating expenses

•Operating expenses increased ~~$924~~$338 million, or ~~10.4%~~3.4%, in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase was primarily due to incremental costs associated with increased volume, ~~including COVID-19 vaccinations~~as well as increased investments in the segment’s operations and ~~diagnostic testing,~~capabilities, partially offset by ~~the absence of incremental~~lower expenses associated with COVID-19 vaccination administration compared to the ~~Company’s initial COVID-19 pandemic mitigation efforts incurred in the six months ended June 30, 2020.~~prior year.

•Operating expenses as a percentage of total revenues ~~increased~~decreased to ~~20.5%~~19.7% in the six months ended June 30, ~~2021~~2022 compared to ~~20.0%~~20.5% in the prior year. The ~~increase~~decrease in operating expenses as a percentage of total revenues was primarily driven by the increases in ~~operating expenses~~total revenues described above.

Adjusted operating income

•Adjusted operating income increased ~~$484~~$24 million, or ~~16.4%~~0.7% in the six months ended June 30, ~~2021~~2022 compared to the prior year. The increase in adjusted operating income was primarily driven by ~~COVID-19 vaccinations and diagnostic testing,~~the increased prescription and front store volume ~~and~~described above, improved generic drug ~~purchasing.~~purchasing and the favorable impact of business initiatives in the six months ended June 30, 2022. These increases were partially offset by continued pharmacy reimbursement ~~pressure.~~pressure, decreased COVID-19 ~~vaccinations and~~ diagnostic testing ~~contributed approximately 20% of~~and increased investments in the segment’s ~~adjusted operating income for the six months ended June 30, 2021.~~operations and capabilities.

Prescriptions filled

•Prescriptions filled increased ~~6.8%~~3.3% on a 30-day equivalent basis in the six months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by ~~COVID-19 vaccinations~~increased utilization and the ~~continued adoption~~impact of ~~patient care programs.~~a weaker cough, cold and flu season experienced in the prior year, partially offset by decreased COVID-19 vaccinations. Excluding the impact of COVID-19 vaccinations, prescriptions filled increased ~~3.2%~~5.1% on a 30-day equivalent basis for the six months ended June 30, ~~2021~~2022 compared to the prior year.

Generic dispensing rate

•The Retail/LTC segment’s generic dispensing rate ~~decreased~~increased to ~~86.5%~~88.0% in the six months ended June 30, ~~2021~~2022 compared to ~~89.2%~~86.5% in the prior year. The ~~decrease~~increase in the segment’s generic dispensing rate was primarily driven by ~~an increase~~a decrease in brand prescriptions, largely attributable to decreased COVID-19 vaccinations in the six months ended June 30, ~~2021.~~2022 compared to the prior year. Excluding the impact of COVID-19 vaccinations, the segment’s total generic dispensing rate ~~increased to~~was 89.9% and 89.6% in the six months ended June 30, ~~2021.~~2022 and 2021, respectively.

5255

Corporate/Other Segment

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


										Change																	Change
		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30, 2021 vs 2020				Six Months Ended June 30, 2021 vs 2020					Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30, 2022 vs 2021				Six Months Ended June 30, 2022 vs 2021
In millions, except percentages	In millions, except percentages	2021		2020		2021		2020		$		%		$		%		In millions, except percentages	2022		2021		2022		2021		$		%		$		%
Revenues:	Revenues:																	Revenues:
Premiums	Premiums	$	15	$	14	$	33	$	33	$	1	7.1	%	$	—	—	%	Premiums	$	15	$	15	$	32	$	33	$	—	—	%	$	(1)	(3.0)	%
Services	Services	15		15		29		17		—		—	%	12		70.6	%	Services	19		15		33		29		4		26.7	%	4		13.8	%
Net investment income	Net investment income	152		57		255		126		95		166.7	%	129		102.4	%	Net investment income	76		152		171		255		(76)		(50.0)	%	(84)		(32.9)	%
Total revenues	Total revenues	182		86		317		176		96		111.6	%	141		80.1	%	Total revenues	110		182		236		317		(72)		(39.6)	%	(81)		(25.6)	%
Cost of products sold	Cost of products sold	8		—		16		—		8		100.0	%	16		100.0	%	Cost of products sold	10		8		20		16		2		25.0	%	4		25.0	%
Benefit costs	Benefit costs	54		51		99		119		3		5.9	%	(20)		(16.8)	%	Benefit costs	162		54		221		99		108		200.0	%	122		123.2	%
Operating expenses	Operating expenses	529		448		956		825		81		18.1	%	131		15.9	%	Operating expenses	494		529		1,341		956		(35)		(6.6)	%	385		40.3	%
Operating loss	Operating loss	(409)		(413)		(754)		(768)		4		1.0	%	14		1.8	%	Operating loss	(556)		(409)		(1,346)		(754)		(147)		(35.9)	%	(592)		(78.5)	%
Adjusted operating loss (1)	Adjusted operating loss (1)	(369)		(343)		(672)		(628)		(26)		(7.6)	%	(44)		(7.0)	%	Adjusted operating loss (1)	(555)		(369)		(860)		(672)		(186)		(50.4)	%	(188)		(28.0)	%

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

Commentary - Three Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

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

•Total revenues ~~increased $96~~decreased $72 million, or ~~111.6%~~39.6%, to ~~$182~~$110 million in the three months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by ~~higher~~lower net investment income ~~primarily related to~~from private equity ~~investments.~~investments and lower net realized capital gains in the three months ended June 30, 2022 compared to the prior year.

Adjusted operating loss

•Adjusted operating loss increased ~~$26~~$186 million in the three months ended June 30, ~~2021~~2022 compared to the prior ~~year. The increase was~~year primarily driven by ~~higher employee benefit costs~~the strengthening of reserves in the Company’s long-term care insurance business and ~~incremental operating expenses associated with Company’s investments in transformation, partially offset by~~ the ~~increase~~decreases in net investment income ~~in the three months ended June 30, 2021~~ described above.

Commentary - Six Months Ended June 30, ~~2021~~2022 vs. ~~2020~~2021

Revenues

•Total revenues ~~increased $141~~decreased $81 million, or ~~80.1%~~25.6%, to ~~$317~~$236 million in the six months ended June 30, ~~2021~~2022 compared to the prior year primarily driven by ~~higher~~lower net investment income ~~primarily related to~~from private equity ~~investments.~~investments and lower net realized capital gains in the six months ended June 30, 2022 compared to the prior year.

Adjusted operating loss

•Adjusted operating loss increased ~~$44~~$188 million in the six months ended June 30, ~~2021~~2022 compared to the prior ~~year. The increase was~~year primarily driven by ~~higher employee benefit costs~~the strengthening of reserves in the Company’s long-term care insurance business and ~~incremental operating expenses associated with Company’s investments in transformation, partially offset by~~ the ~~increase~~decreases in net investment income ~~in the six months ended June 30, 2021~~ described above.

Liquidity and Capital Resources

Cash Flows

The Company maintains a level of liquidity sufficient to allow it to meet its cash needs in the short-term. Over the long term, the Company manages its cash and capital structure to maximize shareholder return, maintain its financial condition and maintain flexibility for future strategic initiatives. The Company continuously assesses its regulatory capital requirements, working capital needs, debt and leverage levels, debt maturity schedule, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions. The Company believes its operating cash flows, commercial paper program, credit facilities, ~~sale-leaseback program,~~ as well as any potential future borrowings, will be sufficient to fund these future payments and long-term initiatives. As of June 30, ~~2021,~~2022, the Company had approximately ~~$7.1~~$12.1 billion in cash and cash equivalents, ~~$1.9~~approximately $5.8 billion of which was held by the parent company or nonrestricted subsidiaries.

The net change in cash, cash equivalents and restricted cash during the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:


		Six Months Ended June 30,				Change					Six Months Ended June 30,				Change
In millions, except percentages	In millions, except percentages	2021		2020		$		%		In millions, except percentages	2022		2021		$		%
Net cash provided by operating activities	Net cash provided by operating activities	$	8,739	$	10,424	$	(1,685)	(16.2)	%	Net cash provided by operating activities	$	9,006	$	8,739	$	267	3.1	%
Net cash used in investing activities	Net cash used in investing activities	(2,974)		(2,930)		(44)		1.5	%	Net cash used in investing activities	(4,123)		(2,974)		(1,149)		(38.6)	%
Net cash provided by (used in) financing activities		(6,558)		1,697		(8,255)		(486.4)	%
Net increase (decrease) in cash, cash equivalents and restricted cash		$	(793)	$	9,191	$	(9,984)	(108.6)	%
Net cash used in financing activities										Net cash used in financing activities	(5,111)		(6,512)		1,401		21.5	%
Net decrease in cash, cash equivalents and restricted cash										Net decrease in cash, cash equivalents and restricted cash	$	(228)	$	(747)	$	519	69.5	%

Commentary

•Net cash provided by operating activities ~~decreased~~increased by ~~$1.7 billion~~$267 million in the six months ended June 30, ~~2021~~2022 compared to the prior year. The ~~decrease~~increase was primarily due to ~~items that favorably impacted operating cash flows in~~the timing of payments during the six months ended June 30, 2020 that did not recur during the current year including: the deferral of quarterly estimated federal and state income tax payments normally due during the second quarter of 2020 until the third quarter of 2020, reduced benefit costs during the second quarter of 2020 due2022 compared to the deferral of elective procedures and other discretionary utilization in the Health Care Benefits segment as a result of the COVID-19 pandemic and the timing of payments and pricing actions during 2020 designed to recover the HIF, which was paid in the third quarter of 2020.prior year.

•Net cash used in investing activities increased by ~~$44 million~~$1.1 billion in the six months ended June 30, ~~2021~~2022 compared to the prior year primarily due to ~~increased~~a reduction in restricted cash as a result of the sale of health savings account funds held on behalf of customers in conjunction with the sale of PayFlex, partially offset by lower net purchases of investments and ~~property and equipment, largely offset by a decrease in cash used for acquisitions.~~the gross proceeds from the sale of PayFlex.

•Net cash used in financing activities ~~was $6.6~~decreased to $5.1 billion in the six months ended June 30, ~~2021~~2022 compared to ~~net cash provided by financing activities of $1.7~~$6.5 billion in the prior year. The decrease in cash ~~provided by~~used in financing activities primarily related to ~~increased~~lower repayments of long-term debt during the six months ended June 30, 2022 compared to the prior year, partially offset by share repurchases in the six months ended June 30, ~~2021 compared to the prior year and the absence of proceeds from the issuance of $4.0 billion of senior notes in the six months ended June 30, 2020.~~2022.

Short-term Borrowings

Commercial Paper and Back-up Credit Facilities

The Company did not have any commercial paper outstanding as of June 30, ~~2021.~~2022. In connection with its commercial paper program, the Company maintains a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May ~~17, 2023,~~16, 2025, a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2026, and a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, ~~2024, and a $2.0 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2026.~~2027. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of June 30, ~~2021,~~2022, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Federal Home Loan Bank of Boston

A subsidiary of the Company is a member of the Federal Home Loan Bank of Boston (the “FHLBB”). As a member, the subsidiary has the ability to obtain cash advances, subject to certain minimum collateral requirements. The maximum

borrowing capacity available from the FHLBB as of June 30, ~~2021~~2022 was approximately ~~$985~~$930 million. As of June 30, ~~2021,~~2022, there were no outstanding advances from the FHLBB.

Long-term Borrowings

In May 2022, the Company exercised the par call option on its outstanding 3.5% senior notes due July 2022 and redeemed for cash on hand the entire $1.5 billion aggregate principal amount.

Debt Covenants

The Company’s back-up revolving credit facilities and unsecured senior notes contain customary restrictive financial and operating covenants. These covenants do not include an acceleration of the Company’s debt maturities in the event of a downgrade in the Company’s credit ratings. The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of June 30, ~~2021,~~2022, the Company was in compliance with all of its debt covenants.

Debt Ratings

As of June 30, ~~2021,~~2022, the Company’s long-term debt was rated “Baa2” by Moody’s Investor Service, Inc. (“Moody’s”) and “BBB” by Standard & Poor’s Financial Services LLC (“S&P”), and its commercial paper program was rated “P-2” by Moody’s and “A-2” by S&P. The outlook on the Company’s long-term debt is “Stable” by ~~Moody’s. In June 2021,~~Moody’s and “Positive” by S~~&P changed the outlook on the Company’s long-term debt from “Stable” to “Positive.”~~&P. In assessing the Company’s credit strength, the Company believes that both Moody’s and S&P considered, among other things, the Company’s capital structure and financial policies as well as its consolidated balance sheet, its historical acquisition activity and other financial information. Although the Company currently believes its long-term debt ratings will remain investment grade, it cannot guarantee the future actions of Moody’s and/or S&P. The Company’s debt ratings have a direct impact on its future borrowing costs, access to capital markets and new store operating lease costs.

Share Repurchase Program

The following share repurchase program has been authorized by CVS Health Corporation’s Board of Directors (the “Board”):


In billions Authorization Date	Authorized		Remaining as of June 30, 2022
December 9, 2021 (“2021 Repurchase Program”)	$	10.0	$	8.0

The 2021 Repurchase Program permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. The 2021 Repurchase Program can be modified or terminated by the Board at any time.

During the six months ended June 30, 2022, the Company repurchased approximately 19.1 million shares of common stock for approximately $2.0 billion pursuant to the 2021 ~~and 2020,~~Repurchase Program, including share repurchases under the ASR transaction described below. During the six months ended June 30, 2021, the Company did not repurchase any shares of its common stock. ~~See Note 5 ‘‘Shareholders’ Equity’’~~

Pursuant to the ~~unaudited condensed consolidated financial statements~~authorization under the 2021 Repurchase Program, the Company entered into a $1.5 billion fixed dollar ASR with Barclays Bank PLC (“Barclays”). Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares at a price of $103.34 per share, which were placed into treasury stock in January 2022. The ASR was accounted for ~~additional information on~~as an initial treasury stock transaction for $1.2 billion and a forward contract for $0.3 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus. In February 2022, the ~~Company’s share repurchase program.~~Company received approximately 2.7 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $1.5 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2022.

At the time they were received, the initial and final receipt of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share.

Critical Accounting Policies

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

~~Recoverability of Goodwill~~

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

The fair value of the reporting units is estimated using a combination of a discounted cash flow method and a market multiple method. The determination of the fair value of the reporting units requires the Company to make significant assumptions and estimates. These assumptions and estimates primarily include the selection of appropriate peer group companies; control premiums and valuation multiples appropriate for acquisitions in the industries in which the Company competes; discount rates; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, income taxes, capital expenditures and future working capital requirements. When determining these assumptions and preparing these estimates, the Company considers each reporting unit’s historical results and current operating trends; consolidated revenues, profitability and cash flow results and forecasts; and industry trends. The Company’s estimates can be affected by a number of factors, including general economic and regulatory conditions; the risk-free interest rate environment; the Company’s market capitalization; efforts of customers and payers to reduce costs, including their prescription drug costs, and/or increase member co-payments;

the continued efforts of competitors to gain market share, consumer spending patterns and the Company’s ability to achieve its revenue growth projections and execute on its cost reduction initiatives.

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

The COVID-19 pandemic continues to evolve. The impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition is uncertain, but the impact could be adverse and material. If the LTC reporting unit does not achieve its forecasts, it is reasonably possible in the near term that the goodwill of the LTC reporting unit could be deemed to be impaired by a material amount. As of June 30, 2021, the goodwill balance in the LTC reporting unit was $431 million.

For a full description of the Company’s ~~other~~ critical accounting policies, see “Critical Accounting Policies” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the ~~2020~~2021 Form 10-K.

Cautionary Statement Concerning Forward-Looking Statements

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

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

Anticipates

Believes

Can

Continue

Could

Estimates

Evaluate

Expects

Explore

Forecast

Guidance

Intends

Likely

May

Might

Outlook

Plans

Potential

Predict

Probable

Projects

Seeks

Should

View

Will

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

~~Form 10-Q Table of Contents~~

Forward-looking statements rely on a number of estimates, assumptions and projections concerning future events, and are subject to a number of significant risks and uncertainties and other factors that could cause actual results to differ materially from those statements. Many of these risks and uncertainties and other factors are outside our control. Certain of these risks and uncertainties and other factors are described under “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020;~~2021 and under “Risk Factors” included in Part II, Item 1A of this report; these are not the only risks and uncertainties we face. There can be no assurance that the Company has identified all the risks

Form 10-Q Table of Contents

that affect it. Additional risks and uncertainties not presently known to the Company or that the Company currently believes to be immaterial also may adversely affect the Company’s businesses. If any of those risks or uncertainties develops into actual events, those events or circumstances could have a material adverse effect on the Company’s businesses, operating results, cash flows, financial condition and/or stock price, among other effects.

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

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Company has not experienced any material changes in exposures to market risk since December 31, ~~2020.~~2021. See the information contained in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020~~2021 for a discussion of the Company’s exposures to market risk.

Item 4.Controls and Procedures

Evaluation of disclosure controls and procedures: The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a‑15(f) and 15d‑15(f)) as of June 30, ~~2021,~~2022, have concluded that as of such date the Company’s disclosure controls and procedures were adequate and effective and designed to provide reasonable assurance that material information relating to the Company and its subsidiaries would be made known to such officers on a timely basis.

Changes in internal control over financial reporting: There has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that occurred in the three months ended June 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II.Other Information

Item 1.Legal Proceedings

The information contained in Note 810 ‘‘Commitments and Contingencies’’ contained in “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.

Item 1A.Risk Factors

There have been no material changes to the “Risk Factors” disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. Those risk factors could adversely affect the Company’s businesses, operating results, cash flows and/or financial condition as well as the market price of ~~the Company’s~~CVS Health Corporation’s common shares.

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

The following table presents the total number of shares purchased in the three months ended June 30, ~~2021,~~2022, the average price paid per share and the approximate dollar value of shares that still could have been purchased at the end of the applicable fiscal period, pursuant to the share repurchase program authorized by CVS Health Corporation’s Board of Directors on ~~November 2, 2016.~~December 9, 2021. See Note 57 ‘‘Shareholders’ Equity’’ contained in “Notes to Condensed Consolidated Financial Statements (Unaudited)” in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Fiscal Period

Total Number
of Shares
Purchased

Average
Price Paid per
Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs

April 1, ~~2021~~2022 through April 30, ~~2021~~2022

—

~~13,869,392,446~~8,000,000,137

May 1, ~~2021~~2022 through May 31, ~~2021~~2022

—

~~13,869,392,446~~8,000,000,137

June 1, ~~2021~~2022 through June 30, ~~2021~~2022

—

~~13,869,392,446~~8,000,000,137

—

Form 10-Q Table of Contents

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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

INDEX TO EXHIBITS



10			Material Contracts

10.1*			~~The Registrant~~’~~s Severance Plan for Non-Store Employees amended~~ ~~as of January 1,~~ ~~2021.~~

~~10.2~~10.1			Five Year Credit Agreement dated as of May 16, 2022, by and among the Registrant, the lenders party thereto, and Bank of America, N.A., as Administrative Agent.

10.2			First Amendment to Five Year Credit Agreement dated as of May 16, 2022, to the Five Year Credit Agreement dated as of May 1 111 , 2021, by and among the Registrant, the lenders party thereto , ~~Barclays Bank PLC and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, Goldman Sachs Bank USA and Wells Fargo Bank, National Association, as Co-Documentation Agents,~~ and Bank of America, N.A.,as Administrative Agent.
10.3*			~~SeparationAgreement dated June 9, 2021 between CVS Pharmacy, Inc. and Eva C. Boratto.~~

10.4*10.3			~~Letter~~First Amendment to Five Year Credit Agreement dated as of May 16, ~~2021 between~~2022, to the Five Year Credit Agreement dated as of May 16, 2019, by and among the Registrant, the lenders party thereto and ~~Shawn Guertin.~~Bank of America, N.A., as Administrative Agent.

10.5*			~~Restrictive Covenant Agreement dated May 16, 2021 between CVS Pharmacy, Inc. and Shawn Guertin.~~

10.6*			~~Change in Control Agreement dated May 16, 2021 between the Registrant and Shawn Guertin.~~

15			Letter re: unaudited interim financial information

15.1			Letter from Ernst & Young LLP acknowledging awareness of the use of a report dated August ~~4, 2021~~ 3, 2022 related to their reviews of interim financial information.

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

31.1			Certification by the Chief Executive Officer.

31.2			Certification by the Chief Financial Officer.

32			Section 1350 Certifications

32.1			Certification by the Chief Executive Officer.

32.2			Certification by the Chief Financial Officer.

101

101			The following materials from the CVS Health Corporation Quarterly Report on Form 10-Q for the three and six months ended June 30, ~~2021~~2022 formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Shareholders’ Equity and (vi) the related Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104

104			Cover Page Interactive Data File - The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021,~~2022, formatted in Inline XBRL (included as Exhibit 101).

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SIGNATURES

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


						CVS HEALTH CORPORATION


Date:	August ~~4, 2021~~3, 2022	By:	/s/ Shawn M. Guertin
			Shawn M. Guertin
			Executive Vice President and Chief Financial Officer