Cigna Group

Cigna Healthcare Segment

Cigna Healthcare includes the U.S. Healthcare and International Health businesses, which provide comprehensive medical and coordinated solutions to clients and customers. As described in the introduction to Segment Reporting, performance of the Cigna Healthcare segment is measured using adjusted revenues and pre-tax adjusted income from operations.

In January 2024, we entered into a definitive agreement to sell the Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits and CareAllies businesses within the U.S. Healthcare operating segment to HCSC, subject to applicable regulatory approvals and other customary closing conditions. See Note 5 to the Consolidated Financial Statements for further information.

Key Factors Affecting Segment Performance

Key factors affecting results for this segment include:

•customer growth;

•revenue growth, including increases to premium rates in consideration of anticipated medical costs (also referred to as premium rate increases);

•medical cost trend (also referred to as higher medical costs), which is impacted by utilization (the quantity of medical services consumed by our customers), unit costs (the cost per medical service) and mix of services;

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

•medical costs as a percentage of premiums (medical care ratio or "MCR") for our insured businesses, which includes affordability initiatives that serve to mitigate medical cost inflation; and

•selling, general and administrative expenses excluding special items as a percentage of adjusted revenues (which we refer to as adjusted SG&A expense ratio).

(1)Pre-tax adjusted margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues.

(2)See Note 17 to the Consolidated Financial Statements for reconciliation of pre-tax adjusted income from operations and adjusted revenues to Income before income taxes and Total revenues, respectively.

(3)SG&A expense ratio is calculated as selling, general and administrative expenses including special items ($2,637 million and $2,920 million for the three months ended September 30, 2024 and 2023, respectively, and $7,986 million and $8,298 million for the nine months ended September 30, 2024 and 2023, respectively) divided by Total revenues. Adjusted SG&A expense ratio is calculated as selling, general and administrative expenses excluding special items ($2,637 million and $2,763 million for the three months ended September 30, 2024 and 2023, respectively, and $7,986 million and $8,141 million for the nine months ended September 30, 2024 and 2023, respectively) as a percentage of adjusted revenues. There were no special items for the three and nine months ended September 30, 2024; special items were $157 million for the three and nine months ended September 30, 2023.

Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on overall category.

Adjusted revenues increased 3% and 4%, primarily due to higher premiums within employer insured (+$238 million and +$810 million), Medicare Part D (+$202 million and +$410 million) and stop loss (+$141 million and +$457 million), in each case reflecting premium rate increases to cover expected increases in underlying medical costs, partially offset by lower premiums within Individual and Family Plans (-$268 million and -$754 million), reflecting a decrease in customers.

Pre-tax adjusted income from operations decreased 4% for the three months ended September 30, 2024, primarily due to higher medical costs (-$569 million), partially offset by higher adjusted revenues (+$395 million) and lower selling, general and administrative expenses excluding special items (+$126 million), primarily reflecting ongoing efficiencies. Pre-tax adjusted income from operations increased 6% for the nine months ended September 30, 2024, primarily due to higher adjusted revenues (+$1.4 billion) and lower selling, general and administrative expenses excluding special items (+$155 million), primarily reflecting ongoing efficiencies, partially offset by higher medical costs (-$1.3 billion). The impact of higher premiums in adjusted revenues and medical costs are reflected in the medical care ratio calculation.

The medical care ratio increased 230 bps for the three months ended September 30, 2024, primarily due to a higher U.S. Healthcare medical care ratio, reflecting relatively equal contributions from business mix and one additional business day in the third quarter of 2024. Themedical care ratio increased 70 bps for the nine months ended September 30, 2024, primarily due to a higher U.S. Healthcare medical care ratio driven by business mix.

Theadjusted SG&A expense ratio decreased 160 bps and 110 bps, primarily due to revenue growth outpacing volume-related expenses (-80 bps and -60 bps) and ongoing efficiencies (-60 bps and -30 bps).

Medical Customers

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 administrative services 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.

(1)International Health excludes medical customers served by less than 100% owned subsidiaries, as well as certain customers served by our third-party administrator.

Total medical customers decreased 3%, primarily due to a decrease in Individual and Family Plans customers.

See Part I, Item 1 of our 2023 Form 10-K for definitions of Cigna Healthcare's market segments. During the fourth quarter of 2023, the U.S. Commercial and U.S. Government operating segments merged to form the U.S. Healthcare operating segment. Medical Customer information presented as of September 30, 2023 has been restated to conform to the new operating segment presentation.

Unpaid Claims and Claim Expenses

Our unpaid claims and claim expenses liability was flat, driven by a decrease in Individual and Family Plans customers (-$290 million), mostly offset by stop loss seasonality (+$175 million) and Medicare Advantage (+$80 million).