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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Executive Overview 53

Liquidity and Capital Resources 60

Critical Accounting Estimates 65

Segment Reporting 68

Evernorth 68

U.S. Medical 70

International Markets 71

Group Disability and Other 72

Corporate 73

Investment Assets 73

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 December 31, 2020 compared with December 31, 2019 and our results of operations for 2020 compared with 2019 and 2018 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 II, Item 8 of this Annual Report on Form 10-K ("Form 10-K") and the “Risk Factors” contained in Part I, Item 1A of this Form 10-K. For comparisons of our results of operations for 2019 compared with 2018, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2019.

Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 3 to the Consolidated Financial Statements in this Form 10-K for additional information regarding the Company’s significant accounting policies. In some of our financial tables in this MD&A, we present either percentage changes or “N/M” when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points (“bps”).

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

We use adjusted income from operations as our principal financial measure of operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as shareholders’ net income (or income before taxes for the segment metric) excluding realized investment gains and losses, amortization of acquired intangible assets, special items and prior to 2020, results of Anthem, Inc. and Coventry Health Care Inc. (“Coventry”) (collectively, the “transitioning clients”) (see the “Key Transactions and Business Developments” section of this MD&A for further discussion of transitioning clients). 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:

•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.

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

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

The term adjusted revenues is defined as total revenues excluding the following adjustments: revenue contribution from transitioning clients prior to 2020, special items and Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.

EXECUTIVE OVERVIEW

Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”) is a global health services organization with a mission of helping those we serve improve their health, well-being and peace of mind. We offer a differentiated set of pharmacy, medical, dental and related products and services offered by our subsidiaries. For further information on our business and strategy, see Item 1, "Business" in this Form 10-K.

COVID-19 Update

The novel strain of coronavirus (“COVID-19”) was declared a pandemic by the World Health Organization in March 2020. From the onset of the COVID-19 pandemic we have taken actions to drive affordability, reduce uncertainty and make health care easier. For customers, these actions include COVID-19 related cost share waivers, expanded access to virtual care, support for access to medication and advocating for whole person health through various behavioral health initiatives. We have supported the medical community by simplifying processes and donating medications for a COVID-19 clinical trial. Cigna and the Cigna Foundation have assisted our communities through several initiatives including the launch of the Brave of Heart Fund that provides financial assistance to survivors of front-line U.S. health care workers who gave their lives in the fight against COVID-19. Cigna also provides emotional support services to their families. The Evernorth team launched ParachuteRx, a drug cost assistance program to certain customers without health coverage due to furlough or job loss. Cigna Medical Group was among the first in the United States to administer antibody therapies to high-risk COVID-19 patients in a non-hospital setting. Cigna also partnered with other organizations on digital access to vaccination records for those who have received the COVID-19 vaccine to facilitate return to work and daily activities.

We have continued to support our workforce by enabling remote work where appropriate, and implemented enhanced safety protocols and programs that support the health and mental well-being of our employees. We have continued to execute our business continuity plans over our operations such as leveraging purchasing volume across the pharmaceutical supply chain in order to mitigate risk associated with prescription drug supply. We did not incur significant disruptions to our operations during 2020 from COVID-19.

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

The COVID-19 pandemic has pervasively impacted the economy, financial markets and the global health care delivery systems. The effects of the COVID-19 pandemic on the Company began to emerge in the United States at the end of the first quarter and were not material to the Company's results of operations or financial condition for that period.

Beginning in April, we experienced a significant deferral of care by our customers. The deferral of care moderated over the course of the second quarter with utilization levels eventually returning to nearly normal levels by the end of June. In the third quarter, we experienced increased medical utilization as we observed a reduction to the level of deferred care and our customers sought care for COVID-19 testing and treatment.

In the fourth quarter, as COVID-19 cases increased, the costs for testing and treatment exceeded the savings related to the deferral of care. These impacts were most prevalent in the U.S. Medical segment where fourth quarter earnings were adversely impacted by increased costs of COVID-19 care and decreased contributions from our specialty products. Full year U.S. Medical results reflect COVID-19 impacts of deferral of care by our customers partially offset by the cost of COVID-19 care, the cost of COVID-19 related actions including premium relief programs for employer clients, cost share waivers for customers, customer disenrollment and actions to support providers and employees.

Our Group Disability and Other results reflect significantly elevated life insurance claims related to the COVID-19 pandemic and its effects in the third and fourth quarters. Quarterly and year-to-date earnings in our Evernorth segment also reflected effects of the pandemic, specifically, a favorable mix of claims as a result of both the type of drugs dispensed as well as the distribution method used for dispensing and fulfilling, partially offset by lower 30-day retail script volume. Segment results are discussed further in the "Segment Reporting" section of this MD&A and discussion of the impact of COVID-19 on our investment portfolio and related considerations regarding our investment outlook can be found in Note 11 to the Consolidated Financial Statements and in the "Investment Assets" discussion of this MD&A.

While it is difficult to predict the impact of the COVID-19 pandemic on our results beyond 2020, we believe that such results may be impacted by, among other things, higher medical costs to treat those affected by the virus, lower customer volumes due to rising unemployment, lower future risk adjustment revenue due to disrupted care impeding appropriate documentation of customer risk profiles in our Medicare Advantage business, the return of costs for those who had previously deferred care, vaccine costs, continued cost share waivers, the potential for continued deferral of care, or lower investment returns.

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

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

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

Financial Highlights

See Note 1 to the Consolidated Financial Statements for a description of our segments. Unless otherwise specified, the commentary provided below describes our results for the year ended December 31, 2020 compared with the year ended December 31, 2019. Results for 2018 only include Express Scripts for the period following the acquisition on December 20, 2018.

Summarized below are certain key measures of our performance by segment for the years ended December 31:

Financial highlights by segment

For the Years Ended December 31, Increase (Decrease) Increase (Decrease)

Revenues

Adjusted revenues by segment

Revenue contribution from transitioning clients — 13,347 459 N/M N/M

Special items 204 — 123 N/M N/M

Earnings per share (diluted)

Pre-tax adjusted income from operations by segment

Adjustment for transitioning clients — 1,726 62 N/M N/M

Income attributable to noncontrolling interests 37 20 14 85 43

Net realized investment gains (losses) 279 221 (124) 26 N/M

Amortization of acquired intangible assets (1,982) (2,949) (235) 33 N/M

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

Consolidated Results of Operations (GAAP basis)

For the Years Ended December 31, Increase (Decrease) Increase (Decrease)

Debt extinguishment costs (199) (2) — (197) N/M (2) N/M

Gain (loss) on sale of business 4,203 — — 4,203 N/M — N/M

Less: Net income attributable to noncontrolling interests 31 16 9 15 94 7 78

Consolidated effective tax rate 21.9 % 22.1 % 26.1 % (20) bps (400) bps

Medical customers (in thousands)

Dollars in Millions Diluted Earnings Per Share

For the Years Ended December 31, For the Years Ended December 31,

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

Adjustment for transitioning clients — (1,316) (47) — (3.46) (0.19)

Special items

Debt extinguishment costs 151 — — 0.41 — —

Charge for organizational efficiency plan 24 162 — 0.07 0.43 —

Risk corridors recovery (76) — — (0.21) — —

Contractual adjustment for a former client (155) — — (0.42) — —

(Gain) on sale of business (3,217) — — (8.73) — —

Charges (benefits) associated with tax reform — — (2) — — (0.01)

Commentary: 2020 versus 2019

Unless indicated otherwise, the commentary presented below, and in the segment discussions that follow, compare results for the year ended December 31, 2020 with results for the year ended December 31, 2019.

Shareholders’ net income increase was driven by the gain on sale of the Group Disability and Life business, lower amortization charges and higher adjusted income from operations, partially offset by the absence of earnings from transitioning clients.

Adjusted income from operations increased, driven in part by higher earnings in the Evernorth segment reflecting customer growth and increased script volumes, an increase in the International Markets segment results and lower interest costs in Corporate due to a lower level of outstanding debt. These favorable effects were partially offset by lower earnings in the Group Disability and Other segment reflecting significantly elevated life claims related to the effects of COVID-19.

Medical customers decreased due to declines in the Middle Market and National Accounts market segments and increased disenrollment driven by the impacts of COVID-19. Those decreases were partially offset by growth in the Select, International and Medicare Advantage segments.

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

Premiums increased, reflecting customer growth in insured products and rate increases reflecting expected medical cost inflation and the return of the health insurance industry tax. These factors were partially offset by the impact of premium relief programs implemented in response to significantly lower than historical utilization as customers deferred care in 2020 due to the COVID-19 pandemic.

Fees and other revenues decreased, primarily reflecting the transition of U.S. Medical's commercial customers to Evernorth's retail pharmacy network beginning in the third quarter of 2019 (see Note 3(K) to the Consolidated Financial Statements for further information).

Net investment income decrease was driven by lower yields, including lower income from partnership investments due to current economic conditions. These effects were partially offset by higher average assets. See the "Investment Assets" section of this MD&A for further discussion.

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

Medical costs and other benefit expenses increased, reflecting both customer growth and direct costs associated with COVID-19, partially offset by care deferrals in insured products in U.S. Medical and higher life claims in Group Disability and Other due to the effects of the COVID-19 pandemic.

Selling, general and administrative expenses were essentially flat, primarily reflecting lower charges in 2020 for the organizational efficiency plan and the risk corridors claim recovery recognized in the third quarter of 2020 (see the "Risk Mitigation Programs - Individual ACA Business" section of this MD&A and Note 21 to the Consolidated Financial Statements for further discussion), offset by the return of the health insurance industry tax.

Amortization of acquired intangible assets decreased, primarily reflecting lower amortization of customer-related intangibles associated with the transitioning clients.

Income tax expense increased for 2020, largely attributable to the sale of Cigna's Group Disability and Life business.The consolidated effective tax rate decreased slightly, driven by recognition of certain incremental federal and state tax benefits, largely offset by the return of the nondeductible health insurance industry tax.

Key Transactions and Business Developments

Sale of Group Disability and Life Business

As discussed in Note 5 to the Consolidated Financial Statements, Cigna sold the U.S. Group Disability and Life business to New York Life Insurance Company for $6.2 billion on December 31, 2020. The “Liquidity and Capital Resources” section of this MD&A provides discussion of the use of proceeds from this divestiture.

Organizational Efficiency Plan

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

Merger with Express Scripts

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

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

Industry Developments and Other Matters

The "Business - Regulation" section of this Form 10-K provides a detailed description of The Patient Protection and Affordable Care Act (“ACA”) provisions and other legislative initiatives that impact our businesses, including regulations issued by the Centers for Medicare & Medicaid Services (“CMS”) and the Departments of the Treasury and Health and Human Services. Our businesses continue to operate in a dynamic environment, and the laws and regulations applicable to us, including the ACA, continue to be subject to legislative, regulatory and judicial challenges. The following table provides information on the expected impact of these items and other matters:

Item Description

Risk Mitigation Programs – Individual ACA Business

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

Risk Adjustment. At the end of each program year the risk adjustment balances are subject to audit by CMS through the RADV program. RADV audits for the 2017 and 2018 benefit years have been completed, subject to the error rates appeal period. Final settlement for the 2017 and 2018 benefit years is expected in 2021 and 2022, respectively. Based on the information currently available, we have adjusted our risk adjustment balances to reflect our estimate of expected outcome as of December 31, 2020 and December 31, 2019.

Risk Adjustment

Total risk adjustment balance $ (73) $ (166)

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

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

Risk adjustment program charges of $(26) million pre-tax were fully offset by RADV adjustment favorability of $26 million pre-tax for 2020, compared with net charges of $162 million pre-tax ($126 million after-tax) in 2019 and $147 million pre-tax ($116 million after-tax) in 2018.

LIQUIDITY AND CAPITAL RESOURCES

(In millions)

Liquidity

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

Liquidity requirements at the subsidiary level generally consist of:

•pharmacy, medical costs and other benefit payments;

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

•income taxes; and

•debt service.

Our subsidiaries normally meet their liquidity requirements by:

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

•using cash flows from operating activities;

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

•selling investments; and

•borrowing from affiliates, subject to applicable regulatory limits.

Liquidity requirements at the parent company level generally consist of:

•debt service;

•payment of declared dividends to shareholders;

•lending to subsidiaries as needed; and

•pension plan funding.

The parent company normally meets its liquidity requirements by:

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

•collecting dividends from its subsidiaries;

•using proceeds from issuing debt and common stock; and

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

Dividends from our insurance, Health Maintenance Organization (“HMO”) and foreign subsidiaries are subject to regulatory restrictions. See Note 19 to the Consolidated Financial Statements for additional information regarding these restrictions. Most of Evernorth's subsidiaries are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to Cigna.

Cash flows for the years ended December 31 were as follows:

Net cash provided by operating activities $ 10,350 $ 9,485 $ 3,770

Net cash provided by (used in) investing activities:

Cash used to acquire Express Scripts, net of cash acquired — — (24,062)

Purchases of property and equipment and other (1,071) (1,061) (540)

Net cash (used in) provided by financing activities:

Foreign currency effect on cash 41 (8) (24)

Change in cash, cash equivalents and restricted cash $ 4,834 $ 1,556 $ 883

The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2020 compared with the same period in 2019.

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 driven by higher pharmacy and services costs payables due to business growth, offset by increases in accounts receivable due to business growth, higher inventory purchases and the resumption of the health insurance industry tax.

Investing and Financing activities

Cash flows from investing activities increased, primarily due to the net proceeds from the sale of the Group Disability and Life business, partially offset by higher net investment purchases.

Cash used in finance activities increased, primarily due to stock repurchases and debt repayments, partially offset by higher debt issuance.

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

For the year ended December 31, 2020, we repurchased 21.9 million shares for approximately $4.1 billion. From January 1, 2021 through February 24, 2021, we repurchased 8.1 million shares for approximately $1.7 billion. Share repurchase authority was $2.1 billion as of February 24, 2021.

Capital Resources

Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, credit agreements and the issuance of long-term debt and equity 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 parent. Dividends from U.S. regulated subsidiaries were $2.3 billion in 2020 and 2019. Nonregulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to parent for general corporate purposes.

We prioritize our use of capital resources to:

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

•pay dividends to shareholders;

•consider acquisitions that are strategically and economically advantageous; and

•return capital to shareholders through share repurchases.

At December 31, 2020, our debt-to-capitalization ratio was 39.5%, a decline from 45.2% at December 31, 2019.

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

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

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

Our revolving credit agreements provide us the ability to borrow amounts for general corporate purposes, including for purpose of providing liquidity support if necessary under our commercial paper program discussed below. As of December 31, 2020, there were no outstanding balances under either of the revolving credit agreements.

Cigna also maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time not to exceed $4.25 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The commercial paper program had approximately $1.0 billion outstanding at December 31, 2020 at an average interest rate of 0.2%.

See Note 7 to the Consolidated Financial Statements for further information on our credit agreements and commercial paper program.

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

Liquidity and Capital Resources Outlook

We maintain sufficient liquidity to meet our cash needs through our cash and cash equivalents balances, cash flows from operations, commercial paper program, credit agreements and the issuance of long-term debt and equity securities. As of December 31, 2020, we had $4.25 billion of undrawn committed capacity under our revolving credit agreements (which amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $3.2 billion of remaining capacity under our commercial paper program and $10.5 billion in cash and short-term investments, approximately $5.2 billion of which was held by the parent company or certain nonregulated subsidiaries. We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy. A description of our outstanding debt can be found in Note 7 to the Consolidated Financial Statements.

On January 6, 2021, Cigna initiated a quarterly cash dividend and declared the first quarterly cash dividend of $1.00 per share of Cigna common stock to be paid on March 25, 2021 to shareholders of record as of March 10, 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.

As of December 31, 2020, our unfunded pension liability was $977 million, an increase of $104 million from December 31, 2019, primarily attributable to a decrease in discount rates of approximately 80 basis points, partially offset by investment asset returns. In 2020, we made an immaterial pension contribution as required under the Pension Protection Act of 2006. We expect the required contributions for 2021 to be immaterial. See Note 15 to the Consolidated Financial Statements for additional information.

Risks to our liquidity and capital resources outlook include cash projections that may not be realized and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the "Risk Factors" section of this Form 10-K. Though we believe we have adequate sources of liquidity, significant disruption or volatility in the capital and credit markets could affect our ability to access those markets for additional borrowings or increase costs. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.7 billion from its subsidiaries without further approvals as of December 31, 2020.

Guarantees and Contractual Obligations

We are contingently liable for various contractual obligations entered into in the ordinary course of business. See the: "Liquidity and Capital Resources" section of this MD&A for additional information on how we manage our liquidity requirements related to these obligations. See Note 21 to the Consolidated Financial Statements for discussion of various guarantees.

On-Balance Sheet

Insurance liabilities

Health Care Medical claims payable 3,041 3,041

Off-Balance Sheet

(1)Amounts include scheduled interest payments and current maturities of long-term debt. Finance leases are included in long-term debt and primarily represent obligations for information technology network storage, servers and equipment. See Note 18 to the Consolidated Financial Statements for information regarding finance leases. See Note 7 to the Consolidated Financial Statements for information regarding our long-term debt.

On balance sheet:

•Insurance liabilities. Excluded from the table above are $4 billion of insurance liabilities ($3 billion in contractholder deposit funds; $1 billion in future policy benefits) associated with the sold retirement benefits, individual life insurance and annuity businesses, reinsured workers’ compensation, as well as the group life and personal accident businesses as their related net cash flows are not expected to impact our cash flows. Excluding these amounts, the sum of the obligations presented above exceeds the corresponding insurance and contractholder liabilities of $17 billion recorded on the balance sheet. This is because some of the recorded insurance liabilities reflect discounting for interest and the recorded contractholder liabilities exclude future interest crediting, charges and fees. The timing and amount of actual future cash flows may differ from those presented above.

◦Contractholder deposit funds: see Note 9 to the Consolidated Financial Statements for our accounting policy for this liability. Expected future cash flows presented above also include estimated future interest crediting on current fund balances based on current investment yields less the estimated cost of insurance charges and mortality and administrative fees for universal life policies.

◦Future policy benefits and unpaid claims and claim expenses: see Note 9 to the Consolidated Financial Statements for our accounting policies for these liabilities. Expected future cash flows for these liabilities presented in the table above are undiscounted. The expected future cash flows for guaranteed minimum death benefit (“GMDB”) reported in future policy benefits do not consider any of the related reinsurance arrangements.

•Long-term debt includes scheduled interest payments and current maturities of long-term debt. See Note 7 to the Consolidated Financial Statements for information regarding long-term debt. Finance leases are included in long-term debt and primarily represent obligations for information technology network storage, servers and equipment. See Note 18 to the Consolidated Financial Statements for information regarding finance leases.

•Other noncurrent liabilities include estimated payments for guaranteed minimum income benefit (“GMIB”) contracts (without considering any related reinsurance arrangements), pension, other postretirement and postemployment benefit obligations, supplemental and deferred compensation plans, interest rate and foreign currency swap contracts and reinsurance liabilities. Estimated payments of $61 million for deferred compensation, non-qualified and international pension plans and other postretirement and postemployment benefit plans are expected to be paid in less than one year and are included in the table above. We expect to make immaterial contributions to the qualified domestic pension plans during 2021 and they are reflected in the above table. We expect to make payments subsequent to 2021 for these obligations; however, subsequent payments have been excluded from the table as their timing is based on plan assumptions that may materially differ from actual activities. See Note 15 to the Consolidated Financial Statements for further information on pension obligations.

•Operating leases see Note 18 to the Consolidated Financial Statements for additional information.

The table above excludes the liabilities for uncertain tax positions because we cannot reasonably estimate the timing of such future payments. In the event we are unable to sustain all of our $1.2 billion of uncertain tax positions it could result in future tax payments of approximately $900 million. See Note 20 to the Consolidated Financial Statements for additional information on uncertain tax positions.

Off-Balance Sheet:

•Purchase obligations. As of December 31, 2020, purchase obligations consisted of estimated payments required under contractual arrangements for future services and investment commitments and they are included in the table below.

(In millions)

Debt securities $ 149

Commercial mortgage loans 10

Limited liability entities (other long-term investments) (1) 2,325

Total investment commitments 2,484

Future service commitments 713

Total purchase obligations $ 3,197

(1)See Note 11 to the Consolidated Financial Statements for additional information.

Our estimated future service commitments primarily represent contracts for certain outsourced business processes and information technology maintenance and support. We generally have the ability to terminate these agreements, but do not anticipate doing so at this time. Purchase obligations exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of goods or services to be purchased.

Guarantees

We are contingently liable for various financial and other guarantees provided in the ordinary course of business. See Note 21 to the Consolidated Financial Statements for additional information on guarantees.

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 below. We regularly evaluate items that may impact critical accounting estimates.

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

In addition to the estimates presented in the following tables, there are other accounting estimates used in preparing our Consolidated Financial Statements, including estimates of liabilities for future policy benefits, as well as estimates with respect to pension and postretirement benefits other than pensions and certain compensation accruals.

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. The tables below present the adverse impacts of certain possible changes in assumptions. The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of operations, liquidity or financial condition, except for assessing impairment of goodwill.

SEGMENT REPORTING

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

In segment discussions, we present adjusted revenues and “pre-tax adjusted income from operations,” defined as income before taxes excluding realized investment gains (losses), amortization of acquired intangible assets, special items and, for periods prior to 2020, results of transitioning clients. Ratios presented in this segment discussion exclude the same items as pre-tax adjusted income from operations. See Note 22 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income before income taxes to pre-tax adjusted income from operations, as well as a reconciliation of total revenues to adjusted revenues. Note 22 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

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

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

See the "Executive Overview" section of this MD&A for summarized financial results of each of our segments.

Evernorth Segment

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

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

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

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

The key factors that impact Evernorth revenues and costs of revenues are volume, mix of claims and price. These key factors are discussed further below. See Note 3 to the Consolidated Financial Statements included in this 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. As we seek to improve the effectiveness of our integrated solutions for the benefit of our clients, we are continuously innovating and optimizing the supply chain. Our gross profit could also increase or decrease as a result of supply chain initiatives implemented. Inflation also impacts our pricing because most of our contracts provide that we bill clients and pay pharmacies based on a generally recognized price index for pharmaceuticals. Therefore, the rate of inflation for prescription drugs and our efforts to manage this inflation for our clients can affect our revenues and cost of revenues.

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

Results of Operations

Less: Contractual adjustment for a former client (204) — — (204) N/M — N/M

Pre-tax adjusted margin 4.6 % 5.3 % 5.8 % (70) bps (50) bps

For the Years Ended December 31, Change Favorable(Unfavorable)

(Dollars and adjusted scripts in millions) 2020 2019

Selected Financial Information(1)

Pharmacy revenue by distribution channel

Adjusted home delivery and specialty revenues 49,886 45,836 9 %

Pharmacy script volume

Adjusted home delivery and specialty scripts(2) 287 283 1 %

Generic fill rate

Overall generic fill rate 87.2 % 86.8 % 40 bps

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

(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.

2020 versus 2019

In the first quarter of 2020, U.S. Government operating segment customers transitioned to Express Scripts’ retail pharmacy network. In the third quarter of 2019, U.S. Commercial operating segment customers transitioned to Express Scripts’ retail pharmacy network. Results of operations for 2018 reflected the results for the period following the acquisition of Express Scripts on December 20, 2018 along with the legacy Cigna home delivery business.

Adjusted network revenues. The increase reflected the transition of U.S. Medical’s customers, higher claims volume, due to our collaboration with Prime Therapeutics, and increased prices due to inflation on branded drugs. These favorable effects were partially offset by claims mix due to the increase in the generic fill rate.

Adjusted home delivery and specialty revenues.The increase reflected higher prices, due to inflation on branded drugs and higher home delivery and specialty claims volume. These increases were partially offset by claims mix due to an increase in the generic fill rate.

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

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

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

•customer growth;

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

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

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

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

Results of Operations

Pre-tax adjusted margin 9.9 % 10.5 % 10.7 % (60) bps (20) bps

U.S. Medical Customers

As of December 31, Change Favorable(Unfavorable) Change Favorable(Unfavorable)

2020 versus 2019

Adjusted revenues. The increase for the year ended December 31, 2020 compared with 2019 reflects customer growth in our Medicare Advantage and U.S. Commercial insured businesses, as well as higher premium rates due to anticipated underlying medical cost trend and the resumption of the health insurance industry tax. These favorable effects were partially offset by the impact of premium relief programs for clients beginning in the second quarter of 2020 in response to significantly lower than historical utilization as individuals deferred care due to the COVID-19 pandemic.

Pre-tax adjusted income from operations was essentially flat reflecting customer growth in our U.S. Commercial insured and Medicare Advantage businesses and net favorable COVID-19 related impacts; offset by the return of the health insurance industry tax and less favorable prior period development. COVID-19 related impacts include deferral of care by our customers; partially offset by direct COVID-19 costs, costs of actions we have taken to support customers, providers and employees, and increased disenrollment resulting from the economic impacts of the pandemic.

Medical care ratio. The decrease reflects COVID-19 related impacts and the pricing effect of the health insurance industry tax. COVID-19 related impacts include deferral of care by our customers; partially offset by direct COVID-19 costs and premium relief programs extended to employer clients.

Expense ratio. The expense ratio was flat reflecting higher insured revenues as well as efficiencies from continued disciplined expense management and the resumption of the health insurance industry tax.

Other Items Affecting U.S. Medical Results

Unpaid Claims and Claim Expenses

Our unpaid claims and claim expenses liability was higher as of December 31, 2020 compared with December 31, 2019, primarily due to customer growth in our Medicare Advantage and U.S. Commercial insured businesses.

Medical Customers

Our medical customer base decreased at December 31, 2020 compared with December 31, 2019, reflecting a lower customer base in our Middle Markets and National Accounts segments and increased disenrollment resulting from the economic impacts of the COVID-19 pandemic; partially offset by growth in our Select segment and our Medicare Advantage business.

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

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

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

•has medical claims that are administered by us.

International Markets Segment

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

•premium growth, including new business and customer retention;

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

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

•the impact of foreign currency movements.

Results of Operations

2020 versus 2019

Adjusted revenues increased mainly due to business growth in Asia and Europe, partially offset by premium relief programs, primarily in Europe and unfavorable foreign currency movements.

Pre-tax adjusted income from operations increased reflecting lower acquisition and loss ratios and business growth, primarily in Asia, partially offset by higher expense ratios. The ratios in 2020 reflect the costs of actions to support clients; additionally, the expense ratio reflects actions to support employees and investments in the business for future growth.

The segment’s loss ratio decreased reflecting lower medical utilization due to the COVID-19 pandemic, partially offset by premium relief programs.

The acquisition costratio decreased reflecting an update to our commission deferral process and lower acquisition expenses in Asia, partially offset by premium relief programs.

The expense ratio (excluding acquisition costs) increased, reflecting strategic investments and the unfavorable impact of premium relief programs.

Other Items Related to International Markets Results

South Korea is the single largest geographic market for our International Markets segment. For the year ended December 31, 2020, South Korea generated 38% of the segment’s adjusted revenues and 60% of the segment’s pre-tax adjusted income from operations.

Group Disability and Other

Group Disability and Other included for the period presented, Cigna’s Group Disability and Life business which offered group long-term and short-term disability, and group life, accident, voluntary and specialty insurance products and services. Additionally, this segment includes Corporate Owned Life Insurance (“COLI”) and the Company’s run-off operations. As described in the introduction of Segment Reporting, performance of Group Disability and Other 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;

•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

Pre-tax adjusted margin 5.5 % 9.7 % 10.5 % (420) bps (80) bps

2020 versus 2019

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

Pre-tax adjusted income from operationsand margin decreased due to unfavorable life claims experience related to the COVID-19 pandemic, unfavorable disability claims experience and lower investment income, partially offset by favorable results in our voluntary products.

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

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.

2020 versus 2019

Pre-tax adjusted loss from operations was lower, reflecting lower interest expense due to lower levels of debt.

INVESTMENT ASSETS

The following table presents our investment asset portfolio excluding separate account assets as of December 31, 2020 and December 31, 2019. Additional information regarding our investment assets is included in Notes 11, 12, 13 and 14 to the Consolidated Financial Statements.

Investments classified as assets of business held for sale (1) (7,709)

Investments per Consolidated Balance Sheets $ 24,593 $ 22,479

(1)On December 31, 2020, Cigna completed the sale of its U.S. Group Disability and Life business and transferred a total of $8.4 billion of investments to New York Life Insurance Company as part of this divestiture. The investment assets transferred to New York Life were primarily debt securities and, to a lesser extent, commercial mortgage loans. The table above includes $7.7 billion as of December 31, 2019 of investments associated with this business that was previously held for sale.

Debt Securities

Investments in debt securities include publicly-traded and privately-placed bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor. These investments are classified as available for sale and are carried at fair value on our balance sheet. Additional information regarding valuation methodologies, key inputs and controls is included in Note 12 to the Consolidated Financial Statements. More detailed information about debt securities by type of issuer and maturity dates is included in Note 11 to the Consolidated Financial Statements.

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

Federal government and agency $ 456 $ 733

State and local government 167 810

Mortgage and other asset-backed 435 536

As a result of the U.S. Group Disability and Life business divestiture, $7.8 billion of debt securities were transferred to New York Life on December 31, 2020, see Note 5 to the Consolidated Financial Statements for further information. The debt securities transferred to New York Life were primarily Corporate and State and local government sectors. This decrease in our debt securities portfolio was partially offset by an increase in valuations due to decreasing yields and net purchase activity during the year.

As of December 31, 2020, $15.6 billion, or 86% of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $2.5 billion were below investment grade. The majority of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum. Although our allocation to below investment grade bonds has increased since the prior year, these quality characteristics have not otherwise changed materially from the prior year and remain consistent with our investment strategy.

Investments in debt securities are diversified by issuer, geography and industry as appropriate. On an aggregate basis, the debt securities portfolio continues to perform according to original investment expectations. However, due to the economic impacts of the COVID-19 pandemic, there are certain issuers, particularly within the aviation, energy and hospitality sectors, that are showing signs of distress, primarily in the form of requests for temporary covenant relief. There were no material unrealized losses in any of these sectors as of the reporting date. We continue to monitor the economic environment and its effect on our portfolio, and consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.

Foreign government obligations are concentrated in Asia, primarily South Korea, consistent with our risk management practice and local regulatory requirements of our international business operations. Corporate debt securities include private placement assets of $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.

Commercial Mortgage Loans

As of December 31, 2020, the $1.4 billion commercial mortgage loan portfolio consisted of approximately 45 loans that are in good standing. Our commercial mortgage loans are fixed rate loans, diversified by property type, location and borrower. Given the quality and diversity of the underlying real estate, positive debt service coverage and significant borrower cash invested generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 11 to the Consolidated Financial Statements.

As a result of the U.S. Group Disability and Life business divestiture, $0.6 billion of commercial mortgage loans were transferred to New York Life on December 31, 2020, see Note 5 to the Consolidated Financial Statements for further information. Loans are secured by high quality commercial properties, located in strong institutional markets, and are generally made at less than 65% of the property’s value at origination of the loan. Property value, debt service coverage, quality, building tenancy and stability of cash flows are all important financial underwriting considerations. We hold no direct residential mortgage loans and do not originate or service securitized mortgage loans.

COVID-19 has negatively impacted commercial real estate fundamentals and capital market activity with concentrated weakness in hotels and regional malls. Our mortgage loan portfolio is well diversified by property type and geography with no material exposure to hotels and no exposure to regional shopping malls. We continue to monitor the 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 loans secured by office properties are in good standing.

Other Long-term Investments

Other long-term investments of $2.8 billion as of December 31, 2020 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures and other deposit activity that is required to support various insurance and health services businesses. The increase in other long-term investments is driven by net new funding activity. These limited partnership entities typically invest in mezzanine debt or equity of privately-held companies and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified across approximately 175 separate partnerships and approximately 90 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 4% of our securities and real estate partnership portfolio.

Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. We could experience losses into future periods, but the magnitude of these losses will depend in part on the length and extent of the economic disruption, the speed of the recovery and the overall economic impacts.

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture on the equity method of accounting and report our share of the net assets of $0.8 billion in Other assets. Our 50% share of the investment portfolio supporting the joint venture's business is approximately $5.6 billion, primarily invested in Chinese corporate and government debt securities diversified by issuer, industry and geography, as appropriate. To a lesser extent and consistent with its investment strategy, the joint venture is invested in Chinese equity investments comprised of approximately 50% equity mutual funds, with the remainder invested in equity securities and private equity partnerships. We participate in the approval of the joint venture's investment strategy and continuously review its execution. There were no investments with a material unrealized loss as of December 31, 2020.

Investment Outlook

The impact of COVID-19 on the economy, despite unprecedented monetary and fiscal support, and the uncertainty as to the strength and sustainability of the recovery prior to a widely available vaccine, continues to dominate financial markets. The low interest rate environment continues to pressure income from both short-term and longer-term investments. U.S. treasury rates remain near all-time lows and the wider market credit spreads experienced during the beginning of the second quarter of 2020 have meaningfully narrowed, resulting in historically low yields for investment grade assets. We continue to actively monitor the economic impact of the pandemic, as well as fiscal and monetary responses, and their potential impact on the portfolio. Net investment income projections into 2021 reflect continued market volatility and portfolio impacts, particularly in certain sectors such as aviation, hospitality and energy, as well as other areas most severely impacted by COVID-19. Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date. These future conditions are not reasonably predictable; however, we believe that the vast majority of our investments will continue to perform under their contractual terms. Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the long-term. Although future impairment losses 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 financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for financial instruments:

•changes in the fair values of insurance-related assets and liabilities because their primary risks are insurance rather than market risk;

•changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets); and

•changes in the fair values of other significant assets and liabilities, such as goodwill, deferred policy acquisition costs, taxes and various accrued liabilities. Because they are not financial instruments, their primary risks are other than market risk.

Excluding these items, our primary market risk exposures from financial instruments are:

•Interest-rate risk on fixed-rate, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.

•Foreign currency exchange rate risk of the U.S. dollar, net of derivatives used for hedging, is primarily to the South Korean won, Chinese yuan renminbi and New Zealand dollar. An unfavorable change in exchange rates reduces the carrying value of net assets denominated in foreign currencies.

Our Management of Market Risks

We predominantly rely on three techniques to manage our exposure to market risk:

•Investment/liability matching. We generally select investment assets with characteristics (such as duration, yield, currency and liquidity) that correspond to the underlying characteristics of our related insurance and contractholder liabilities so that we can match the investments to our obligations. Shorter-term investments generally support shorter-term life and health liabilities. Medium-term, fixed-rate investments support interest-sensitive and health liabilities. Longer-term investments generally support products with longer payout periods such as annuities.

•Use of local currencies for foreign operations. We generally conduct our international business through foreign operating entities that maintain assets and liabilities in local currencies. This technique limits exchange rate risk to our net assets.

•Use of derivatives. We use derivative financial instruments to reduce our primary market risks. See Note 11 to the Consolidated Financial Statements for additional information about derivative financial instruments.

Effect of Market Fluctuations

Assuming a 100 basis point increase in interest rates and 10% strengthening in the U.S. dollar to foreign currencies, the effect of hypothetical changes in market rates or prices on the fair value of certain financial instruments, subject to the exclusions noted above (particularly insurance liabilities), would have been as follows as of December 31:

10% strengthening in U.S. dollar to foreign currencies $ 0.4 $ 0.3

The effect of a hypothetical increase in interest rates, primarily on debt securities and commercial mortgage loans, was determined by estimating the present value of future cash flows using various models, primarily duration modeling. The decrease in our sensitivity to market interest rates since the prior year is primarily due to our decreased interest sensitive investment portfolio base, due to the transfer of debt securities and commercial mortgage loans to New York Life on December 31, 2020. See Note 5 to the Consolidated Financial Statements for additional information on the divestiture of our U.S. Group Disability and Life business.

In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company’s long-term debt would decrease approximately $3.0 billion at December 31, 2020 and $2.5 billion at December 31, 2019. Changes in the fair value of our long-term debt do not impact our financial position or operating results. See Note 7 to the Consolidated Financial Statements for additional information about the Company’s debt.

The effect of a hypothetical strengthening of the U.S. dollar relative to the foreign currencies of certain financial instruments held by us was estimated to be 10% of the fair value of these instruments, translated to the U.S. dollar. Our foreign operations hold investment assets, such as debt securities, cash and cash equivalents that are generally invested in the currency of the related liabilities.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained under the caption “Market Risk” in the MD&A section of this Form 10-K is incorporated by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To theBoard of Directors and Shareholders of Cigna Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cigna Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Evernorth and U.S. Medical Reporting Units

As described in Note 17 to the consolidated financial statements, as of December 31, 2020, goodwill is primarily reported in the Evernorth segment ($33.8 billion), the U.S. Medical segment ($10.4 billion) and, to a lesser extent, the International Markets segment ($0.4 billion). Management conducts its annual quantitative evaluation for goodwill impairment during the third quarter at the reporting unit level and writes it down through shareholders’ net income if impaired. On a quarterly basis, management performs a qualitative impairment assessment to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value. Fair value of a reporting unit is generally estimated based on either a market approach or a discounted cash flow analysis using assumptions that management believes a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within that reporting unit. Projections of future cash flows for each reporting unit are consistent with management’s annual planning process for revenues, pharmacy costs, benefits expenses, operating expenses, taxes, capital levels and long-term growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Evernorth and U.S. Medical reporting units is a critical audit matter are the significant judgment by management when determining the fair value measurement of the reporting units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimate of the reporting units’ fair value related to the assumptions for the discount rate and projection of future cash flows. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over management’s methodology, inputs and assumptions used in its goodwill impairment assessment of the Evernorth and U.S. Medical reporting units. These procedures also included, among others, testing management’s process for determining the fair value estimate of the reporting units; evaluating the appropriateness of the discounted cash flow analysis; testing the completeness and accuracy of underlying data used in the discounted cash flow analysis; and evaluating the key inputs and significant assumptions related to the discount rate and the projections of future cash flows. The underlying inputs and assumptions used in the development of the discount rate and the projections of future cash flows that were evaluated related to the weighted average cost of capital, revenues, pharmacy costs, benefits expenses, operating expenses, capital levels and long-term growth rates. Evaluating the reasonableness of management’s inputs and assumptions involved considering (i) the current and past performance of the reporting unit, (ii) the consistency of the discount rate and long-term growth rates with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of certain significant assumptions related to the discount rate.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 25, 2021

We have served as the Company’s auditor since 1983.

Cigna CorporationConsolidated Statements of Income

For the Years Ended December 31,

Revenues

Benefits and expenses

Amortization of acquired intangible assets 1,982 2,949 235

Debt extinguishment costs (199) (2) —

Gain (loss) on sale of business 4,203 — —

Net realized investment gains (losses) 149 177 (81)

Less: Net income attributable to noncontrolling interests 31 16 9

Shareholders’ net income per share

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

Cigna CorporationConsolidated Statements of Comprehensive Income

For the Years Ended December 31,

Other comprehensive income (loss), net of tax

Net translation gains (losses) on foreign currencies 252 (59) (167)

Postretirement benefits liability adjustment (105) (133) 127

Other comprehensive income (loss), net of tax 72 765 (405)

Comprehensive income (loss) attributable to noncontrolling interests

Net income attributable to redeemable noncontrolling interest 14 11 9

Net income attributable to other noncontrolling interests 17 5 —

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

Cigna CorporationConsolidated Balance Sheets

As of December 31,

Assets

Assets of business held for sale — 9,512

Deferred policy acquisition costs 3,385 2,958

Liabilities

Current insurance and contractholder liabilities $ 5,308 $ 4,921

Pharmacy and other service costs payable 13,347 10,454

Accrued expenses and other liabilities 8,515 7,347

Liabilities of business held for sale — 6,812

Non-current insurance and contractholder liabilities 16,844 16,052

Deferred tax liabilities, net 8,939 9,387

Other non-current liabilities 4,629 4,460

Contingencies — Note 21

Redeemable noncontrolling interests 58 35

Shareholders’ equity

Common stock (1) 4 4

Accumulated other comprehensive loss (861) (941)

Less: treasury stock, at cost (6,372) (2,193)

Other noncontrolling interests 7 6

(1)Par value per share, $0.01; shares issued, 390 million as of December 31, 2020 and 386 million as of December 31, 2019; authorized shares, 600 million.

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

Cigna Corporation

Consolidated Statements of Changes in Total Equity

Reclassification adjustment related to U.S. tax reform legislation (229) 229 — —

Exchange of Old Cigna common stock (58) 58 — —

Effect of issuing stock for employee benefit plans 59 (138) 206 127 127

Common dividends declared (per share: $0.04) (10) (10) (10)

Other transactions impacting noncontrolling interests — — (6)

Effect of issuing stock for employee benefit plans 555 (104) 451 451

Common dividends declared (per share: $0.04) (15) (15) (15)

Other transactions impacting noncontrolling interests — (6) (6) (8)

Effect of issuing stock for employee benefit plans 672 (90) 582 582

Other comprehensive income (loss) 80 80 80 (8)

Common dividends declared (per share: $0.04) (15) (15) (15)

Other transactions impacting noncontrolling interests (3) (3) (16) (19) 17

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

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

Cigna CorporationConsolidated Statements of Cash Flows

For the Years Ended December 31,

Cash Flows from Operating Activities

Realized investment losses (gains), net (149) (177) 81

Deferred income tax (benefit) (386) (313) (101)

Gain on sale of business (4,203) — —

Debt extinguishment costs 199 2 —

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

Deferred policy acquisition costs (307) (242) (237)

Reinsurance recoverable and Other assets 230 (277) (234)

Pharmacy and other service costs payable 2,891 (192) (842)

Accounts payable and Accrued expenses and other liabilities 1,346 1,343 332

Cash Flows from Investing Activities

Proceeds from investments sold:

Investment maturities and repayments:

Investments purchased or originated:

Debt securities and equity securities (4,765) (4,282) (5,637)

Property and equipment purchases, net (1,094) (1,050) (528)

Divestiture, net of cash sold 5,592 — —

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,976 (734) (26,378)

Cash Flows from Financing Activities

Deposits and interest credited to contractholder deposit funds 1,023 955 1,040

Net proceeds on issuance of term loan 1,398 — —

Repayment of term loan (1,400) — —

Payments for debt extinguishment (212) (3) —

Net proceeds on issuance of long-term debt 3,465 — 22,856

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (8,533) (7,187) 23,515

Net increase in cash, cash equivalents and restricted cash 4,834 1,556 883

Cash, cash equivalents and restricted cash January 1, (1) 5,411 3,855 2,972

Cash reclassified to assets of business held for sale — (743) —

Supplemental Disclosure of Cash Information:

(1)Includes $743 million reported in Assets of business held for sale as of January 1, 2020. See table below for Cash, cash equivalents and restricted cash reconciliation.

(2)See table below for Cash, cash equivalents and restricted cash reconciliation as of December 31, 2020 and December 31, 2019.

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

As of December 31,

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

CIGNA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Note Number Footnote Page

BUSINESS AND CAPITAL STRUCTURE

1 Description of Business 86

2 COVID-19 and Related Economic Impact 87

3 Summary of Significant Accounting Policies 87

4 Accounts Receivable, Net 94

5 Mergers, Acquisitions and Divestitures 95

6 Earnings Per Share 96

8 Common and Preferred Stock 99

INSURANCE INFORMATION

9 Insurance and Contractholder Liabilities 100

INVESTMENTS

12 Fair Value Measurements 115

13 Variable Interest Entities 120

14 Accumulated Other Comprehensive Income (Loss) 122

WORKFORCE MANAGEMENT AND COMPENSATION

16 Employee Incentive Plans 127

PROPERTY, LEASES AND OTHER ASSET BALANCES

17 Goodwill, Other Intangibles and Property and Equipment 130

COMPLIANCE, REGULATION AND CONTINGENCIES

19 Shareholders’ Equity and Dividend Restrictions 134

21 Contingencies and Other Matters 137

RESULTS DETAILS

22 Segment Information 138

Note 1 – Description of Business

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

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

The Company reports its results in the segments detailed below:

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

Evernorth includes a broad range of coordinated and point solution health services capabilities, as well as those from partners across the health care system in 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 Cigna’s 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, behavioral health, dental, vision, health advocacy programs and other products and services for insured and self-insured clients. U.S. Government solutions include Medicare Advantage, Medicare Supplement, and Medicare Part D plans for seniors, Medicaid plans, and individual health insurance plans both on and off the public exchanges.

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

The remainder of our business operations are reported in Group Disability and Other, 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. On December 31, 2020, Cigna completed the sale of its U.S. Group Disability and Life business to New York Life Insurance Company. See Note 5 for additional information.

•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.

Note 2 – COVID-19 and Related Economic Impact

All aspects of our business were impacted in fiscal year 2020 by the ongoing coronavirus ("COVID-19") pandemic. The Company initiated several actions to assist our customers, clients, health care providers and employees in this time of crisis. As described below, management has taken a number of steps to assess the impact on our business, including the financial reporting implications associated with this pandemic.

The Company conducted its annual quantitative evaluation of goodwill impairment during the third quarter of 2020. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses and market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins. During the fourth quarter of 2020, the Company conducted its normal quarterly qualitative assessment and concluded that the current economic and business conditions did not result in a triggering event requiring a quantitative analysis.

For all other long-lived assets, including intangible assets, the Company conducted its normal quarterly qualitative impairment assessment and concluded that the current economic and business conditions did not result in a triggering event requiring a quantitative impairment analysis. There were no material impairments recorded for the year ended December 31, 2020.

The Company reviewed all classes of financial instruments including investments, accounts receivable and reinsurance recoverables. The additional allowance for expected credit losses recorded was not material for the year ended December 31, 2020.

Note 3 – Summary of Significant Accounting Policies

Basis of Presentation

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

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

Recently Adopted Accounting Guidance

The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments, and its related amendments, as of January 1, 2020, using the modified retrospective transition method. The new standard requires the use of a current expected credit loss impairment model to develop and recognize credit losses for financial instruments at amortized cost when the asset is first originated or acquired, and each subsequent reporting period. The new standard also eliminates the concept

of other-than-temporary impairments and changes the criteria for impairment of available-for-sale debt securities. A cumulative effect adjustment of $30 million after-tax was recorded as a reduction to retained earnings as of January 1, 2020, reflecting an additional allowance for future expected credit losses required under the new model, primarily related to reinsurance recoverables. Subsequent changes in the allowance are reported in current period earnings. See additional information regarding the Company’s accounting policy for establishing the allowance for credit losses in Accounts Receivable, Net (Note 4), Reinsurance (Note 10) and Investments (Note 11).

The Company adopted ASU 2017-04, Simplifying the Test for Goodwill Impairment, as of January 1, 2020, on a prospective basis. The new standard eliminates the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment. There was no impact of adopting this new standard to the Company’s financial statements because our quarterly qualitative assessments did not result in a triggering event for impairment of goodwill, and the results of our annual quantitative evaluation performed in the third quarter of 2020 indicated that the estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

Accounting Guidance Not Yet Adopted

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04)

•Optional, effective upon issuance (March 12, 2020) through December 31, 2022.

•Provides temporary optional relief to ease the potential burden of accounting for reference rate reform under existing GAAP. Amendments are elective and apply to all entities that have contracts, hedging relationships and other transactions that reference interbank offered rates, including LIBOR, expected to be discontinued for new contracts by December 31, 2021.

•Permits optional expedients and exceptions to simplify the accounting for contract modifications, hedging arrangements and held-to-maturity investments, when certain changes are made to a contract or instrument to facilitate reference rate reform.

•An entity may elect to apply the amendments, by topic or subsection, at any point prospectively through December 31, 2022. When elected, the optional expedients must be applied consistently for all eligible contracts or transactions.

To date, the Company has identified minimal exposure to LIBOR and does not anticipate that LIBOR’s phase-out will have a material impact on its operations or financial results.

Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12)

•Effective date of January 1, 2023 for Cigna (early adoption permitted) and requires the following key provisions (for insurance entities that issue long-duration contracts)

•Changes to the measurement of the future policy benefits liability for traditional and limited-pay insurance contracts:

•Assumptions used to measure cash flows (such as mortality, morbidity and lapse assumptions) to be updated at least annually with the effect of changes in those assumptions remeasured retrospectively and reflected in current period net income.

•Discount rate assumptions to be updated quarterly based on an upper-medium grade fixed-income instrument yield that maximizes the use of observable market inputs, with any changes reflected in other comprehensive income.

•Deferred policy acquisition costs ("DAC") related to long-duration insurance contracts to be amortized on a constant-level basis over the expected term of the related contracts. Other related deferred or capitalized balances (such as unearned revenue liability and value of business acquired) may use this simplified amortization method.

•Market risk benefits (defined as protecting the contractholder from other-than-nominal capital market risk and exposing the insurer to that risk) to be measured at fair value, with changes in fair value recognized in net income each period, except for the effect of changes in the insurance entity’s credit risk to be recognized in other comprehensive income.

•Additional disclosures, including disaggregated rollforwards for the liability for future policy benefits, market risk benefits, separate account liabilities and deferred acquisition costs, as well as information about significant inputs, judgments, assumptions and methods used in measurement.

•Transition methods at adoption vary:

•Changes to the liability for future policy benefits to use a modified retrospective approach applied to all outstanding contracts on the basis of their existing carrying amounts as of the beginning of the earliest period presented, with an option to elect a full retrospective transition under certain criteria. Remeasuring the future policy benefits liability for the discount rate to be recorded through accumulated other comprehensive income at transition.

•DAC to follow the transition method used for future policyholder benefits.

•Market risk benefits to be transitioned retrospectively and measured at fair value at the beginning of the earliest period presented. The difference between this fair value and carrying value to be recognized in the opening balance of retained earnings, excluding the effect of credit risk changes that are to be recognized in accumulated other comprehensive income.

Expected effects:

•The new guidance will apply to our long-duration insurance products predominantly within the International Markets and Other segments.

•The Company will adopt the standard on January 1, 2023, using the modified retrospective transition method for changes to the liability for future policy benefits and DAC.

•The Company has developed a cross-functional implementation project plan and expects to have significant changes to our processes, systems, controls and financial results and disclosures.

•Although we continue to evaluate the new requirements of the standard and model their impacts across various products, we are unable to project or estimate the magnitude or frequency of expected changes to our financial results. However, it is possible that our income recognition pattern could change for several reasons:

•Applying periodic assumption updates, versus the current locked-in model, may change our timing of profit or loss recognition.

•DAC amortization will be on a constant level basis over the expected term of the related contracts, and no longer tied to the emergence of profit on such contracts.

•Features, such as the Company’s GMDB product, that provide market-risk benefits are not currently measured at fair value, so these liabilities and related reinsurance recoverables will become subject to market sensitivity, notably to interest rates.

•While not yet quantified, the cumulative effect of implementing this guidance may be material to the Company’s beginning shareholders' equity balance upon adoption.

•The Company continues to monitor developing implementation guidance, particularly with respect to reinsured blocks of business.

Significant Accounting Policies

The Company’s accounting policies are described either in this Note or in the applicable Notes to the Consolidated Financial Statements as listed in the table of contents.

A.Cash and Cash Equivalents

Cash and cash equivalents are carried at cost that approximates fair value. Cash equivalents consist of short-term investments with maturities of three months or less from the time of purchase. The Company reclassifies cash overdraft positions to liabilities when the legal right of offset does not exist.

B.Inventories

Inventories consist of prescription drugs and medical supplies and are stated at the lower of first-in-first-out cost or net realizable value.

C.Deferred Policy Acquisition Costs

Costs eligible for deferral include incremental, direct costs of acquiring new or renewal insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs include commissions, sales compensation and benefits, policy issuance and underwriting costs. The Company records acquisition costs differently depending on the product line. Acquisition costs for:

•Supplemental health, life and accident insurance products (primarily individual products) that comprise the majority of the Company’s deferred policy acquisition costs and group health and accident insurance products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.

•Universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.

•Other products are expensed as incurred.

Deferred policy acquisition costs also include the value of business acquired (“VOBA”) for certain acquisitions with material long-duration insurance contracts. The Company recorded amortization of deferred policy acquisition costs of $502 million in 2020, $483 million in 2019 and $406 million in 2018 primarily in Selling, general and administrative expenses.

Each year, deferred policy acquisition costs are tested for recoverability. For universal life and other individual products, management estimates the present value of future revenues less expected payments. For group health and accident insurance products, management estimates the sum of unearned premiums and anticipated net investment income less future expected claims and related costs. If management’s estimates of these sums are less than the deferred costs, the Company reduces deferred policy acquisition costs and records an additional expense.

D.Other Assets (Current and Non-Current)

CI US Equity

CI · 10-K · period ended 2020-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CI US Equity☆

CI · 10-K · period ended 2020-12-31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CI US Equity