UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31, 2019~~

September 30, 2021

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

OF THE SECURITIES EXCHANGE ACT OF 1934

~~for~~

For the transition period from _____ to

_____

Commission file number ~~1-08323~~

1-38769

Cigna Corporation

(Exact name of registrant as specified in its charter)

~~Delaware~~	~~82-4991898~~
Delaware		82-4991898
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)			~~(I.R.S. Employer~~ Identification No.)
~~900 Cottage Grove Road Bloomfield, Connecticut~~	~~06002~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~
~~(860) 226-6000~~
~~Registrant’s telephone number, including area code~~
~~(860) 226-6741 or (215) 761-5511~~
~~Registrant’s facsimile number, including area code~~
~~Not Applicable~~
~~(Former name, former address and former fiscal year, if changed since last report)~~

900 Cottage Grove Road

Bloomfield,Connecticut06002

(Address of principal executive offices) (Zip Code)

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

Not Applicable

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

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

~~Indicate by check mark~~				~~YES~~	NO
·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.				þ	o
·whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).				þ	o
·whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
~~Large accelerated filer~~ þ	~~Accelerated filer~~o	~~Non-accelerated filer~~o	~~Smaller Reporting Company~~o	~~Emerging growth company~~o
·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.o
·~~whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~				o	þ

~~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

New York Stock Exchange, Inc.

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes _

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

Yes ☐ No ☒

As of ~~April 15, 2019, 379,457,650~~October 29, 2021, 331,427,775 shares of the issuer’s common stock were outstanding.

~~Table of Contents~~

Cigna Corporation

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

subsidiaries.

~~Table of Contents~~

~~Part I.~~ ~~FINANCIAL INFORMATION~~

Part I. FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

~~Cigna Corporation~~

~~Consolidated Statements of Income~~

Unaudited

Three Months Ended

March 31,

(In millions, except per share amounts)

2019

2018

Revenues

Pharmacy revenues

$
25,179

$
717

Premiums

9,971

8,999

Fees and other revenues

2,450

1,368

Net investment income

346

329

TOTAL REVENUES

37,946

11,413

Benefits and expenses

Pharmacy and other service costs

24,050

561

Medical costs and other benefit expenses

7,620

6,772

Selling, general and administrative expenses

3,303

2,745

Amortization of acquired intangible assets

743

27

TOTAL BENEFITS AND EXPENSES

35,716

10,105

Income from operations

2,230

1,308

Interest expense and other

(452)

(57)

Net realized investment gains (losses)

10

(33)

Income before income taxes

1,788

1,218

TOTAL INCOME TAXES

416

301

Net income

1,372

917

Less: net income attributable to noncontrolling interests

4

2

SHAREHOLDERS’ NET INCOME

$
1,368

$
915

Shareholders’ net income per share

Basic

$
3.61

$
3.78

Diluted

$
3.56

$
3.72

a
Cigna Corporation
Consolidated Statements of Income
Unaudited Unaudited
Three Months Ended September 30, Nine Months Ended September 30,
(In millions, except per share amounts) 2021 2020 2021 2020
Revenues
Pharmacy revenues $ 31,013 $ 27,802 $ 89,085 $ 79,464
Premiums 10,275 10,682 30,812 31,928
Fees and other revenues 2,532 2,174 7,324 6,424
Net investment income 468 297 1,169 873
TOTAL REVENUES 44,288 40,955 128,390 118,689
Benefits and expenses
Pharmacy and other service costs 30,070 26,624 86,306 76,425
Medical costs and other benefit expenses 8,330 8,429 24,819 23,863
Selling, general and administrative expenses 3,093 3,301 9,368 10,106
Amortization of acquired intangible assets 501 493 1,499 1,487
TOTAL BENEFITS AND EXPENSES 41,994 38,847 121,992 111,881
Income from operations 2,294 2,108 6,398 6,808
Interest expense and other (303) (336) (915) (1,101)
Debt extinguishment costs — — (141) (199)
Net realized investment gains (losses) 68 32 128 (18)
Income before income taxes 2,059 1,804 5,470 5,490
TOTAL INCOME TAXES 424 406 1,188 1,143
Net income 1,635 1,398 4,282 4,347
Less: Net income attributable to noncontrolling interests 14 10 33 24
SHAREHOLDERS' NET INCOME $ 1,621 $ 1,388 $ 4,249 $ 4,323
Shareholders’ net income per share
Basic $ 4.84 $ 3.81 $ 12.44 $ 11.77
Diluted $ 4.80 $ 3.78 $ 12.32 $ 11.66

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

~~Table of Contents~~

~~Cigna Corporation~~

~~Consolidated Statements of Comprehensive Income~~

Unaudited

Three Months Ended

March 31,

(In millions)

2019

2018

Shareholders’ net income

$
1,368

$
915

Shareholders’ other comprehensive income, net of tax

Net unrealized appreciation (depreciation), securities and derivatives

442

(284)

Net translation of foreign currencies

(24)

45

Postretirement benefits liability adjustment

11

13

Shareholders’ other comprehensive income (loss), net of tax

429

(226)

Shareholders’ comprehensive income

1,797

689

Comprehensive income (loss) attributable to noncontrolling interests

Net income attributable to redeemable noncontrolling interests

3

2

Net income attributable to other noncontrolling interests

1

-

Other comprehensive (loss) attributable to redeemable noncontrolling interests

(2)

(2)

Total comprehensive income attributable to noncontrolling interests

2

-

TOTAL COMPREHENSIVE INCOME

$
1,799

$
689

Cigna Corporation
Consolidated Statements of Comprehensive Income
Unaudited Unaudited
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Net income $ 1,635 $ 1,398 $ 4,282 $ 4,347
Other comprehensive income (loss), net of tax
Net unrealized appreciation (depreciation) on securities and derivatives 32 120 (119) 401
Net translation gains (losses) on foreign currencies (125) 109 (228) 4
Postretirement benefits liability adjustment 16 14 49 (15)
Other comprehensive income (loss), net of tax (77) 243 (298) 390
Total comprehensive income 1,558 1,641 3,984 4,737
Comprehensive income (loss) attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interest 4 4 12 12
Net income attributable to other noncontrolling interests 10 6 21 12
Other comprehensive (loss) attributable to redeemable noncontrolling interest (1) (4) (6) (10)
Total comprehensive income attributable to noncontrolling interests 13 6 27 14
SHAREHOLDERS' COMPREHENSIVE INCOME $ 1,545 $ 1,635 $ 3,957 $ 4,723

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

~~Cigna Corporation~~

~~Consolidated Balance Sheets~~

Unaudited

As of

As of

March 31,

December 31,

(In millions, except per share amounts)

2019

2018

Assets

Cash and cash equivalents

$
4,976

$
3,855

Investments

1,662

2,045

Accounts receivable, net

10,941

10,473

Inventories

2,382

2,821

Other current assets

1,175

1,236

Total current assets

21,136

20,430

Long-term investments

27,257

26,929

Reinsurance recoverables

5,385

5,507

Deferred policy acquisition costs

2,817

2,821

Property and equipment

4,523

4,562

Goodwill

44,537

44,505

Other intangible assets

38,338

39,003

Other assets

2,276

1,630

Separate account assets

8,079

7,839

TOTAL ASSETS

$
154,348

$
153,226

Liabilities

Current insurance and contractholder liabilities

$
7,060

$
6,801

Pharmacy and service costs payable

11,145

10,702

Accounts payable

4,488

4,366

Accrued expenses and other liabilities

7,361

7,071

Short-term debt

2,915

2,955

Total current liabilities

32,969

31,895

Non-current insurance and contractholder liabilities

20,043

19,974

Deferred tax liabilities, net

9,403

9,453

Other non-current liabilities

3,832

3,470

Long-term debt

37,571

39,523

Separate account liabilities

8,079

7,839

TOTAL LIABILITIES

111,897

112,154

Contingencies — Note 16

Redeemable noncontrolling interests

38

37

Shareholders’ equity

Common stock (1)

4

4

Additional paid-in capital

27,855

27,751

Accumulated other comprehensive loss

(1,282)

(1,711)

Retained earnings

16,426

15,088

Less: treasury stock, at cost

(595)

(104)

TOTAL SHAREHOLDERS’ EQUITY

42,408

41,028

Other noncontrolling interests

5

7

Total equity

42,413

41,035

Total liabilities and equity

$
154,348

$
153,226

SHAREHOLDERS’ EQUITY PER SHARE

$
111.52

$
107.71

Cigna Corporation
Consolidated Balance Sheets
Unaudited
As of
September 30, As of
December 31,
(In millions) 2021 2020
Assets
Cash and cash equivalents $ 3,483 $ 10,182
Investments 1,374 1,331
Accounts receivable, net 16,250 12,191
Inventories 3,020 3,165
Other current assets 1,360 930
Total current assets 25,487 27,799
Long-term investments 23,756 23,262
Reinsurance recoverables 5,035 5,200
Deferred policy acquisition costs 3,367 3,385
Property and equipment 4,070 4,205
Goodwill 46,056 44,648
Other intangible assets 34,615 35,179
Other assets 2,715 2,687
Separate account assets 9,150 9,086
TOTAL ASSETS $ 154,251 $ 155,451
Liabilities
Current insurance and contractholder liabilities $ 5,917 $ 5,308
Pharmacy and other service costs payable 14,705 13,347
Accounts payable 5,659 5,478
Accrued expenses and other liabilities 7,356 8,515
Short-term debt 2,703 3,374
Total current liabilities 36,340 36,022
Non-current insurance and contractholder liabilities 16,576 16,844
Deferred tax liabilities, net 8,832 8,939
Other non-current liabilities 4,261 4,629
Long-term debt 31,609 29,545
Separate account liabilities 9,150 9,086
TOTAL LIABILITIES 106,768 105,065
Contingencies — Note 15 0 0
Redeemable noncontrolling interests 56 58
Shareholders’ equity
Common stock (1)
4 4
Additional paid-in capital 29,077 28,975
Accumulated other comprehensive loss (1,153) (861)
Retained earnings 31,803 28,575
Less: Treasury stock, at cost (12,316) (6,372)
TOTAL SHAREHOLDERS’ EQUITY 47,415 50,321
Other noncontrolling interests 12 7
Total equity 47,427 50,328
Total liabilities and equity $ 154,251 $ 155,451

(1)Par value per share, $0.01; shares issued, ~~384~~394 million as of ~~March 31, 2019~~September 30, 2021 and ~~381~~390 million as of December 31, ~~2018;~~2020; authorized ~~shares;~~shares, 600 million.

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

~~Cigna Corporation~~

~~Consolidated Statements of Changes in Total Equity~~

Unaudited
Three Months Ended March 31, 2019
(In millions)

Common
Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
(Loss)

Retained
Earnings

Treasury
Stock

Shareholders’
Equity

Other Non-
controlling
Interests

Total
Equity

Redeemable
Non-
controlling
Interests

Balance at December 31, 2018

$
4

$
27,751

$
(1,711)

$
15,088

$
(104)

$
41,028

$
7

$
41,035

$
37

Cumulative effect of adopting new lease accounting guidance (ASU 2016-02) (1)

(15)

(15)

(15)

Effect of issuing stock for employee benefit plans

104

(29)

75

75

Other comprehensive income (loss)

429

429

429

(2)

Net income

1,368

1,368

1

1,369

3

Common dividends declared (per share: $0.04)

(15)

(15)

(15)

Repurchase of common stock

(462)

(462)

(462)

Other transactions impacting noncontrolling interests

-

(3)

(3)

-

Balance at March 31, 2019

$
4

$
27,855

$
(1,282)

$
16,426

$
(595)

$
42,408

$
5

$
42,413

$
38

Three Months Ended March 31, 2018
(In millions)

Common
Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
(Loss)

Retained
Earnings

Treasury
Stock

Shareholders’
Equity

Other Non-
controlling
Interests

Total
Equity

Redeemable
Non-
controlling
Interests

Balance at December 31, 2017

$
74

$
2,940

$
(1,082)

$
15,800

$
(4,021)

$
13,711

$
-

$
13,711

$
49

Cumulative effect of accounting for financial instruments and hedging

(10)

68

58

58

Reclassification adjustment related to U.S. tax reform legislation

(229)

229

-

-

Effect of issuing stock for employee benefit plans

23

(69)

68

22

22

Other comprehensive (loss)

(226)

(226)

(226)

(2)

Net income

915

915

915

2

Common dividends declared (per share: $0.04)

(10)

(10)

(10)

Repurchase of common stock

(275)

(275)

(275)

Other transactions impacting noncontrolling interests

-

-

Balance at March 31, 2018

$
74

$
2,963

$
(1,547)

$
16,933

$
(4,228)

$
14,195

$
-

$
14,195

$
49

~~(1) See Note 2 for further information about the Company’s adoption of new leasing guidance (ASU 2016-02).~~

Cigna Corporation
Consolidated Statements of Changes in Total Equity
Unaudited
Three Months Ended September 30, 2021
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total Equity Redeemable Noncontrolling Interests
Balance at June 30, 2021 $ 4 $ 29,403 $ (1,077) $ 30,513 $ (10,134) $ 48,709 $ 7 $ 48,716 $ 51
Effects of issuing stock for employee benefits plans 76 (1) 75 75
Other comprehensive (loss) (76) (76) (76) (1)
Net income 1,621 1,621 10 1,631 4
Common dividends declared (per share: $1.00) (331) (331) (331)
Repurchase of common stock (400) (2,181) (2,581) (2,581)
Other transactions impacting noncontrolling interests (2) (2) (5) (7) 2
Balance at September 30, 2021 $ 4 $ 29,077 $ (1,153) $ 31,803 $ (12,316) $ 47,415 $ 12 $ 47,427 $ 56
Three Months Ended September 30, 2020
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total
Equity Redeemable Noncontrolling Interests
Balance at June 30, 2020 $ 4 $ 28,699 $ (788) $ 23,052 $ (3,601) $ 47,366 $ 5 $ 47,371 $ 34
Effect of issuing stock for employee benefit plans 78 (2) 76 76
Other comprehensive income (loss) 247 247 247 (4)
Net income 1,388 1,388 6 1,394 4
Repurchase of common stock (1,045) (1,045) (1,045)
Other transactions impacting noncontrolling interests (4) (4) 25
Balance at September 30, 2020 $ 4 $ 28,777 $ (541) $ 24,440 $ (4,648) $ 48,032 $ 7 $ 48,039 $ 59

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

~~Cigna Corporation~~

~~Consolidated Statements of Cash Flows~~

Unaudited

Three Months Ended March 31,

(In millions)

2019

2018

Cash Flows from Operating Activities

Net income

$
1,372

$
917

Adjustments to reconcile net income to net cash provided by operating activities:

       Depreciation and amortization

897

140

       Realized investment (gains) losses, net

(10)

33

       Deferred income tax (benefit) expense

(162)

9

     Net changes in assets and liabilities, net of non-operating effects:

       Accounts receivable

(396)

(53)

       Inventories

440

94

       Deferred policy acquisition costs

(51)

(76)

       Reinsurance recoverable and other assets

124

51

       Insurance liabilities

360

849

       Pharmacy and service costs payable

444

(124)

       Accounts payable and accrued expenses and other liabilities

91

193

       Other, net

83

(8)

NET CASH PROVIDED BY OPERATING ACTIVITIES

3,192

2,025

Cash Flows from Investing Activities

Proceeds from investments sold:

       Debt and equity securities

1,471

499

Investment maturities and repayments:

       Debt and equity securities

319

297

       Commercial mortgage loans

89

28

Other sales, maturities and repayments (primarily short-term and other long-term investments)

367

112

Investments purchased or originated:

       Debt and equity securities

(1,088)

(2,259)

       Commercial mortgage loans

(95)

(68)

       Other (primarily short-term and other long-term investments)

(388)

(206)

Property and equipment purchases, net

(194)

(103)

Acquisitions, net of cash acquired

(6)

-

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

475

(1,700)

Cash Flows from Financing Activities

Deposits and interest credited to contractholder deposit funds

247

292

Withdrawals and benefit payments from contractholder deposit funds

(251)

(306)

Net change in short-term debt

(1,048)

(3)

Repayment of long-term debt

(1,000)

(131)

Repurchase of common stock

(462)

(310)

Issuance of common stock

53

20

Other, net

(73)

(92)

NET CASH (USED IN) FINANCING ACTIVITIES

(2,534)

(530)

Effect of foreign currency rate changes on cash and cash equivalents

(12)

4

Net increase (decrease) in cash and cash equivalents

1,121

(201)

Cash and cash equivalents, January 1,

3,855

2,972

Cash and cash equivalents, March 31,

$
4,976

$
2,771

Supplemental Disclosure of Cash Information:

     Income taxes paid, net of refunds

$
29

$
31

     Interest paid

$
377

$
46

Cigna Corporation
Consolidated Statements of Changes in Total Equity
Unaudited
Nine Months Ended September 30, 2021
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total
Equity Redeemable Noncontrolling Interests
Balance at December 31, 2020 $ 4 $ 28,975 $ (861) $ 28,575 $ (6,372) $ 50,321 $ 7 $ 50,328 $ 58
Effect of issuing stock for employee benefit plans 507 (90) 417 417
Other comprehensive (loss) (292) (292) (292) (6)
Net income 4,249 4,249 21 4,270 12
Common dividends declared (per share: $3.00) (1,021) (1,021) (1,021)
Repurchase of common stock (400) (5,854) (6,254) (6,254)
Other transactions impacting noncontrolling interests (5) (5) (16) (21) (8)
Balance at September 30, 2021 $ 4 $ 29,077 $ (1,153) $ 31,803 $ (12,316) $ 47,415 $ 12 $ 47,427 $ 56
Nine Months Ended September 30, 2020
(In millions) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Retained Earnings Treasury Stock Shareholders’ Equity Other Non- controlling Interests Total
Equity Redeemable Noncontrolling Interests
Balance at December 31, 2019 $ 4 $ 28,306 $ (941) $ 20,162 $ (2,193) $ 45,338 $ 6 $ 45,344 $ 35
Cumulative effect of adopting new credit loss guidance (ASU 2016-13)
(30) (30) (30)
Effect of issuing stock for employee benefit plans 471 (86) 385 385
Other comprehensive income (loss) 400 400 400 (10)
Net income 4,323 4,323 12 4,335 12
Common dividends declared (per share: $0.04) (15) (15) (15)
Repurchase of common stock (2,369) (2,369) (2,369)
Other transactions impacting noncontrolling interests (11) (11) 22
Balance at September 30, 2020 $ 4 $ 28,777 $ (541) $ 24,440 $ (4,648) $ 48,032 $ 7 $ 48,039 $ 59

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

Cigna Corporation
Consolidated Statements of Cash Flows
Unaudited
Nine Months Ended September 30, 2021
(In millions) 2021 2020
Cash Flows from Operating Activities
Net income $ 4,282 $ 4,347
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,180 2,089
Realized investment (gains) losses, net (128) 18
Deferred income tax (benefit) (104) (340)
Debt extinguishment costs 141 199
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable (4,039) (2,810)
Inventories 145 5
Deferred policy acquisition costs (182) (244)
Reinsurance recoverable and Other assets (281) (468)
Insurance liabilities 863 740
Pharmacy and other service costs payable 1,357 2,084
Accounts payable and Accrued expenses and other liabilities (1,411) (32)
Other, net 93 468
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,916 6,056
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities 1,052 2,038
Investment maturities and repayments:
Debt securities and equity securities 1,265 1,097
Commercial mortgage loans 127 14
Other sales, maturities and repayments (primarily short-term and other long-term investments) 1,261 1,086
Investments purchased or originated:
Debt securities and equity securities (2,742) (3,317)
Commercial mortgage loans (233) (55)
Other (primarily short-term and other long-term investments) (1,768) (1,434)
Property and equipment purchases, net (850) (775)
Acquisitions, net of cash acquired (1,836) (135)
Divestiture, net of cash sold (61) —
Other, net 51 37
NET CASH (USED IN) INVESTING ACTIVITIES (3,734) (1,444)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds 132 769
Withdrawals and benefit payments from contractholder deposit funds (139) (736)
Net change in short-term debt 1,633 592
Net proceeds on issuance of term loan — 1,398
Payments for debt extinguishment (136) (212)
Repayment of long-term debt (4,578) (6,897)
Net proceeds on issuance of long-term debt 4,260 3,465
Repurchase of common stock (6,321) (2,352)
Issuance of common stock 301 239
Common stock dividend paid (1,017) (15)
Other, net 24 (63)
NET CASH (USED IN) FINANCING ACTIVITIES (5,841) (3,812)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash (46) (7)
Net (decrease) increase in cash, cash equivalents and restricted cash (6,705) 793
Cash, cash equivalents and restricted cash January 1, (1)
10,245 5,411
Cash, cash equivalents and restricted cash, September 30, 3,540 6,204
Cash reclassified to assets of business held for sale — (798)
Cash, cash equivalents and restricted cash September 30, per Consolidated Balance Sheets (2)
$ 3,540 $ 5,406
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 1,916 $ 1,408
Interest paid $ 950 $ 1,112
(1)Includes $743 million reported in Assets of business held for sale as of January 1, 2020.
(2)Restricted cash and cash equivalents were reported in other long-term investments as of September 30, 2021, December 31, 2020 and September 30, 2020. Restricted cash and cash equivalents were reported in other long-term investments and other assets as of December 31, 2019.

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
8

CIGNA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TABLE OF CONTENTS

Note
Number
Footnote
Page

BUSINESS AND CAPITAL STRUCTURE

1
Description of Business
7
2
Summary of Significant Accounting Policies
8
3
Accounts Receivable, Net
9
4
Mergers and Acquisitions
9
5
Earnings Per Share
10
6
Debt
11
INSURANCE INFORMATION

7
Insurance and Contractholder Liabilities
12
8
Reinsurance
15
INVESTMENTS

9
Investments
17
10
Fair Value Measurements
21
11
Variable Interest Entities
27
12
Accumulated Other Comprehensive Income (Loss)
28
WORKFORCE MANAGEMENT AND COMPENSATION

13
Pension and Other Postretirement Benefit Plans
28
PROPERTY, LEASES AND OTHER ASSET BALANCES

14
Leases
29
COMPLIANCE, REGULATION AND CONTINGENCIES

15
Income Taxes
31
16
Contingencies and Other Matters
31
17
Condensed Consolidating Financial Information
34
RESULTS DETAILS

18
Segment Information
41

Note Number Footnote Page
BUSINESS AND CAPITAL STRUCTURE
1
Description of Business
10
2
Summary of Significant Accounting Policies
11
3
Accounts Receivable, Net
11
4
Mergers , Acquisitions and Divestitures
12
5
Earnings Per Share
13
6
Debt
14
INSURANCE INFORMATION
7
Insurance and Contractholder Liabilities
16
8
Reinsurance
18
INVESTMENTS
9
Investments
20
10
Fair Value Measurements
24
11
Variable Interest Entities
28
12
Accumulated Other Comprehensive Income (Loss)
29
PROPERTY, LEASES AND OTHER ASSET BALANCES
13
Leases
30
COMPLIANCE, REGULATION AND CONTINGENCIES
14
Income Taxes
30
15
Contingencies and Other Matters
30
RESULTS DETAILS
16
Segment Information
32

Note 1 — – Description of Business

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

services.

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

~~As described more fully~~

The Company provides details of its reporting segments and recent changes below:

In connection with the sale of the U.S. Group Disability and Life business on December 31, 2020, the remainder of our operations previously referred to as "Group Disability and Other" in ~~Note 4, on December 20, 2018, Cigna completed~~our 2020 Form 10-K is now referred to as "Other Operations". There were no changes to the ~~acquisition~~underlying business included in this category. Our business that offers group voluntary products and services was not sold to New York Life Insurance Company ("New York Life") and results of ~~Express Scripts Holding Company (“Express Scripts”).~~ ~~As a result, our segments have changed as described below, effective~~this business are reported in the ~~fourth quarter~~U.S. Medical segment.

Evernorth includes a broad range of ~~2018. Prior year financial data presented~~coordinated and point solution health services capabilities, as well as those from partners across the health care system, in ~~this Form 10-Q has been restated to reflect this new segment presentation.~~

~~Health Services~~ ~~includes~~ pharmacy solutions, benefits management solutions, care solutions and intelligence solutions, which are provided to health plans, employers, government organizations and health care providers.

U.S. Medical includes U.S. Commercial and U.S. Government businesses that provide comprehensive medical and coordinated solutions to clients and customers. U.S. Commercial products and services include medical, pharmacy, ~~home delivery~~behavioral health, dental, vision, health advocacy programs and ~~certain medical management services. This segment includes Express Scripts’ business from the date of acquisition with the exception of Express Scripts’~~other products and services for insured and administrative services only ("ASO") clients. U.S. Government solutions include Medicare Advantage, Medicare Supplement and Medicare Part D ~~business that is reported in~~plans for seniors, Medicaid plans and individual health insurance plans both on and off the ~~Government operating segment.~~

~~Integrated Medical~~ ~~offers a variety of medical solutions to employers and individuals.~~

·	~~The~~ *~~Commercial~~* operating segment serves employers (also referred to as “clients”) and their employees (also referred to as “customers”) and other groups. This segment provides deeply integrated medical and specialty offerings including medical, pharmacy, dental, behavioral health and vision, health advocacy programs and other products and services to insured and self-insured clients.

·	~~The~~ *~~Government~~* operating segment offers Medicare Advantage, Medicare Supplement, and Medicare Part D plans to Medicare-eligible beneficiaries as well as Medicaid plans. This operating segment also offers health insurance coverage to individual customers both on and off public exchanges. This segment includes the acquired Express Scripts’ Medicare Part D business.

public exchanges.

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

Cigna entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc. ("Chubb") for $5.75 billion cash. Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a joint venture in Turkey in 2022.

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

·	*~~Group Disability and Life~~* ~~provides group long-term and short-term disability, group life, accident, voluntary and specialty insurance products and related services.~~

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

·	*~~Run-off businesses:~~*

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

	·	*~~Settlement Annuity~~* ~~business in run-off.~~

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

	·	*~~Certain international run-off businesses~~*

•Group Disability and Life. Prior to the sale of the U.S. Group Disability and Life business on December 31, 2020, this segment provided group long-term and short-term disability, group life, accident, voluntary and specialty insurance products and related services.

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

•Run-off businesses:

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

•Settlement Annuity business in run-off.

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

Corporatereflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other ~~operations, interest on uncertain tax positions,~~operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, severance, certain ~~enterprise-wide projects~~overhead and enterprise wide project costs and intersegment eliminations for products and services sold between segments. ~~Prior to 2019, compensation cost for stock options was also included in Corporate. Beginning in the first quarter of 2019, this cost is recorded by the segments.~~

Note 2 — – Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Cigna Corporation and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company adopted Article 5 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”) effective December 31, 2018 in conjunction with the acquisition of Express Scripts. As a result, the Company now presents current assets and liabilities on its balance sheet. The Company reclassified realized investment gains (losses) from revenue and now reports them below income from operations with interest expense in our Consolidated Statements of Income, in conformity with Article 5. Prior years’ information was reclassified to conform to this new presentation.

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

These interim Consolidated Financial Statements are unaudited but include all adjustments (including normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the periods reported. The interim Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes included in the ~~2018~~2020 Annual Report on Form 10-K (“~~2018~~2020 Form 10-K”). The preparation of interim Consolidated Financial Statements necessarily relies heavily on estimates. This and ~~certain~~ other factors, including the seasonal nature of portions of the health care and related benefits business, ~~as well as~~ competitive and other market conditions, as well as COVID-19 related impacts, call for caution in estimating full-year results based on interim results of operations.

Recent Accounting Pronouncements

The ~~2018~~Company's 2020 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted our financial statements or may impact ~~our financial statements~~them in the future. ~~The following information provides~~There have been no updates ~~on recently~~to accounting guidance not yet adopted or recently issued accounting pronouncements that have occurred since the Company filed its ~~2018~~2020 Form ~~10-K.~~

~~Recently Adopted Accounting Guidance~~

~~The Company adopted Accounting Standards Update (“ASU”) 2016-02,~~ ~~Leases¸~~ as of January 1, 2019 (the adoption date) on a modified retrospective basis for leases in effect as of and after the adoption date. This new guidance requires balance sheet recognition of assets and liabilities arising from leases, as well as additional disclosures regarding the amount, timing and uncertainty of cash flows from leases. The Company implemented a new lease system and corresponding internal controls to administer our leases and facilitate compliance with this new standard.

The Company elected the practical expedient package, allowing the Company to carry forward the assessment of 1) whether our contracts contain or are leases, 2) lease classification and 3) whether previously capitalized costs continue to qualify as initial direct costs. Upon adoption, the Company recognized new right-of-use assets and lease liabilities related to our operating leases, because finance (capital) leases were already reflected on the Company’s Consolidated Balance Sheets. The impact of adoption on the Company’s net assets and retained earnings was not material, nor was there10-K that would have a material impact onto our ~~Consolidated Statements~~financial statements. There were no new accounting standards adopted as of ~~Income or Cash Flows. See Note 14 for additional disclosures about the Company’s leases.~~

~~Accounting Guidance Not Yet Adopted~~

~~Accounting Standard and~~
~~Effective Date~~

~~Requirements and Expected Effects of New Guidance Not Yet Adopted~~

~~Measurement of Credit Losses on Financial Instruments (ASU 2016-13)~~

~~Required as of January 1, 2020~~

~~Requires:~~

· A new approach using expected credit losses to estimate and recognize credit losses for certain financial instruments (such as mortgage loans, reinsurance recoverables and other receivables) when such instruments are first originated or acquired.

· ~~Changes in the criteria for impairment of available-for-sale debt securities~~

· ~~Adoption using a modified retrospective approach with a cumulative-effect adjustment recorded in retained earnings~~

~~Expected effects:~~

· ~~The Company is continuing to evaluate this new standard and its expected effects on our financial statements and disclosures. We will adopt the standard as of January 1, 2020.~~

· ~~An additional allowance for future expected credit losses for certain financial instruments will be required at adoption.~~

September 30, 2021 that had a material impact to our financial statements.

Note 3 — – Accounts Receivable, Net

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


(In millions)	September 30, 2021		December 31, 2020
Noninsurance customer receivables	$	6,797	$	5,534
Pharmaceutical manufacturers receivable	6,526		4,676
Insurance customer receivables	2,567		1,789
Other receivables	360		192
Total	$	16,250	$	12,191

These receivables are reported net of our allowances of $1.5 billion as of September 30, 2021 and $1.2 billion as of December 31, 2020. These allowances include contractual allowances for certain rebates receivable with pharmaceutical manufacturers and certain receivables from third-party payors, discounts and claims adjustments issued to customers in the form of client credits, an allowance for ~~doubtful accounts, customer~~current expected credit ~~allowances~~losses and ~~contractual allowances that, in the aggregate, were $456~~other non-credit adjustments.

The Company's allowance for current expected credit losses was $57 million as of ~~March 31, 2019~~September 30, 2021 and ~~$217~~$65 million as of December 31, ~~2018:~~

(In millions)

March 31, 2019

December 31, 2018

Insurance customer receivables

$
2,261

$
1,888

Noninsurance customer receivables

4,635

4,988

Pharmaceutical manufacturers receivable(1)

3,682

3,321

Other receivables

363

276

Total accounts receivable, net

$
10,941

$
10,473

~~(1)~~ ~~Includes $624 million at March 31, 2019~~2020.

Note 4 – Mergers, Acquisitions and ~~$406 million at December 31, 2018 of receivables under noninsurance customer contracts.~~

~~Note 4~~ ~~— Mergers and Acquisitions~~

Divestitures

A.Acquisition of ~~Express Scripts~~

MDLIVE

On ~~December 20, 2018,~~April 19, 2021, Cigna acquired ~~Express Scripts through~~97% of MDLIVE, Inc. ("MDLIVE"), a ~~series~~24/7 virtual care platform. Combined with Cigna's previously held equity investment, Cigna now owns 100% of ~~mergers (collectively, the “Merger”). Cigna Holding Company (formerly named Cigna Corporation~~MDLIVE. The acquisition of MDLIVE will enable Cigna's Evernorth segment to continue expanding access to virtual care and ~~referred to as “Old Cigna”)~~delivering a more affordable, convenient and Express Scripts each merged with and into a wholly-owned subsidiary of Cigna. As a result of these transactions, Cigna became the parent of the combined company. Our 2018 Form 10-K includes detailed disclosures of merger consideration, purchase price allocation and intangible assets identified in this transaction. connected care experience for consumers.

The purchase price ~~allocation was~~of $2.0 billion consisted of cash consideration. In accordance with GAAP, the total consideration transferred has been allocated to the tangible and intangible net assets acquired based on ~~management’s~~management's preliminary estimates of their fair values and may change as additional information becomes ~~available. For~~available over the next several months. During the three months ended ~~March 31, 2019, there were no changes~~September 30, 2021, the Company made immaterial measurement period adjustments to the purchase price allocation.

The estimated fair values of assets acquired and liabilities assumed as of the closing date were as follows:


(In millions)
Goodwill	$	1,438
Acquired intangible assets	627
Tangible assets acquired net of liabilities assumed	17
Total consideration transferred	2,082
Less: Fair value to Cigna's previously held equity interest	(55)
Total purchase price	$	2,027

Most of the goodwill is assigned to the Evernorth segment ($1.3 billion). Goodwill is not deductible for federal income tax purposes. The acquired intangible assets primarily consist of customer relationships ($577 million) as well as internal-use software, provider networks and a trade name. The fair value of the customer relationships and the amortization period were determined using an income approach that relies heavily on projected future net cash flows including key assumptions for customer attrition, margins and discount rates. The customer relationship intangible asset is amortized over a period of 17 years in a pattern that reflects when Cigna expects to receive the benefits of the related cash flows.

The results of MDLIVE have been included in the Company's Consolidated Financial Statements from the date of the acquisition. Revenues from MDLIVE and their results of operations were not material to Cigna's consolidated results of operations for the three or nine months ended September 30, 2021. The pro forma effects of this acquisition for current and prior periods were not material to our consolidated results of operations.

B.Divestiture of U.S. Group Disability and Life business

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

C.Integration and Transaction-related Costs

~~The~~

In the first nine months of 2021, the Company incurred ~~integration and transaction~~ costs related to ~~Express Scripts,~~the acquisition of MDLIVE, the terminated merger with Anthem, Inc. (“Anthem”) and the sale of the U.S. Group Disability and Life business. In the first nine months of 2020, the Company incurred costs related to the acquisition and integration of Express Scripts Holding Company ("Express Scripts"), the terminated merger with Anthem, the sale of the U.S. Group Disability and Life insurance business and other ~~transactions of $136~~transactions. These costs were $13 million pre-tax ($~~108~~(35) million after-tax) for the three months and $58 million pre-tax ($1 million after-tax) for the nine months ended ~~March 31, 2019,~~September 30, 2021, compared with ~~$60~~$112 million pre-tax ($5083 million after-tax) for the three months and $339 million pre-tax ($256 million after-tax) for the nine months ended ~~March 31, 2018.~~September 30, 2020. These costs consisted

primarily of certain projects to integrate or separate the Company’s systems, products and services, fees for legal, advisory and other professional services and certain employment-related costs. After-tax costs for the three and ~~in 2018, amortization~~nine months ended September 30, 2021 included a tax benefit from the resolution of ~~Bridge Facility fees.~~

a tax matter related to the sold Group Disability and Life business.

Note 5 — – Earnings Per Share (“EPS”)

Basic and diluted earnings per share were computed as follows:

Three Months Ended

March 31, 2019

March 31, 2018

(Shares in thousands, dollars in millions, except per
share amounts)

Basic

Effect of
Dilution

Diluted

Basic

Effect of
Dilution

Diluted

Shareholders’ net income

$
1,368

$
1,368

$
915

$
915

Shares:

Weighted average

379,387

379,387

242,179

242,179

Common stock equivalents

4,637

4,637

3,609

3,609

Total shares

379,387

4,637

384,024

242,179

3,609

245,788

EPS

$
3.61

$
(0.05)

$
3.56

$
3.78

$
(0.06)

$
3.72


	Three Months Ended
	September 30, 2021						September 30, 2020
(Shares in thousands, dollars in millions, except per share amounts)	Basic		Effect of Dilution		Diluted		Basic		Effect of Dilution		Diluted
Shareholders’ net income	$	1,621			$	1,621	$	1,388			$	1,388
Shares:
Weighted average	335,166				335,166		364,427				364,427
Common stock equivalents			2,413		2,413				2,763		2,763
Total shares	335,166		2,413		337,579		364,427		2,763		367,190
EPS	$	4.84	$	(0.04)	$	4.80	$	3.81	$	(0.03)	$	3.78


	Nine Months Ended
	September 30, 2021						September 30, 2020
(Shares in thousands, dollars in millions, except per share amounts)	Basic		Effect of Dilution		Diluted		Basic		Effect of Dilution		Diluted
Shareholders’ net income	$	4,249			$	4,249	$	4,323			$	4,323
Shares:
Weighted average	341,583				341,583		367,410				367,410
Common stock equivalents			3,197		3,197				3,421		3,421
Total shares	341,583		3,197		344,780		367,410		3,421		370,831
EPS	$	12.44	$	(0.12)	$	12.32	$	11.77	$	(0.11)	$	11.66

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

Three Months Ended
March 31,

(In millions)

2019

2018

Anti-dilutive options

2.8

0.9

anti-dilutive:

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Anti-dilutive options 1.5 4.6 1.5 4.2

The Company held approximately 62.6 million shares of common stock in treasury at September 30, 2021, 35.5 million shares as of December 31, 2020 and 26.7 million shares as of September 30, 2020.

On August 23, 2021, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements (“ASR agreements”) with Morgan Stanley & Co. LLC and JP Morgan Chase Bank, N.A. (collectively, the “Counterparties”) to repurchase $2.0 billion of common stock in aggregate. On August 24, 2021, in accordance with the ASR agreements we remitted $2.0 billion to the Counterparties and received an initial delivery of 7.7 million shares of our common stock. The final number of shares to be received under the ASR agreements will be determined based on the daily volume-weighted average share price of our common stock over the term of the agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. We expect final settlement under the ASR agreements to occur in the fourth quarter of 2021. At final settlement, we may be entitled to receive additional shares of our common stock from the Counterparties or we may be required to make a payment. If we are obligated to make a payment, we may elect to satisfy such obligation in cash or shares of our common stock. We recorded the payments to the Counterparties as a reduction to stockholders’ equity, consisting of a $1.6 billion increase in treasury stock, which reflects the value of the initial 7.7 million shares received upon initial settlement, and a $400 million decrease in capital in excess of par value or Additional paid-in capital, which reflects the value of the stock held back by the Counterparties pending final settlement of the agreements. The $400 million recorded in Additional paid-in capital will be reclassified to treasury stock upon settlement of the ASR agreements. The initial delivery of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share on the effective date of the ASR agreements.

Note 6— – Debt

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

March 31,

December 31,

(In millions)

Issuer

2019

2018

Short-term debt

Current maturities: $1,000 million, 2.25% Senior Notes

Express Scripts

$
998

$
995

Current maturities: $337 million, 7.25% Senior Notes

ESI

340

343

Current maturities: $1,000 million, Floating Rate Notes due 2020

Cigna

998

-

Commercial paper

Old Cigna/Cigna

558

1,500

Other, including finance leases

Other

21

117

Total short-term debt

$
2,915

$
2,955

Long-term uncollateralized debt

Cigna debt (issued to finance acquisition)

$1,000 million, Floating Rate Notes due 2020

Cigna

$
-

$
997

$1,750 million, 3.2% Notes due 2020

Cigna

1,744

1,743

$1,000 million, Floating Rate Notes due 2021

Cigna

997

996

$1,250 million, 3.4% Notes due 2021

Cigna

1,246

1,245

$2,000 million, Floating Rate Term Loan due 2021

Cigna

1,998

2,997

$700 million, Floating Rate Notes due 2023

Cigna

697

697

$3,100 million, 3.75% Notes due 2023

Cigna

3,085

3,085

$2,200 million, 4.125% Notes due 2025

Cigna

2,187

2,187

$3,800 million, 4.375% Notes due 2028

Cigna

3,774

3,774

$2,200 million, 4.8% Notes due 2038

Cigna

2,178

2,178

$3,000 million, 4.9% Notes due 2048

Cigna

2,964

2,964

Express Scripts debt (assumed in acquisition)

$500 million, 4.125% Senior Notes due 2020

Medco

505

506

$500 million, 2.600% Senior Notes due 2020

Express Scripts

493

493

$400 million, Floating Rate Senior Notes due 2020

Express Scripts

400

399

$500 million, 3.300% Senior Notes due 2021

Express Scripts

499

499

$1,250 million, 4.750% Senior Notes due 2021

Express Scripts

1,282

1,285

$1,000 million, 3.900% Senior Notes due 2022

Express Scripts

998

998

$500 million, 3.050% Senior Notes due 2022

Express Scripts

482

481

$1,000 million, 3.000% Senior Notes due 2023

Express Scripts

961

959

$1,000 million, 3.500% Senior Notes due 2024

Express Scripts

968

966

$1,500 million, 4.500% Senior Notes due 2026

Express Scripts

1,507

1,508

$1,500 million, 3.400% Senior Notes due 2027

Express Scripts

1,390

1,386

$449 million, 6.125% Senior Notes due 2041

Express Scripts

493

493

$1,500 million, 4.800% Senior Notes due 2046

Express Scripts

1,465

1,465

Old Cigna debt (pre-acquisition)

$250 million, 4.375% Notes due 2020

Old Cigna

248

248

$300 million, 5.125% Notes due 2020

Old Cigna

298

298

$78 million, 6.37% Notes due 2021

CGC

78

78

$300 million, 4.5% Notes due 2021

Old Cigna

297

297

$750 million, 4% Notes due 2022

Old Cigna

746

746

$100 million, 7.65% Notes due 2023

Old Cigna

100

100

$17 million, 8.3% Notes due 2023

Old Cigna

17

17

$900 million, 3.25% Notes due 2025

Old Cigna

895

895

$600 million, 3.05% Notes due 2027

Old Cigna

595

595

$259 million, 7.875% Debentures due 2027

Old Cigna

259

259

$45 million, 8.3% Step Down Notes due 2033

Old Cigna

45

45

$191 million, 6.15% Notes due 2036

Old Cigna

190

190

$121 million, 5.875% Notes due 2041

Old Cigna

119

119

$317 million, 5.375% Notes due 2042

Old Cigna

315

315

$1,000 million, 3.875% Notes due 2047

Old Cigna

988

988

Other, including finance leases

Other

68

32

Total long-term debt

$
37,571

$
39,523

~~Notes issued~~

(In millions) September 30, 2021 December 31, 2020
Short-term debt
$78 million, 6.37% Notes due 6/2021 $ — $ 78
$1,000 million, Floating Rate Notes due 9/2021 — 999
$1,250 million, 3.4% Notes due 9/2021 — 1,249
Commercial paper 2,680 1,030
Other, including finance leases 23 18
Total short-term debt $ 2,703 $ 3,374
Long-term debt
$277 million, 4% Notes due 2022 $ — $ 276
$973 million, 3.9% Notes due 2022 — 972
$500 million, 3.05% Notes due 2022 494 490
$17 million, 8.3% Notes due 2023 17 17
$63 million, 7.65% Notes due 2023 63 63
$700 million, Floating Rate Notes due 2023 699 698
$1,000 million, 3% Notes due 2023 982 975
$1,187 million, 3.75% Notes due 2023 1,185 2,181
$500 million, 0.613% Notes due 2024 498 —
$1,000 million, 3.5% Notes due 2024 982 977
$900 million, 3.25% Notes due 2025 897 896
$2,200 million, 4.125% Notes due 2025 2,192 2,191
$1,500 million, 4.5% Notes due 2026 1,504 1,505
$800 million, 1.25% Notes due 2026 796 —
$1,500 million, 3.4% Notes due 2027 1,419 1,410
$259 million, 7.875% Debentures due 2027 259 259
$600 million, 3.05% Notes due 2027 596 595
$3,800 million, 4.375% Notes due 2028 3,781 3,780
$1,500 million, 2.4% Notes due 2030 1,490 1,489
$1,500 million, 2.375% Notes due 2031 (1)
1,500 —
$45 million, 8.3% Step Down Notes due 2033 45 45
$190 million, 6.15% Notes due 2036 190 190
$2,200 million, 4.8% Notes due 2038 (1)
2,192 2,180
$750 million, 3.2% Notes due 2040 743 742
$121 million, 5.875% Notes due 2041 119 119
$448 million, 6.125% Notes due 2041 490 490
$317 million, 5.375% Notes due 2042 315 315
$1,500 million, 4.8% Notes due 2046 1,465 1,465
$1,000 million, 3.875% Notes due 2047 988 988
$3,000 million, 4.9% Notes due 2048 2,967 2,966
$1,250 million, 3.4% Notes due 2050 1,235 1,235
$1,500 million , 3.4% Notes due 2051 1,476 —
Other, including finance leases 30 36
Total long-term debt $ 31,609 $ 29,545

(1)The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 9 for further information about the Company's interest rate risk management and these derivative instruments.

Debt Issuance and Redemption. In order to ~~fund~~decrease future interest expense, mitigate future refinancing risk and raise proceeds for general corporate purposes, the ~~Express Scripts acquisition.~~ ~~As presented in~~Company entered into the ~~table above,~~following transactions during the nine months ended September 30, 2021:

•Debt issuance: On March 3, 2021, the Company issued ~~private placement Notes with registration rights in the third quarter~~$4.3 billion of ~~2018~~new senior notes. The proceeds of this issuance were mainly used to ~~finance the Express Scripts acquisition. Total~~redeem outstanding debt securities. The remaining proceeds ~~were approximately $20.0 billion.~~are available for general corporate purposes. Interest on this debt is ~~generally~~ paid ~~semi-annually except~~semi-annually.

Principal

Maturity Date

Interest Rate

Net Proceeds

$500 million

March 15, 2024

0.613%

$499 million

$800 million

March 15, 2026

1.250%

$797 million

$1,500 million

March 15, 2031

2.375%

$1,492 million

$1,500 million

March 15, 2051

3.400%

$1,479 million

•Debt redemption: During the first nine months of 2021, the Company completed the redemption of a total of $4.5 billion in aggregate principal amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $141 million ($110 million after-tax), consisting primarily of premium payments.

Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for ~~quarterly interest payments on~~general corporate purposes, including for the ~~floating rate notes.~~

~~Term Loan Credit Agreement.~~purpose of providing liquidity support if necessary under our commercial paper program discussed below. As of September 30, 2021, there were no outstanding balances under these revolving credit agreements.

In April 2021, Cigna ~~borrowed~~entered into a $3.0 billion ~~under its Term Loan Credit Agreement (the “Term Loan Credit Agreement”) to finance the Merger~~five-year revolving credit and ~~to pay fees~~letter of credit agreement that matures in April 2026 and ~~expenses of the Merger. The Term Loan Credit Agreement contains customary covenants and restrictions, including~~ a ~~financial covenant~~$1.0 billion three-year revolving credit agreement that Cigna’s leverage ratio may not exceed 60%. There is no remaining amount available for borrowing under this agreement. In the first quarter of 2019, the Company repaid $1 billion principal of the term loan. The remaining $2 billion term loan principal ismatures in April 2024, which are diversified among 23 ~~banks.~~

~~Revolving Credit Agreement.~~ ~~Cigna has a Revolving Credit~~banks and ~~Letter~~replaced the five-year revolving credit and letter of ~~Credit Agreement (the “Revolving Credit Agreement”)~~credit agreement that ~~matures on~~was scheduled to mature in April ~~6, 2023 and is diversified among 23 banks.~~

2023. Under the current agreements, Cigna can borrow up to ~~$3.25~~$3.0 billion and $1.0 billion, respectively, for general corporate purposes, with up to $500 million available under the five-year facility for issuance of letters of credit. The revolving credit ~~decreased by $22 million of letters of credit under the Revolving Credit Agreement as of March 31, 2019. The Revolving Credit Agreement~~agreements also ~~includes an option to increase the facility amount up to $500 million and~~include an option to extend the termination date for an additional one-year ~~periods,~~period, subject to consent of the banks.

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

Each of the five-year facility, the three-year facility and the 364-day facility include an option to increase commitments in an aggregate amount of up to $1.5 billion across all three facilities. Each of the three facilities also contain customary covenants and restrictions including a financial covenant that the Company’s leverage ratio may not exceed 60%.

~~Cigna is~~, subject to certain exceptions upon the ~~borrower under the Revolving Credit Agreement and the Term Loan Credit Agreement and certain subsidiaries~~consummation of ~~Cigna may be required to guarantee these obligations under certain circumstances.~~

an acquisition.

Commercial ~~Paper~~~~. The~~Paper. Under our commercial paper program ~~had approximately $560 million outstanding~~we may issue short-term, unsecured commercial paper notes privately placed on a discounted basis through certain broker dealers at ~~March 31, 2019 at~~any time not to exceed an ~~average interest rate~~aggregate amount of ~~2.90%.~~

$5.0 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes.

The Company was in compliance with its debt covenants as of ~~March 31, 2019.~~

September 30, 2021.

Note 7— – Insurance and Contractholder Liabilities

A.Account Balances —– Insurance and Contractholder Liabilities

~~As of March 31, 2019, December 31, 2018 and March 31, 2018, the~~

The Company’s insurance and contractholder liabilities were comprised of the following:

March 31, 2019

December 31, 2018

March 31, 2018

(In millions)

Current

Non-
current

Total

Current

Non-
current

Total

Total

Contractholder deposit funds

$
621

$
7,326

$
7,947

$
641

$
7,365

$
8,006

$
8,153

Future policy benefits

643

9,048

9,691

740

8,981

9,721

9,934

Unpaid claims and claim expenses

Integrated Medical

2,943

18

2,961

2,678

19

2,697

2,638

Other segments

2,421

3,304

5,725

2,394

3,230

5,624

5,502

Unearned premiums

432

347

779

348

379

727

1,291

Total insurance and contractholder liabilities

$
7,060

$
20,043

$
27,103

$
6,801

$
19,974

$
26,775

$
27,518


	September 30, 2021						December 31, 2020						September 30, 2020
(In millions)	Current		Non-current		Total		Current		Non-current		Total		Total
Contractholder deposit funds	$	362	$	6,717	$	7,079	$	350	$	6,823	$	7,173	$	7,662
Future policy benefits	307		9,183		9,490		327		9,317		9,644		10,102
Unearned premiums	494		408		902		485		394		879		828
Unpaid claims and claim expenses
U.S. Medical	3,825		21		3,846		3,166		18		3,184		3,200
Other segments	929		247		1,176		980		292		1,272		6,235
Total													28,027
Insurance and contractholder liabilities classified as Liabilities of business held for sale (1)													(6,591)
Total insurance and contractholder liabilities	$	5,917	$	16,576	$	22,493	$	5,308	$	16,844	$	22,152	$	21,436

(1)Amounts classified as Liabilities of business held for sale primarily include $5.2 billion of unpaid claims, $759 million of contractholder deposit funds and $646 million of future policy benefits as of September 30, 2020.

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

B.Unpaid Claims and Claim Expenses ~~— Integrated~~– U.S. Medical

This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities. This liability no longer includes amounts from the international health care business now reported in International Markets following our change in segment reporting in the fourth quarter of 2018. The prior year presentation has been updated to reflect this segment change.

The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was ~~$2.7~~$3.6 billion at ~~March 31, 2019~~September 30, 2021 and ~~$2.5~~$3.0 billion at ~~March 31, 2018.~~

September 30, 2020.

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

Three Months Ended

March 31,

March 31,

(In millions)

2019

2018

Beginning balance

$
2,697

$
2,420

Less: Reinsurance and other amounts recoverable

264

262

Beginning balance, net

2,433

2,158

Incurred costs related to:

Current year

6,095

5,284

Prior years

(117)

(115)

Total incurred

5,978

5,169

Paid costs related to:

Current year

3,786

3,382

Prior years

1,908

1,540

Total paid

5,694

4,922

Ending balance, net

2,717

2,405

Add: Reinsurance and other amounts recoverable

244

233

Ending balance

$
2,961

$
2,638


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

Incurred costs related to:
Current year	22,167		18,935
Prior years	(180)		(126)
Total incurred	21,987		18,809
Paid costs related to:
Current year	18,701		16,061
Prior years	2,665		2,363
Total paid	21,366		18,424
Ending balance, net	3,581		2,974
Add: Reinsurance and other amounts recoverable	265		226
Ending balance	$	3,846	$	3,200

Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims ~~for~~of certain business ~~where~~for which the Company administers the plan benefits ~~but the~~without any right of ~~offset does not exist.~~offset. See Note 8 for additional information on reinsurance.

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

Three Months Ended

(Dollars in millions)

March 31, 2019

March 31, 2018

$

%(1)

$

%(2)

Actual completion factors

$
55

0.2
  %
$
52

0.3
  %
Medical cost trend

62

0.3

54

0.3

Other

-

-

9

-

Total favorable variance

$
117

0.5
  %
$
115

0.6
  %

follows:

Nine Months Ended
(Dollars in millions) September 30, 2021 September 30, 2020
$
%(1)
$
%(2)
Actual completion factors $ 56 0.2 % $ 47 0.2 %
Medical cost trend 124 0.5 79 0.3
Total favorable variance $ 180 0.7 % $ 126 0.5 %

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

2020.

(2)Percentage of current year incurred costs as reported for the year ended December 31, ~~2017.~~

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

~~Prior year development increased shareholders’ net income by $~~39 ~~million ($~~50 ~~million before tax) for the three months ended March 31, 2019, compared with $~~40 ~~million ($~~51 ~~million before tax) for the three months ended March 31, 2018. Favorable~~2019.

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

services that is lower than our estimates used to establish prior year reserves.

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

This liability now includes amounts from international health care following our change in segment reporting in 2018 as discussed in Note 1. The prior year presentation has been updated to reflect this segment change.

Operations

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

(In millions)

March 31, 2019

March 31, 2018

Group Disability and Other

Group Disability and Life

$
4,786

$
4,549

Other Operations

194

175

Total Group Disability and Other

4,980

4,724

International Markets

745

778

Unpaid claims and claim expenses Group Disability and Other and International Markets

$
5,725

$
5,502

~~Interest is accreted and recognized~~


(In millions)	September 30, 2021		September 30, 2020
Other Operations
Group Disability and Life	$	—	$	5,206
Other Operations	267		162
Total Other Operations	267		5,368
International Markets	909		867
Unpaid claims and claim expenses Other Operations and International Markets	$	1,176	$	6,235

Activity, net of intercompany transactions, in ~~medical costs and other benefit expenses in~~ the ~~Consolidated Statements of Income.~~

~~Activity in the Company’s liabilities for~~ unpaid claims and claim expenses ~~excluding Other Operations, are~~for International Markets and, prior to the sale, Group Disability and Life (see Note 4 for further information) is presented in the following table. Prior to the sale, the majority of the liability related to disability claims with long tailed payouts. See Note 9C to the Consolidated Financial Statements included in our 2020 Form 10-K for additional discussion of these disability reserves that are now sold. Liabilities associated with Other Operations are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.

Three Months Ended

(In millions)

March 31, 2019

March 31, 2018

Beginning balance

$
5,432

$
5,274

Less: Reinsurance

156

140

Beginning balance, net

5,276

5,134

Incurred claims related to:

Current year

1,428

1,393

Prior years:

Interest accretion

38

38

All other incurred

(32)

(61)

Total incurred

1,434

1,370

Paid claims related to:

Current year

474

471

Prior years

856

853

Total paid

1,330

1,324

Foreign currency

(7)

2

Ending balance, net

5,373

5,182

Add: Reinsurance

158

145

Ending balance

$
5,531

$
5,327


	Nine Months Ended
(In millions)	September 30, 2021		September 30, 2020 (1)
Beginning balance	$	963	$	5,816
Less: Reinsurance	59		184
Beginning balance, net	904		5,632
Incurred claims related to:
Current year	2,110		4,277
Prior years:
Interest accretion	—		118
All other incurred	(38)		(12)
Total incurred	2,072		4,383
Paid claims related to:
Current year	1,549		2,435
Prior years	532		1,702
Total paid	2,081		4,137

Foreign currency	(43)		5

Ending balance, net	852		5,883
Add: Reinsurance	57		190
Ending balance	$	909	$	6,073

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

Reinsurance in the table above reflects amounts due from reinsurers related to unpaid claims liabilities. The Company’s insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses. See Note 8 for additional information on reinsurance.

The majority of the liability for unpaid claims and claim expenses is related to disability claims with long-tailed payouts. Interest earned on assets backing these liabilities is an integral part of pricing and reserving. Therefore, interest accreted on prior year balances is shown as a separate component of prior year incurred claims. This interest is calculated by applying the average discount rate used in determining the liability balance to the average liability balance over the period. The remaining prior year incurred claims amount primarily reflects updates to the Company’s liability estimates and variances between actual experience during the period relative to the assumptions and expectations reflected in determining the liability. Assumptions reflect the Company’s expectations over the life of the book of business and will vary from actual experience in any period, both favorably and unfavorably, with variation in resolution rates being the most significant driver for the long-term disability business. Favorable prior year incurred claims for the three months ended March 31, 2019 primarily reflect favorable life loss ratio experience, partially offset by unfavorable long-term disability resolution rate experience. Favorable prior year incurred claims reported for the three months ended March 31, 2018 primarily reflected favorable life loss ratio experience.

Note 8 — – Reinsurance

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

A.Reinsurance Recoverables

The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. ~~Components of the Company’s reinsurance recoverables are presented~~Included in the ~~following table. The~~ table below ~~includes $280~~are $214 million ~~as of March 31, 2019 and $297 million as of December 31, 2018~~ of current reinsurance recoverables that are reported in ~~other~~Other current assets as of September 30, 2021; as of December 31, 2020 there was $217 million of current reinsurance recoverables reported in Other current assets.

(Dollars in millions)
Line of Business

Reinsurer(s)

March 31,
2019

December 31,
2018

Collateral and Other Terms at March 31, 2019

Ongoing Operations

Integrated Medical, International Markets, Group Disability, COLI

Various

$
470

$
464

Balances range from less than $1 million up to $65 million. Over 70% of the balance is from companies rated as investment grade by Standard & Poor’s.

Total recoverables related to ongoing operations

470

464

Acquisition, disposition or runoff activities

Individual Life and Annuity (sold in 1998)

Lincoln National Life and Lincoln Life & Annuity of New York

3,254

3,312

Both companies’ ratings were well above the level that would trigger a contractual obligation to fully secure the outstanding balance.

GMDB (effectively exited in 2013)

Berkshire

844

893

100% secured by assets in a trust.

Retirement Benefits Business (sold in 2004)

Prudential Retirement Insurance and Annuity

761

787

100% secured by assets in a trust.

Supplemental Benefits Business (2012 acquisition)

Great American Life

254

261

100% secured by assets in a trust.

Other

Various

82

87

100% secured by assets in a trust or other deposits.

Total recoverables related to acquisition, disposition or runoff activities

5,195

5,340

Total reinsurance recoverables

$
5,665

$
5,804

The Company’s reinsurance recoverables as of September 30, 2021 are presented in the following table by range of external credit rating and collateral level:


(in millions)	Fair value of collateral contractually required to meet or exceed carrying value of recoverable		Collateral provisions exist that may mitigate risk of credit loss(3)		No collateral		Total
Ongoing Operations
Upper-medium grade and higher (1)	$	—	$	—	$	178	$	178
Lower-medium grade (2)	—		—		63		63
Not rated	99		—		24		123
Total recoverables related to ongoing operations	99		—		265		364
Acquisition, disposition or runoff activities
Upper-medium grade and higher (1)
Lincoln National Life and Lincoln Life & Annuity of New York	—		2,942		—		2,942
Berkshire Hathaway Life Insurance Company of Nebraska	284		384		—		668
Prudential Retirement Insurance and Annuity	583		—		—		583
Life Insurance Company of North America	—		451		—		451
Other	223		16		17		256

Not rated	—		12		3		15
Total recoverables related to acquisition, disposition or runoff activities	1,090		3,805		20		4,915
Total	$	1,189	$	3,805	$	285	$	5,279
Allowance for uncollectible reinsurance							(30)
Total reinsurance recoverables							$	5,249

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

(2)Includes BBB- to BBB+ equivalent current credit ratings certified by an NRSRO

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

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

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the ~~recoverables if recovery is not considered probable.~~

recoverables.

B.Effects of Reinsurance

The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It also presents reinsurance recoveries that have been netted against benefit expenses in

In the Company’s Consolidated Statements of ~~Income.~~

Three Months Ended

(In millions)

March 31,
2019

March 31,
2018

Ceded Premiums

Individual life insurance and annuity business sold

$
34

$
37

Other

96

98

Total ceded premiums

130

135

Reinsurance recoveries

Individual life insurance and annuity business sold

55

57

Other

4

47

Total reinsurance recoveries

$
59

$
104

~~The effects~~Income, Premiums were reported net of amounts ceded to reinsurers and Medical costs and other benefit expenses were reported net of reinsurance ~~on written premiums for short-duration contracts were not materially different from the recognized premium amounts shown~~recoveries in the ~~table above.~~

following amounts:

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Total ceded premiums $ 134 $ 122 $ 418 $ 367
Total reinsurance recoveries $ 138 $ 117 $ 419 $ 397

C.Effective Exit of GMDB and GMIB Business

The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction in 2013. Berkshire reinsured 100% of the Company’s future claim payments in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately ~~$3.3~~$3.2 billion remaining at ~~March 31, 2019.~~

September 30, 2021.

GMDB is accounted for as assumed and ceded reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below. GMIB assets are reported in ~~other~~Other current assets and ~~other~~Other assets and GMIB liabilities are reported in ~~accrued~~Accrued expenses and other liabilities and ~~other~~Other non-current liabilities.

Assumptions used in fair value measurement for these assets and liabilities are discussed in Note 10 of the Company's 2020 Form 10-K.

GMDB

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

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

(Dollars in millions, excludes impact of reinsurance ceded)

March 31, 2019

December 31, 2018

Account value

$
8,996

$
8,402

Net amount at risk

$
1,943

$
2,466

Number of contractholders (estimated)

215,000

220,000

payments unless the Berkshire reinsurance limit is exceeded.


(Dollars in millions, excludes impact of reinsurance ceded)	September 30, 2021		December 31, 2020
Account value	$	9,552	$	9,523
Net amount at risk	$	1,467	$	1,570

Number of contractholders (estimated)	170,000		185,000

GMIB

The Company reinsured contracts with issuers of GMIB products. The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the related underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that can only occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”), for these contracts including retrocessional coverage from ~~Berkshire, for these contracts.~~

~~Assumptions used in fair value measurement.~~ GMIB assets and liabilities are established using capital market assumptions and assumptions related to future annuitant behavior (including mortality, lapse, and annuity election rates). The Company classifies GMIB assets and liabilities in Level 3 of the fair value hierarchy described in Note 10 because assumptions related to future annuitant ~~behavior~~ ~~are largely unobservable.~~

~~The only assumption expected to impact future shareholders’ net income is non-performance risk.~~ The non-performance risk adjustment reflects a market participant’s view of nonpayment risk by adding an additional spread to the discount rate in the calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral. The impact of non-performance risk was immaterial for the three months ended March 31, 2019 and 2018.

Berkshire.

GMIB liabilities totaling ~~$700~~$610 million as of ~~March 31, 2019~~September 30, 2021 and ~~$706~~$729 million as of December 31, ~~2018 were reported in accrued expenses and other liabilities and other non-current liabilities.~~2020 are classified as Level 3 because fair value inputs are largely unobservable. There were ~~three~~3 reinsurers covering 100% of the GMIB exposures as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018~~2020 as follows:

(In millions)
Line of Business

Reinsurer

March 31,
2019

December 31,
2018

Collateral and Other Terms at March 31, 2019

GMIB

Berkshire

  $
339

  $
341

100% were secured by assets in a trust.

Sun Life Assurance Company of Canada

206

208

Liberty Re (Bermuda) Ltd.

183

184

94% were secured by assets in a trust.

Total GMIB recoverables reported in other current assets and other assets

  $
728

  $
733

~~Amounts included in shareholders net income for GMIB assets~~


(In millions)
Line of Business	Reinsurer	September 30, 2021		December 31, 2020		Collateral and Other Terms at September 30, 2021
GMIB	Berkshire	$	298	$	353	100% were secured by assets in a trust.
	Sun Life Assurance Company of Canada	179		215
	Liberty Re (Bermuda) Ltd.	160		190		100% were secured by assets in a trust.
Total GMIB recoverables reported in Other current assets and Other assets		$	637	$	758

All reinsurers are rated A- equivalent and ~~liabilities were not material for the three months ended March 31, 2019 or 2018.~~

higher by an NRSRO.

Note 9 — – Investments

Cigna’s investment portfolio consists of a broad range of investments including debt ~~and~~securities, equity securities, commercial mortgage loans, policy loans, other long-term investments, short-term investments and derivative financial instruments. The sections below provide more detail regarding our investment balances ~~net investment income~~ and realized investment gains and losses. See Note 10 for information about the valuation of the Company’s investment portfolio.

March 31, 2019

December 31, 2018

(In millions)

Current

Long-term

Total

Current

Long-term

Total

Debt securities

   $
1,363

   $
21,806

   $
23,169

   $
1,320

   $
21,608

   $
22,928

Equity securities

-

210

210

377

171

548

Commercial mortgage loans

32

1,832

1,864

32

1,826

1,858

Policy loans

-

1,403

1,403

-

1,423

1,423

Other long-term investments

-

2,006

2,006

-

1,901

1,901

Short-term investments

267

-

267

316

-

316

Total

   $
1,662

   $
27,257

   $
28,919

   $
2,045

   $
26,929

   $
28,974

Further information about our accounting policies for investment assets can be found in Note 11 of the Company's 2020 Form 10-K.

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

September 30, 2021 December 31, 2020
(In millions) Current Long-term Total Current Long-term Total
Debt securities $ 895 $ 16,962 $ 17,857 $ 959 $ 17,172 $ 18,131
Equity securities — 551 551 — 501 501
Commercial mortgage loans 40 1,485 1,525 13 1,406 1,419
Policy loans — 1,329 1,329 — 1,351 1,351
Other long-term investments — 3,429 3,429 — 2,832 2,832
Short-term investments 439 — 439 359 — 359
Total $ 1,374 $ 23,756 $ 25,130 $ 1,331 $ 23,262 $ 24,593

A.Investment Portfolio

Debt Securities

The amortized cost and fair value by contractual maturity periods for debt securities were as follows at ~~March 31, 2019:~~

Amortized

Fair

(In millions)

Cost

Value

Due in one year or less

     $
1,366

     $
1,370

Due after one year through five years

6,516

6,684

Due after five years through ten years

9,529

9,682

Due after ten years

4,231

4,925

Mortgage and other asset-backed securities

494

508

Total

     $
22,136

     $
23,169

September 30, 2021:


(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	914	$	920
Due after one year through five years	5,316		5,543
Due after five years through ten years	5,799		6,161
Due after ten years	3,975		4,759
Mortgage and other asset-backed securities	457		474
Total	$	16,461	$	17,857

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

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

Amortized

Unrealized

Unrealized

Fair

(In millions)

Cost

Appreciation

Depreciation

Value

March 31, 2019

Federal government and agency

$
513

$
221

$
(1)

$
733

State and local government

851

77

-

928

Foreign government

2,126

183

(4)

2,305

Corporate

18,152

676

(133)

18,695

Mortgage and other asset-backed

494

21

(7)

508

Total

$
22,136

$
1,178

$
(145)

$
23,169

Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)

$
2,269

$
555

$
(13)

$
2,811

December 31, 2018

Federal government and agency

$
507

$
204

$
(1)

$
710

State and local government

920

66

(1)

985

Foreign government

2,214

155

(7)

2,362

Corporate

18,403

411

(453)

18,361

Mortgage and other asset-backed

506

16

(12)

510

Total

$
22,550

$
852

$
(474)

$
22,928

Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)

$
2,264

$
479

$
(40)

$
2,703

below:

(In millions) Amortized
Cost Allowance for Credit Loss Unrealized
Appreciation Unrealized
Depreciation Fair
Value
September 30, 2021
Federal government and agency $ 277 $ — $ 105 $ — $ 382
State and local government 153 — 16 — 169
Foreign government 2,317 — 235 (33) 2,519
Corporate 13,257 (11) 1,136 (69) 14,313
Mortgage and other asset-backed 457 — 21 (4) 474
Total $ 16,461 $ (11) $ 1,513 $ (106) $ 17,857
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)
$ 2,282 $ (3) $ 721 $ (9) $ 2,991
December 31, 2020
Federal government and agency $ 334 $ — $ 122 $ — $ 456
State and local government 150 — 17 — 167
Foreign government 2,201 — 318 (8) 2,511
Corporate 13,108 (19) 1,506 (33) 14,562
Mortgage and other asset-backed 427 (7) 27 (12) 435
Total $ 16,220 $ (26) $ 1,990 $ (53) $ 18,131
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)
$ 2,282 $ (5) $ 838 $ (3) $ 3,112

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

Review of declines in fair value. Management reviews impaired debt securities ~~with~~to determine whether a ~~decline in fair value from cost for impairment~~credit loss allowance is needed based on criteria that include:

·~~length of time and~~

•severity of decline;

•financial health and specific ~~near term~~ prospects of the issuer;

· and

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

·~~the Company’s intent to sell or the likelihood of a required sale prior to recovery.~~

~~Management believes the unrealized depreciation below to be temporary based on this review, and therefore has not impaired these amounts.~~ region.

The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded, by investment grade and the length of time these securities have been in an unrealized loss position.

March 31, 2019

December 31, 2018

Fair

Amortized

Unrealized

Number

Fair

Amortized

Unrealized

Number
(Dollars in millions)

Value

Cost

Depreciation

of Issues

Value

Cost

Depreciation

of Issues
One year or less

Investment grade

     $
715

     $
734

     $
(19)

190

     $
7,127

     $
7,367

     $
(240)

1,324
Below investment grade

     $
324

     $
328

     $
(4)

393

     $
1,185

     $
1,240

     $
(55)

1,190
More than one year

Investment grade

     $
4,431

     $
4,532

     $
(101)

919

     $
3,023

     $
3,181

     $
(158)

784
Below investment grade

     $
455

     $
476

     $
(21)

355

     $
249

     $
270

     $
(21)

245

These debt securities are primarily corporate securities with a decline in fair value that reflects an increase in market yields since purchase. Our allowance for credit losses on debt securities was not material as of September 30, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020
(Dollars in millions) Fair
Value Amortized
Cost Unrealized
Depreciation Number
of Issues Fair
Value Amortized
Cost Unrealized
Depreciation Number
of Issues
One year or less
Investment grade $ 2,583 $ 2,660 $ (77) 799 $ 1,026 $ 1,045 $ (19) 300
Below investment grade 558 571 (13) 695 381 405 (24) 232
More than one year
Investment grade 115 123 (8) 67 18 18 — 6
Below investment grade 201 209 (8) 45 90 100 (10) 33
Total $ 3,457 $ 3,563 $ (106) 1,606 $ 1,515 $ 1,568 $ (53) 571

Equity Securities
The following table provides the values of the Company's equity security investments as of September 30, 2021 and December 31, 2020. The amount of impairments or value changes resulting from observable price changes on equity securities still held was not material to the financial statements as of September 30, 2021 or December 31, 2020.
September 30, 2021 December 31, 2020
(In millions) Cost Carrying Value Cost Carrying Value
Equity securities with readily determinable fair values $ 203 $ 180 $ 180 $ 202
Equity securities with no readily determinable fair value 227 332 225 255
Hybrid equity securities 57 39 58 44
Total $ 487 $ 551 $ 463 $ 501

Commercial Mortgage Loans

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

~~Credit quality~~.

The Company regularly evaluates and monitors credit risk ~~beginning with~~from the initial ~~underwriting of a~~ mortgage loan underwriting and ~~continuing~~ throughout the investment holding period. ~~Mortgage origination professionals employ an internal credit quality rating system designed to evaluate~~For more information on the ~~relative risk of the transaction at origination that is then updated each year as part of the annual portfolio loan review. The Company evaluates~~Company's accounting policies and ~~monitors credit quality on a consistent and ongoing basis, classifying each loan as a loan in good standing, potential problem loan or problem loan.~~

~~Quality ratings are based on our evaluation of a number of key inputs related~~methodologies regarding these investments, see Note 11 to the ~~loan, including real estate market-related factors such as rental rates~~Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Loan-to-value and ~~vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However,~~debt service coverage ratio are the two most significant contributors to the credit quality ~~rating are~~ratings that the ~~debt service coverage~~Company uses to evaluate and loan-to-value ratios. The debt service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on debt, with a ratio below 1.0 indicating that there is not enough cash flow to cover the requiredmonitor credit risk in its commercial mortgage loan ~~payments. The loan-to-value ratio, commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the loan.~~

portfolio. The following table summarizes the credit risk profile of the Company’s commercial mortgage loan portfolio ~~based on loan-to-value and debt service coverage ratios~~ as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018:~~

(Dollars in millions)

March 31, 2019

December 31, 2018

Average Debt

Average Debt

Carrying

Service Coverage

Average Loan-

Carrying

Service Coverage

Average Loan-

Loan-to-Value Ratio

Value

Ratio

to-Value Ratio

Value

Ratio

to-Value Ratio

Below 60%

     $
1,167


2.12

     $
1,132

2.14

60% to 79%

621

1.92

650

1.93

80% to 100%

76

1.49

76

1.49

Total

     $
1,864


2.03

58%

     $
1,858

2.04

58%

~~The Company’s annual in-depth review of its~~2020:


(Dollars in millions)	September 30, 2021					December 31, 2020
Loan-to-Value Ratio	Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio
Below 60%	$	563	2.18			$	533	2.28
60% to 79%	839		1.84			751		2.08
80% to 100%	129		1.47			141		1.33
Allowance for credit losses	(6)					(6)
Total	$	1,525	1.93	61	%	$	1,419	2.08	61	%

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

Other Long-Term Investments

Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag due to the ~~primary mechanism for identifying emerging risks in the portfolio. The most recent review was completed by the Company’s investment professionals in the second quarter~~timing of ~~2018 and included an analysis of each underlying property’s most recent annual~~when financial statements, rent rolls, operating plans, budgets, a physical inspection of the property and other pertinent factors. Based on historical results, current leases, lease expirations and rental conditions in each market, the Company estimated the current year and future stabilized property income and fair value for each loan.

~~The Company re-evaluates a loan’s credit quality between annual reviews if new property~~ information is received from the general partner or ~~an event such as delinquency or a borrower’s request for restructure causes management~~manager of the investments.

Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to ~~believe~~fair value when cash flows indicate that the ~~Company’s estimate of financial performance,~~carrying value may not be recoverable. Additionally, statutory and other restricted deposits and foreign currency swaps carried at fair value orare reported in the ~~risk profile of the underlying property has been impacted.~~

~~Impaired commercial mortgage loans.~~ A commercial mortgage loan is considered impaired when it is probable that the Company will not collect all amounts due per the terms of the promissory note. Impaired loans are carried at the lower of the unpaid principal balance or fair value of the underlying collateral. Interest income on impaired mortgage loans is only recognized when a payment is received.

~~There were no impaired commercial mortgage loans as of March 31, 2019 or December 31, 2018~~.

~~Short-Term Investments and Cash Equivalents~~

~~Short-term investments and cash equivalents included the following types of issuers:~~

March 31,

December 31,
(In millions)

2019

2018
Corporate securities

    $
1,531

    $
581
Federal government securities

    $
127

    $
82
Foreign government securities

    $
162

    $
238
Money market funds

    $
855

    $
1,174

B.~~Realized Investment Gains and Losses~~

~~The following realized gains and losses on investments exclude amounts required to adjust future policy benefits for the run-off settlement annuity business,~~table below as ~~well as realized gains and losses attributed to the Company’s separate accounts because those gains and losses generally accrue directly to separate account policyholders.~~

Three Months Ended

March 31,
(In millions)

2019

2018
Net realized investment gains (losses), excluding investment asset write-downs

    $
11

    $
(16)
Write-downs on debt securities

(1)

(13)
Write-downs on other invested assets

-

(4)
Net realized investment (losses) gains, before income taxes

    $
10

    $
(33)

Net realized investment gains, excluding investment asset write-downs, for the three months ended March 31, 2019 represent primarily mark to market gains on equity securities. Net realized investment losses, excluding investment asset write-downs, for the three months ended March 31, 2018 represent primarily losses on sales of debt securities. Realized gains or losses on equity securities still held at March 31, 2019 and 2018 were not material.

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

Three Months Ended

March 31,
(In millions)

2019

2018
Proceeds from sales

    $
1,086

    $
499
Gross gains on sales

    $
14

    $
5
Gross losses on sales

    $
(10)

    $
(22)

C.these investments:

Carrying value as of
(In millions) September 30, 2021 December 31, 2020
Real estate investments $ 1,161 $ 951
Securities partnerships 2,098 1,737
Other 170 144
Total $ 3,429 $ 2,832

B.Derivative Financial Instruments

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

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

The Company manages the credit risk of these derivative instruments by diversifying its portfolio among approved dealers of high credit quality, and through routine monitoring of credit risk exposures. Certain of the Company’s over-the-counter derivative instruments require either the Company or the counterparty to post collateral or demand immediate payment depending on the amount of the net liability position of the derivative instrument and predefined financial strength or credit rating thresholds. These collateral posting requirements vary by counterparty and amounts posted were not significant as of March 31, 2019 or December 31, 2018.

~~The Company’s derivative financial instruments are presented as follows:~~

·~~Fair value hedges of the foreign exchange-related changes in fair values of certain foreign-denominated bonds:~~ Swap fair values are reported in long-term investments or other non-current liabilities. Changes in fair values attributable to foreign exchange risk of the swap contracts and the hedged bonds are reported in other realized investment gains and losses. The portion of the swap contracts’ changes in fair value excluded from the assessment of hedge effectiveness is recorded in accumulated other comprehensive income and recognized in net investment income as swap coupon payments are accrued, offsetting the foreign-denominated coupons received on the designated bonds.

·~~Net investment hedges of certain foreign subsidiaries that conduct their business principally in Euros:~~ The fair values of the swap contracts are reported in other assets or other non-current liabilities. The changes in fair values of these instruments are reported in other comprehensive income, specifically in translation of foreign currencies. The portion of the change in swap fair values relating to foreign exchange spot rates will be recognized in earnings upon deconsolidation of the hedged foreign subsidiaries. The remaining changes in swap fair value are excluded from our effectiveness assessment and recognized in interest expense as swap coupon payments are accrued. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.

·~~Economic hedges for derivatives not designated as accounting hedges:~~ Fair values of derivative instruments are reported in current investments or accrued expenses and other liabilities. The changes in fair values are reported in net realized investment gains and losses.

~~Gross~~gross fair values of our derivative financial instruments are presented in Note 10. As of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018, and for the three months ended March 31, 2019 and 2018,~~2020, the effects of derivative financial instruments onused in these individual hedging strategies were not material to the Consolidated Financial Statements, ~~were not material,~~ including gains or losses reclassified from ~~accumulated~~Accumulated other comprehensive income into ~~shareholders’~~Shareholders' net income, ~~as well as~~ amounts excluded from the assessment of hedge ~~effectiveness.~~effectiveness and fair values of assets posted or held as collateral supporting these fair values. The following table summarizes the types and notional quantity of derivative instruments held by the ~~Company.~~

Notional Value as of

(In millions)

March 31,

December 31,

Type of Instrument

Purpose

2019

2018

Foreign currency swap contracts

Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.

   $
593

   $
525

Foreign currency swap contracts

Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.

   $
439

   $
439

Foreign currency forward contracts

Economic hedge: To hedge the foreign exchange related changes in fair values of a U.S. dollar-denominated bond portfolio to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged bond portfolio.

   $
309

   $
309

Company:

Notional Value as of
(In millions) September 30, 2021 December 31, 2020
Purpose Type of Instrument
Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.
Foreign currency swap contracts $ 1,070 $ 925
Fair value hedge: To convert a portion of the interest rate exposure on the Company's long-term debt from fixed to variable rates. This more closely aligns the Company's interest expense with the interest income received on its cash equivalent and short-term investment balances. The variable rates are benchmarked to SOFR.
Interest rate swap contracts $ 750 $ —
Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.
Foreign currency swap contracts $ 526 $ 526
Foreign currency forward contracts $ 697 $ 636
Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.
Foreign currency forward contracts $ 671 $ 538
Economic hedge: To hedge against the foreign exchange depreciation of certain foreign subsidiary earnings denominated in South Korean Won. The notional value of hedging instruments aligns with the U.S. dollar equivalent of hedged foreign-denominated earnings.
Average rate option contracts $ 120 $ —

The Company implemented two new hedging strategies during the second quarter of 2021 that are described in the above table and are accounted for as follows:

• Fair value hedges of the interest rate exposure on the Company’s long-term debt: Using fair value hedge accounting, the fair values of the swap contracts are reported in Other assets or Other liabilities. The critical terms of these swaps match those of the long-term debt being hedged. As a result, the carrying value of the hedged debt is adjusted to reflect changes in its fair value driven by the Secured Overnight Financing Rate ("SOFR"). The effects of those adjustments on interest expense are offset by the effects of corresponding changes in the swaps' fair value. The net impact from the hedge reported in Interest

expense and other reflects interest expense on the hedged debt at the variable interest rate. Cash flows relating to these contracts are reported in Operating activities.

• Economic hedge against the depreciation of foreign subsidiary earnings due to changes in the quarterly average exchange rate: Fair values of average rate option contracts are reported in Other assets. Because hedge accounting is not applied, changes in fair value are reported currently in earnings in Fees and other revenues. Cash flows relating to these contracts are reported in Operating activities.

As there have been no other changes to the types of derivative financial instruments the Company uses, refer to the Company’s 2020 Form 10-K for further discussion on our accounting policy.

C.Realized Investment Gains and Losses
The following realized gains and losses on investments exclude amounts required to adjust future policy benefits for the run-off settlement annuity business (consistent with accounting for a premium deficiency), as well as realized gains and losses attributed to the Company’s separate accounts because those gains and losses generally accrue directly to separate account policyholders:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Net realized investment gains (losses), excluding credit loss expense and asset write-downs $ 44 $ 24 $ 114 $ 33
Credit loss (expense) recoveries 24 8 14 (41)
Other investment asset write-downs — — — (10)
Net realized investment gains (losses), before income taxes $ 68 $ 32 $ 128 $ (18)
Net realized investment gains, excluding credit loss expense and asset write-downs for the nine months ended September 30, 2021 was primarily driven by mark-to-market gains on equity securities and gains on the sales of real estate partnerships, partially offset by mark-to-market losses on derivatives. This activity for the nine months ended September 30, 2020 primarily represent gains on sales of debt securities, partially offset by mark-to-market losses on equity securities and derivatives. Credit loss (expense) recoveries on invested assetsreflect credit losses incurred on debt securities primarily relating to issuers in certain industries that have been impacted by the global COVID-19 pandemic. Realized gains and losses on equity securities still held at September 30, 2021 and 2020 were not material.

Note 10 — – Fair Value Measurements

The Company carries certain financial instruments at fair value in the financial statements including debt securities, certain equity securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions, such as when ~~impaired.~~

impaired or when there are observable price changes for equity securities with no readily determinable fair value.

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

The Company’s financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP.

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

~~The Company estimates fair values using prices from third parties or internal pricing methods. Fair value estimates received from third-party pricing services~~

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

~~The Company is responsible for determining fair~~ value and ~~for assigning the appropriate level within~~determine the fair value hierarchy ~~based on~~for each class of financial instruments, see Note 12 "Fair Value Measurements" to the significance of unobservable inputs. The Company reviews methodologies, processes and controls of third-party pricing services and compares prices on a test basis to those obtained from other external pricing sources or internal estimates. The Company performs ongoing analyses of both prices received from third-party pricing services and those developed internally to determine that they represent appropriate estimates of fair value. The controls executed by the Company include evaluating changes in prices and monitoring for potentially stale valuations. The Company also performs sample testing of sales values to confirm the accuracy of prior fair value estimates. The minimal exceptions identified during these processes indicate that adjustments to prices are infrequent and do not significantly impact valuations. We conduct an annual on-site visit of the most significant pricing service to review their processes, methodologies and controls. This on-site review includes a walk-through of inputs for a sample of securities held across various asset types to validate the documented pricing process.

Company's 2020 Form 10-K.

A.Financial Assets and Financial Liabilities Carried at Fair Value

The following table provides information as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018~~2020 about the Company’s financial assets and liabilities carried at fair value. Separate account assets are also recorded at fair value on the Company’s Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generally accrue directly to policyholders.

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other Observable
Inputs
(Level 2)

Significant Unobservable
Inputs
(Level 3)

Total

As of

As of

As of

As of

As of

As of

As of

As of

March 31,

December 31,

March 31,

December 31,

March 31,

December 31,

March 31,

December 31,

(In millions)

2019

2018

2019

2018

2019

2018

2019

2018

Financial assets at fair value

Debt securities

Federal government and agency

$
212

$
209

$
521

$
501

$
-

$
-

$
733

$
710

State and local government

-

-

928

985

-

-

928

985

Foreign government

-

-

2,277

2,356

28

6

2,305

2,362

Corporate

-

-

18,458

18,127

237

234

18,695

18,361

Mortgage and other asset-backed

-

-

369

372

139

138

508

510

Total debt securities

212

209

22,553

22,341

404

378

23,169

22,928

Equity securities (1)

8

384

49

43

32

32

89

459

Short-term investments

-

-

267

316

-

-

267

316

Derivative assets

-

-

58

53

-

-

58

53

Real estate funds priced at NAV as a practical expedient (2)

230

239

Financial liabilities at fair value

Derivative liabilities

$
-

$
-

$
14

$
10

$
-

$
-

$
14

$
10

(In millions) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020
Financial assets at fair value
Debt securities
Federal government and agency $ 141 $ 207 $ 241 $ 249 $ — $ — $ 382 $ 456
State and local government — — 169 167 — — 169 167
Foreign government — — 2,505 2,498 14 13 2,519 2,511
Corporate — — 13,600 13,878 713 684 14,313 14,562
Mortgage and other asset-backed — — 333 309 141 126 474 435
Total debt securities 141 207 16,848 17,101 868 823 17,857 18,131
Equity securities (1)
23 50 165 165 31 31 219 246
Short-term investments — — 439 325 — — 439 325
Derivative assets (2)
— — 126 72 — — 126 72
Financial liabilities at fair value
Derivative liabilities $ — $ — $ 49 $ 108 $ — $ — $ 49 $ 108

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

(2) ~~As a practical expedient, certain real estate funds~~Derivative assets above include an immaterial amount as of September 30, 2021 and $34 million as of December 31, 2020 that are ~~carried at fair value based on the Company’s ownership share of the equity of the investee (Net Asset Value (“NAV”)) including changes~~presented in the ~~fair value of its underlying investments. The funds have a quarterly redemption frequency, 45-90 day redemption notice period and $58 million in unfunded commitments as of March 31, 2019.~~

~~Level 1 Financial Assets~~

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

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

~~Level 2 Financial Assets and Financial Liabilities~~

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

~~Debt and equity securities.~~ Approximately 97% of the Company’s investments in debt and equity securities are classified in Level 2 including most public and private corporate debt and hybrid equity securities, federal agency and municipal bonds, non-government mortgage-backed securities and preferred stocks. Third-party pricing services and internal methods often use recent trades of securities with similar features and characteristics because many debt securities do not trade daily. Pricing models are used to determine these prices when recent trades are not available. These models calculate fair values by discounting future cash flows at estimated market interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data and industry and economic events. For mortgage-backed securities, inputs and assumptions may also include characteristics of the issuer, collateral attributes, prepayment speeds and credit rating.

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

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

~~Derivative assets and liabilities~~ classified in Level 2 represent over-the-counter instruments such as foreign currency forward and swap contracts. Fair values for these instruments are determined using market observable inputs including forward currency and interest rate curves and widely published market observable indices. Credit risk related to the counterparty and the Company is considered when estimating the fair values of these derivatives. However, the Company is largely protected by collateral arrangements with counterparties and determined that no adjustment for credit risk was required as of March 31, 2019 or December 31, 2018. The nature and use of these derivative financial instruments are describeddisclosed in Note 9.

See Note 9 for more information on our Derivative Financial Instruments.

Level 3 Financial Assets and Financial Liabilities

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

The Company classifies certain newly-issued, privately-placed, complex or illiquid securities in Level 3. Approximately 2% of debt and equity securities are priced using significant unobservable inputs and classified in this category.

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

Quantitative Information about Unobservable Inputs

The following table summarizes the fair value and significant unobservable inputs used in pricing the following debt securities that were developed directly by the Company as of March 31, 2019 and December 31, 2018. The range and weighted average basis point amounts (“bps”) for liquidity and credit spreads (adjustment to discount rates) reflect the Company’s best estimates of the unobservable adjustments a market participant would make to calculate these fair values.

~~Corporate and government debt securities.~~

The significant unobservable input used to value ~~the following~~our corporate and government debt securities and mortgage and other asset-backed securities is an adjustment for liquidity. AnThis adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security.

~~Mortgage~~ The following table summarizes the fair value and ~~other asset-backed securities.~~ ~~The~~ significant unobservable inputs that were developed directly by the Company and used ~~to value the following mortgage~~in pricing these debt securities as of September 30, 2021 and ~~other asset-backed securities are liquidity~~December 31, 2020. The range and ~~weighting of credit spreads. An adjustment~~weighted average basis point (“bps”) amounts for liquidity ~~is made as~~reflect the Company’s best estimates of the ~~measurement date that considers current~~unobservable adjustments a market ~~conditions, issuer circumstances and complexity of the security structure when there is limited trading activity for the security. An adjustment~~participant would make to weight credit spreads is needed to value a more complex bond structure with multiple underlying collateral and no standard market valuation technique. The weighting of credit spreads is primarily based on the underlying collateral’s characteristics and their proportional cash flows supporting the bond obligations.

Unobservable Adjustment

Fair Value as of

Unobservable Input

Range (Weighted Average) as of

(Fair value in millions)

March 31, 2019

December 31, 2018

March 31, 2019

March 31, 2019

December 31, 2018

Debt securities

Corporate and government debt securities

$
253

$
229

Liquidity

80 - 930 (230) bps

50 - 930 (230) bps

Mortgage and other asset-backed securities

139

138

Liquidity

60 - 360 (70) bps

60 - 340 (70) bps

Weighting of credit spreads

210 - 380 (280) bps

190 - 340 (260) bps

Securities not priced by the Company (1)

12

11

Total Level 3 debt securities

$
404

$
378

calculate these fair values.

Fair Value as of Unobservable Adjustment Range (Weighted Average by Quantity) as of
(Fair value in millions ) September 30, 2021 December 31, 2020 Unobservable input September 30, 2021 September 30, 2021 December 31, 2020
Debt securities
Corporate and government debt securities $ 727 $ 696 Liquidity 60 - 2300 (460) bps 60 - 1370 (470) bps
Mortgage and other asset-backed securities 141 126 Liquidity 60 - 390 (90) bps 60 - 380 (80) bps
Securities not priced by the Company (1)
— 1
Total Level 3 debt securities $ 868 $ 823

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

~~Significant increases~~

A significant increase in liquidity ~~or credit spreads~~spread adjustments would result in a lower fair value ~~measurements~~measurement, while ~~decreases in these inputs~~a decrease would result in a higher fair value ~~measurements. The unobservable inputs are generally not interrelated and a change in the assumption used for one unobservable input is not accompanied by a change in the other unobservable input.~~

measurement.

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

The following table summarizes the changes in financial assets and financial liabilities classified in Level 3 for the three and nine months ended ~~March 31, 2019~~September 30, 2021 and ~~2018.~~2020. Gains and losses reported in ~~this~~the table may include net changes in fair value that are attributable to both observable and unobservable inputs.

Debt and Equity Securities
(In millions)

For the Three Months Ended
March 31,

2019

2018

Balance at January 1,

    $
410

    $
732

Total (losses) included in shareholders’ net income

(1)

(20)

Gains (losses) included in other comprehensive income

7

(5)

Gains (losses) required to adjust future policy benefits for settlement annuities (1)

2

(4)

Purchases, sales, settlements

Purchases

-

10

Sales

-

(11)

Settlements

(1)

(2)

Total purchases, sales and settlements

(1)

(3)

Transfers into/(out of) Level 3

��

Transfers into Level 3

20

20

Transfers out of Level 3 (2)

(1)

(124)

Total transfers into/(out of) Level 3

19

(104)

Balance at March 31,

    $
436

    $
596

Total (losses) included in shareholders’ net income attributable to instruments held at the reporting date

    $
(1)

    $
(7)

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
(In millions) 2021 2020 2021 2020
Debt and Equity Securities
Beginning balance $ 854 $ 860 $ 854 $ 555
Total gains (losses) included in shareholders’ net income 3 (1) (8) 4
Gains (losses) included in other comprehensive income 2 17 (7) (42)
Gains (losses) required to adjust future policy benefits for settlement annuities (1)
1 7 (6) 4
Purchases, sales and settlements
Purchases 37 3 108 67
Sales (36) (1) (36) (13)
Settlements (1) (8) (26) (15)
Total purchases, sales and settlements — (6) 46 39
Transfers into/(out of) Level 3
Transfers into Level 3 58 102 181 629
Transfers out of Level 3 (19) (33) (161) (243)
Total transfers into/(out of) Level 3 39 69 20 386
Ending balance $ 899 $ 946 $ 899 $ 946
Total gains (losses) included in Shareholders’ net income attributable to instruments held at the reporting date $ (3) $ — $ (3) $ (2)
Change in unrealized gains or losses included in Other comprehensive income for assets held at the end of the reporting period $ 2 $ 17 $ (8) $ (37)

(1)Amounts do not accrue to shareholders.

(2) Beginning in 2018, certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities). Private equity securities of $70 million as of December 31, 2017 are included in the 2018 Transfers out of Level 3 amount.

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

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

Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company’s best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Market activity typically decreases during periods of economic uncertainty and this decrease in activity reduces the availability of market observable data. As a result, the level of unobservable judgment that must be applied to the pricing of certain instruments increases and is typically observed through the widening of liquidity spreads. Transfers between Level 2 and Level 3 during ~~2019~~2021 and ~~2018~~2020 primarily reflected changes in liquidity ~~and credit risk~~ estimates for certain private placement issuers across several sectors. ~~As noted above, transfers~~Transfers into and out of Level 3 ~~during 2018 also include $70 million~~were higher in 2020 due to significant fluctuations in unobservable inputs experienced as a result of ~~private equity securities that are no longer carried at fair value.~~

the uncertainty over the economic impacts related to COVID-19. See discussion under Quantitative Information about Unobservable Inputs above for more information.

Separate Accounts

The investment income and fair value gains and losses of ~~separate~~Separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company’s Consolidated Statements of Income and Cash Flows. ~~See Note 10 to the Consolidated Financial Statements contained in the 2018 Form 10-K for additional policy information related to separate accounts.~~

Fair values of ~~separate~~Separate account assets at ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018~~2020 were as follows:

Quoted Prices in Active
Markets for Identical
Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant Unobservable
Inputs
(Level 3)

Total

March 31,

December 31,

March 31,

December 31,

March 31,

December 31,

March 31,

December 31,

(In millions)

2019

2018

2019

2018

2019

2018

2019

2018

Guaranteed separate accounts (See Note 16)

$
204

$
187

$
264

$
267

$
-

$
-

$
468

$
454

Non-guaranteed separate accounts (1)

1,328

1,204

5,346

5,216

244

233

6,918

6,653

Subtotal

$
1,532

$
1,391

$
5,610

$
5,483

$
244

$
233

7,386

7,107

Non-guaranteed separate accounts priced at NAV as a practical expedient (1)

693

732

Total separate account assets

$
8,079

$
7,839

(In millions) Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3) Total
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Guaranteed separate accounts (See Note 15) $ 223 $ 226 $ 290 $ 297 $ — $ — $ 513 $ 523
Non-guaranteed separate accounts (1)
1,982 1,925 5,463 5,600 345 355 7,790 7,880
Subtotal $ 2,205 $ 2,151 $ 5,753 $ 5,897 $ 345 $ 355 8,303 8,403
Non-guaranteed separate accounts priced at NAV as a practical expedient (1)
847 683
Separate account assets per Consolidated Balance Sheets $ 9,150 $ 9,086

(1)Non-guaranteed separate accounts included ~~$3.9~~$4.4 billion as of ~~March 31, 2019~~September 30, 2021 and ~~$3.8~~$4.2 billion as of December 31, ~~2018~~2020 in assets supporting the Company’s pension plans, including ~~$0.2~~$0.3 billion classified in Level 3 as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018.~~

~~Separate account assets in Level 1 primarily include exchange-listed equity securities. Level 2 assets primarily include:~~

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

·	~~actively-traded institutional and retail mutual fund investments.~~

2020.

Separate account assets classified in Level 3 primarily support Cigna’s pension plans and include ~~commercial mortgage loans as well as~~ certain newly-issued, privately-placed, complex or illiquid securities that are priced using methods discussed ~~above.~~above, as well as commercial mortgage loans. Activity, including transfers into and out of Level 3, was not material for the three and nine months ended ~~March 31, 2019 and 2018~~.

September 30, 2021 or 2020.

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

Unfunded

Fair Value as of

Commitments as of

March 31,

Redemption Frequency

Redemption Notice

(In millions)

March 31, 2019

December 31, 2018

2019

(if currently eligible)

Period

Securities partnerships
$

464

$
477

$
351

Not applicable

Not applicable

Real estate funds

216

237

-

Quarterly

30-90 days

Hedge funds

13

18

-

Up to annually, varying by fund

30-90 days

Total
$

693

$
732

$
351

investments:

Fair Value as of Unfunded Commitment as of September 30, 2021 Redemption Frequency
(if currently eligible) Redemption Notice
Period
(In millions) September 30, 2021 December 31, 2020
Securities partnerships $ 534 $ 463 $ 253 Not applicable Not applicable
Real estate funds 309 215 — Quarterly 30 - 90 days
Hedge funds 4 5 — Up to annually, varying by fund 30 - 90 days
Total $ 847 $ 683 $ 253

As of September 30, 2021, the Company does not have plans to sell any of these assets at less than fair value. These investments are structured to satisfy longer-term investment objectives. Securities partnerships are contractually non-redeemable and the underlying investment assets are expected to be liquidated by the fund managers within ten years after inception.

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

Some financial assets and liabilities are not carried at fair value, ~~each reporting period, but may be measured using fair value only under certain conditions~~ such as ~~investments when they become impaired, including~~commercial mortgage loans that are carried at unpaid principal, investment real estate that is carried at depreciated cost and ~~commercial mortgage loans, and certain~~ equity securities with no readily determinable fair ~~value. There were~~value when there are no observable market transactions. However, these financial assets and liabilities may be measured using fair value under certain conditions, such as when investments become impaired ~~investments~~and are written down to their fair ~~values~~value, or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.

For the nine months ended September 30, 2021 and 2020, no impairments were recognized requiring these assets to be measured at fair value. Realized investment gains and losses from these observable price changes for the ~~three~~nine months ended ~~March 31, 2019. Recorded values for these asset types representing less than 1% of total investments,~~September 30, 2021 and September 30, 2020 were ~~written down to their fair values, resulting in immaterial realized investment losses for the three months ended March 31, 2018.~~

not material.

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

The following table includes the Company’s financial instruments not recorded at fair value that are subject to fair value disclosure requirements at ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018.~~2020. In addition to universal life products and finance leases, financial instruments that are carried in the Company’s Consolidated Financial Statements at amounts that approximate fair value are excluded from the following ~~table.~~

Classification in

March 31, 2019

December 31, 2018

(In millions)

Fair Value
Hierarchy

Fair Value

Carrying
Value

Fair Value

Carrying
Value

Commercial mortgage loans

Level 3

$
1,875

$
1,864

$
1,832

$
1,858

Long-term debt, including current maturities, excluding finance leases

Level 2

$
41,027

$
39,840

$
40,819

$
40,829

~~Fair values of off-balance sheet financial instruments were not material as of March 31, 2019 and December 31, 2018.~~

table:

Classification in Fair Value Hierarchy September 30, 2021 December 31, 2020
(In millions) Fair Value Carrying Value Fair Value Carrying Value
Commercial mortgage loans Level 3 $ 1,563 $ 1,525 $ 1,456 $ 1,419
Long-term debt, including current maturities, excluding finance leases Level 2 $ 35,794 $ 31,579 $ 37,676 $ 31,835

Note 11 — – Variable Interest Entities

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

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

·	~~the risks and rewards created by and shared through the entity; and~~

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

required. The Company determined it was not a primary beneficiary in any material variable interest ~~entities~~entity as of ~~March 31, 2019~~September 30, 2021 or December 31, ~~2018.~~2020. The Company’s involvement inwith variable interest entities ~~where~~for which it is not the primary beneficiary ~~is described below.~~

~~Securities limited partnerships and real estate limited partnerships~~. The Company owns interests in securities limited partnerships and real estate limited partnerships that are defined as variable interest entities. These partnerships invest in the equity or mezzanine debthas not changed materially from December 31, 2020. For details of privately held companies and real estate properties. General partners unaffiliated with the Company control decisions that most significantly impact the partnership’s operations and the limited partners do not have substantive kick-out or participating rights. The Company’s maximum exposure to these entities of $3.3 billion across approximately 140 limited partnerships as of March 31, 2019 includes $1.5 billion reported in long-term investments and commitments to contribute an additional $1.8 billion. The Company’s noncontrolling interest in each of these limited partnerships is generally less than 10% of the partnership ownership interests.

~~Other asset-backed and corporate securities.~~ ~~In the normal course of its investing activities, the Company also makes passive investments in certain asset-backed and corporate securities that are issued by~~our accounting policy for variable interest entities ~~whose sponsors or issuers are unaffiliated with the Company. The Company receives fixed-rate cash flows from these investments~~ and the ~~maximum potential exposure to loss is limited to~~composition of variable interest entities with which the carrying amount of $0.6 billion as of March 31, 2019 that is reported in debt securities. The Company’s combined ownership interests are insignificant relative to the total principal amounts issued by these entities.

~~The~~ Company is ~~also~~ involved, refer to Note 13 in real estate joint ventures, independent physician associations and a joint venture in India that are variable interest entities. The carrying values and maximum exposures associated with these arrangements are immaterial.

the Company's 2020 Form 10-K. The Company has not provided, and does not intend to provide, financial support to any of ~~the above entities that it is not contractually required to provide. The Company performs ongoing qualitative analyses of its involvement with~~ these variable interest entities ~~to determine if consolidation is required.~~

in excess of its maximum exposure.

Note 12 — – Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI includes unrealized appreciation on securities and derivatives (excluding appreciation on investments supporting future policy benefit liabilities of the run-off settlement annuity business) (See Note 9), foreign currency translation and the net postretirement benefits liability adjustment. AOCI includes the Company’s share from unconsolidated entities ~~accounted for using~~reported on the equity method. AOCI excludes amounts required to adjust future policy benefits for the run-off settlement annuity business and a portion of deferred acquisition costs associated with the corporate-owned life insurance business. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized. Changes in the components of AOCI were as follows:

Three Months Ended

March 31,
(In millions)

2019

2018

Securities and Derivatives

Beginning balance

$
18

$
328

Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)

-

65

Reclassification adjustment to retained earnings related to new financial instruments guidance(1)

-

(4)

Reclassification adjustment from retained earnings related to new hedging guidance

-

(6)

Adjusted beginning balance

18

383

Appreciation (depreciation) on securities and derivatives

565

(385)

Tax (expense) benefit

(122)

77

Net appreciation (depreciation) on securities and derivatives

443

(308)

Reclassification adjustment for (gains) losses included in shareholders’ net income (net realized investment gains)

(1)

30

Tax (expense)

-

(6)

Net (gains) losses reclassified from AOCI to net income

(1)

24

Other comprehensive income (loss), net of tax

442

(284)

Ending balance

$
460

$
99

Translation of foreign currencies

Beginning balance

$
(221)

$
(65)

Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)

-

(4)

Adjusted beginning balance

(221)

(69)

Translation of foreign currencies

(23)

46

Tax (expense)

(1)

(1)

Net translation of foreign currencies

(24)

45

Ending balance

$
(245)

$
(24)

Postretirement benefits liability

Beginning balance

$
(1,508)

$
(1,345)

Reclassification adjustment to retained earnings related to U.S. tax reform legislation(1)

(290)

Adjusted beginning balance

(1,508)

(1,635)

Reclassification adjustment for amortization of net losses from past experience and prior service costs (selling, general and administrative expenses)

15

17

Reclassification adjustment for settlement (selling, general and administrative expenses)

10

-

Tax (expense)

(14)

(4)

Other comprehensive income, net of tax

11

13

Ending balance

$
(1,497)

$
(1,622)

~~(1) See Note 2 in Cigna’s 2018 Form 10-K for further information about the Company’s adoption of new accounting standards in 2018.~~

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Securities and Derivatives
Beginning balance $ 749 $ 1,256 $ 900 $ 975
Appreciation (depreciation) on securities and derivatives 59 159 (113) 499
Tax (expense) benefit (16) (27) 9 (96)
Net appreciation (depreciation) on securities and derivatives 43 132 (104) 403
Reclassification adjustment for (gains) losses included in Shareholders' net income (Net realized investment (gains) losses) (14) (16) (20) (3)
Reclassification adjustment for tax expense included in Shareholders’ net income 3 4 5 1
Net (gains) losses reclassified from AOCI to Shareholders' net income (11) (12) (15) (2)
Other comprehensive income (loss), net of tax 32 120 (119) 401
Ending balance $ 781 $ 1,376 $ 781 $ 1,376
Translation of foreign currencies
Beginning balance $ (113) $ (374) $ (15) $ (275)
Translation of foreign currencies (118) 102 (216) 7
Tax (expense) benefit (7) 7 (12) (3)
Other comprehensive income (loss), net of tax (125) 109 (228) 4
Less: Net translation gain (loss) on foreign currencies attributable to noncontrolling interests (1) (4) (6) (10)
Shareholders' other comprehensive income (loss), net of tax (124) 113 (222) 14
Ending balance $ (237) $ (261) $ (237) $ (261)
Postretirement benefits liability
Beginning balance $ (1,713) $ (1,670) $ (1,746) $ (1,641)
Reclassification adjustment for amortization of net prior actuarial losses and prior service costs (Interest expense and other) 21 18 60 54
Reclassification adjustment for settlement (Interest expense and other) — — 4 —
Reclassification adjustment for tax (benefit) included in Shareholders’ net income (5) (4) (15) (13)
Net adjustments reclassified from AOCI to Shareholders' net income 16 14 49 41
Valuation update — — — (73)
Tax benefit — — — 17
Net change due to valuation update — — — (56)
Other comprehensive income (loss), net of tax 16 14 49 (15)
Ending balance $ (1,697) $ (1,656) $ (1,697) $ (1,656)

Note 13 ~~— Pension and Other Postretirement Benefit Plans~~

– Leases

A.~~About our Plans~~

~~Pension plans~~. Future benefit accruals for the Company’s domestic defined benefit pension plans are frozen. The Company also has foreign pension and other postretirement benefit plans that are immaterial to our results of operations, liquidity and financial position.

~~Other postretirement benefit plans.~~ ~~The Company’s postretirement medical plan was frozen in 2013. The Company also offers certain postretirement life insurance benefits through various plans.~~

B.~~Cost of Our Plans~~

~~Net pension and other postretirement benefits cost was as follows for the three months ended March 31:~~

Pension Benefits

Other Postretirement Benefits

Three Months Ended

Three Months Ended

March 31,

March 31,
(In millions)

2019

2018

2019

2018
Service cost

   $
1

   $
1

   $
-

   $
-
Interest cost

49

42

2

2
Expected long-term return on plan assets

(56)

(64)

-

-
Amortization of:

Net loss from past experience

16

17

-

-
Prior service cost

-

-

(1)

-
Litigation settlement - plan amendment

142

-

-

-
Settlement loss

10

-

-

-
Net cost

   $
162

   $
(4)

   $
1

   $
2

As further discussed in Note 16, Old Cigna and the Cigna Pension Plan are defendants in a class action lawsuit related to the Plan’s conversion of certain employees from an annuity to a cash balance benefit in 1997. In the first quarter of 2019, the Plan was amended to reflect the additional benefits required by the Court Order. In addition, class participants were notified of their increased benefits and payment of benefits commenced. This activity resulted in a one-time expense of $142 million representing the present value of the additional pension benefits under the Court Order. An offsetting expense credit was also recorded to reduce the litigation reserve held.

Pension and other postretirement benefits expense is reported in “interest expense and other” in the Consolidated Statements of Income. The Company did not make any contributions to the domestic qualified pension plans for the three months ended March 31, 2019. Contributions to these plans are expected to be immaterial for the remainder of 2019.

~~Note 14~~ ~~— Leases~~

~~As discussed in Note 2, the Company adopted ASU 2016-02,~~ ~~Leases,~~ as of January 1, 2019. As permitted by the standard, the Company did not restate its Consolidated Financial Statements for periods prior to the adoption date and the required disclosures presented below are prospective only. The Company’s operating leases are primarily for office space and certain computer and other equipment, and have terms ranging from one month to 18 years.

~~Accounting policy.~~ The Company determines if an arrangement is a lease and its lease classification (operating or finance) at inception. Beginning in the first quarter of 2019, both operating and finance leases result in (1) a right-of-use (“ROU”) asset that represents our right to use the underlying asset for the lease term, and (2) a lease liability that represents our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are reflected in the following lines in the Company’s Consolidated Balance Sheet:

	~~ROU Asset~~	~~Current Lease Liability~~	~~Non-Current Lease Liability~~
~~Operating lease~~	~~Other Assets~~	~~Accrued expenses and other liabilities (current)~~	~~Other liabilities (non-current)~~
~~Finance lease~~	~~Property and equipment~~	~~Short-term debt~~	~~Long-term debt~~

These lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Most of the Company’s leases do not provide an implicit rate, so the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease pre-payments made and excludes lease incentives for operating leases. The Company’s lease terms may include options to extend or terminate a lease when it is reasonably certain that the Company will exercise that option.

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. Variable lease payments are expensed as incurred and represent amounts that are not fixed in nature, such as maintenance and other services provided by the lessor, and are not tied to an index or rate.

~~The components of lease expense were as follows:~~

~~(In millions)~~	~~Three Months Ended~~ ~~March 31, 2019~~
~~Operating lease cost~~	$	47
~~Finance lease cost:~~
~~Amortization of ROU assets~~		8
~~Interest on lease liabilities~~		1
~~Total finance lease cost~~		9
~~Variable lease cost~~		12
~~Total lease cost~~	$	68

~~Supplemental cash flow information related to leases was as follows:~~

~~(In millions)~~	~~Three Months Ended~~ ~~March 31, 2019~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash outflows from operating leases~~	$	42
~~Operating cash outflows from finance leases~~	$	1
~~Financing cash outflows from finance leases~~	$	6

~~ROU assets obtained in exchange for lease obligations:~~
~~Operating leases~~	$	26
~~Finance leases~~	$	45

Operating and finance lease ~~ROU~~Right-of-Use (“ROU”) assets and lease liabilities were as ~~follows at the balance sheet date:~~

~~(In millions)~~	~~March 31, 2019~~
~~Operating leases:~~
~~Operating lease ROU assets~~	$	~~602~~

~~Accrued expenses and other current liabilities~~		~~160~~
~~Other non-current liabilities~~		~~524~~
~~Total operating lease liabilities~~	$	~~684~~

~~Finance leases:~~
~~Property and equipment, gross~~	$	99
~~Accumulated depreciation~~		~~(8)~~
~~Property and equipment, net~~	$	91

~~Short-term debt~~	$	21
~~Long-term debt~~		68
~~Total finance lease liabilities~~	$	89

The weighted average remaining lease term was 5 years for operating leases and 6 years for finance leases. The weighted average discount rate for operating leases was 3.88% and 3.86% for finance leases.

~~Maturities of lease liabilities were as~~ follows:

(In millions)

Operating Leases

Finance Leases

2019

    $
129

    $
18

2020

169

23

2021

140

14

2022

121

14

2023

81

9

Thereafter

124

22

Total lease payments

764

100

Less: imputed interest

80

11

Total

    $
684

    $
89

~~Disclosures regarding minimum lease payments under previous lease accounting guidance can be found in the Company’s 2018 Form 10-K.~~

(In millions) September 30, 2021 December 31, 2020
Operating leases:
Operating lease ROU assets $ 519 $ 552
Accrued expenses and other liabilities $ 145 $ 152
Other non-current liabilities 460 491
Total operating lease liabilities $ 605 $ 643
Finance leases:
Property and equipment, gross $ 96 $ 98
Accumulated depreciation (45) (46)
Property and equipment, net $ 51 $ 52
Short-term debt $ 23 $ 18
Long-term debt 30 36
Total finance lease liabilities $ 53 $ 54

Note 15 —14 – Income Taxes

Income Tax Expense

The 21.7% effective tax rate for the ~~three~~nine months ended ~~March 31, 2019 of 23.3%~~September 30, 2021 was ~~lower~~higher than the ~~24.7%~~20.8% rate for the same period in ~~2018. The decline was~~2020. This increase is primarily attributable to the absence of favorable items which reduced the rate in 2020, including settlements of uncertain tax positions and the remeasurement of deferred state income taxes due to ~~suspension~~changes in statutory rates and adjustments in apportionment factors, partially offset by the elimination of the ~~non-deductible~~nondeductible health insurance industry ~~tax.~~

~~The Company continues to retain a significant portion of its foreign earnings overseas, where they are generally subject to a higher~~ tax ~~rate than that imposed~~ in the United States. Additional deferred tax liabilities of $137 million for foreign withholding taxes would have been recorded if these earnings were intended to be remitted domestically. A portion of these withholding taxes may be eligible for credit against the Company’s U.S. tax liability.

B. ~~Uncertain Tax Positions and Other Tax Matters~~

~~Changes in uncertain tax positions for the three months ended March 31, 2019 and 2018 were immaterial. There were no significant updates to tax return audits in the first quarter of 2019.~~

2021.

Note 16 —15 – Contingencies and Other Matters

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

A.Financial Guarantees: Retiree and Life Insurance Benefits

The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business ~~(Prudential Retirement Insurance and Annuity Company or “Prudential”)~~ has the right to redirect the management of the related assets to provide for benefit payments. As of ~~March 31, 2019,~~September 30, 2021, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately ~~$455~~$440 million. ~~Approximately 11% of these are reinsured by Prudential. The remaining guarantees are provided by the Company with minimal reinsurance from third parties. The Company establishes an~~An additional liability is established if management believes that the Company will be required to make ~~payment~~payments under the guarantees; there were no additional liabilities required for these guarantees, net of reinsurance, as of ~~March 31, 2019.~~September 30, 2021. Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value ~~hierarchy (see~~ ~~Note 10~~).

hierarchy.

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

B.Certain Other Guarantees

The Company had indemnification obligations as of ~~March 31, 2019~~September 30, 2021 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, ~~the~~ filing of tax returns, compliance with law or ~~the~~ identification of

outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of

the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were no liabilities for these indemnification obligations as of ~~March 31, 2019.~~

September 30, 2021.

C.Guaranty Fund Assessments

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

There were no material ~~impacts related to~~charges or credits resulting from existing or new guaranty fund assessments for the ~~three~~nine months ended ~~March 31, 2019.~~

September 30, 2021.

D.Legal and Regulatory Matters

The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator’s filing of a complaint under court seal and other legal matters arising, for the most part, in the ordinary course of managing a global health service business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions. ~~Further information on income tax matters can be found in Note 15.~~

Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss and certain other material litigation matters are described below. ~~When litigation and regulatory~~For those matters ~~present loss contingencies~~ that ~~are both probable and estimable,~~ the Company ~~accrues the estimated~~has identified with a reasonably possible material loss, by a charge to shareholders’ net income. The estimated loss is the Company’s best estimate of the probable loss at the time or an amount within a range of estimated losses reflecting the most likely outcome or the minimum amount of the range (if no amount is better than any other estimated amount in the range). For material pending litigation and legal or regulatory matters discussed below, the Company provides disclosure in the aggregate of accruals and range of loss, or a statement that such information cannot be estimated. ~~In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company.~~ The Company’s accruals for the matters discussed below under “Litigation Matters”~~, as well as litigation related to certain of the Company’s claim operating practices~~ and ~~disputes around reimbursement rates to providers,~~“Regulatory Matters” are ~~immaterial.~~not material. Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if any) for these matters at this time. In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company. An adverse outcome in one or more of these matters could be material to the Company’s results of operations, financial condition or liquidity for any particular period. The outcomes of lawsuits are inherently unpredictable and we may be unsuccessful in these ongoing litigation matters or any future claims or litigation.

Litigation Matters

~~Amara cash balance pension plan litigation.~~ ~~In December 2001, Janice Amara filed a class action lawsuit in the U.S. District Court for the District of Connecticut against Cigna Corporation (now Old Cigna)~~

Risk Corridors and the Cigna Pension Plan on behalf of herself and other similarly situated Plan participants affected by the 1998 conversion to a cash balance formula. The plaintiffs allege various violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), including that the Plan’s cash balance formula discriminates against older employees; that the conversion resulted in a wear-away period (when the pre-conversion accrued benefit exceeded the post-conversion benefit); and that the Plan communications contained inaccurate or inadequate disclosures about these conditions.

In 2008, the District Court (1) affirmed the Company’s right to convert to a cash balance plan prospectively beginning in 1998; (2) found for plaintiffs on the disclosure claim only; and (3) required the Company to pay pre-1998 benefits under the pre-conversion traditional annuity formula and post-1997 benefits under the post-conversion cash balance formula. From 2008 through 2015, this case has undergone a series of court proceedings that resulted in the original District Court Order being largely upheld. In 2015, the Company submitted to the District Court its proposed method for calculating the additional pension benefits due to class members and plaintiffs responded in August 2015.

Since then, there has been continued litigation regarding the calculation of benefits, attorneys’ fees, and the administration of the remedy payments. On November 29, 2018, the Court ordered the Pension Plan to pay attorneys’ and incentive fees of $32 million, and to pay any past due lump sums and back benefits within 90 days of the Order. The attorneys’ fees were paid as ordered in December 2018. In the first quarter of 2019, the Company amended the Plan, notified class participants of their increased benefits and

~~commenced remedy benefit payments out of the Plan, including the past due lump sums and back benefits. See Note 13 for additional information.~~

~~In April 2019, plaintiffs challenged certain aspects of the methodology used to calculate and pay benefits. The Company and the Plan are vigorously opposing plaintiffs’ motion.~~

~~Cigna~~CSR Litigation with ~~Anthem~~the Federal Government. ~~In February 2017, the Company delivered~~As a ~~notice to Anthem terminating the 2015 merger agreement, and notifying Anthem that it must pay the Company the $1.85 billion reverse termination fee pursuant to the terms~~result of ~~the merger agreement. Also~~a Supreme Court decision in ~~February 2017,~~April 2020, the Company filed suit in early May 2020 against ~~Anthem~~the United States in the ~~Delaware~~U.S. Court of ~~Chancery (the “Chancery Court”~~Federal Claims seeking to recover two types of payments the Federal Government owes Cigna under the risk corridors and cost-sharing reduction (“CSR”) programs of The Patient Protection and Affordable Care Act. In aggregate, the complaint sought to recover more than $315 million: $120 million in risk corridors payments and more than $195 million in CSR payments. We received $120 million in payments in September 2020, which resolved our risk corridors claim. Our claim seeking declaratory judgments that the Company’s termination of the merger agreement was valid and that Anthem was not permitted to extend the termination date. The complaint also sought payment of the reverse termination fee and additional damages in an amount exceeding $13 billion, including the lost premium value to the Company’s shareholders caused by Anthem’s willful breaches of the merger agreement. Anthem has countersued, alleging its own claimsrecovery for ~~damages.~~

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

~~The litigation between the parties~~CSR payments remains pending. A trial was held during the first quarter of 2019. Oral arguments on post-trial briefs have been set for September 2019 and we expect the judge to issue a decision before the end of the year. We believe in the merits of our claims and dispute Anthem’s claims, and we intend to vigorously defend ourselves and pursue our claims.

Express Scripts Litigation with ~~Anthem.~~Anthem. In March 2016, Anthem filed a lawsuit in the United States District Court for the Southern District of New York alleging various breach of contract claims against Express Scripts relating to the parties’ rights and obligations under the periodic pricing review section of the pharmacy benefit management agreement between the parties including allegations that Express Scripts failed to negotiate new pricing concessions in good faith, as well as various alleged service issues. Anthem also requested that the court enter declaratory judgment that Express Scripts is required to provide Anthem competitive benchmark pricing, that Anthem can terminate the agreement and that Express Scripts is required to provide Anthem with post-termination services at competitive benchmark pricing for one year following any termination by Anthem. Anthem claims it is entitled to ~~$13.0~~$13 billion in additional pricing concessions over the remaining term of the agreement, as well as $1.8 billion for one year following any contract termination by Anthem and $150 million in damages for service issues (“Anthem’s Allegations”). On April 19, 2016, in response to Anthem’s complaint, Express Scripts filed its answer denying Anthem’s Allegations in their entirety and asserting affirmative defenses and counterclaims against Anthem. The court subsequently granted Anthem’s motion to dismiss ~~two~~2 of ~~six~~6 counts of Express Scripts’ amended counterclaims. ~~The current scheduling order runs through the completion~~Express Scripts filed its Motion for Summary Judgment on August 27, 2021. Anthem’s completed filing of ~~summary judgment briefing~~its Response to Express Scripts’ Motion for Summary Judgment on October 16, 2021. Express Scripts’ Reply in ~~February 2020.~~Support of its Motion for Summary Judgment is due November 19, 2021. There is no tentative trial date. ~~We believe in the merits of our claims and dispute Anthem’s claims, and we intend to vigorously defend ourselves and pursue our claims.~~

Regulatory Matters

Civil Investigative ~~Demand.~~ Demand. The U.S. Department of Justice (“DOJ”) is conducting ~~an industry review~~industry-wide investigations of Medicare Advantage organizations’ risk adjustment practices under Medicare Parts C and D including medical chart reviews and health exams. For certain Medicare Advantage organizations, those investigations have resulted in litigation. The Company ~~is currently responding to~~has received information requests (civil investigative demands) ~~received~~ from the DOJ (U.S. Attorney’s Offices for the Eastern District of Pennsylvania and the Southern District of New ~~York)~~York ("SDNY")). We ~~will continue~~are continuing to cooperate with the ~~DOJ’s investigation.~~

~~Disability claims regulatory matter.~~ ~~The Company is subject~~DOJ and have responded and continue to ~~an agreement with the Departments of Insurance for Maine, Massachusetts, Pennsylvania, Connecticut and California (together, the “Lead States”), originally entered into~~respond to its requests. Additionally, in ~~2013, that relates~~relation to the ~~Company’s long-term disability~~SDNY’s investigation, a qui tam action that was filed by a relator in the United States District Court for the Southern District of New York in 2017 was unsealed on August 6, 2020. The action asserts claims ~~handling practices. The agreement provides for enhanced procedures~~ related to ~~documentation and disposition. Cigna~~risk adjustment practices arising from certain health exams conducted as part of Cigna’s Medicare Advantage business. The DOJ has ~~cooperated fully with~~not intervened in the ~~Lead~~case at this time. On September 29, 2021, the qui tam action was transferred to the United States ~~and we believe we have addressed~~District Court for the ~~requirements~~Middle District of the agreement. The Lead States recently initiated a re-examination of our practices. Accordingly, the Company may be subject to additional costs, penalties and requests to change its business practices that could negatively impact future earnings for this business.

Tennessee.

Note 17 ~~— Condensed Consolidating Financial Information~~

Effective with the Merger that closed on December 20, 2018 (see Note 4 for further information) the senior notes issued by Cigna, Old Cigna, ESI, Medco, and Express Scripts became jointly and severally and fully and unconditionally (subject to certain customary release provisions, including sale, exchange, transfer or liquidation of the guarantor subsidiary) guaranteed by Cigna, Old Cigna, ESI, Medco and Express Scripts, as applicable. Details of these debt obligations are presented in Note 6. The following condensed consolidating financial information has been prepared in accordance with the requirements as prescribed by the SEC in Regulation S-X. The condensed consolidating financial information presented below is not indicative of what the financial position, results of operations or cash flows would have been had each of the entities operated as an independent company during the periods for various reasons, including, but not limited to, intercompany transactions and integration of systems.

~~The condensed consolidating financial information is presented separately for:~~

~~(i)~~		~~Cigna (the Parent Company), guarantor, the issuer of additional guaranteed obligations;~~
~~(ii)~~		~~Old Cigna (former Parent Company), guarantor, the issuer of additional guaranteed obligations;~~
~~(iii)~~		~~Express Scripts, guarantor, the issuer of additional guaranteed obligations;~~
~~(iv)~~		~~ESI, guarantor, the issuer of additional guaranteed obligations;~~
~~(v)~~		~~Medco, guarantor, the issuer of additional guaranteed obligations;~~
~~(vi)~~		~~Non-guarantor subsidiaries, on a combined basis;~~
~~(vii)~~		Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Cigna, Old Cigna, Express Scripts, ESI, Medco and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and
~~(viii)~~		~~Cigna and subsidiaries on a consolidated basis.~~

~~Condensed Consolidating Statements of Income~~

For the three months ended March 31, 2019
(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated
Revenues

Pharmacy revenues

$
-

$
-

$
-

$
17,622

$
3,763

$
14,142

$
(10,348)

$
25,179
Premiums

-

-

-

-

-

9,971

-

9,971
Fees and other revenues

-

-

-

190

84

3,101

(925)

2,450
Net investment income (loss)

(9)

-

15

3

2

335

-

346
Total revenues

(9)

-

15

17,815

3,849

27,549

(11,273)

37,946
Benefits and expenses

Pharmacy and other service costs

-

-

-

16,363

3,689

14,346

(10,348)

24,050
Medical costs and other benefit expenses

-

-

-

-

-

7,620

-

7,620
Selling, general and administrative expenses

(99)

73

13

835

87

3,319

(925)

3,303
Amortization of acquired intangible assets

-

-

-

577

83

83

-

743
Total benefits and expenses

(99)

73

13

17,775

3,859

25,368

(11,273)

35,716
Income (loss) from operations

90

(73)

2

40

(10)

2,181

-

2,230
Interest and other income (expense)

(237)

(87)

(124)

(4)

(9)

9

-

(452)
Intercompany interest income (expense)

(31)

(3)

124

(62)

(39)

11

-

-
Net realized investment gains

-

-

-

-

-

10

-

10
Income (loss) before income taxes

(178)

(163)

2

(26)

(58)

2,211

-

1,788
Total income tax (benefit) expense

(37)

(31)

1

(17)

(17)

517

-

416
Income (loss) before equity in earnings of subsidiaries

(141)

(132)

1

(9)

(41)

1,694

-

1,372
Equity in earnings of subsidiaries

1,509

1,152

488

432

84

-

(3,665)

-
Net income

1,368

1,020

489

423

43

1,694

(3,665)

1,372
Less: Net income attributable to noncontrolling interests

-

-

-

-

-

4

-

4
Shareholders’ net income

$
1,368

$
1,020

$
489

$
423

$
43

$
1,690

$
(3,665)

$
1,368
Other comprehensive income, net of tax

429

429

1

1

-

412

(843)

429
Shareholders’ comprehensive income

$
1,797

$
1,449

$
490

$
424

$
43

$
2,102

$
(4,508)

$
1,797

~~Condensed Consolidating Statements of Income~~

For the three months ended March 31, 2018
(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated
Revenues

Premiums

$
-

$
-

$
-

$
-

$
-

$
8,999

$
-

$
8,999
Fees and other revenues

-

-

-

-

-

1,368

-

1,368
Pharmacy revenues

-

-

-

-

-

717

-

717
Net investment income

-

-

-

-

-

329

-

329
Total revenues

-

-

-

-

-

11,413

-

11,413
Benefits and expenses

Medical costs and other benefit expenses

-

-

-

-

-

6,772

-

6,772
Pharmacy and other service costs

-

-

-

-

-

561

-

561
Selling, general and administrative expenses

-

64

-

-

-

2,681

-

2,745
Amortization of acquired intangible assets

-

-

-

-

-

27

-

27
Total benefits and expenses

-

64

-

-

-

10,041

-

10,105
Income (loss) from operations

-

(64)

-

-

-

1,372

-

1,308
Interest and other (expense)

-

(85)

-

-

-

28

-

(57)
Intercompany interest income (expense)

-

(16)

-

-

-

16

-

-
Net realized investment (losses)

-

-

-

-

-

(33)

-

(33)
Income (loss) before income taxes

-

(165)

-

-

-

1,383

-

1,218
Total income tax (benefit) expense

-

(39)

-

-

-

340

-

301
Income (loss) before equity in earnings of subsidiaries

-

(126)

-

-

-

1,043

-

917
Equity in earnings of subsidiaries

915

1,041

-

-

-

-

(1,956)

-
Net income

915

915

-

-

-

1,043

(1,956)

917
Less: net income attributable to noncontrolling interests

-

-

-

-

-

2

-

2
Shareholders’ net income

$
915

$
915

$
-

$
-

$
-

$
1,041

$
(1,956)

$
915
Other comprehensive (loss), net of tax

(226)

(226)

-

-

-

(237)

463

(226)
Shareholders’ comprehensive income

$
689

$
689

$
-

$
-

$
-

$
804

$
(1,493)

$
689

~~Condensed Consolidating Balance Sheets~~

As of March 31, 2019
(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated
Assets

Cash and cash equivalents

$
-

$
-

$
1,596

$
44

$
-

$
3,336

$
-

$
4,976
Investments

417

6

-

-

-

1,239

-

1,662
Accounts receivable, net

-

2

-

4,670

626

5,643

-

10,941
Inventories

-

-

-

-

-

2,382

-

2,382
Other current assets

-

131

-

282

3

1,042

(283)

1,175
Total current assets

417

139

1,596

4,996

629

13,642

(283)

21,136
Long-term investments

-

10

-

-

-

27,247

-

27,257
Reinsurance recoverables

-

-

-

-

-

5,385

-

5,385
Deferred policy acquisition costs

-

-

-

-

-

2,817

-

2,817
Property and equipment

-

-

-

2,386

-

2,137

-

4,523
Investments in subsidiaries

70,036

28,174

52,560

17,551

8,205

-

(176,526)

-
Intercompany receivables, net

-

3,054

-

8,371

2,222

26,839

(40,486)

-
Goodwill

-

-

31,049

-

-

13,488

-

44,537
Other intangible assets

-

-

8,400

18,489

6,958

4,491

-

38,338
Other assets

27

227

-

152

78

2,001

(209)

2,276
Separate account assets

-

-

-

-

-

8,079

-

8,079
TOTAL ASSETS

$
70,480

$
31,604

$
93,605

$
51,945

$
18,092

$
106,126

$
(217,504)

$
154,348
Liabilities

Current insurance and contractholder liabilities

$
-

$
-

$
-

$
-

$
-

$
7,060

$
-

$
7,060
Pharmacy and service costs payable

-

-

-

9,245

1,291

609

-

11,145
Accounts payable

22

-

2

833

4

3,627

-

4,488
Accrued expenses and other liabilities

719

288

92

1,522

276

4,747

(283)

7,361
Short-term debt

1,556

-

998

352

-

9

-

2,915
Total current liabilities

2,297

288

1,092

11,952

1,571

16,052

(283)

32,969
Non-current insurance and contractholder liabilities

-

-

-

-

-

20,043

-

20,043
Deferred tax liabilities, net

-

-

1,999

4,898

1,664

1,051

(209)

9,403
Other non-current liabilities

-

715

-

577

241

2,299

-

3,832
Intercompany payables, net

4,904

4,477

30,552

-

-

553

(40,486)

-
Long-term debt

20,871

5,112

10,938

41

505

104

-

37,571
Separate account liabilities

-

-

-

-

-

8,079

-

8,079
TOTAL LIABILITIES

28,072

10,592

44,581

17,468

3,981

48,181

(40,978)

111,897
Redeemable noncontrolling interests

-

-

-

-

-

38

-

38
TOTAL SHAREHOLDERS’ EQUITY

42,408

21,012

49,024

34,477

14,111

57,902

(176,526)

42,408
Noncontrolling interests

-

-

-

-

-

5

-

5
TOTAL EQUITY

42,408

21,012

49,024

34,477

14,111

57,907

(176,526)

42,413
TOTAL LIABILITIES AND EQUITY

$
70,480

$
31,604

$
93,605

$
51,945

$
18,092

$
106,126

$
(217,504)

$
154,348

~~Condensed Consolidating Balance Sheets~~

As of December 31, 2018

(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated

Assets

Cash and cash equivalents

$
243

$
-

$
633

$
43

$
-

$
2,936

$
-

$
3,855

Investments

-

-

-

-

-

2,045

-

2,045

Accounts receivable, net

-

-

-

4,206

748

5,519

-

10,473

Inventories

-

-

-

-

-

2,821

-

2,821

Other current assets

14

59

-

310

-

1,063

(210)

1,236

Total current assets

257

59

633

4,559

748

14,384

(210)

20,430

Long-term investments

-

10

-

-

-

26,919

-

26,929

Reinsurance recoverables

-

-

-

-

-

5,507

-

5,507

Deferred policy acquisition costs

-

-

-

-

-

2,821

-

2,821

Property and equipment

-

-

-

2,432

-

2,130

-

4,562

Investments in subsidiaries

68,969

27,544

52,035

17,115

8,117

-

(173,780)

-

Intercompany receivables, net

-

4,505

-

7,425

2,335

24,882

(39,147)

-

Goodwill

-

-

31,049

-

-

13,456

-

44,505

Other intangible assets

-

-

8,400

18,962

7,040

4,601

-

39,003

Other assets

48

198

-

68

74

1,488

(246)

1,630

Separate account assets

-

-

-

-

-

7,839

-

7,839

TOTAL ASSETS

$
69,274

$
32,316

$
92,117

$
50,561

$
18,314

$
104,027

$
(213,383)

$
153,226

Liabilities

Current insurance and contractholder liabilities

$
-

$
-

$
-

$
-

$
-

$
6,801

$
-

$
6,801

Pharmacy and service costs payable

-

-

-

8,422

1,579

701

-

10,702

Accounts payable

22

-

-

834

4

3,506

-

4,366

Accrued expenses and other liabilities

396

182

129

1,387

189

4,998

(210)

7,071

Short-term debt

-

1,500

995

353

-

107

-

2,955

Total current liabilities

418

1,682

1,124

10,996

1,772

16,113

(210)

31,895

Non-current insurance and contractholder liabilities

-

-

-

-

-

19,974

-

19,974

Deferred tax liabilities, net

-

-

2,001

5,012

1,685

1,001

(246)

9,453

Other non-current liabilities

-

685

-

497

290

1,998

-

3,470

Intercompany payables, net

4,965

4,361

29,569

-

-

252

(39,147)

-

Long-term debt

22,863

5,110

10,932

24

506

88

-

39,523

Separate account liabilities

-

-

-

-

-

7,839

-

7,839

TOTAL LIABILITIES

28,246

11,838

43,626

16,529

4,253

47,265

(39,603)

112,154

Redeemable noncontrolling interests

-

-

-

-

-
��
37

-

37

TOTAL SHAREHOLDERS’ EQUITY

41,028

20,478

48,491

34,032

14,061

56,718

(173,780)

41,028

Noncontrolling interest

-

-

-

-

-

7

-

7

TOTAL EQUITY

41,028

20,478

48,491

34,032

14,061

56,725

(173,780)

41,035

TOTAL LIABILITIES AND EQUITY

$
69,274

$
32,316

$
92,117

$
50,561

$
18,314

$
104,027

$
(213,383)

$
153,226

~~Condensed Consolidating Cash Flow Statements~~

For the Three Months Ended March 31, 2019

(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated

Net cash (used in) provided by operating activities

$
1,102

$
947

$
(6)

$
1,802

$
(110)

$
1,295

$
(1,838)

$
3,192

Cash Flows from Investing Activities

Net change in loans due to (from) affiliates

-

1,600

(1,700)

-

-

141

(41)

-

Proceeds from investments sold:

Debt securities and equity securities

-

-

-

-

-

1,471

-

1,471

Investment maturities and repayments:

Debt securities and equity securities

-

-

-

-

-

319

-

319

Commercial mortgage loans

-

-

-

-

-

89

-

89

Other sales, maturities and repayments (primarily short-term and other long-term investments)

-

-

-

-

-

367

-

367

Investments purchased or originated:

Debt securities and equity securities

-

-

-

-

-

(1,088)

-

(1,088)

Commercial mortgage loans

-

-

-

-

-

(95)

-

(95)

Other sales, maturities and repayments (primarily short-term and other long-term investments)

(417)

(6)

-

-

-

35

-

(388)

Property and equipment purchases, net

-

-

-

(55)

-

(139)

-

(194)

Acquisitions, net of cash acquired

-

-

-

-

-

(6)

-

(6)

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

(417)

1,594

(1,700)

(55)

-

1,094

(41)

475

Cash Flows from Financing Activities

Net change in amounts due to (from) affiliates, net

-

(141)

2,669

(1,744)

110

(935)

41

-

Intercompany dividends paid

-

(900)

-

-

-

(922)

1,822

-

Deposits and interest credited to contractholder deposit funds

-

-

-

-

-

247

-

247

Withdrawals and benefit payments from contractholder deposit funds

-

-

-

-

-

(251)

-

(251)

Net change in short-term debt

558

(1,500)

-

-

-

(106)

-

(1,048)

Repayment of long-term debt

(1,000)

-

-

-

-

-

-

(1,000)

Repurchase of common stock

(462)

-

-

-

-

-

-

(462)

Issuance of common stock

53

-

-

-

-

-

-

53

Other, net

(77)

-

-

(2)

-

(10)

16

(73)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(928)

(2,541)

2,669

(1,746)

110

(1,977)

1,879

(2,534)

Effect of foreign currency rate changes on cash and cash equivalents

-

-

-

-

-

(12)

-

(12)

Net (decrease) increase in cash and cash equivalents

(243)

-

963

1

-

400

-

1,121

Cash and cash equivalents, January 1,

243

-

633

43

-

2,936

-

3,855

Cash and cash equivalents, March 31,

$
-

$
-

$
1,596

$
44

$
-

$
3,336

$
-

$
4,976

~~Condensed Consolidating Cash Flow Statements~~

For the Three Months Ended March 31, 2018

(In millions)

Cigna

Old Cigna

Express
Scripts
Holding
Company

Express
Scripts,
Inc.

Medco Health
Solutions, Inc.

Non-
Guarantors

Eliminations
and
Consolidation
Adjustments

Consolidated

Net cash provided by operating activities

$
-

$
641

$
-

$
-

$
-

$
1,833

$
(449)

$
2,025

Cash Flows from Investing Activities

Net change in loans due to affiliates

-

-

-

-

-

102

(102)

-

Proceeds from investments sold:

Debt securities and equity securities

-

-

-

-

-

499

-

499

Investment maturities and repayments:

Debt securities and equity securities

-

-

-

-

-

297

-

297

Commercial mortgage loans

-

-

-

-

-

28

-

28

Other sales, maturities and repayments (primarily short-term and other long-term investments)

-

-

-

-

-

112

-

112

Investments purchased or originated:

Debt securities and equity securities

-

-

-

-

-

(2,259)

-

(2,259)

Commercial mortgage loans

-

-

-

-

-

(68)

-

(68)

Other sales, maturities and repayments (primarily short-term and other long-term investments)

-

(2)

-

-

-

(204)

-

(206)

Property and equipment purchases, net

-

-

-

-

-

(103)

-

(103)

NET CASH (USED IN) INVESTING ACTIVITIES

-

(2)

-

-

-

(1,596)

(102)

(1,700)

Cash Flows from Financing Activities

Net change in amounts due (from) affiliates, net

-

(102)

-

-

-

-

102

-

Intercompany dividends paid

-

-

-

-

-

(449)

449

-

Deposits and interest credited to contractholder deposit funds

-

-

-

-

-

292

-

292

Withdrawals and benefit payments from contractholder deposit funds

-

-

-

-

-

(306)

-

(306)

Net change in short-term debt

-

-

-

-

-

(3)

-

(3)

Repayment of long-term debt

-

(131)

-

-

-

-

-

(131)

Repurchase of common stock

-

(310)

-

-

-

-

-

(310)

Issuance of common stock

-

20

-

-

-

-

-

20

Other, net

-

(125)

-

-

-

33

-

(92)

NET CASH (USED IN) FINANCING ACTIVITIES

-

(648)

-

-

-

(433)

551

(530)

Effect of foreign currency rate changes on cash and cash equivalents

-

-

-

-

-

4

-

4

Net (decrease) in cash and cash equivalents

-

(9)

-

-

-

(192)

-

(201)

Cash and cash equivalents, January 1,

-

9

-

-

-

2,963

-

2,972

Cash and cash equivalents, March 31,

$
-

$
-

$
-

$
-

$
-

$
2,771

$
-

$
2,771

~~Note 18~~ —16 – Segment Information

See Note 1 for a description of our segments that changed effective with the fourth quarter of 2018 along with one of our principal financial measures of segment operating performance, which is now pre-tax adjusted income from operations. Prior year segment information reported in this Form 10-Q has been adjusted to reflect these changes. In addition, effective with the first quarter of 2019, the Company began allocating compensation cost for stock options to the segments. ~~Prior year segment information was not restated for this change.~~ A description of our basis for reporting segment operating results is outlined below. Intersegment ~~transactions~~revenues primarily reflect pharmacy ~~sales to insured customers of~~related transactions between the ~~Integrated~~Evernorth and U.S. Medical ~~segment. These transactions are eliminated in consolidation.~~

segments.

The Company uses ~~“pre-tax~~"pre-tax adjusted income from ~~operations”~~operations" and ~~“adjusted revenues”~~"adjusted revenues" as its principal financial measures of segment operating performance because management believes they best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability. ~~Pre-tax~~We define pre-tax adjusted income from operations ~~is defined~~ as income before taxes excluding net realized investment results, amortization of acquired intangible assets ~~results of transitioning clients Anthem Inc. and Coventry Health Care, Inc. (the “transitioning clients”)~~ and special items. ~~Adjusted revenues is defined as revenues excluding: 1) revenue contributions from transitioning clients; 2) the Company’s~~Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of ~~accounting; and 3) special items, if any. Income or expense amounts that~~accounting are ~~excluded from adjusted income from operations because they are not indicative of underlying performance or the responsibility of operating segment management include:~~

·~~Realized investment gains (losses) including changes in market values of certain financial instruments between balance sheet dates, as well as gains and losses associated with invested asset sales~~

·~~Amortization of acquired intangible assets because these relate to costs incurred for acquisitions~~

·~~Results of transitioning clients because those results are not indicative of ongoing results~~

·also excluded. Special items ~~if any,~~are matters that management believes are not representative of the underlying results of operations due to ~~the~~their nature or ~~size of these matters. Further context about these items~~size. Adjusted income (loss) from operations is ~~provided in~~measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.

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

The Company defines adjusted revenues as total revenues excluding the ~~footnotes listed in the table below.~~

~~The~~ following ~~table presents the~~adjustments: special items ~~recorded by the Company for the three months ended March 31, 2019~~ and ~~2018.~~

Three Months Ended
(In millions)

March 31, 2019

March 31, 2018
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s)

After-tax

Before-tax

After-tax

Before-tax
Integration and transaction-related costs (selling, general and administrative expenses)

$
108

$
136

$
50

$
60

~~Summarized segment financial information for the three months ended March 31 was as follows:~~

(In millions)

Health
Services

Integrated
Medical

International
Markets

Group
Disability and
Other

Corporate and
Eliminations

Total
Three Months Ended March 31, 2019

Revenues from external customers (1)

$
26,197

$
8,910

$
1,384

$
1,109

$
-

$
37,600
Inter-segment revenues

737

162

-

7

(906)

-
Net investment income (loss)

15

123

38

180

(10)

346
Total revenues

26,949

9,195

1,422

1,296

(916)

37,946
Revenue contributions from transitioning clients

(4,489)

-

-

-

-

(4,489)
Net realized investment results from equity method subsidiaries (2)

-

-

(28)

-

-

(28)
Adjusted revenues

$
22,460

$
9,195

$
1,394

$
1,296

$
(916)

$
33,429
Income (loss) before taxes

$
942

$
1,157

$
222

$
93

$
(626)

$
1,788
Pre-tax adjustments to reconcile to adjusted income from operations

Adjustment for transitioning clients

(660)

-

-

-

-

(660)
(Income) attributable to noncontrolling interests

(1)

-

(4)

-

-

(5)
Net realized investment (gains) (2)

-

(5)

(23)

(10)

-

(38)
Amortization of acquired intangible assets

713

18

11

1

-

743
Special items

Integration and transaction-related costs

-

-

-

-

136

136
Pre-tax adjusted income (loss) from operations

$
994

$
1,170

$
206

$
84

$
(490)

$
1,964
(In millions)

Health Services

Integrated
Medical

International
Markets

Group
Disability and
Other

Corporate and
Eliminations

Total
Three Months Ended March 31, 2018

Revenues from external customers (1)

$
786

$
7,903

$
1,302

$
1,093

$
-

$
11,084
Inter-segment revenues

284

136

-

3

(423)

-
Net investment income

1

111

37

175

5

329
Total revenues

1,071

8,150

1,339

1,271

(418)

11,413
Net realized investment results from equity method subsidiaries (2)

-

-

2

-

-

2
Adjusted revenues

$
1,071

$
8,150

$
1,341

$
1,271

$
(418)

$
11,415
Income (loss) before taxes

$
83

$
972

$
213

$
103

$
(153)

$
1,218
Pre-tax adjustments to reconcile to adjusted income from operations

(Income) attributable to noncontrolling interests

-

-

(4)

-

-

(4)
Net realized investment losses (2)

-

18

4

12

1

35
Amortization of acquired intangible assets

-

22

4

1

-

27
Special items

Integration and transaction-related costs

-

-

-

-

60

60
Pre-tax adjusted income (loss) from operations

$
83

$
1,012

$
217

$
116

$
(92)

$
1,336

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

~~(2)~~ Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.

The following tables present the special items recorded by the Company for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended Nine Months Ended
(In millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s) After-tax Before-tax After-tax Before-tax After-tax Before-tax After-tax Before-tax
Debt extinguishment costs $ — $ — $ — $ — $ 110 $ 141 $ 151 $ 199
Integration and transaction-related (benefits) costs
(Selling, general and administrative expenses) (35) 13 83 112 1 58 256 339
(Benefits) charges associated with litigation matters
(Selling, general and administrative expenses) — — — — (21) (27) 19 25
Charge for organizational efficiency plan
(Selling, general and administrative expenses) — — — — — — 24 31
Risk corridors recovery
(Selling, general and administrative expenses) — — (76) (101) — — (76) (101)
Contractual adjustment for a former client
(Pharmacy revenues) — — (89) (117) — — (155) (204)
Total impact from special items $ (35) $ 13 $ (82) $ (106) $ 90 $ 172 $ 219 $ 289

Summarized segment financial information was as follows:
(In millions) Evernorth U.S. Medical International Markets Other Operations Corporate and Eliminations Total
Three months ended September 30, 2021
Revenues from external customers $ 32,668 $ 9,588 $ 1,500 $ 63 $ 1 $ 43,820
Inter-segment revenues 942 587 — — (1,529)
Net investment income 4 322 66 77 (1) 468
Total revenues 33,614 10,497 1,566 140 (1,529) 44,288
Net realized investment results from certain equity method investments — — 22 — — 22
Adjusted revenues $ 33,614 $ 10,497 $ 1,588 $ 140 $ (1,529) $ 44,310
Income (loss) before taxes $ 1,074 $ 1,075 $ 199 $ 32 $ (321) $ 2,059
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (10) — (6) — — (16)
Net realized investment (gains) losses — (93) 46 1 — (46)
Amortization of acquired intangible assets 484 6 11 — — 501
Special items
Integration and transaction-related (benefits) costs — — — — 13 13
Pre-tax adjusted income (loss) from operations $ 1,548 $ 988 $ 250 $ 33 $ (308) $ 2,511
(In millions) Evernorth U.S. Medical International Markets Other Operations Corporate and Eliminations Total
Three months ended September 30, 2020
Revenues from external customers $ 29,016 $ 9,047 $ 1,439 $ 1,156 $ — $ 40,658
Inter-segment revenues 926 478 — 6 (1,410)
Net investment income 2 104 38 152 1 297
Total revenues 29,944 9,629 1,477 1,314 (1,409) 40,955
Net realized investment results from certain equity method investments — — (37) — — (37)
Special item related to contractual adjustment for a former client (117) — — — — (117)
Adjusted revenues $ 29,827 $ 9,629 $ 1,440 $ 1,314 $ (1,409) $ 40,801
Income (loss) before taxes $ 1,086 $ 846 $ 253 $ 97 $ (478) $ 1,804
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (5) — (5) — — (10)
Net realized investment (gains) losses — 6 (48) (27) — (69)
Amortization of acquired intangible assets 479 6 8 — — 493
Special items
Integration and transaction-related (benefits) costs — — — — 112 112
Risk corridors recovery — (101) — — — (101)
Contractual adjustment for a former client (117) — — — — (117)
Pre-tax adjusted income (loss) from operations $ 1,443 $ 757 $ 208 $ 70 $ (366) $ 2,112

33

(In millions) Evernorth U.S. Medical International Markets Other Operations Corporate and Eliminations Total
Nine months ended September 30, 2021
Revenues from external customers $ 93,640 $ 28,879 $ 4,526 $ 175 $ 1 $ 127,221
Inter-segment revenues 3,174 1,692 — — (4,866)
Net investment income 12 744 180 233 — 1,169
Total revenues 96,826 31,315 4,706 408 (4,865) 128,390
Net realized investment results from certain equity method investments
— — 12 — — 12
Adjusted revenues $ 96,826 $ 31,315 $ 4,718 $ 408 $ (4,865) $ 128,402
Income (loss) before taxes $ 2,752 $ 3,144 $ 685 $ 67 $ (1,178) $ 5,470
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (21) — (18) — — (39)
Net realized investment (gains) losses (1)
4 (172) 49 3 — (116)
Amortization of acquired intangible assets 1,449 20 30 — — 1,499
Special items
Debt extinguishment costs — — — — 141 141
Integration and transaction-related (benefits) costs — — — — 58 58
(Benefits) charges associated with litigation matters — — — — (27) (27)
Pre-tax adjusted income (loss) from operations $ 4,184 $ 2,992 $ 746 $ 70 $ (1,006) $ 6,986
(In millions) Evernorth U.S. Medical International Markets Other Operations Corporate and Eliminations Total
Nine months ended September 30, 2020
Revenues from external customers
$ 82,986 $ 26,999 $ 4,325 $ 3,506 $ — $ 117,816
Inter-segment revenues 2,785 1,448 — 17 (4,250)
Net investment income 30 279 104 458 2 873
Total revenues 85,801 28,726 4,429 3,981 (4,248) 118,689
Net realized investment results from certain equity method investments — — (87) — — (87)
Special item related to contractual adjustment for a former client (204) — — — — (204)
Adjusted revenues $ 85,597 $ 28,726 $ 4,342 $ 3,981 $ (4,248) $ 118,398
Income (loss) before taxes $ 2,551 $ 3,529 $ 877 $ 298 $ (1,765) $ 5,490
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (12) — (15) — — (27)
Net realized investment (gains) losses (1)
— 28 (75) (22) — (69)
Amortization of acquired intangible assets 1,439 23 22 3 — 1,487
Special items
Debt extinguishment costs — — — — 199 199
Integration and transaction-related (benefits) costs — — — — 339 339
(Benefits) charges associated with litigation matters — — — — 25 25
Charge for organizational efficiency plan — — — — 31 31
Risk corridors recovery — (101) — — — (101)
Contractual adjustment for a former client (204) — — — — (204)
Pre-tax adjusted income (loss) from operations $ 3,774 $ 3,479 $ 809 $ 279 $ (1,171) $ 7,170

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

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

Three Months Ended

March 31,

(In millions)

2019

2018

Products (Pharmacy revenues) (ASC 606)

Home delivery and specialty revenues

$
11,784

$
717

Network revenues

12,273

-

Other

1,122

-

Total pharmacy revenues

25,179

717

Insurance premiums

Integrated Medical premiums (ASC 944)

Commercial Premiums

Risk

3,039

2,611

Stop loss

1,069

980

Other

278

258

Government

Medicare Advantage

1,607

1,498

Medicare Part D

525

228

Other

1,065

1,101

Total Integrated Medical premiums

7,583

6,676

International Markets premiums

1,304

1,260

Domestic disability, life and accident premiums

1,047

998

Other premiums

37

65

Total premiums

9,971

8,999

Services (ASC 606)

Fees

2,390

1,352

Other external revenues

60

16

Total services

2,450

1,368

Total revenues from external customers

$
37,600

$
11,084

~~The Health Services segment~~September 30:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2021		2020		2021		2020
Products (Pharmacy revenues) (ASC 606)
Network revenues	$	15,797	$	13,968	$	45,390	$	39,200
Home delivery and specialty revenues	13,515		12,422		38,987		36,319
Other	1,701		1,412		4,708		3,945
Total pharmacy revenues	31,013		27,802		89,085		79,464
Insurance premiums (ASC 944)
U.S. Medical premiums
U.S. Commercial
Health Insurance	3,591		3,397		10,692		9,948
Stop loss	1,225		1,146		3,613		3,459
Other	320		281		938		853
U.S. Government
Medicare Advantage	2,079		1,895		6,287		5,680
Medicare Part D	315		360		1,175		1,242
Other	1,241		1,117		3,606		3,246
Total U.S. Medical premiums	8,771		8,196		26,311		24,428
International Markets premiums	1,446		1,360		4,338		4,079
Domestic disability, life and accident premiums	—		1,106		—		3,346
Other premiums	58		20		163		75
Total premiums	10,275		10,682		30,812		31,928
Services (ASC 606)
Fees	2,513		2,120		7,185		6,253
Other external revenues	19		54		139		171
Total services	2,532		2,174		7,324		6,424
Total revenues from external customers	$	43,820	$	40,658	$	127,221	$	117,816

Evernorth may also provide certain financial and performance guarantees, ~~in its pharmacy benefit management contracts~~ including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive ~~performance penalties~~compensation if we fail to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue for any estimated payouts within ~~accrued~~Accrued expenses and other

liabilities (current). These estimates are adjusted at the end of the guarantee period. ~~Historically, adjustments to original estimates have not been material.~~ The ~~balance~~performance guarantee liability was $1.0 billion as of ~~March 31, 2019~~September 30, 2021 and ~~$895 million~~$1.1 billion as of December 31, ~~2018.~~

The Company recognized revenues as follows from Anthem and the Department of Defense for the three months ended March 31, 2019. The Company did not recognize revenue from these two customers for the three months ended March 31, 2018. These revenues were reported in the Health Services segment.

		~~Three Months Ended~~
		~~March 31, 2019~~
~~Anthem~~		~~12%~~
~~Department of Defense~~		8%

2020.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition as of ~~March 31, 2019~~September 30, 2021 compared with December 31, ~~2018~~2020 and our results of operations for the three and nine months ended ~~March 31, 2019~~September 30, 2021, compared with the same ~~period~~periods last ~~year.~~year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2018 (“2018~~ 2020 ("Form ~~10-K”~~10-K")~~, in~~. In particular, we encourage you to refer to the “Risk Factors” contained in Part I, Item 1A of ~~that form.~~

the 2020 Form 10-K.

Unless otherwise indicated, financial information in ~~the~~this MD&A is presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 2 to the Consolidated Financial Statements in our ~~2018~~2020 Form 10-K for additional information regarding the ~~Company’s~~Company's significant accounting policies and see Note 2 to ~~these~~the Consolidated Financial Statements in ~~the~~this Form 10-Q for updates to those ~~accounting~~ policies resulting from adopting new accounting ~~guidance.~~guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors ~~such as the seasonal nature of portions of the health care and related pharmacy and other benefits businesses, as well as competitive and other market conditions,~~ call for caution in estimating full-year results based on interim results of operations. In some of our financial tables in this MD&A, we present either percentage changes or “N/M” when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points (“bps”).

In this MD&A, our consolidated measures “adjusted income from operations,” earnings per share on that same basis and “adjusted revenues” are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of “shareholders’ net income,” “earnings per share” and “total revenues.” ~~As discussed in Note 18, we~~We also use pre-tax adjusted income from operations and adjusted revenues to measure the results of our segments.

~~We use~~

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

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

·~~Results of transitioning clients because those results are not indicative of ongoing results~~.

·Special items ~~if any,~~are matters that management believes are not representative of the underlying results of operations due to ~~the~~their nature or ~~size~~size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders’ net income. See the below Financial Highlights section for a reconciliation of ~~these matters. See Note 18~~consolidated adjusted income from operations to ~~the Consolidated Financial Statements for descriptions of special items.~~

~~Adjusted~~shareholders’ net income.

The Company defines adjusted revenues ~~is defined~~ as total revenues excluding the following adjustments: ~~revenue contributions from transitioning clients,~~ special items and ~~Cigna’s~~Cigna's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.

Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a

substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a reconciliation of consolidated adjusted revenues to total revenues.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our ~~financial,~~ strategic and operational ~~plans or~~ initiatives; ~~our ability to predict and manage medical and pharmacy costs and price effectively;~~ our ability to adapt to changes ~~or trends~~ in an evolving and rapidly changing industry; the scale, scope and duration of the COVID-19 pandemic and its potential impact on our business, operating results, cash flows or financial condition; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or increase market share; price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain ~~good~~satisfactory relationships with physicians, hospitals, other health ~~care~~service providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical ~~manufacturers;~~manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug ~~pricing; the impact of modifications~~pricing or industry pricing benchmarks; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations; risks related to ~~our operations and processes; our ability to identify potential~~ strategic ~~acquisitions or~~ transactions and ~~realize~~realization of the expected benefits ~~(including anticipated synergies)~~ of such transactions, ~~in full or within the anticipated time frame,~~ including with respect to the ~~Merger,~~sale of our international life, accident and supplemental benefits business, as well as integration difficulties or underperformance relative to expectations; dependence on success of relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; our ability to ~~integrate operations, resources~~invest in and properly maintain our information technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data security incident; potential liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; ~~the outcome of litigation, regulatory audits, investigations, actions and/or guaranty fund assessments;~~ uncertainties surrounding participation in government-sponsored programs such as Medicare; the ~~effectiveness~~outcome of litigation, regulatory audits, investigations; compliance with applicable privacy, security and ~~security~~data laws, regulations and standards; potential failure of our ~~information technology~~prevention, detection and ~~other business~~control systems; unfavorable economic and market conditions, stock market or interest rate declines, risks related to a downgrade in financial strength ratings of our insurance subsidiaries; the impact of our ~~debt service obligations on~~significant indebtedness and the ~~availability of funds~~potential for ~~other business purposes;~~further indebtedness in the future; unfavorable industry, economic or political ~~conditions, including foreign currency movements; acts of war, terrorism, natural disasters or pandemics;~~conditions; credit risk related to our reinsurers; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors ~~and~~of our 2020 Form 10-K, Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our ~~2018~~2020 Form 10-K, this MD&A and as described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

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

EXECUTIVE OVERVIEW

~~As described more fully in Note 4 to our Consolidated~~

Financial ~~Statements, on December 20, 2018, we completed the acquisition of Express Scripts Holding Company (“Express Scripts”) and changed our segments effective in the fourth quarter of 2018.~~ Highlights

See Note 1 to ~~our~~the Consolidated Financial Statements for a description of our segments. As described further in Note 2 to the Consolidated Financial Statements, we adopted Article 5 of Regulation S-X issued by the SEC effective December 31, 2018. Prior year information presented in this Form 10-Q has been restated to reflect these changes. In addition, as discussed in Note 18 to our Consolidated Financial Statements, effective in the first quarter of 2019, compensation cost for stock options is now recorded by our segments. Prior year segment information has not been restated for this change. Results for the three months ended March 31, 2019 included the results of Express Scripts’ business, whereas results for the three months ended March 31, 2018 reflected Cigna’s stand-alone historical results. Unless otherwise specified, theThe commentary provided below describes our results for the three and nine months ended ~~March 31, 2019~~September 30, 2021 compared with the same ~~period~~periods in ~~2018.~~

2020. Unless specified otherwise, commentary applies to both the three and nine month periods.

Summarized below are certain key measures of our performance by segment for the three and nine months ended ~~March 31, 2019~~September 30, 2021 and ~~2018:~~

~~Financial Highlights by Segment~~

Three Months Ended
March 31,

(Dollars in millions, except per share amounts)

2019

2018

% Change

Revenues

Adjusted revenues by segment

Health Services

$
22,460

$
1,071

N/M

Integrated Medical

9,195

8,150

13
%
International Markets

1,394

1,341

4

Group Disability and Other

1,296

1,271

2

Corporate, including eliminations

(916)

(418)

(119)

Adjusted revenues

33,429

11,415

193

Revenue contributions from transitioning clients

4,489

-

N/M

Net realized investment gains (losses) from equity method subsidiaries

28

(2)

N/M

Total revenues

$
37,946

$
11,413

232
%
Shareholders’ net income

$
1,368

$
915

50
%
Adjusted income from operations

$
1,498

$
1,010

48
%
Earnings per share (diluted)

Shareholders’ net income

$
3.56

$
3.72

(4)
%
Adjusted income from operations

$
3.90

$
4.11

(5)
%
Pre-tax adjusted income from operations by segment

Health Services

$
994

$
83

N/M

Integrated Medical

1,170

1,012

16
%
International Markets

206

217

(5)

Group Disability and Other

84

116

(28)

Corporate

(490)

(92)

N/M

Consolidated pre-tax adjusted income (loss) from operations

1,964

1,336

47

Adjustment for transitioning clients

660

-

N/M

Income attributable to noncontrolling interests

5

4

25

Realized investment gains (losses)

38

(35)

209

Amortization of acquired intangible assets

(743)

(27)

N/M

Special items

(136)

(60)

(127)

Income before income taxes

$
1,788

$
1,218

47
%

2020:
Financial highlights by segment
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts) 2021 2020 % Change 2021 2020 % Change
Revenues
Adjusted revenues by segment
Evernorth $ 33,614 $ 29,827 13 % $ 96,826 $ 85,597 13 %
U.S. Medical 10,497 9,629 9 31,315 28,726 9
International Markets 1,588 1,440 10 4,718 4,342 9
Other Operations 140 1,314 (89) 408 3,981 (90)
Corporate, net of eliminations (1,529) (1,409) (9) (4,865) (4,248) (15)
Adjusted revenues 44,310 40,801 9 128,402 118,398 8
Net realized investment results from certain equity method investments (22) 37 N/M (12) 87 N/M
Special items — 117 N/M — 204 N/M
Total revenues $ 44,288 $ 40,955 8 % $ 128,390 $ 118,689 8 %
Shareholders’ net income $ 1,621 $ 1,388 17 % $ 4,249 $ 4,323 (2) %
Adjusted income from operations $ 1,936 $ 1,618 20 % $ 5,408 $ 5,528 (2) %
Earnings per share (diluted)
Shareholders’ net income $ 4.80 $ 3.78 27 % $ 12.32 $ 11.66 6 %
Adjusted income from operations $ 5.73 $ 4.41 30 % $ 15.69 $ 14.91 5 %
Pre-tax adjusted income (loss) from operations by segment
Evernorth $ 1,548 $ 1,443 7 % $ 4,184 $ 3,774 11 %
U.S. Medical 988 757 31 2,992 3,479 (14)
International Markets 250 208 20 746 809 (8)
Other Operations 33 70 (53) 70 279 (75)
Corporate, net of eliminations (308) (366) 16 (1,006) (1,171) 14
Consolidated pre-tax adjusted income from operations 2,511 2,112 19 6,986 7,170 (3)
Income attributable to noncontrolling interests 16 10 60 39 27 44
Net realized investment gains (losses) (1)
46 69 (33) 116 69 68
Amortization of acquired intangible assets (501) (493) (2) (1,499) (1,487) (1)
Special items (13) 106 N/M (172) (289) 40
Income before income taxes $ 2,059 $ 1,804 14 % $ 5,470 $ 5,490 — %

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

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


Consolidated Results of Operations (GAAP basis)
	Three Months Ended September 30,								Nine Months Ended September 30,
(Dollars in millions)	2021			2020			% Change		2021			2020			% Change


Pharmacy revenues	$	31,013		$	27,802		12	%	$	89,085		$	79,464		12	%
Premiums	10,275			10,682			(4)		30,812			31,928			(3)
Fees and other revenues	2,532			2,174			16		7,324			6,424			14
Net investment income	468			297			58		1,169			873			34
Total revenues	44,288			40,955			8		128,390			118,689			8
Pharmacy and other service costs	30,070			26,624			13		86,306			76,425			13
Medical costs and other benefit expenses	8,330			8,429			(1)		24,819			23,863			4
Selling, general and administrative expenses	3,093			3,301			(6)		9,368			10,106			(7)
Amortization of acquired intangible assets	501			493			2		1,499			1,487			1
Total benefits and expenses	41,994			38,847			8		121,992			111,881			9
Income from operations	2,294			2,108			9		6,398			6,808			(6)
Interest expense and other	(303)			(336)			10		(915)			(1,101)			17
Debt extinguishment costs	—			—			N/M		(141)			(199)			29


Net realized investment gains (losses)	68			32			113		128			(18)			N/M
Income before income taxes	2,059			1,804			14		5,470			5,490			—
Total income taxes	424			406			4		1,188			1,143			4
Net income	1,635			1,398			17		4,282			4,347			(1)
Less: Net income attributable to noncontrolling interests	14			10			40		33			24			38
Shareholders' net income	$	1,621		$	1,388		17	%	$	4,249		$	4,323		(2)	%
Consolidated effective tax rate	20.6		%	22.5		%	(190)	bps	21.7		%	20.8		%	90	bps
Medical customers (in thousands)
U.S. Medical									15,305			15,314			—	%
International Markets									1,736			1,668			4
Total									17,041			16,982			—	%


Reconciliation of Shareholders’ Net Income (GAAP) to Adjusted Income from Operations
	Dollars in Millions								Diluted Earnings Per Share
	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,

	2021		2020		2021		2020			2021		2020		2021		2020
Shareholders’ net income	$	1,621	$	1,388	$	4,249	$	4,323		$	4.80	$	3.78	$	12.32	$	11.66
After-tax adjustments required to reconcile to adjusted income from operations
Net realized investment (gains) losses (1)	(42)		(64)		(99)		(75)			(0.12)		(0.17)		(0.29)		(0.20)
Amortization of acquired intangible assets	392		376		1,168		1,061			1.15		1.02		3.40		2.86

Special items
Debt extinguishment costs	—		—		110		151			—		—		0.32		0.41
Integration and transaction-related (benefits) costs	(35)		83		1		256			(0.10)		0.23		—		0.69
(Benefits) charges associated with litigation matters	—		—		(21)		19			—		—		(0.06)		0.05
Charge for organizational efficiency plan	—		—		—		24			—		—		—		0.06
Risk corridors recovery	—		(76)		—		(76)			—		(0.21)		—		(0.20)
Contractual adjustment for a former client	—		(89)		—		(155)			—		(0.24)		—		(0.42)


Total special items	(35)		(82)		90		219			(0.10)		(0.22)		0.26		0.59
Adjusted income from operations	$	1,936	$	1,618	$	5,408	$	5,528		$	5.73	$	4.41	$	15.69	$	14.91

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

COVID-19 Update

As Cigna closely monitors the evolving dynamics of the COVID-19 pandemic, the Company’s commitment to the health and safety of its employees, customers and clients remains our primary focus. Cigna firmly believes COVID-19 vaccinations help control the spread of the virus, limit the severity of the disease and save lives. The Company continues its work to increase vaccinations by enabling, educating and encouraging vaccine acceptance across all eligible populations. Cigna continues to provide access to care and supportive resources to help everyone it serves knowledgeably navigate the pandemic and take care of their physical and mental health during this time.

For the third quarter of 2021, COVID-19 impacts are most notable in our U.S. Medical segment as net unfavorable COVID-19 related impacts increased as compared with the same period in 2020. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines as well as lower risk adjustment revenues in our Medicare Advantage business. For the nine months ended September 30, 2021 compared with the same period in 2020 the net unfavorable impacts reflect increased direct costs of COVID-19 testing, treatment and vaccines, the significant deferral of care by our customers in 2020, lower risk adjustment revenues in our Medicare Advantage business and increased disenrollment resulting from the economic effects of the pandemic. These impacts were partially offset by the absence of the premium relief programs implemented in the second quarter of 2020.

We continue to execute our business continuity plans over our operations such as optimizing purchasing volume across the pharmaceutical supply chain in order to mitigate risk of disruption with prescription drug supply due to ongoing global supply disruptions.

The situation surrounding COVID-19 remains fluid with continued uncertainty and a wide range of potential outcomes. We continue to actively manage our response and assess impacts to our financial position and operating results, as well as mitigate adverse developments in our business. There continues to be uncertainty surrounding the pace, duration and extent of the COVID-19 pandemic and its related impacts — including the vaccination efforts and new COVID-19 variants — on ~~page 54.~~

~~Consolidated Results~~our results for the remainder of ~~Operations (GAAP basis)~~

Three Months Ended
March 31,

(Dollars in millions)

2019

2018

% Change

Pharmacy revenues

$
25,179

$
717

N/M

Premiums

9,971

8,999

11
%
Fees and other revenues

2,450

1,368

79

Net investment income

346

329

5

Total revenues

37,946

11,413

232

Pharmacy and other service costs

24,050

561

N/M

Medical costs and other benefit expenses

7,620

6,772

13

Selling, general and administrative expenses

3,303

2,745

20

Amortization of acquired intangible assets

743

27

N/M

Total benefits and expenses

35,716

10,105

253

Income from operations

2,230

1,308

70

Interest expense and other

(452)

(57)

N/M

Net realized investment gains (losses)

10

(33)

130

Income before income taxes

1,788

1,218

47

Income taxes

416

301

38

Net income

1,372

917

50

Less: net income attributable to noncontrolling interest

4

2

100

Shareholders’ net income

$
1,368

$
915

50
%
Consolidated effective tax rate

23.3
%
24.7
%

140
bps
Medical customers (in thousands)

Integrated Medical

15,421

15,214

1
%
International Markets

1,572

1,555

1

Total

16,993

16,769

1
%

~~Reconciliation~~2021 and beyond. We believe that such financial results may continue to be impacted by, among other things, vaccine related costs, higher medical costs to treat those affected by the virus, lower customer volumes due to a disrupted employment market, lower risk adjustment revenue due to disrupted care impeding appropriate documentation of ~~Shareholders’ Net Income to Adjusted Income from Operations~~

Diluted Earnings Per Share

Three Months Ended

Three Months Ended

March 31,

March 31,

(In millions, except per share amounts)

2019

2018

2019

2018

Shareholders’ net income

$
1,368

$
915

$
3.56

$
3.72

After-tax adjustments required to reconcile to adjusted income from operations

- Adjustment for transitioning clients

(504)

-

(1.31)

-

- Net realized investment (gains) losses

(38)

25

(0.10)

0.10

- Amortization of acquired intangible assets

564

20

1.47

0.08

Special items

- Integration and transaction-related costs

108

50

0.28

0.21

Adjusted income from operations

$
1,498

$
1,010

$
3.90

$
4.11

customer risk profiles in our Medicare Advantage business, the pace at which costs return as well as the severity of costs for those who had previously deferred care, the potential for future deferral of care, or volatility in the economic markets.

For further information regarding the potential impact of COVID-19 on the Company, see “Risk Factors” contained in Part I, Item 1A of our 2020 Form 10-K.

Commentary: Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

~~Earnings~~September 30, 2020

The commentary presented below, and ~~Revenue~~

in the segment discussions that follow, compare results for the three and nine months ended September 30, 2021 with results for the three and nine months ended September 30, 2020. Unless otherwise specified, commentary applies to both the three and nine month periods.

Shareholders’ net income increased for the three months ended September 30, 2021 compared with the same period last year, primarily driven by ~~the earnings contribution from Express Scripts and~~ higher adjusted income from operations (see below). For the nine months ended September 30, 2021, shareholders' net income decreased slightly compared with the same period last year, reflecting a decline in adjusted income from operations (see below). For the ~~Integrated Medical segment, partially offset by interest expense on debt issued to finance the Express Scripts acquisition. The decline~~nine months ended September 30, 2021 shareholders' net income increased on a per-share basis ~~also reflects the dilution caused by shares issued in connection~~compared with the ~~Express Scripts acquisition.~~

same period last year due to the favorable effect of the share repurchase program.

Adjusted income from operations increased ~~reflecting~~for the three months ended September 30, 2021 compared with the same period last year, primarily resulting from higher earnings across our reporting segments, partially offset by the absence of earnings from ~~Express Scripts’ pharmacy benefits~~the sold Group Disability and ~~medical management businesses reported~~Life business. The increase in earnings in the ~~Health Services segment. Improved results~~Evernorth segment was primarily attributable to effective management of supply chain and business growth; in ~~Integrated~~the U.S. Medical ~~also contributed~~and International segments, earnings growth largely reflected significantly higher net investment income (see net investment income discussion below). For the nine months ended September 30, 2021, adjusted income from operations declined compared with the same period last year, primarily due to lower earnings in U.S. Medical reflecting the ~~increase.~~unfavorable impacts of COVID-19 and the absence of earnings from the sold Group Disability and Life business. These ~~favorable results~~unfavorable effects were partially offset by ~~higher interest expense reported~~increased earnings in ~~Corporate~~the Evernorth segment. For the nine months ended September 30, 2021, adjusted income from ~~the debt issued to finance the acquisition and the debt assumed from Express Scripts. On~~operations increased on a per-share basis ~~the decrease also reflects the dilution caused by shares issued in connection~~compared with the ~~Express Scripts acquisition.~~

same period last year due to the favorable effect of the share repurchase program.

Medical customers~~increased, primarily attributable to~~ were flat, reflecting growth in our Select, Individual, International Markets and Medicare Advantage businesses, offset by a lower customer base in our National Accounts and Middle Markets segments including disenrollment resulting from the ~~select market segment.~~economic impacts of the COVID-19 pandemic.

Pharmacy revenues increased, reflecting inflation on branded drugs and higher claim volume, primarily due to our collaboration with Prime Therapeutics. See the ~~Integrated Medical segment section for additional discussion.~~

~~Revenue~~ ~~growth largely reflects the addition of Express Scripts and, to a lesser extent, business growth in the Integrated Medical segment. Detailed revenue items are discussed further below.~~

·~~Pharmacy revenues~~ ~~in 2019 reflect the Express Scripts pharmacy benefit management business. In 2018, Cigna’s home delivery business comprised the entire~~ ~~amount. See the Health Services~~"Evernorth segment" section of this MD&A for further discussion of ~~pharmacy~~Pharmacy revenues.

Premiums were lower, reflecting the sale of the Group Disability and Life business. This effect was partially offset by an increase in U.S. Medical premiums resulting from increased customers in our insured businesses, higher primarily resulting from: 1) customer growth across all segments, predominantly Integrated Medical: 2) a contribution from Express Scripts’ Medicare Part D business, and 3) rate increases in Integrated Medical in line withpremium rates due to anticipated underlying medical cost ~~trend.~~

·trend and, for the nine months ended September 30,2021 the absence of premium relief programs implemented in the second quarter of 2020 in response to deferred care due to the COVID-19 pandemic.

Fees and other ~~revenues.~~ ~~The increase was~~revenues increased, primarily driven by ~~contributions from Express Scripts’ medical management business reported~~growth in ~~the Health Services segment. To a lesser extent, higher fees in~~Evernorth's pharmacy services business.

Net investment income increased due to strong returns on our ~~Integrated Medical segment contributed~~securities limited partnership investments, partially offset by lower average assets due to the ~~increase. The increases in Integrated Medical were due to growth in our specialty businesses~~sale of the Group Disability and ~~an increased customer base~~Life business. See the "Investment Assets" section of this MD&A for ~~our administrative services only (“ASO”) business.~~

·~~Net investment income~~ ~~was higher reflecting growth in average assets.~~

~~Other Components of Consolidated Results of Operations~~

·further discussion.

Pharmacy and other service ~~costs.~~ ~~In 2019, this amount is largely comprised of Express Scripts’ pharmacy benefits~~costs increased, reflecting inflation on branded drugs and ~~medical management~~ ~~businesses~~ ~~reported in the Health Services segment. In 2018, Cigna home delivery comprised the entire amount.~~

·higher claim volume, primarily due to our collaboration with Prime Therapeutics.

Medical costs and other benefit expenses ~~increased,~~ decreased slightly for the three months ended September 30, 2021 compared with the same period last year, reflecting the sale of the Group Disability and Life business, largely ~~attributable~~ offset by an increase in U.S. Medical due to ~~the addition~~higher costs of ~~Express Scripts’ Medicare Part D business along with~~COVID-19 treatment, testing and vaccines and customer growth in our insured businesses. For the nine months ended September 30, 2021, the increase compared with the same period last year was due to higher medical costs in U.S. Medical for the reasons cited above and ~~medical cost inflation~~a significant reduction in ~~Integrated Medical.~~

·deferred care in 2021 as compared to 2020. Most care was deferred in the second quarter of 2020, with claims returning to more normal levels beginning in the third quarter of 2020. These unfavorable effects were partially offset by the sale of the Group Disability and Life business.

Selling, general and administrative expenses ~~increased,~~decreased, primarily ~~due to~~resulting from the ~~addition~~sale of ~~Express Scripts. To a lesser extent, volume-related expenses in Integrated Medical~~the Group Disability and ~~increased integration~~Life business and ~~transaction-related costs (reported as a special item) also contributed to~~ the ~~expense growth. These increases were partially offset by suspension~~elimination of the health insurance industry ~~tax~~tax. These favorable effects were partially offset by expense growth in ~~2019.~~

·~~Amortization of acquired intangible assets~~ ~~in 2019 primarily reflects the impact of the Express Scripts acquisition. See Note 3 in the Consolidated Financial Statements of our 2018 Form 10-K for additional~~ ~~information~~ ~~on the intangible assets identified in the Express Scripts acquisition.~~

·Evernorth and U.S. Medical reflecting business growth.

Interest expense and other~~increased significantly primarily~~ decreased due to ~~interest incurred on~~lower levels of average outstanding debt ~~issued in the third quarter of 2018 to finance the Express Scripts acquisition along with Express~~ ~~Scripts’~~resulting from debt ~~assumed upon closing of the acquisition.~~

·~~Realized investment gains (losses).~~ ~~We reported realized investment gains~~repayments.

Debt extinguishment costs were lower for the ~~three~~nine months ended ~~March, 31, 2019~~September 30, 2021 compared with ~~losses for~~ the same period last ~~year. The~~ ~~improvement~~ ~~largely~~year because the debt repaid in 2021 had lower interest rates than the debt repaid in 2020.

Realized investment results ~~from~~ significantly improved, primarily due to favorable market value adjustments on equity securities in 2021 compared with 2020 and ~~higher gains~~lower credit loss reserves on ~~sales of fixed maturities.~~

·debt securities.

Effective tax rate. The ~~consolidated effective tax rate~~ ~~declined, due to suspension~~decrease for the three months ended September 30, 2021 compared with the same period last year primarily reflects the repeal of the nondeductible health insurance industry tax in ~~2019.~~

~~Key Transactions~~2021. For the nine months ended September 30, 2021, the effective tax rate was higher than the same period last year, driven by recognition of certain incremental federal and ~~Developments~~

~~Acquisition~~state tax benefits in the first quarter of ~~Express Scripts~~

~~As discussed~~2020, partially offset by the repeal of the nondeductible health insurance industry tax in ~~more detail~~2021.

Developments

Medicare Star Quality Ratings (“Star Ratings”)

The Centers for Medicare & Medicaid Services ("CMS") uses a Star Rating system to measure how well Medicare Advantage (“MA”) plans perform, scoring how well plans perform in several categories, including quality of care and customer service. Star Ratings range from one to five stars. CMS recognizes plans with Star Ratings of four stars or greater with quality bonus payments and the ability to offer enhanced benefits. Approximately 87% of our ~~2018 Form 10-K,~~ MA customers were in four star or greater plans for bonus payments received in 2021 and approximately 88% were in four star or greater plans for bonus payments to be received in 2022; we expect this percentage to increase to 89% for bonus payments to be received in 2023.

Agreement to sell International Markets life, accident and supplemental benefits businesses

Cigna ~~acquired Express Scripts on December 20, 2018~~entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc. ("Chubb") for $5.75 billion cash. Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a ~~cash~~joint venture in Turkey in 2022. The “Liquidity and ~~stock transaction valued at $52.8 billion. The “Liquidity”~~Capital Resources” section of this MD&A provides ~~further~~discussion of the expected impact of this transaction to liquidity.

Purchase of MDLIVE

As discussed in Note 4 to the Consolidated Financial Statements, on April 19, 2021 Cigna's Evernorth segment completed the acquisition of MDLIVE, Inc., a 24/7 virtual care platform. The acquisition of MDLIVE will enable Evernorth to continue expanding access to virtual care and delivering a more affordable, convenient and connected care experience for consumers. The “Liquidity and Capital Resources” section of this MD&A provides discussion of the impact of this transaction on liquidity.

Sale of Group Disability and Life Business

As discussed in Note 4 to the ~~acquisition~~Consolidated Financial Statements, Cigna sold its U.S. Group Disability and Life business to New York Life Insurance Company for $6.2 billion on ~~our liquidity~~December 31, 2020. The “Liquidity and ~~capital resources.~~

~~We continue to incur costs related to~~Capital Resources” section of this ~~transaction. These costs are being reported in “integration and transaction-related costs” as a special item and excluded from adjusted income from operations. The results~~MD&A provides discussion of the Express Scripts’ business were included in Cigna’s consolidated financial information for the three months ended March 31, 2019, whereas the three months ended March 31, 2018 reflected Cigna’s stand-alone historical results.

On January 30, 2019, Anthem exercised its early termination right and terminated the pharmacy benefit management services agreement with us, effective March 1, 2019. There is a twelve-month transition period ending March 1, 2020. use of proceeds from this divestiture.

Regulation

The ~~transition~~"Business - Regulation" section of Anthem’s customers is expected to occur at various dates, as informed by Anthem’s technology platform migration schedule. Over the next twelve months, we will focus on an effective transition of this relationship and related services over Anthem’s accelerated timeline. We exclude the results of Express Scripts’ contract with Anthem (and also Coventry) from our ~~non-GAAP reporting metrics “adjusted revenues” and “adjusted income from operations.” We refer to these clients as “transitioning clients.”~~

~~Industry Developments and Other Matters Affecting Our Health Services and Integrated Medical Segments~~

~~Our 2018~~2020 Form 10-K provides a detailed description of The Patient Protection and Affordable Care Act (“ACA”) provisions and other legislative initiatives that impact our ~~health care and pharmacy services~~ businesses, including regulations issued by the Centers for Medicare & Medicaid Services (“CMS”) and the Departments of the Treasury and Health and Human ~~Services (“HHS”). The health care and pharmacy services~~Services. Our businesses continue to operate in a dynamic environment, and the laws and regulations applicable to ~~these businesses,~~us, including the ACA, continue to be subject to legislative, regulatory and judicial challenges.

The ~~table presented below~~Patient Protection and Affordable Care Act ("ACA")

ACA Litigation: As described in the “Business - Regulation” section of our 2020 Form 10-K, a federal district court ruled that the “individual mandate” in the ACA is unconstitutional and that the entire law must be struck down. On appeal, the Court of Appeals for the Fifth Circuit agreed that the “individual mandate” is unconstitutional but ordered the district court to reexamine whether the other provisions of the ACA can remain in effect, thereby leaving in doubt whether the entire ACA is unconstitutional until there is a final judicial determination on appeal. The California-led states and the U.S. House of Representatives filed petitions seeking to appeal the Fifth Circuit's ruling to the U.S. Supreme Court. The case was argued before the Supreme Court on November 10, 2020. On June 17, 2021, the Supreme Court issued its decision, upholding the ACA in its entirety. There are no changes to our business as a result of the decision.

Cost-Sharing Reduction Subsidies: The ACA provides for cost-sharing reductions that offset the amount that qualifying customers pay for deductibles, copays and coinsurance. The federal government stopped funding insurers for the cost-sharing reduction ("CSR”) subsidies in 2017. Certain insurers have sued the federal government for failure to pay cost-sharing reduction subsidies. In the first set of consolidated appeals, the Court of Appeals for the Federal Circuit issued a decision on August 14, 2020, finding that (i) the CSR reimbursement provision of the ACA imposes an ~~update~~obligation on the ~~impact~~government to pay, but (ii) the insurers' damages must be reduced by the amount of additional premium tax credit payments that each insurer received as a result of the government’s termination of CSR payments. On February 19, 2021 two insurers filed a petition seeking Supreme Court review. On June 21, 2021, the Supreme Court declined the insurers’ petitions, which means the decision from the Court of Appeals for the Federal Circuit stands and will not

be modified further. As described in Note 15 to the Consolidated Financial Statements, we filed a lawsuit in May 2020 against the federal government seeking payment of these subsidies. Our case remains pending. Our premium rates for the 2018, 2019, 2020 and 2021 plan years reflected a lack of government funding for cost-sharing reduction subsidies.

Corporate Tax Reform. Recent proposals related to corporate tax reform propose raising corporate taxes, among other things. Some proposed reforms could have a material impact on our future results of operations. We will continue to monitor developments.

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

Transparency in Coverage. As previously disclosed in our 2020 Form 10-K, in October 2020, the Departments of Health and Human Services, Labor and the Treasury issued a final rule that requires most group health plans and health insurance issuers in the individual and group markets to disclose price and cost-sharing information for all items and ~~other matters affecting~~services to participants and enrollees (the “Rule”). On August 20, 2021, the agencies jointly released guidance regarding the implementation of the Rule. Importantly, the guidance announced that the agencies will (i) indefinitely defer enforcement of the Rule’s requirement that plans and issuers publish machine-readable files relating to prescription drug pricing pending further rulemaking and (ii) defer enforcement of the Rule’s requirement to publish the remaining machine-readable files until July 1, 2022.

Risk Adjustment. As discussed in the “Regulation” and “Risk Factors” sections of our ~~Integrated Medical and Health Services segments as of March 31, 2019.~~


~~Item~~			~~Description~~

~~Medicare Advantage~~			~~Medicare Star Quality Ratings (“Star Ratings”):~~ Medicare Advantage (“MA”) plans must have a Star Rating of four Stars or greater to qualify for bonus payments. Approximately 73% of our Medicare Advantage customers are in a four Star or greater plan for bonus payments to be received in 2019. We expect this percentage to increase to 77% for bonus payments to be received in 2020. ~~MA Rates:~~ ~~Final MA reimbursement rates for~~ 2020 ~~were published by CMS in April 2019. We do not expect the new rates to have a material impact on our consolidated results of operations in 2020.~~
			~~Risk Adjustment Validation (“RADV”) Audits:~~ ~~As discussed in the “Regulation” and “Risk Factors” sections of our 2018~~ Form 10-K, our MA business is subject to reviews, including RADV audits. In 2012, CMS released a payment methodology that provided for sample audit error rates to be extrapolated to the entire MA contract after comparing audit results to a similar audit of Medicare Fee for Service (the “FFS Adjuster”) and applying an FFS Adjuster to establish actuarial equivalency in payment rates as required by the Medicare statute. However, a methodology to calculate the FFS Adjuster was not finalized and CMS has, to date, not completed any RADV audits using extrapolation. In 2018, CMS issued a proposed rule that included, among other things, extrapolation of the error rate related to audit findings without applying the FFS Adjuster. This rule is discussed further in the Regulation section of our 2018 Form 10-K. If adopted in its current form, the rule could have a detrimental impact to all MA insurers and affect the ability of plans to deliver high quality health care for the population served. While it is uncertain that CMS will finalize the rule as proposed, if they did, it could have a material impact on the Company’s future results of operations.


~~Item~~			~~Description~~

~~Health Insurance Industry Tax~~			~~Health Insurance Industry Tax:~~ Federal legislation suspended the health insurance industry tax for 2019 and our premium rates for 2019 reflect this suspension. For the three months ended March 31, 2018 we recorded $97 million for the industry tax. Under current legislation, the tax is expected to return in 2020.
~~Public Health Exchanges~~			~~Market Participation:~~ For 2019, we expanded our individual coverage to Arizona while continuing to offer coverage on the public health insurance exchanges where we were represented in 2018: Colorado, Illinois, Missouri, North Carolina, Tennessee and Virginia. ~~Cost Sharing Reduction Subsidies:~~ The ACA provides for cost sharing reductions that offset the amount that qualifying customers pay for deductibles, copayments and coinsurance. The federal government stopped funding insurers for the cost sharing reduction subsidies in 2017. Certain insurers have sued the federal government for failure to pay cost sharing reduction subsidies and the matter remains unresolved. To date, judges in four of those actions have ruled in favor of the insurers. We will continue to monitor developments. Our premium rates for the 2019 plan year continue to reflect a lack of government funding for cost sharing reduction subsidies.
~~Prescription Drug Pricing~~			As discussed in the Regulation section of our 2018 Form 10-K, prescription drug pricing and the role of pharmacy benefit managers have been a focus of the current administration. In February 2019, HHS proposed changes to the federal anti-kickback safe harbor to exclude regulatory protection for rebates between drug manufacturers and Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers in the context of these government programs. The proposed regulations in their current form apply solely to Medicare Part D and Medicaid programs that include our Government business in the Integrated Medical segment. The proposed regulations also seek to create new safe harbor protections for fixed fee services arrangements between drug manufacturers and pharmacy benefit managers, as well as protections for discounts offered at the point of sale. These proposed regulations, if adopted as written, could affect current industry practices. We do not expect them to have a material effect on our business or results of operations. This area continues to be the subject of legislative and regulatory activity.

~~Risk Mitigation Programs – Individual ACA Business~~

~~In April of 2019, CMS published the final Notice of Benefit and Payment Parameters for the 2020 plan year that addressed the 2017 benefit year~~ risk adjustment data validation ~~program.~~(“RADV”) audits by CMS ~~intends~~and the Office of the Inspector General (“OIG”). We expect that CMS, OIG and other federal agencies will continue to ~~publish 2017 benefit~~closely scrutinize components of the Medicare program.

The “Regulation” section of our 2020 Form 10-K also discusses a proposed rule issued by CMS in 2018 for RADV audits of contract year 2011 and all subsequent years that included, among other things, extrapolation of the error rate related to RADV audit findings without applying the adjustment for underlying fee-for-service data ~~validation error rates~~errors as currently contemplated by CMS’ RADV audit methodology. RADV audits for our contract years 2011 through 2015 are currently in ~~May~~process. CMS has announced its intent to use third-party auditors to audit all MA contracts by either a comprehensive or a targeted RADV review for each contract year. If the proposed rule is adopted in its current form, it could result in some combination of degraded plan benefits, higher monthly premiums and ~~preliminary adjustments~~reduced choice for the population served by all MA insurers. The Company, along with other MA organizations and additional interested parties, submitted comments to ~~risk adjustment transfers in August. Based~~CMS on the ~~information currently available,~~proposed rule as part of the notice-and-comment rulemaking process. The comment period concluded on August 28, 2019 and CMS issued guidance on October 20, 2021 extending the timeline to finalize the proposed rule until November 2022. If CMS adopts the rule as proposed, there could be a material impact on the Company’s future results of operations, though we expect the rule would be subject to legal challenges. In addition, the Company is ~~not able~~subject to ~~reasonably estimate a potential adjustment from the data validation program. The Company does not expect the adjustment to have a material adverse impact~~OIG RADV audits that are in process.

Also, as described in Note 15 to the ~~Company’s results~~Consolidated Financial Statements, the U.S. Department of ~~operations, financial condition or liquidity for any particular period.~~

~~See the MD&A in our 2018 Form 10-K for background around legal actions related to the risk corridor and~~Justice is currently conducting an industry-wide investigation of risk adjustment ~~programs. During the first quarter of 2019, there have been no significant updates to these matters.~~

~~The following table presents our balances associated with the risk adjustment program as of March 31, 2019~~data submission practices and ~~December 31, 2018.~~

Net Receivable (Payable) Balance

March 31,

December 31,
(In millions)

2019

2018
Risk Adjustment

Receivables (1)

$
43

$
32
Payables (2)

(239)

(187)
Total risk adjustment balance

$
(196)

$
(155)

~~(1) Receivables, net of allowances, are reported in accounts receivable~~business processes, which in the ~~Consolidated Balance Sheets.~~

~~(2) Payables are reported~~case of certain other MA organizations has resulted in ~~accrued expenses and other liabilities (current) in the Consolidated Balance Sheets.~~

Charges for the risk adjustment program were $40 million pre-tax ($30 million after-tax) for the three months ended March 31, 2019 and $80 million pre-tax ($60 million after-tax) for the same period in 2018.

litigation.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

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

~~Liquidity~~

Cash requirements at the subsidiary level generally consist of:

•pharmacy, medical costs ~~pharmacy~~ and other benefit payments;

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

•income taxes; and

·~~income taxes.~~

•debt service.

Our subsidiaries normally meet their ~~operating~~liquidity requirements by:

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

•using cash flows from operating activities;

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

•selling investments; and

•borrowing from affiliates, subject to applicable regulatory limits.

~~Liquidity~~

Cash requirements at the parent company level generally consist of:

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

•payment of declared dividends to shareholders;

•lending to subsidiaries as needed; and

•pension plan funding.

The parent company normally meets its liquidity requirements by:

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

•collecting dividends from its subsidiaries;

•using proceeds from ~~issuance of~~issuing debt and common stock; and

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

Dividends from our insurance, Health Maintenance Organization (“HMO”) and certain foreign subsidiaries are subject to regulatory restrictions. ~~Because most~~See Note 19 to the Consolidated Financial Statements in our 2020 Form 10-K for additional information regarding these restrictions. Most of ~~Express Scripts’~~Evernorth's subsidiaries are not subject to regulatory restrictions ~~on paying~~regarding dividends ~~Express Scripts’ operations~~and therefore provide ~~significantly increased~~significant financial flexibility to Cigna.

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

Three Months Ended March 31,
(In millions)

2019

2018

Operating activities

   $
3,192

$
2,025

Investing activities

   $
475

$
(1,700)

Financing activities

   $
(2,534)

$
(530)

Nine Months Ended September 30,
(In millions) 2021 2020
Operating activities $ 2,916 $ 6,056
Investing activities $ (3,734) $ (1,444)
Financing activities $ (5,841) $ (3,812)

The following discussion explains variances in the various categories of cash flows for the ~~three~~nine months ended ~~March 31, 2019~~September 30, 2021 compared with the same period in ~~2018.~~

2020.

Operating activities

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

Cash flows from operating activities ~~increased, primarily~~decreased, driven by increases in accounts receivable due to higher ~~net income adjusted for depreciation~~pharmacy claim volume and ~~amortization,~~business growth, the timing of ~~pharmacy~~accounts payable and ~~services costs payables~~accrued liabilities, and ~~reduction in inventories. These increases were~~approximately $800 million of tax payments related to the gain on sale of the Group Disability and Life business, partially offset by ~~the~~ absence of ~~an early receipt of April payments from CMS in 2018 of approximately $730 million.~~

the health insurance industry tax payment.

Investing and Financing activities

Cash flows ~~from~~used in investing activities increased, primarily due to ~~higher proceeds from investment sales coupled with~~the acquisition of MDLIVE and lower investment ~~purchases.~~

sale activity.

Cash used in financing activities increased, primarily due to ~~a partial repayment of~~higher stock repurchases including shares purchased pursuant to the ~~term loan, net commercial paper activity~~ASR agreements (described below) and ~~stock repurchase.~~

an increase in dividends paid, partially offset by lower debt repayments.

We maintain a share repurchase program authorized by our Board of ~~Directors. Under this program,~~Directors, under which we may repurchase shares of our common stock from time to ~~time, depending on market conditions and alternate uses of capital.~~time. The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through open market purchases ~~or privately negotiated transactions~~ in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including through Rule 10b5-1 trading ~~plans.~~plans or privately negotiated transactions. The program may be suspended or discontinued at any time.

For the ~~three~~nine months ended ~~March 31, 2019,~~September 30, 2021, we repurchased ~~2.5~~26.5 million shares for approximately ~~$460 million. From April 1, 2019 through May 1, 2019 we repurchased 0.6 million shares for approximately $95 million. The remaining share~~$6.3 billion including the $2.0 billion paid under the ASR agreements. Share repurchase authority was $6.6 billion as of ~~May 1, 2019 was $390 million.~~

November 3, 2021.

Capital Resources

Our capital resources ~~(primarily~~consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and ~~proceeds from~~ the issuance of long-term debt and equity ~~securities)~~securities. Our businesses generate significant cash flow from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends from U.S. regulated subsidiaries were $2.1 billion and $1.6 billion for the nine months ended September 30, 2021 and 2020, respectively. Non-regulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to the parent company for general corporate purposes.

We prioritize our use of capital resources to:

•Invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide ~~protection for policyholders, furnish~~the capital necessary to maintain or improve the financial strength ratings of subsidiaries and to ~~underwrite insurance risks and facilitate continued business growth.~~

~~Our acquisition of Express Scripts increased our~~repay debt and ~~shareholders’ equity in 2018 as follows:~~

·~~Stock.~~ ~~Express Scripts’~~fund pension obligations if necessary;

•pay dividends to shareholders;

•consider acquisitions that are strategically and economically advantageous; and

•return capital to shareholders ~~received 0.2434 of a~~through share ~~of common stock of Cigna for every one share of Express Scripts’ common stock. Cigna issued 137.6 million additional shares to Express Scripts’ shareholders.~~

·~~Debt.~~ ~~See Note 6 to the Consolidated Financial Statements for further description of the debt issued to finance the acquisition.~~

·~~Assumption of Express Scripts’ Senior Notes.~~ ~~See Note 6 to the Consolidated Financial Statements for further description of the notes assumed in the acquisition of Express Scripts.~~

repurchases.

At ~~March 31, 2019,~~September 30, 2021, our debt-to-capitalization ratio was ~~48.8%~~42.0%, ~~a decline~~an increase from ~~50.9%~~39.5% at December 31, ~~2018. We expect to deleverage to~~2020, reflecting an increase in short term debt levels in conjunction with the ~~upper 30s within 18 to 24 months of closing~~execution of the ~~Express Scripts acquisition using cash flows from operating activities.~~

ASR agreements.

Sale of life, accident and supplemental benefits businesses in seven countries. Cigna entered into a ~~new Revolving Credit Agreement~~definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc. ("Chubb") for $5.75 billion cash. Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a joint venture in Turkey in 2022. Cigna estimates it will receive approximately $5.4 billion of net after-tax proceeds from this transaction and expects to utilize the after-tax proceeds from the transaction primarily for share repurchases.

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

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

Commercial Paper Program. Cigna ~~obligations under the~~ maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time not to exceed an aggregate amount of $5.0 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes.

Revolving Credit ~~Agreement~~Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above.

Cigna's revolving credit agreements include a $3.0 billion five-year revolving credit and ~~the Term Loan Credit Agreement.~~ letter of credit agreement that expires in April 2026; a $1.0 billion three-year revolving credit agreement that expires in April 2024; and a $1.0 billion 364-day revolving credit agreement that will expire in April 2022.

See Note 6 to the Consolidated Financial Statements for further information on ~~these guarantees, as well as information on~~ our ~~Revolving Credit Agreement~~credit agreements and ~~the Term Loan Credit Agreement. Cigna had $22 million of letters of credit outstanding under the Revolving Credit Agreement as of March 31, 2019.~~

Management, guided by regulatory requirements and rating agency capital guidelines, determines the amount of capital resources that we maintain. Management allocates resources to new long-term business commitments when returns, considering the risks, look promising and when the resources available to support existing business are adequate.

~~We prioritize our use of capital resources to:~~

·~~provide the capital necessary to support growth and maintain or improve the financial strength ratings of subsidiaries and to fund pension obligations;~~

·~~consider acquisitions that are strategically and economically advantageous; and~~

·~~return capital to investors primarily through share repurchases.~~

~~We continue to maintain a~~commercial paper program.

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

Liquidity and Capital Resources Outlook

~~At March 31, 2019, there was approximately $5.2~~

We maintain sufficient liquidity to meet our cash needs through our cash and cash equivalents balances, cash flows from operations, commercial paper program, credit agreements and the issuance of long-term debt and equity securities. As of September 30, 2021, we had $5.0 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $2.3 billion of remaining capacity under our commercial paper program and $3.9 billion in cash and short-term investments, ~~$2.4 billion~~approximately $810 million of which was held by the parent company or subsidiaries with no regulatory or other restrictions on transferring cash to the parent via dividend or loan. In 2019, we expect to have $6.2 billion of capital available for deployment including $2.1 billion of dividends that our regulated insurance companies may pay without prior regulatory approval. The parent company’s cash obligations for the remainder of 2019 are expected to approximate $2.6 billion primarily for repayment of debt, interest and anticipated dividends and excluding commercial paper maturities that we expect to re-issue as needed to manage our parent company liquidity requirements.

certain non-regulated subsidiaries. We expect to have sufficient liquidity to meet the obligations discussed above, based on the cash currently available to the parent and current projections for subsidiary dividends and cash flows from the newly acquired Express Scripts operations. In addition, we actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy.

~~During~~ A description of our outstanding debt can be found in Note 6 to the Consolidated Financial Statements.

For the first ~~quarter~~nine months of ~~2019, our unfunded pension liability increased by approximately $140 million due to~~2021, Cigna declared and paid quarterly cash dividends of $1.00 per share of Cigna common stock. On October 27, 2021 the ~~settlement~~Board of ~~the Amara litigation. Our required contributions for 2019 under the Pension Protection Act~~Directors declared a quarterly cash dividend of ~~2006 remain unchanged and are still expected~~$1.00 per share of Cigna common stock to be ~~immaterial. See Note 13~~paid on December 22, 2021 to shareholders of record on December 7, 2021. Cigna currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of Cigna and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board of Directors may deem relevant.

Risks to our ~~Consolidated Financial Statements for additional information regarding our pension plans.~~

~~Our~~liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the ~~Risk Factors~~"Risk Factors" section of our ~~2018~~2020 Form 10-K. In those cases, we expect to have the flexibility to satisfy liquidity needs through a variety of measures including intercompany borrowings. The parent company can borrow an additional $760 million from its insurance subsidiaries without additional state approval. We have additional liquidity available through short-term commercial paper borrowing capacity and the $3.25 billion revolving credit agreement discussed in Note 6 to the Consolidated Financial Statements.

Though we believe we have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase ~~costs associated with borrowing funds.~~

costs. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $875 million from its subsidiaries without further approvals as of September 30, 2021.

Guarantees and Contractual Obligations

We are contingently liable for various contractual obligations entered into in the ordinary course of business. See Note 1615 to the Consolidated Financial Statements for discussion of various guarantees.

We have updated ~~the~~ long-term debt obligations and purchase obligations as of September 30, 2021 which were previously provided in our ~~2018~~2020 Form 10-K.

Less than 1

1-3

4-5

After 5

(In millions, on an undiscounted basis)

Total

year(1)

years

years

years

On-Balance Sheet

Long-term debt

54,750

1,211

13,025

9,389

31,125

Off-Balance Sheet

Purchase obligations

2,708

938

1,281

392

97

Investment commitments are described in Note 9 to the Consolidated Financial Statements. There have been no material changes to other information presented in our table of guarantees and contractual obligations set forth in our 2020 Form 10-K.
(In millions, on an undiscounted basis) Total 2021 2022 to 2023 2024 to 2025 Thereafter
On-Balance Sheet
Long-term debt (1)
$ 48,499 $ 319 $ 5,876 $ 6,735 $ 35,569
Off-Balance Sheet
Purchase Obligations $ 3,428 $ 918 $ 1,628 $ 563 $ 319

(1)Amounts ~~reflect cash obligations for the remainder~~include scheduled interest payments, current maturities of ~~2019.~~

long-term debt and finance leases.

CRITICAL ACCOUNTING ESTIMATES

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

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

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

Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosures presented in ~~our 2018~~the 2020 Form 10-K. We regularly evaluate items that may impact critical accounting estimates.

Our most critical accounting estimates, as well as the effect of hypothetical changes in material assumptions used to develop each estimate, are described in the ~~2018~~2020 Form 10-K. As of ~~March 31, 2019,~~September 30, 2021, there were no significant changes to the critical accounting estimates from what was reported in our ~~2018~~2020 Form 10-K.

Goodwill and Other Intangible Assets

Our annual evaluations of goodwill and other intangible assets for impairments were completed during the third quarter of 2021. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses or market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

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

SEGMENT REPORTING

The following section of this MD&A discusses the results of each of our segments. As a result of the Express Scripts acquisition, during the fourth quarter of 2018, we changed our segment reporting to reflect the new management and business reporting structure of the combined company. Prior year segment information presented in this Form 10-Q has been restated to conform to the new segment presentation. See Note 1 to ~~our~~the Consolidated Financial Statements for a description of our segments.

In segment discussions, we present adjusted revenues and “pre-tax adjusted income from operations,” defined as income before taxes excluding realized investment gains (losses), amortization of acquired intangible assets ~~results of transitioning clients~~ and special items. Ratios presented in this segment discussion exclude the same items as pre-tax adjusted income from operations. See Note 1816 to ~~our~~the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income before income taxes to pre-tax adjusted income from operations, as well as a reconciliation of total revenues to adjusted revenues. Note 1816 to ~~our~~the Consolidated Financial Statements also explains ~~two additional items~~ that ~~are important in understanding our segment results: 1)~~ segment revenues include both external revenues and sales between segments that are eliminated in Corporate; and 2) beginning in the first quarter of 2019, compensation cost for stock options is recorded by the segments. Prior year segment information has not been restated for the change in stock option reporting.

Corporate.

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

~~See the MD&A Executive Overview beginning on page 46 for summarized financial results~~

Evernorth Segment

Evernorth includes a broad range of ~~each of our segments.~~

~~Health Services Segment~~

~~The Health Services segment includes the~~coordinated and point solution health services, including pharmacy ~~benefit~~solutions, benefits management ~~pharmacy home delivery~~solutions, care solutions and certain medical management services. This segment includes Express Scripts’ business from the December 20, 2018 date of acquisition with the exception of Express Scripts’ Medicare Part D business ~~that is reported in the Government operating segment. This segment also includes Cigna’s legacy mail order pharmacy business.~~ Due to the timing of the acquisition, first quarter 2018 results of operations and select financial information did not include results from the Express Scripts’ business. The main driver of period over period increases in the financial information presented below is the inclusion of results from the Express Scripts’ business in first quarter of 2019.intelligence solutions. As described in the introduction to Segment Reporting, ~~on page 54,~~Evernorth performance ~~of the Health Services segment~~ is measured using the below metrics:

•Adjusted gross profit and pre-tax adjusted income from ~~operations.~~

~~The key factors that~~operations, which exclude the impact ~~Health Services revenues~~of special items.

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

•Generic fill rate is defined as the total number of ~~revenues are volume, mix and price. These key factors are discussed further below. See Note 2 to~~generic scripts divided by the ~~Consolidated Financial Statements included in our 2018 Form 10-K for additional information on revenue and cost recognition policies for this segment.~~

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

·The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. As our mix of drugs changes, our resulting pharmacy revenues and cost of revenues correspondingly may increase or decrease. The primary driver of fluctuations within our mix of claims is the generic fill rate.total overall scripts filled. Generally, higher generic fill rates reduce revenues, as generic drugs are typically priced lower than the branded drugs they replace. However, as ingredient cost paid to pharmacies on generic drugs is incrementally lower than the price charged to our clients, higher generic fill rates generally have a favorable impact on our gross profit. The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (such as therapies for chronic conditions) commonly dispensed from home delivery pharmacies as compared to acute medications that are primarily dispensed by pharmacies in our retail networks.

The key factors that impact Evernorth revenues and costs of revenues are volume, mix of claims and price. These key factors are discussed further below. See Note 3 to the Consolidated Financial Statements included in our 2020 Form 10-K for additional information on revenue and cost recognition policies for this segment.

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

•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. Types of drugs can have an impact on our pharmacy revenues, pharmacy and other service costs and gross profit, including amounts payable under certain financial and performance guarantees with our clients. In addition to the types of drugs, the mix of generic claims (i.e., generic fill rate) also impacts our gross profit. Furthermore, our gross profit differs among network, home delivery and specialty distribution methods and can impact our profitability.

•Our client contract pricing is impacted by our ongoing ability to negotiate supply chain contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates. ~~We are able~~As we seek to ~~reduce~~improve the ~~rate~~effectiveness of ~~drug price increases and, in some cases, lower our clients’ prescription drug spend through~~ our integrated ~~set~~solutions for the benefit of ~~solutions, including sharing significant amounts of pharmaceutical manufacturer rebates with~~ our ~~clients. We refer to this as “management of~~clients, we are continuously innovating and optimizing the supply chain.” Our gross profit could also increase or decrease as a result of supply chain initiatives implemented. Inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients can affect our revenues and cost of revenues.

In this MD&A, we present revenues and gross profit, as well as adjusted revenues and ~~pre-tax~~ adjusted ~~income from operations “excluding transitioning clients” in addition to those~~gross profit, consistent with our segment reporting metrics, ~~including transitioning clients. See the “Key Transactions and Developments” section on page 49 of this MD&A for further discussion of transitioning clients and why we present this information.~~

which exclude special items.

Results of Operations

Financial Summary
Three Months Ended March 31,
(In millions)

2019

2018

Total revenues

$
26,949

$
1,071

Less: revenue contributions from transitioning clients

(4,489)

-

Adjusted revenues

$
22,460

$
1,071

Gross profit

$
2,114

$
103

Gross profit excluding transitioning clients

$
1,396

$
103

Pre-tax adjusted income from operations

$
994

$
83

Pre-tax adjusted margin

4.4
%

7.7
%

(Dollars and adjusted scripts in millions)

Three Months
Ended March 31,
2019

Selected Financial Information(1)

Pharmacy revenue by distribution channel

Network revenues

$
9,268

Home delivery and specialty revenues

11,041

Other revenues

1,122

Total pharmacy revenues

$
21,431

Pharmacy script volume

Adjusted network scripts(2)

222

Adjusted home delivery and specialty scripts(2)

70

Total adjusted scripts(2)

292

Generic fill rate

Network

87.8
%
Home delivery

84.4
%
Overall generic fill rate

87.4
%

Financial Summary Three Months Ended
September 30, Change Favorable
(Unfavorable) Nine Months Ended
September 30, Change Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Total revenues $ 33,614 $ 29,944 12 % $ 96,826 $ 85,801 13 %
Less: Contractual adjustment for a former client — (117) N/M — (204) N/M
Adjusted revenues(1)
$ 33,614 $ 29,827 13 % $ 96,826 $ 85,597 13 %
Gross profit $ 2,161 $ 2,107 3 % $ 6,079 $ 5,589 9 %
Adjusted gross profit(1)
$ 2,161 $ 1,990 9 % $ 6,079 $ 5,385 13 %
Pre-tax adjusted income from operations $ 1,548 $ 1,443 7 % $ 4,184 $ 3,774 11 %
Pre-tax adjusted margin 4.6 % 4.8 % (20) bps 4.3 % 4.4 % (10) bps

Three Months Ended September 30, Change Favorable
(Unfavorable) Nine Months Ended September 30, Change Favorable
(Unfavorable)
(Dollars and adjusted scripts in millions) 2021 2020 2021 2020
Selected Financial Information(1)
Pharmacy revenue by distribution channel
Adjusted network revenues $ 16,488 $ 14,522 14 % $ 47,792 $ 41,179 16 %
Adjusted home delivery and specialty revenues 13,796 12,699 9 39,911 37,111 8
Other revenues 1,701 1,412 20 4,708 3,946 19
Total adjusted pharmacy revenues $ 31,985 $ 28,633 12 % $ 92,411 $ 82,236 12 %
Pharmacy script volume
Adjusted network scripts(2)
340 309 10 % 1,002 890 13 %
Adjusted home delivery and specialty scripts(2)
71 72 (1) 212 215 (1)
Total adjusted scripts(2)
411 381 8 % 1,214 1,105 10 %
Generic fill rate
Network 86.3 % 87.0 % (70) bps 86.3 % 87.9 % (160) bps
Home delivery 85.9 % 85.3 % 60 bps 85.8 % 85.1 % 70 bps
Overall generic fill rate 86.3 % 86.9 % (60) bps 86.3 % 87.6 % (130) bps

(1)Amounts exclude ~~contributions from transitioning clients.~~

special items.

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

Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

~~This segment includes Express Scripts’ business~~September 30, 2020

Adjusted network revenues. The increases reflected increased prices, primarily due to inflation on branded drugs and higher claims volume, primarily due to our collaboration with Prime Therapeutics. These increases were partially offset by claims mix, primarily due to an increase in the generic fill rate when excluding the impact of COVID-19 vaccines.

Adjusted home delivery and specialty revenues.The increases reflected increased prices, primarily due to inflation on branded drugs, as well as higher specialty claims volume due in part to our collaboration with Prime Therapeutics. These increases were partially offset by lower home delivery claims volume and claims mix due to an increase in the generic fill rate.

Other revenues. The increases reflected higher volume from our CuraScript Specialty Distribution business.

Adjusted gross profit. For the three and nine months ended September 30, 2021, the increase reflected benefits from the ~~date~~effective management of ~~acquisition~~supply chain, customer growth and higher adjusted pharmacy script volumes, primarily due to our collaboration with Prime Therapeutics. For the ~~exception~~nine months ended September 30, 2021, the increase also reflected an increase in specialty pharmacy services.

Pre-tax adjusted income from operations. For the three and nine months ended September 30, 2021, the increase reflected benefits from the effective management of ~~Express Scripts’~~supply chain, customer growth and higher adjusted pharmacy script volumes, primarily due to our collaboration with Prime Therapeutics, partially offset by strategic investments. For the nine months ended September 30, 2021, the increase also reflected an increase in specialty pharmacy services.

U.S. Medical Segment

U.S. Medical includes Cigna’s U.S. Commercial and U.S. Government businesses that provide comprehensive medical and coordinated solutions to clients and customers to support whole-person health needs. U.S. Commercial products and services include medical, pharmacy, behavioral health, dental, vision, health advocacy programs and other products and services for insured and administrative services only ("ASO") clients. U.S. Government solutions include Medicare Advantage, Medicare Supplement and Medicare Part D ~~business that is reported in~~plans for seniors, Medicaid plans and individual health insurance plans both on and off the Government operating segment. The Company acquired Express Scripts on December 20, 2018. First quarter 2018 results of operations and select financial information reflect only Cigna’s legacy mail order pharmacy business.

The main driver of period over period increases in the financial information is the inclusion of results from the Express Scripts’ business in first quarter 2019. The Health Services segment reflects strong performance, including customer growth, adjusted pharmacy script volume and specialty pharmacy care.

~~Total pharmacy customers for the first quarter 2019 reflect strong new customer sales, retention and organic customer growth.~~

~~Integrated~~ ~~Medical~~ ~~Segment~~

The Integrated Medical segment includes the businesses previously reported in “Global Health Care” except as follows: 1) international health care products are now reported in the International Markets segment; 2) mail order pharmacy business is now reported in the Health Services segment; and 3) Medicare supplement business previously reported in “Global Supplemental Benefits” is now reported in Integrated Medical.

The business section of our 2018 Form 10-K (see the “Integrated Medical” section beginning on page 3) describes the various products and funding solutions offered by this segment, including the various revenue sources.public exchanges. As described in the introduction to Segment Reporting, ~~on page 54,~~ performance of the ~~Integrated~~U.S. Medical segment is measured using pre-tax adjusted income from operations. Key factors affecting profitability for this segment include:

•customer growth;

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

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

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

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

Results of Operations

Financial Summary

Three Months Ended March 31,

Change
Favorable

(In millions)

2019

2018

(Unfavorable)

Adjusted revenues

  $
9,195

  $
8,150

13
%
Pre-tax adjusted income from operations

  $
1,170

  $
1,012

16
%
Adjusted pre-tax margin

12.7
%
12.4
%
30
bps
Medical care ratio

78.9
%
77.5
%
(140)
bps
Expense ratio

22.2
%
24.1
%
190
bps

As of

As of

(In millions)

March 31, 2019

December 31, 2018

% Change

Unpaid claims and claim expenses – Integrated Medical

  $
2,961

  $
2,697

10
%

As of March 31,

(In thousands)

2019

2018

% Change

Integrated Medical Customers

Commercial risk

1,991

1,844

8
%
Government

1,405

1,389

1
%
Total risk

3,396

3,233

5
%
Service

12,025

11,981

-
%
Total

15,421

15,214

1
%

Financial Summary Three Months Ended September 30, Change Favorable
(Unfavorable) Nine Months Ended September 30, Change Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Adjusted revenues $ 10,497 $ 9,629 9 % $ 31,315 $ 28,726 9 %
Pre-tax adjusted income from operations $ 988 $ 757 31 % $ 2,992 $ 3,479 (14) %
Pre-tax adjusted margin 9.4 % 7.9 % 150 bps 9.6 % 12.1 % (250) bps
Medical care ratio 84.4 % 82.6 % (180) bps 83.9 % 77.2 % (670) bps
Expense ratio 20.1 % 21.8 % 170 bps 20.0 % 22.2 % 220 bps

Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

September 30, 2020

Adjusted revenuesincreased ~~reflecting higher revenues~~for the three months and nine months ended September 30, 2021 compared with the same periods in ~~both our Commercial and Government operating segments. The increase in the Commercial segment reflected~~2020 reflecting customer growth in our ~~risk~~Medicare Advantage and Individual businesses, ~~as well as~~ higher premium rates due to anticipated underlying medical cost ~~trend.~~trend and higher net investment income. The nine months ended increase also reflects the absence of the premium relief programs for clients implemented in the ~~Government segment reflected~~second quarter of 2020 in response to significantly lower than historical utilization as individuals deferred care due to the ~~addition of Express Scripts’ Medicare Part D business.~~

COVID-19 pandemic.

Pre-tax adjusted income from operations ~~increased, reflecting strong ongoing performance in our Commercial segment including increased contributions from our commercial risk business and specialty products.~~

~~Medical care ratio.~~ ~~As expected, the medical care ratio~~ increased for the three months ended ~~March 31, 2019~~September 30, 2021 compared with the same period in ~~2018, primarily reflecting~~2020. The increase is due to higher net investment income, increased specialty contributions and the ~~addition~~repeal of ~~Express Scripts’ Medicare Part D business with a seasonally higher loss ratio~~the health insurance industry tax; partially offset by net unfavorable COVID-19 related impacts. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines as well as lower risk adjustment revenues in our Medicare Advantage business. Pre-tax adjusted income from operations decreased for the ~~pricing~~nine months ended September 30, 2021 compared with the same period in 2020. The decrease is due to net unfavorable COVID-19 related impacts; partially offset by higher net investment income, increased specialty contributions and the repeal of the health insurance industry tax. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines, the significant deferral of care by our customers in 2020, lower risk adjustment revenues in our Medicare Advantage business and increased disenrollment resulting from the economic effects of the pandemic. These impacts were partially offset by the absence of the premium relief programs implemented in the second quarter of 2020. COVID-19 impacts for the remainder of 2021 and beyond may vary as discussed in the "COVID-19 Update" section of this MD&A.

The medical care ratio increased for the three months and nine months ended September 30, 2021 compared with the same periods in 2020, reflecting COVID-19 related impacts and the repeal of the health insurance industry tax. The unfavorable COVID-19 related impacts primarily reflect higher direct COVID-19 testing, treatment and vaccine costs. The nine months ended September 30, 2021 increase also reflects the impact of ~~suspension~~the COVID-19 related deferred utilization experienced in the second quarter of 2020; partially offset by the absence of the premium relief programs.

The expense ratio decreased for the three months and nine months ended September 30, 2021 compared with the same periods in 2020, reflecting the repeal of the health insurance industry tax ~~in 2019.~~

~~Expense ratio.~~ ~~The expense ratio decreased for the three months ended March 31, 2019 compared to the same period in 2018, primarily reflecting higher risk revenues~~ and ~~suspension of the health insurance industry tax in 2019.~~

~~Other Items Affecting Integrated Medical Results~~

~~Unpaid Claims and Claim Expenses~~

~~Unpaid claims and claim expenses were higher as of March 31, 2019 compared with December 31, 2018, primarily due to seasonality in our stop loss products.~~

increased revenue.

Medical Customers

As of September 30,
(In thousands) 2021 2020 % Change
U.S. Commercial 2,135 2,120 1 %
U.S. Government 1,517 1,413 7 %
Insured 3,652 3,533 3 %
Service 11,653 11,781 (1) %
Total 15,305 15,314 — %

Our medical customer base was ~~higher~~flat at ~~March 31, 2019~~September 30, 2021 compared with the same period in ~~2018, primarily~~2020, reflecting a lower customer base in our National Accounts and Middle Markets segments including disenrollment resulting from the economic impacts of the COVID-19 pandemic; partially offset by growth in our Select ~~market segment.~~

segment as well as our Individual and Medicare Advantage businesses.

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

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

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

•has medical claims that are administered by us.

Unpaid Claims and Claim Expenses
(In millions) As of September 30, 2021 As of December 31, 2020 % Change
Unpaid claims and claim expenses – U.S. Medical $ 3,846 $ 3,184 21 %

Our unpaid claims and claim expenses liability was higher as of September 30, 2021 compared with December 31, 2020, primarily due to stop loss seasonality, Medicare Part D invoice cycle timing and customer growth in our Individual business.

International Markets Segment

As described in the business section of our 2018 Form 10-K, the International Markets segment includes supplemental health, life and accident business previously reported in the “Global Supplemental Benefits” segment, except for Medicare Supplement business that is now reported in the Integrated Medical segment and certain international businesses in run-off that are now reported in Group Disability and Other. International Markets also includes health care products previously reported in the former “Global Health Care” segment.

As described in the introduction to Segment Reporting, ~~on page 54,~~ performance of the International Markets segment is measured using pre-tax adjusted income from operations. Key factors affecting pre-tax adjusted income from operations for this segment are:

•premium growth, including new business and customer retention;

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

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

•the impact of foreign currency movements.

Results of Operations

Financial Summary
Three Months Ended March 31,

Change
Favorable

(In millions)

2019

2018

(Unfavorable)

Adjusted revenues

  $
1,394

  $
1,341

4
%
Pre-tax adjusted income from operations

  $
206

  $
217

(5)
%
Pre-tax adjusted margin

14.8
%
16.2
%

(140)
bps
Loss ratio

57.2
%
56.3
%

(90)
bps
Acquisition cost ratio

12.3
%
12.9
%

60
bps
Expense ratio (excluding acquisition costs)

19.1
%
17.7
%

(140)
bps

Financial Summary Three Months Ended September 30, Change
Favorable
(Unfavorable) Nine Months Ended September 30, Change
Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Adjusted revenues $ 1,588 $ 1,440 10 % $ 4,718 $ 4,342 9 %
Pre-tax adjusted income from operations $ 250 $ 208 20 % $ 746 $ 809 (8) %
Pre-tax adjusted margin 15.7 % 14.4 % 130 bps 15.8 % 18.6 % (280) bps
Loss ratio 60.9 % 57.4 % (350) bps 60.0 % 55.1 % (490) bps
Acquisition cost ratio 11.2 % 11.8 % 60 bps 11.1 % 10.9 % (20) bps
Expense ratio (excluding acquisition costs) 17.4 % 19.5 % 210 bps 17.8 % 18.7 % 90 bps

Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

September 30, 2020

Adjusted revenuesincreased ~~mainly~~primarily due to ~~the acquisition of OnePath Life in New Zealand in the fourth quarter of 2018 and~~ business growth, ~~in South Korea,~~higher net investment income, and the ~~Middle East and China. These increases are partially offset by unfavorable~~absence of COVID-19 related premium relief programs for the three months ended September 30, 2021. For the nine months ended September 30, 2021, adjusted revenues increased primarily due to favorable foreign currency ~~movements.~~

movements, business growth, higher net investment income, and the absence of COVID-19 related premium relief programs.

Pre-tax adjusted income from operations ~~decreased primarily driven~~increased reflecting higher net investment income and lower expense ratios, partially offset by higher ~~operating expense and~~ loss ratios for the three months ended September 30, 2021. For the nine months ended September 30, 2021, pre-tax adjusted income from operations decreased reflecting higher loss and ~~unfavorable~~acquisition ratios, partially offset by higher net investment income, favorable foreign currency movements, ~~partially~~lower expense ratios, and business growth. The loss, acquisition and expense ratios for both the three and nine months ended September 30, 2020 reflected the unfavorable impact of COVID-19 related premium relief programs.

The segment’s loss ratio increased reflecting higher claims largely due to the impact of the COVID-19 pandemic, including the absence of the favorable impact of lower medical utilization in 2020 and the direct costs of COVID-19 testing and treatment.

The acquisition costratio decreased reflecting lower amortization expenses in Asia and the absence of the unfavorable impact of COVID-19 related premium relief programs for the three months ended September 30, 2021. For the nine months ended September 30, 2021, the acquisition cost ratio increased reflecting the absence of the favorable impact from a refinement to the accounting for acquisition costs, largely offset by ~~the acquisition of OnePath Life and business growth largely~~lower amortization expenses in ~~China and South Korea.~~

Asia.

The ~~segment’s~~ ~~loss ratio~~ ~~was less favorable, largely resulting from higher benefit expense in Europe and South Korea.~~

~~The~~ ~~acquisition cost~~ ~~ratio~~ ~~was lower due to lower spending in certain markets and the acquisition of OnePath Life.~~

~~The increase in the~~ expense ratio (excluding acquisition costs) ~~was~~decreased mainly driven by ~~strategic investments for long-term growth and integration of OnePath Life.~~

lower spend across markets.

Other Items ~~Affecting~~Related to International Markets Results

South Korea is the single largest geographic market for our International Markets segment. For the nine months ended September 30, 2021, South Korea generated 38% of the segment’s adjusted revenues and ~~58%~~63% of the segment’s ~~first quarter 2019~~ pre-tax adjusted income from operations.~~For~~

Other Operations

Prior to the ~~three months ended March 31, 2019, our International Markets segment operations in South Korea represented 2%~~sale of ~~our consolidated revenues and 6% of consolidated pre-tax adjusted income from operations.~~

the Group Disability and Life business on December 31, 2020, Other

Operations included Cigna’s Group Disability and ~~Other~~Life business which offered group long-term and short-term disability and group life, accident, voluntary and specialty insurance products and services. Additionally, for 2021 and 2020, this segment includes ~~the results of the business previously reported in the “Group Disability and Life” segment and “Other Operations” comprising the corporate-owned life insurance~~Corporate Owned Life Insurance (“COLI”) ~~business along with~~and the Company’s run-off of the following businesses: 1) reinsurance; 2) settlement annuity; and 3) the sold individual life insurance and annuity and retirement benefits businesses. In addition, certain international run-off business previously reported in the “Global Supplemental Benefits” segment is now reported in Group Disability and Other.

operations. As described in the introduction of Segment Reporting, ~~on page 54,~~ performance of ~~Group Disability and~~ Other Operations is measured using pre-tax adjusted income from operations. Key factors affecting pre-tax adjusted income from operations are:

·~~premium growth, including new business and customer retention;~~

•premiums;

•net investment income;

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

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

Results of Operations

Financial Summary

Three Months Ended
March 31,

Change
Favorable

(In millions)

2019

2018

(Unfavorable)

Adjusted revenues

  $
1,296

  $
1,271

2
%
Pre-tax adjusted income from operations

  $
84

  $
116

(28)
%
Pre-tax adjusted margin

6.5
%
9.1
%

(260)
bps

Financial Summary Three Months Ended September 30, Change
Favorable
(Unfavorable) Nine Months Ended
September 30, Change
Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Adjusted revenues $ 140 $ 1,314 (89) % $ 408 $ 3,981 (90) %
Pre-tax adjusted income from operations $ 33 $ 70 (53) % $ 70 $ 279 (75) %
Pre-tax adjusted margin 23.6 % 5.3 % 1830 bps 17.2 % 7.0 % 1,020 bps

Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

September 30, 2020

Adjusted revenues ~~increased, due to business growth in the group disability, life~~ and ~~voluntary businesses, partially offset by the continued run-off of international business.~~

~~Pre-tax~~pre-tax adjusted income from operations decreased due to the sale of the Group Disability and ~~margin~~ ~~decreased, reflecting unfavorable disability claims experience, partially offset by favorable life claims experience.~~

Life business on December 31, 2020. Because the sold business constituted the vast majority of the segment's operations, we experienced a substantial decline in adjusted revenues and adjusted income from operations in this segment in 2021 as compared to 2020.

Corporate

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

for products and services sold between segments. ~~As discussed in the introduction to Segment Reporting on page~~ ~~54, beginning in the first quarter of 2019, compensation cost for stock options is now recorded by the segments. Prior year results for Corporate were not restated to reflect this change.~~

Financial Summary

Three Months Ended
March 31,

Change
Favorable

(In millions)

2019

2018

(Unfavorable)

Pre-tax adjusted loss from operations

$
(490)

$
(92)

(433)
%

Financial Summary Three Months Ended
September 30, Change Favorable (Unfavorable) Nine Months Ended September 30, Change Favorable (Unfavorable)
(In millions) 2021 2020 2021 2020
Pre-tax adjusted (loss) from operations $ (308) $ (366) 16 % $ (1,006) $ (1,171) 14 %

Three and Nine Months Ended ~~March 31, 2019~~September 30, 2021 versus Three and Nine Months Ended ~~March 31, 2018~~

September 30, 2020

Pre-tax adjusted loss from operationswas ~~higher,~~lower, reflecting lower interest ~~expense on debt issued in the third quarter of 2018 to finance the Express Scripts acquisition and debt assumed from Express Scripts.~~

expense.

INVESTMENT ASSETS

The following table presents our investment asset portfolio excluding separate account assets as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018.~~2020. Additional information regarding our investment assets is included in Notes 9, 10, 11 and 12 to ~~our~~the Consolidated Financial Statements.

March 31,

December 31,

(In millions)

2019

2018

Debt securities

$
23,169

$
22,928

Equity securities

210

548

Commercial mortgage loans

1,864

1,858

Policy loans

1,403

1,423

Other long-term investments

2,006

1,901

Short-term investments

267

316

Total

$
28,919

$
28,974

(In millions) September 30,
2021 December 31, 2020
Debt securities $ 17,857 $ 18,131
Equity securities 551 501
Commercial mortgage loans 1,525 1,419
Policy loans 1,329 1,351
Other long-term investments 3,429 2,832
Short-term investments 439 359
Total $ 25,130 $ 24,593

Investment Assets related to the international life, accident and supplemental benefits businesses subject to the recently announced divestiture (described in the Developments section of this MD&A) were approximately $4.9 billion as of September 30, 2021.

Debt Securities

Investments in debt securities include ~~publicly traded~~publicly-traded and ~~privately placed~~privately-placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value on our balance sheet. Additional information regarding valuation methodologies, key inputs and controls is included in Note 10 to ~~our~~the Consolidated Financial Statements. More detailed information about debt securities by type of issuer and maturity dates is included in Note 9 to ~~our~~the Consolidated Financial Statements.

The following table reflects our portfolio of debt securities by type of issuer as of ~~March 31, 2019~~September 30, 2021 and December 31, ~~2018.~~

March 31,

December 31,

(In millions)

2019

2018

Federal government and agency

$
733

$
710

State and local government

928

985

Foreign government

2,305

2,362

Corporate

18,695

18,361

Mortgage and other asset-backed

508

510

Total

$
23,169

$
22,928

2020:
(In millions) September 30,
2021 December 31,
2020
Federal government and agency $ 382 $ 456
State and local government 169 167
Foreign government 2,519 2,511
Corporate 14,313 14,562
Mortgage and other asset-backed 474 435
Total $ 17,857 $ 18,131

Our debt securities portfolio ~~increased~~decreased slightly during the first ~~quarter~~nine months of ~~2019~~2021 reflecting ~~increased~~a decrease in valuations due to ~~decreases in market~~increasing yields, ~~partially~~ offset by net ~~sales and maturities.~~ purchase activity.

As of ~~March 31, 2019, $20.7~~September 30, 2021, $15.3 billion, or ~~89%~~86% of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining ~~$2.5~~$2.6 billion were below investment grade. The majority of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum. These quality characteristics have not materially changed ~~from~~since the prior year and ~~are~~remain consistent with our investment strategy.

Investments in debt securities are diversified by issuer, geography and ~~industry~~industry. On an aggregate basis, the debt securities portfolio continues to perform according to original investment expectations. However, due to the economic impacts of the COVID-19 pandemic, there are certain issuers, particularly within the aviation, energy and hospitality sectors, that are showing signs of distress, primarily in the form of requests for temporary covenant relief. There were no material unrealized losses in any of these sectors as ~~appropriate.~~

of the reporting date. We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various

factors in determining the allowance for credit losses on debt securities, which is discussed in Note 9 to the Consolidated Financial Statements.

Foreign government obligations are concentrated in Asia, primarily South Korea and Taiwan, consistent with our risk management practice and local regulatory requirements of our international business operations. ~~Corporate debt~~We expect the amount of these foreign government obligations to decrease significantly during 2022 upon the close of our sale of certain International Markets businesses as discussed in the "Developments" section of this MD&A. Debt securities include private placement assets of ~~$7.0~~$6.0 billion. These investments are generally less marketable than publicly-traded bonds; however, yields on these investments tend to be higher than yields on publicly-traded bonds with comparable credit risk. We perform a credit analysis of each issuer and require financial and other covenants that allow us to monitor issuers for deteriorating financial strength and pursue remedial actions, if warranted.

In addition to amounts classified in debt securities in our Consolidated Balance Sheets, we participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture on

Commercial Mortgage Loans

As of September 30, 2021, the ~~equity basis of accounting and report it in other assets. This entity had an investment~~$1.5 billion commercial mortgage loan portfolio consisted of approximately ~~$6.7 billion supporting its business~~50 loans that ~~is primarily invested~~are in ~~Chinese corporate and government debt securities. There were no investments with a material unrealized loss as of March 31, 2019.~~

~~Commercial Mortgage Loans~~

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

Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at less than ~~70%~~65% of the property’s value at origination of the loan. Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations. We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.

~~Commercial real estate capital markets remain very active~~

Our annual in-depth review of our commercial mortgage loan investments is the primary mechanism for ~~well-leased,~~monitoring the overall quality rating of the mortgage portfolio. We completed the annual in-depth review in the second quarter of 2021 that included an analysis of each underlying property’s most recent annual financial statements, rent rolls, operating plans, a physical inspection of the property and a review of applicable market reports. The results of this annual review confirmed that the overall credit quality of our portfolio remains strong and was generally in line with the previous year’s results.

COVID-19 has negatively impacted commercial real estate ~~located~~fundamentals and capital market activity with concentrated weakness in ~~strong institutional investment markets. The vast majority of properties securing the mortgages in our~~hotels and regional malls. Our mortgage loan portfolio ~~possess these characteristics.~~

~~As of March 31, 2019,~~is well diversified by property type and geography with no material exposure to hotels and no exposure to regional shopping malls. We continue to monitor the ~~$1.9 billion commercial~~long-term impacts on the office sector due to growing headwinds: expanded remote working flexibility, shorter term leases and corporate migration to lower cost states. Our mortgage ~~loan portfolio consisted of approximately 65~~ loans ~~that~~secured by office properties are ~~generally~~ in good standing. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash investment generally ranging between 30 and 40%, we remain confident that borrowers will continue to perform as expected under their contract terms.

Other Long-term Investments

Other long-term investments of ~~$2.0~~$3.4 billion as of September 30, 2021 included investments in securities limited partnerships and real estate limited partnerships, ~~as well as~~ direct investments in real estate joint ~~ventures.~~ventures and other deposit activity that is required to support various insurance and health services businesses. The increase in other long-term investments is primarily driven by net additional funding activity and value creation in the underlying funds. These limited partnership entities typically invest in mezzanine debt or equity of ~~privately held~~privately-held companies ~~(securities partnerships)~~ and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified across approximately ~~140~~200 separate partnerships and approximately 70100 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 4% of our securities and real estate limited partnership portfolio.

~~Problem~~

Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. Our net investment income increased significantly versus the first nine months of 2020 driven by the strong performance of assets underlying our limited partnership investments. The broad recovery has resulted in strong corporate earnings and ~~Potential Problem Investments~~

~~“Problem” bonds~~higher public and ~~commercial mortgage loans~~private asset valuations and valuation recovery through the second quarter of 2021 is generally reflected in third quarter results consistent with the financial information reporting lag. We expect volatility in private equity and real estate fund performance going forward as fair market valuations are ~~either delinquent~~adjusted to reflect market and portfolio transactions.

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture on the equity method of accounting and report our share of the net assets of $0.9 billion in Other assets. Our 50% share of the investment portfolio supporting the joint venture's business is approximately $7.4 billion, primarily invested in Chinese corporate and government debt

securities diversified by ~~60 days or more or~~issuer, industry and geography, as appropriate. To a lesser extent and consistent with its investment strategy, the joint venture is invested in Chinese equity investments comprised of approximately 50% equity mutual funds, with the remainder invested in equity securities and private equity partnerships. We participate in the approval of the joint venture's investment strategy and continuously review its execution. There were no investments with a material unrealized loss as of September 30, 2021.

Investment Outlook

The general optimism globally fueled by business re-opening combined with unprecedented monetary and fiscal support from the U.S. government supports expectations for continued economic growth. U.S. treasury rates have ~~been restructured as~~increased from their historic lows during 2020, but they remain well below long-term historical averages. In addition, the wider market credit spreads experienced during 2020 have narrowed meaningfully, resulting in yields for investment grade assets that also remain well below historical averages. While this continues to terms, including concessions by us for modification of interest rate, principal payment or maturity date. “Potential problem” bonds and commercial mortgage loans are considered current (no payment ispressure the income we earn on our fixed income investments, it has been more than ~~59 days past due), but management believes they have certain characteristics that increase the likelihood that they may become problems.~~

~~The amounts of problem or potential problem investments as of March 31, 2019 and December 31, 2018 were not material.~~

~~Investment Outlook~~

~~Public equity markets rebounded in the first quarter of 2019,~~offset by our limited partnership results, which are reflecting ~~the continued strength of the U.S. economy. However, concerns related to trade and tariffs continue to contribute to financial market volatility.~~improved growth prospects. We continue to ~~closely~~actively monitor ~~global macroeconomic conditions~~the economic impact of the pandemic, including supply chain, labor market and ~~trends, including uncertainty caused by the United Kingdom’s process of exiting the European Union,~~inflation dynamics, as well as fiscal and monetary responses and their potential impact on ~~our~~the portfolio. Over the balance of 2021, we expect net investment ~~portfolio. We expect~~income and investment valuations will reflect the optimism within public and private markets for the continued economic recovery, along with the potential for increasing market volatility ~~in certain sectors, such as retail, energy~~with resulting net investment income and ~~natural gas.~~asset valuation impacts. Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date. These future conditions are not reasonably predictable; however, we believe that the vast majority of our investments will continue to perform under their contractual terms. Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the ~~long term.~~long-term. Although future ~~impairment losses~~declines in investment fair values resulting from interest rate movements and credit deterioration due to both investment-specific and the global economic uncertainties discussed above remain possible, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.

MARKET RISK

Financial Instruments

Our assets and liabilities include ~~certain~~ financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Our primary market risk exposures are interest rate risk and foreign currency exchange rate risk. We encourage you to read this in conjunction with “Market Risk – Financial Instruments” included in the MD&A section of our ~~2018~~2020 Form 10-K. As of ~~March 31, 2019,~~September 30, 2021 there were no material changes in our risk exposures from ~~that~~those reported in our ~~2018~~2020 Form 10-K.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Operations and is incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

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

On December 20, 2018, Cigna acquired Express Scripts (see Note 4 to the accompanying Consolidated Financial Statements for additional information). As of March 31, 2019, management is in the process of evaluating and integrating the internal controls of the acquired Express Scripts business into the Company’s existing operations. Other than the controls enhanced or implemented to integrate the Express Scripts business, there

There have been no changes in ~~Cigna’s~~our internal ~~controls~~control over financial reporting during the ~~period covered by this report~~quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, ~~Cigna’s~~Cigna's internal ~~controls~~control over financial reporting.

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information contained under “Litigation Matters” and “Regulatory Matters” in Note 1615 to the Consolidated Financial Statements is incorporated herein by reference.

For information regarding legal proceedings terminated during the quarter ended June 30, 2021, refer to Note 15 to the Consolidated Financial Statements contained in Part I of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

Item 1A.RISK FACTORS

~~Cigna’s~~

For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~ ~~includes a detailed description of its risk factors.~~

~~ITEM~~2020.

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

~~(c)~~

Issuer Purchases of Equity Securities ~~by the Issuer and Affiliated Purchasers~~

The following table provides information about Cigna’s share repurchase activity for the quarter ended ~~March 31, 2019:~~

Period
Total # of
shares
purchased (1)

Average price
paid per
share

Total # of shares purchased as part
of publicly announced program (2)

Approximate dollar value of
shares that may yet be purchased
as part of publicly announced
program (3)

January 1-31, 2019
1,112,800

$     192.92

1,081,686

$                         737,655,827

February 1-28, 2019
1,092,282

$     187.16

777,100

$                         590,002,891

March 1-31, 2019
827,489

$     167.46

639,570

$                         484,835,777

Total
3,032,571

$     183.90

2,498,356

N/A

September 30, 2021:
Period
Total # of shares purchased (1)
Average price paid per share (1)
Total # of shares purchased as part of
publicly announced program (2)
Approximate dollar value of shares
that may yet be purchased as part
of publicly announced program (3)
July 1-31, 2021 1,538,889 $ 232.43 1,536,623 $ 3,842,810,336
August 1-31, 2021 8,747,861 (1) 8,745,737 $ 1,619,335,337
September 1-30, 2021 1,854 $ 208.07 — $ 1,619,335,337
Total 10,288,604 (1) 10,282,360 N/A

(1) ~~Represents~~Includes shares tendered by employees under the Company’s equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered ~~31,114~~2,266 shares in ~~January, 315,182~~July, 2,124 shares in ~~February~~August and ~~187,919~~1,854 shares in ~~March 2019.~~

September 2021. Amount purchased in August 2021 also reflects the initial delivery of 7.7 million shares pursuant to the ASR agreements discussed in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2. Such repurchase was made pursuant to the Company's share repurchase program described in note (2) below. Average price paid per share for the period August 1-31, 2021 for shares not purchased pursuant to the ASR agreements was $214.11.

(2)Additionally, the Company maintains a share repurchase program authorized by the Board of Directors. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, ~~or privately negotiated transactions,~~ each in compliance with Rule 10b-18 under the ~~Securities~~ Exchange Act, ~~of 1934, as amended.~~or privately negotiated transactions. The program may be suspended or discontinued at any ~~time. From April 1, 2019 through May 1, 2019,~~time and does not have an expiration date. In October 2021, the ~~Company repurchased 0.6 million shares for approximately $95 million, leaving the remaining~~Board increased repurchase authority ~~at $390 million~~by an additional $5 billion. Share repurchase authority was $6.6 billion as of ~~May 1, 2019.~~

November 3, 2021.

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

~~ITEM~~

Item 5. OTHER INFORMATION

Amended and Restated By-laws

Effective as of November 2, 2021, as a result of its annual review of its corporate governance practices, the Board of Directors of the Company adopted restated by-laws (the “By-Laws”) in order to, among other things: (1) provide that shareholder meetings may be held by means of remote communication; (2) eliminate the default date for the annual meeting of shareholders; (3) clarify that the Board may postpone, reschedule or cancel any shareholder meeting; (4) clarify the rules of conduct for a shareholder meeting; (5) update the procedural and information requirements for shareholders to submit director nominations and shareholder proposals; (6) provide procedures for shareholder nominations at special meetings of shareholders where directors are to be elected; (7) permit special meetings of the Board to be called on less than 12 hours’ notice if the person calling the meeting deems it to be necessary or appropriate under the circumstances; (8) add provisions allowing the Board to operate with reduced procedural requirements and take other actions during an emergency, disaster or catastrophe; and (9) make certain other updates, clarifications and ministerial and conforming changes.

The foregoing summary does not purport to be a complete description of the By-Laws and is qualified in its entirety by reference to the complete text of the By-Laws, a copy of which is filed herewith as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated by reference in this Item 5.

Executive Officer Retirements

On September 23, 2021, the Company filed a Form 8-K disclosing the retirements of Matthew G. Manders, President, Government & Solutions, and Timothy C. Wentworth, Chief Executive Officer, Evernorth. On November 3, 2021, the Company and Mr. Manders executed a Retirement Agreement (the “Manders Retirement Agreement”) and agreed to extend Mr. Manders’ retirement date to December 17, 2021. On November 3, 2021, the Company and Mr. Wentworth executed a Retirement Agreement (the “Wentworth Retirement Agreement”) and agreed to extend Mr. Wentworth’s retirement date to February 4, 2022. Effective January 1, 2022, Mr. Wentworth will transition to a non-executive officer role and will continue to provide services on ongoing projects through his retirement date.

Each of the Retirement Agreements include customary confidentiality, non-solicitation, non-competition and non-disparagement provisions. In addition, the agreements provide for benefits, subject to the execution of a Release Agreement, consisting of: (1) the payment of an annual cash incentive for service in 2021 at 100% of their respective annual target; (2) consistent with the terms governing treatment of equity awards upon retirement under the Cigna Long-Term Incentive Plan at the time such awards were made (a) for awards granted prior to December 2020, unexercised and unvested stock options and unvested restricted stock awards will become vested and exercisable upon retirement; (b) for awards granted in February 2021, unvested stock options and unvested restricted stock awards will continue to vest and become exercisable on the originally scheduled vesting dates for those awards; and (c) the payout of previously awarded Strategic Performance Shares (“SPSs”) for the 2019 – 2021, 2020 – 2022, and 2021– 2023 performance periods, prorated based on the number of months that each of Mr. Manders and Mr. Wentworth would have been employed during each 36-month performance period as if their employment continued through December 31, 2021. The estimated aggregate value of these benefits is approximately $8.7 million with respect to Mr. Manders and approximately $13.7 million with respect to Mr. Wentworth, based on a stock price of $218.25 per share, the closing price of Cigna’s common stock on November 3, 2021.

The percentage of actual shares earned and timing of the payment of the SPS awards will be determined by the People Resources Committee of the Board of Directors in accordance with the terms of the Cigna Long-Term Incentive Plan. Stock options awarded under the Cigna Long-Term Incentive Plan will expire at their original term.

Mr. Manders and Mr. Wentworth have each also entered into an Advisory Services Agreement (each, an “Advisory Services Agreement”) with the Company, pursuant to which each will provide advice and counsel to senior management on business planning and strategy. Each will be paid $10,000 per day for each day during which he performs advisory services. The Advisory Services Agreements expire on December 31, 2022.
57

Item 6.EXHIBITS

INDEX TO EXHIBITS

~~Number~~	~~Description~~
Number		Description		Method of Filing
10.1* 3.1				~~Form~~Amended and Restated By-Laws of Cigna ~~Long-Term Incentive Plan: Strategic Performance Share Grant Agreement~~Corporation as last amended November 2 , 2021.		Filed herewith.
10.2* 31.1				~~Form of Cigna Long-Term Incentive Plan: Nonqualified Stock Option Grant Agreement~~	~~Filed herewith.~~
10.3*	~~Form of Cigna Long-Term Incentive Plan: Restricted Stock Grant Agreement~~		~~Filed herewith.~~
10.4*	~~Form of Cigna Long-Term Incentive Plan: Restricted Stock Unit Grant Agreement~~		~~Filed herewith.~~
~~31.1~~	Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934			Filed herewith.
31.2				Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934		Filed herewith.
32.1				Certification of Chief Executive Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350		Furnished herewith.
32.2				Certification of Chief Financial Officer of Cigna Corporation pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350		Furnished herewith.
101				~~Financial statements~~ The following materials from ~~the quarterly report~~Cigna Corporation's Quarterly Report on Form 10-Q ~~of Cigna Corporation~~ for the quarter ended ~~March 31, 2019~~September 30, 2021, formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Total Equity; (v) the Consolidated Statements of Cash ~~Flow;~~Flows; and (vi) the Notes to the Consolidated Financial Statements		Filed herewith.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)		Filed herewith.

* Management contracts and compensatory plans or arrangements.

SIGNATURE

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

Date: November 4, 2021

~~CIGNA CORPORATION~~
CIGNA CORPORATION
~~Date:~~	~~May 2, 2019~~
~~By:~~	~~/s/ Eric P. Palmer~~
	/s/ Brian C. Evanko
Brian C. Evanko		~~Eric P. Palmer~~
		Executive Vice President and
Chief Financial Officer
		(Principal Financial ~~Officer)~~ Officer and Authorized Signatory)


				Page
PART I			FINANCIAL INFORMATION	~~Page~~

			Item 1.	Financial Statements (Unaudited)	3
			Consolidated Statements of Income	1 3
			Consolidated Statements of Comprehensive Income	2 4
			Consolidated Balance Sheets	3 5
			Consolidated Statements of Changes in Total Equity	4 6
			Consolidated Statements of Cash Flows	5 8
			Notes to the Consolidated Financial Statements	6 9

			Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44 36

			Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63 55

			Item 4.	Controls and Procedures	63 55

PART II			OTHER INFORMATION
~~PART II~~			~~OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~	63
Item 1. A.Legal Proceedings	55

			Item 1.A. Risk Factors	63 56

			Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63 56

			Item 5. Other Information	56

			Item 6. Exhibits	~~Exhibits~~58		64
SIGNATURE			65	59

	Unaudited
	Three Months Ended
	March 31,
(In millions, except per share amounts)	2019		2018
Revenues
Pharmacy revenues	$	25,179	$	717
Premiums	9,971		8,999
Fees and other revenues	2,450		1,368
Net investment income	346		329
TOTAL REVENUES	37,946		11,413
Benefits and expenses
Pharmacy and other service costs	24,050		561
Medical costs and other benefit expenses	7,620		6,772
Selling, general and administrative expenses	3,303		2,745
Amortization of acquired intangible assets	743		27
TOTAL BENEFITS AND EXPENSES	35,716		10,105
Income from operations	2,230		1,308
Interest expense and other	(452)		(57)
Net realized investment gains (losses)	10		(33)
Income before income taxes	1,788		1,218
TOTAL INCOME TAXES	416		301
Net income	1,372		917
Less: net income attributable to noncontrolling interests	4		2
SHAREHOLDERS’ NET INCOME	$	1,368	$	915
Shareholders’ net income per share
Basic	$	3.61	$	3.78
Diluted	$	3.56	$	3.72


Cigna Corporation Consolidated Statements of Income
	Unaudited				Unaudited
	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share amounts)	2021		2020		2021		2020
Revenues
Pharmacy revenues	$	31,013	$	27,802	$	89,085	$	79,464
Premiums	10,275		10,682		30,812		31,928
Fees and other revenues	2,532		2,174		7,324		6,424
Net investment income	468		297		1,169		873
TOTAL REVENUES	44,288		40,955		128,390		118,689
Benefits and expenses
Pharmacy and other service costs	30,070		26,624		86,306		76,425
Medical costs and other benefit expenses	8,330		8,429		24,819		23,863
Selling, general and administrative expenses	3,093		3,301		9,368		10,106
Amortization of acquired intangible assets	501		493		1,499		1,487
TOTAL BENEFITS AND EXPENSES	41,994		38,847		121,992		111,881
Income from operations	2,294		2,108		6,398		6,808
Interest expense and other	(303)		(336)		(915)		(1,101)
Debt extinguishment costs	—		—		(141)		(199)

Net realized investment gains (losses)	68		32		128		(18)
Income before income taxes	2,059		1,804		5,470		5,490
TOTAL INCOME TAXES	424		406		1,188		1,143
Net income	1,635		1,398		4,282		4,347
Less: Net income attributable to noncontrolling interests	14		10		33		24
SHAREHOLDERS' NET INCOME	$	1,621	$	1,388	$	4,249	$	4,323
Shareholders’ net income per share
Basic	$	4.84	$	3.81	$	12.44	$	11.77
Diluted	$	4.80	$	3.78	$	12.32	$	11.66

	Unaudited
	As of			As of
	March 31,			December 31,
(In millions, except per share amounts)	2019			2018
Assets
Cash and cash equivalents	$	4,976		$		3,855
Investments	1,662			2,045
Accounts receivable, net	10,941			10,473
Inventories	2,382			2,821
Other current assets	1,175			1,236
Total current assets	21,136			20,430
Long-term investments	27,257			26,929
Reinsurance recoverables	5,385			5,507
Deferred policy acquisition costs	2,817			2,821
Property and equipment	4,523			4,562
Goodwill	44,537			44,505
Other intangible assets	38,338			39,003
Other assets	2,276			1,630
Separate account assets	8,079			7,839
TOTAL ASSETS	$		154,348	$	153,226
Liabilities
Current insurance and contractholder liabilities	$		7,060	$	6,801
Pharmacy and service costs payable	11,145			10,702
Accounts payable	4,488			4,366
Accrued expenses and other liabilities	7,361			7,071
Short-term debt	2,915			2,955
Total current liabilities	32,969			31,895
Non-current insurance and contractholder liabilities	20,043			19,974
Deferred tax liabilities, net	9,403			9,453
Other non-current liabilities	3,832			3,470
Long-term debt	37,571			39,523
Separate account liabilities	8,079			7,839
TOTAL LIABILITIES	111,897			112,154
Contingencies — Note 16
Redeemable noncontrolling interests	38			37
Shareholders’ equity
Common stock (1)	4			4
Additional paid-in capital	27,855			27,751
Accumulated other comprehensive loss	(1,282)			(1,711)
Retained earnings	16,426			15,088
Less: treasury stock, at cost	(595)			(104)
TOTAL SHAREHOLDERS’ EQUITY	42,408			41,028
Other noncontrolling interests	5			7
Total equity	42,413			41,035
Total liabilities and equity	$	154,348		$		153,226
SHAREHOLDERS’ EQUITY PER SHARE	$	111.52		$		107.71


Cigna Corporation Consolidated Balance Sheets
	Unaudited
	As of September 30,		As of December 31,

(In millions)	2021		2020
Assets
Cash and cash equivalents	$	3,483	$	10,182
Investments	1,374		1,331
Accounts receivable, net	16,250		12,191
Inventories	3,020		3,165
Other current assets	1,360		930
Total current assets	25,487		27,799
Long-term investments	23,756		23,262
Reinsurance recoverables	5,035		5,200
Deferred policy acquisition costs	3,367		3,385
Property and equipment	4,070		4,205
Goodwill	46,056		44,648
Other intangible assets	34,615		35,179
Other assets	2,715		2,687
Separate account assets	9,150		9,086
TOTAL ASSETS	$	154,251	$	155,451
Liabilities
Current insurance and contractholder liabilities	$	5,917	$	5,308
Pharmacy and other service costs payable	14,705		13,347
Accounts payable	5,659		5,478
Accrued expenses and other liabilities	7,356		8,515
Short-term debt	2,703		3,374
Total current liabilities	36,340		36,022
Non-current insurance and contractholder liabilities	16,576		16,844
Deferred tax liabilities, net	8,832		8,939
Other non-current liabilities	4,261		4,629
Long-term debt	31,609		29,545
Separate account liabilities	9,150		9,086
TOTAL LIABILITIES	106,768		105,065
Contingencies — Note 15	0		0
Redeemable noncontrolling interests	56		58
Shareholders’ equity
Common stock (1)	4		4
Additional paid-in capital	29,077		28,975
Accumulated other comprehensive loss	(1,153)		(861)
Retained earnings	31,803		28,575
Less: Treasury stock, at cost	(12,316)		(6,372)
TOTAL SHAREHOLDERS’ EQUITY	47,415		50,321
Other noncontrolling interests	12		7
Total equity	47,427		50,328
Total liabilities and equity	$	154,251	$	155,451

Unaudited Three Months Ended March 31, 2019 (In millions)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss)		Retained Earnings		Treasury Stock		Shareholders’ Equity		Other Non- controlling Interests		Total Equity		Redeemable Non- controlling Interests

Balance at December 31, 2018	$	4	$	27,751	$	(1,711)	$	15,088	$	(104)	$	41,028	$	7	$	41,035	$	37
Cumulative effect of adopting new lease accounting guidance (ASU 2016-02) (1)							(15)				(15)				(15)
Effect of issuing stock for employee benefit plans			104						(29)		75				75
Other comprehensive income (loss)					429						429				429		(2)
Net income							1,368				1,368		1		1,369		3
Common dividends declared (per share: $0.04)							(15)				(15)				(15)
Repurchase of common stock									(462)		(462)				(462)
Other transactions impacting noncontrolling interests											-		(3)		(3)		-
Balance at March 31, 2019	$	4	$	27,855	$	(1,282)	$	16,426	$	(595)	$	42,408	$	5	$	42,413	$	38

Three Months Ended March 31, 2018 (In millions)	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss)		Retained Earnings		Treasury Stock		Shareholders’ Equity		Other Non- controlling Interests		Total Equity		Redeemable Non- controlling Interests

Balance at December 31, 2017	$	74	$	2,940	$	(1,082)	$	15,800	$	(4,021)	$	13,711	$	-	$	13,711	$	49
Cumulative effect of accounting for financial instruments and hedging					(10)		68				58				58
Reclassification adjustment related to U.S. tax reform legislation					(229)		229				-				-
Effect of issuing stock for employee benefit plans			23				(69)		68		22				22
Other comprehensive (loss)					(226)						(226)				(226)		(2)
Net income							915				915				915		2
Common dividends declared (per share: $0.04)							(10)				(10)				(10)
Repurchase of common stock									(275)		(275)				(275)
Other transactions impacting noncontrolling interests											-				-
Balance at March 31, 2018	$	74	$	2,963	$	(1,547)	$	16,933	$	(4,228)	$	14,195	$	-	$	14,195	$	49

	Unaudited
	Three Months Ended March 31,
(In millions)	2019		2018
Cash Flows from Operating Activities
Net income	$	1,372	$	917
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	897		140
Realized investment (gains) losses, net	(10)		33
Deferred income tax (benefit) expense	(162)		9
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable	(396)		(53)
Inventories	440		94
Deferred policy acquisition costs	(51)		(76)
Reinsurance recoverable and other assets	124		51
Insurance liabilities	360		849
Pharmacy and service costs payable	444		(124)
Accounts payable and accrued expenses and other liabilities	91		193
Other, net	83		(8)
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,192		2,025
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt and equity securities	1,471		499
Investment maturities and repayments:
Debt and equity securities	319		297
Commercial mortgage loans	89		28
Other sales, maturities and repayments (primarily short-term and other long-term investments)	367		112
Investments purchased or originated:
Debt and equity securities	(1,088)		(2,259)
Commercial mortgage loans	(95)		(68)
Other (primarily short-term and other long-term investments)	(388)		(206)
Property and equipment purchases, net	(194)		(103)
Acquisitions, net of cash acquired	(6)		-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	475		(1,700)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds	247		292
Withdrawals and benefit payments from contractholder deposit funds	(251)		(306)
Net change in short-term debt	(1,048)		(3)
Repayment of long-term debt	(1,000)		(131)
Repurchase of common stock	(462)		(310)
Issuance of common stock	53		20
Other, net	(73)		(92)
NET CASH (USED IN) FINANCING ACTIVITIES	(2,534)		(530)
Effect of foreign currency rate changes on cash and cash equivalents	(12)		4
Net increase (decrease) in cash and cash equivalents	1,121		(201)
Cash and cash equivalents, January 1,	3,855		2,972
Cash and cash equivalents, March 31,	$	4,976	$	2,771
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	$	29	$	31
Interest paid	$	377	$	46



	Unaudited
	Nine Months Ended September 30, 2021
(In millions)	2021		2020
Cash Flows from Operating Activities
Net income	$	4,282	$	4,347
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,180		2,089
Realized investment (gains) losses, net	(128)		18
Deferred income tax (benefit)	(104)		(340)

Debt extinguishment costs	141		199
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable	(4,039)		(2,810)
Inventories	145		5
Deferred policy acquisition costs	(182)		(244)
Reinsurance recoverable and Other assets	(281)		(468)
Insurance liabilities	863		740
Pharmacy and other service costs payable	1,357		2,084
Accounts payable and Accrued expenses and other liabilities	(1,411)		(32)
Other, net	93		468
NET CASH PROVIDED BY OPERATING ACTIVITIES	2,916		6,056
Cash Flows from Investing Activities
Proceeds from investments sold:
Debt securities and equity securities	1,052		2,038
Investment maturities and repayments:
Debt securities and equity securities	1,265		1,097
Commercial mortgage loans	127		14
Other sales, maturities and repayments (primarily short-term and other long-term investments)	1,261		1,086
Investments purchased or originated:
Debt securities and equity securities	(2,742)		(3,317)
Commercial mortgage loans	(233)		(55)
Other (primarily short-term and other long-term investments)	(1,768)		(1,434)
Property and equipment purchases, net	(850)		(775)
Acquisitions, net of cash acquired	(1,836)		(135)
Divestiture, net of cash sold	(61)		—
Other, net	51		37
NET CASH (USED IN) INVESTING ACTIVITIES	(3,734)		(1,444)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds	132		769
Withdrawals and benefit payments from contractholder deposit funds	(139)		(736)
Net change in short-term debt	1,633		592
Net proceeds on issuance of term loan	—		1,398

Payments for debt extinguishment	(136)		(212)
Repayment of long-term debt	(4,578)		(6,897)
Net proceeds on issuance of long-term debt	4,260		3,465
Repurchase of common stock	(6,321)		(2,352)
Issuance of common stock	301		239
Common stock dividend paid	(1,017)		(15)
Other, net	24		(63)
NET CASH (USED IN) FINANCING ACTIVITIES	(5,841)		(3,812)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(46)		(7)
Net (decrease) increase in cash, cash equivalents and restricted cash	(6,705)		793
Cash, cash equivalents and restricted cash January 1, (1)	10,245		5,411
Cash, cash equivalents and restricted cash, September 30,	3,540		6,204
Cash reclassified to assets of business held for sale	—		(798)
Cash, cash equivalents and restricted cash September 30, per Consolidated Balance Sheets (2)	$	3,540	$	5,406
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	$	1,916	$	1,408
Interest paid	$	950	$	1,112

Note Number	Footnote	Page

BUSINESS AND CAPITAL STRUCTURE
1	Description of Business	7
2	Summary of Significant Accounting Policies	8
3	Accounts Receivable, Net	9
4	Mergers and Acquisitions	9
5	Earnings Per Share	10
6	Debt	11
INSURANCE INFORMATION
7	Insurance and Contractholder Liabilities	12
8	Reinsurance	15
INVESTMENTS
9	Investments	17
10	Fair Value Measurements	21
11	Variable Interest Entities	27
12	Accumulated Other Comprehensive Income (Loss)	28
WORKFORCE MANAGEMENT AND COMPENSATION
13	Pension and Other Postretirement Benefit Plans	28
PROPERTY, LEASES AND OTHER ASSET BALANCES
14	Leases	29
COMPLIANCE, REGULATION AND CONTINGENCIES
15	Income Taxes	31
16	Contingencies and Other Matters	31
17	Condensed Consolidating Financial Information	34
RESULTS DETAILS
18	Segment Information	41



Note Number	Footnote	Page

BUSINESS AND CAPITAL STRUCTURE
1	Description of Business	10
2	Summary of Significant Accounting Policies	11
3	Accounts Receivable, Net	11
4	Mergers , Acquisitions and Divestitures	12
5	Earnings Per Share	13
6	Debt	14

INSURANCE INFORMATION
7	Insurance and Contractholder Liabilities	16
8	Reinsurance	18
INVESTMENTS
9	Investments	20
10	Fair Value Measurements	24
11	Variable Interest Entities	28
12	Accumulated Other Comprehensive Income (Loss)	29



PROPERTY, LEASES AND OTHER ASSET BALANCES

13	Leases	30
COMPLIANCE, REGULATION AND CONTINGENCIES

14	Income Taxes	30
15	Contingencies and Other Matters	30
RESULTS DETAILS
16	Segment Information	32

(In millions)	March 31, 2019		December 31, 2018
Insurance customer receivables	$	2,261	$	1,888
Noninsurance customer receivables	4,635		4,988
Pharmaceutical manufacturers receivable(1)	3,682		3,321
Other receivables	363		276
Total accounts receivable, net	$	10,941	$	10,473

	Three Months Ended
	March 31, 2019						March 31, 2018
(Shares in thousands, dollars in millions, except per share amounts)	Basic		Effect of Dilution		Diluted		Basic		Effect of Dilution		Diluted
Shareholders’ net income	$	1,368			$	1,368	$	915			$	915
Shares:
Weighted average	379,387				379,387		242,179				242,179
Common stock equivalents			4,637		4,637				3,609		3,609
Total shares	379,387		4,637		384,024		242,179		3,609		245,788
EPS	$	3.61	$	(0.05)	$	3.56	$	3.78	$	(0.06)	$	3.72

	Three Months Ended March 31,
(In millions)	2019	2018
Anti-dilutive options	2.8	0.9

	Three Months Ended
(Dollars in millions)	March 31, 2019				March 31, 2018
	$		%(1)		$		%(2)
Actual completion factors	$	55	0.2	%	$	52	0.3	%
Medical cost trend	62		0.3		54		0.3
Other	-		-		9		-
Total favorable variance	$	117	0.5	%	$	115	0.6	%

(Dollars in millions) Line of Business	Reinsurer(s)	March 31, 2019		December 31, 2018		Collateral and Other Terms at March 31, 2019
Ongoing Operations
Integrated Medical, International Markets, Group Disability, COLI	Various	$	470	$	464	Balances range from less than $1 million up to $65 million. Over 70% of the balance is from companies rated as investment grade by Standard & Poor’s.
Total recoverables related to ongoing operations		470		464
Acquisition, disposition or runoff activities
Individual Life and Annuity (sold in 1998)	Lincoln National Life and Lincoln Life & Annuity of New York	3,254		3,312		Both companies’ ratings were well above the level that would trigger a contractual obligation to fully secure the outstanding balance.
GMDB (effectively exited in 2013)	Berkshire	844		893		100% secured by assets in a trust.
Retirement Benefits Business (sold in 2004)	Prudential Retirement Insurance and Annuity	761		787		100% secured by assets in a trust.
Supplemental Benefits Business (2012 acquisition)	Great American Life	254		261		100% secured by assets in a trust.
Other	Various	82		87		100% secured by assets in a trust or other deposits.
Total recoverables related to acquisition, disposition or runoff activities		5,195		5,340
Total reinsurance recoverables		$	5,665	$	5,804

	Amortized		Fair
(In millions)	Cost		Value
Due in one year or less	$	1,366	$	1,370
Due after one year through five years	6,516		6,684
Due after five years through ten years	9,529		9,682
Due after ten years	4,231		4,925
Mortgage and other asset-backed securities	494		508
Total	$	22,136	$	23,169

	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Appreciation		Depreciation		Value
March 31, 2019
Federal government and agency	$	513	$	221	$	(1)	$	733
State and local government	851		77		-		928
Foreign government	2,126		183		(4)		2,305
Corporate	18,152		676		(133)		18,695
Mortgage and other asset-backed	494		21		(7)		508
Total	$	22,136	$	1,178	$	(145)	$	23,169
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,269	$	555	$	(13)	$	2,811
December 31, 2018
Federal government and agency	$	507	$	204	$	(1)	$	710
State and local government	920		66		(1)		985
Foreign government	2,214		155		(7)		2,362
Corporate	18,403		411		(453)		18,361
Mortgage and other asset-backed	506		16		(12)		510
Total	$	22,550	$	852	$	(474)	$	22,928
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,264	$	479	$	(40)	$	2,703


(In millions)	Amortized Cost		Allowance for Credit Loss		Unrealized Appreciation		Unrealized Depreciation		Fair Value
September 30, 2021
Federal government and agency	$	277	$	—	$	105	$	—	$	382
State and local government	153		—		16		—		169
Foreign government	2,317		—		235		(33)		2,519
Corporate	13,257		(11)		1,136		(69)		14,313
Mortgage and other asset-backed	457		—		21		(4)		474
Total	$	16,461	$	(11)	$	1,513	$	(106)	$	17,857
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,282	$	(3)	$	721	$	(9)	$	2,991
December 31, 2020
Federal government and agency	$	334	$	—	$	122	$	—	$	456
State and local government	150		—		17		—		167
Foreign government	2,201		—		318		(8)		2,511
Corporate	13,108		(19)		1,506		(33)		14,562
Mortgage and other asset-backed	427		(7)		27		(12)		435
Total	$	16,220	$	(26)	$	1,990	$	(53)	$	18,131
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)	$	2,282	$	(5)	$	838	$	(3)	$	3,112


	Carrying value as of
(In millions)	September 30, 2021		December 31, 2020
Real estate investments	$	1,161	$	951
Securities partnerships	2,098		1,737
Other	170		144
Total	$	3,429	$	2,832

		Notional Value as of
(In millions)		March 31,		December 31,
Type of Instrument	Purpose	2019		2018
Foreign currency swap contracts	Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.	$	593	$	525
Foreign currency swap contracts	Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.	$	439	$	439
Foreign currency forward contracts	Economic hedge: To hedge the foreign exchange related changes in fair values of a U.S. dollar-denominated bond portfolio to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged bond portfolio.	$	309	$	309


		Notional Value as of
(In millions)		September 30, 2021		December 31, 2020
Purpose	Type of Instrument
Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.	Foreign currency swap contracts	$	1,070	$	925
Fair value hedge: To convert a portion of the interest rate exposure on the Company's long-term debt from fixed to variable rates. This more closely aligns the Company's interest expense with the interest income received on its cash equivalent and short-term investment balances. The variable rates are benchmarked to SOFR.	Interest rate swap contracts	$	750	$	—
Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.	Foreign currency swap contracts	$	526	$	526
	Foreign currency forward contracts	$	697	$	636
Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.	Foreign currency forward contracts	$	671	$	538
Economic hedge: To hedge against the foreign exchange depreciation of certain foreign subsidiary earnings denominated in South Korean Won. The notional value of hedging instruments aligns with the U.S. dollar equivalent of hedged foreign-denominated earnings.	Average rate option contracts	$	120	$	—

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
	As of		As of		As of		As of		As of		As of		As of		As of
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(In millions)	2019		2018		2019		2018		2019		2018		2019		2018
Financial assets at fair value
Debt securities
Federal government and agency	$	212	$	209	$	521	$	501	$	-	$	-	$	733	$	710
State and local government	-		-		928		985		-		-		928		985
Foreign government	-		-		2,277		2,356		28		6		2,305		2,362
Corporate	-		-		18,458		18,127		237		234		18,695		18,361
Mortgage and other asset-backed	-		-		369		372		139		138		508		510
Total debt securities	212		209		22,553		22,341		404		378		23,169		22,928
Equity securities (1)	8		384		49		43		32		32		89		459
Short-term investments	-		-		267		316		-		-		267		316
Derivative assets	-		-		58		53		-		-		58		53
Real estate funds priced at NAV as a practical expedient (2)													230		239
Financial liabilities at fair value
Derivative liabilities	$	-	$	-	$	14	$	10	$	-	$	-	$	14	$	10


(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
	As of September 30, 2021		As of December 31, 2020		As of September 30, 2021		As of December 31, 2020		As of September 30, 2021		As of December 31, 2020		As of September 30, 2021		As of December 31, 2020
Financial assets at fair value
Debt securities
Federal government and agency	$	141	$	207	$	241	$	249	$	—	$	—	$	382	$	456
State and local government	—		—		169		167		—		—		169		167
Foreign government	—		—		2,505		2,498		14		13		2,519		2,511
Corporate	—		—		13,600		13,878		713		684		14,313		14,562
Mortgage and other asset-backed	—		—		333		309		141		126		474		435
Total debt securities	141		207		16,848		17,101		868		823		17,857		18,131
Equity securities (1)	23		50		165		165		31		31		219		246
Short-term investments	—		—		439		325		—		—		439		325
Derivative assets (2)	—		—		126		72		—		—		126		72

Financial liabilities at fair value
Derivative liabilities	$	—	$	—	$	49	$	108	$	—	$	—	$	49	$	108


	Fair Value as of					Unobservable Adjustment Range (Weighted Average by Quantity) as of
(Fair value in millions )	September 30, 2021		December 31, 2020		Unobservable input September 30, 2021	September 30, 2021		December 31, 2020
Debt securities
Corporate and government debt securities	$	727	$	696	Liquidity	60 - 2300 (460)	bps	60 - 1370 (470)	bps
Mortgage and other asset-backed securities	141		126		Liquidity	60 - 390 (90)	bps	60 - 380 (80)	bps


Securities not priced by the Company (1)	—		1
Total Level 3 debt securities	$	868	$	823

Debt and Equity Securities (In millions)	For the Three Months Ended March 31,
Debt and Equity Securities (In millions)	2019		2018
Balance at January 1,	$	410	$	732
Total (losses) included in shareholders’ net income	(1)		(20)
Gains (losses) included in other comprehensive income	7		(5)
Gains (losses) required to adjust future policy benefits for settlement annuities (1)	2		(4)
Purchases, sales, settlements
Purchases	-		10
Sales	-		(11)
Settlements	(1)		(2)
Total purchases, sales and settlements	(1)		(3)
Transfers into/(out of) Level 3			��
Transfers into Level 3	20		20
Transfers out of Level 3 (2)	(1)		(124)
Total transfers into/(out of) Level 3	19		(104)
Balance at March 31,	$	436	$	596
Total (losses) included in shareholders’ net income attributable to instruments held at the reporting date	$	(1)	$	(7)



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In millions)	2021		2020		2021		2020
Debt and Equity Securities
Beginning balance	$	854	$	860	$	854	$	555
Total gains (losses) included in shareholders’ net income	3		(1)		(8)		4
Gains (losses) included in other comprehensive income	2		17		(7)		(42)
Gains (losses) required to adjust future policy benefits for settlement annuities (1)	1		7		(6)		4
Purchases, sales and settlements
Purchases	37		3		108		67
Sales	(36)		(1)		(36)		(13)
Settlements	(1)		(8)		(26)		(15)
Total purchases, sales and settlements	—		(6)		46		39
Transfers into/(out of) Level 3
Transfers into Level 3	58		102		181		629
Transfers out of Level 3	(19)		(33)		(161)		(243)
Total transfers into/(out of) Level 3	39		69		20		386
Ending balance	$	899	$	946	$	899	$	946
Total gains (losses) included in Shareholders’ net income attributable to instruments held at the reporting date	$	(3)	$	—	$	(3)	$	(2)
Change in unrealized gains or losses included in Other comprehensive income for assets held at the end of the reporting period	$	2	$	17	$	(8)	$	(37)

	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(In millions)	2019		2018		2019		2018		2019		2018		2019		2018
Guaranteed separate accounts (See Note 16)	$	204	$	187	$	264	$	267	$	-	$	-	$	468	$	454
Non-guaranteed separate accounts (1)	1,328		1,204		5,346		5,216		244		233		6,918		6,653
Subtotal	$	1,532	$	1,391	$	5,610	$	5,483	$	244	$	233	7,386		7,107
Non-guaranteed separate accounts priced at NAV as a practical expedient (1)													693		732
Total separate account assets													$	8,079	$	7,839


	Fair Value as of				Unfunded Commitment as of September 30, 2021		Redemption Frequency (if currently eligible)	Redemption Notice Period
(In millions)	September 30, 2021		December 31, 2020
Securities partnerships	$	534	$	463	$	253	Not applicable	Not applicable
Real estate funds	309		215		—		Quarterly	30 - 90 days
Hedge funds	4		5		—		Up to annually, varying by fund	30 - 90 days
Total	$	847	$	683	$	253

	Classification in	March 31, 2019				December 31, 2018
(In millions)	Fair Value Hierarchy	Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,875	$	1,864	$	1,832	$	1,858
Long-term debt, including current maturities, excluding finance leases	Level 2	$	41,027	$	39,840	$	40,819	$	40,829


	Classification in Fair Value Hierarchy	September 30, 2021				December 31, 2020
(In millions)		Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,563	$	1,525	$	1,456	$	1,419
Long-term debt, including current maturities, excluding finance leases	Level 2	$	35,794	$	31,579	$	37,676	$	31,835