Cigna Group

Note 18 – Goodwill, Other Intangibles, and Property and Equipment

A. Goodwill

Accounting Policy. Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets. The resulting goodwill is assigned to those reporting units expected to realize cash flows from the acquisition, based on those reporting units' relative fair values. The Company's reporting units are aligned with its operating segments as described in Note 1.

The Company 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, the Company 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. The fair value of a reporting unit is generally estimated based on discounted cash flow analysis and market approach models using assumptions that the Company believes a hypothetical market participant would use to determine a current transaction price. Following a change in reporting units or held for sale determination, goodwill is allocated using relative fair value. The significant assumptions and estimates used in determining fair value primarily 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 each reporting unit. Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections. Future cash flows for Evernorth Health Services reporting units are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates. Future cash flows for our other reporting units are primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term growth rates.

Goodwill Activity. Goodwill activity was as follows:

(1)See Note 5 to the Consolidated Financial Statements for further discussion of 2024 and 2023 goodwill impairments.

B. Other Intangible Assets

Accounting Policy. The Company's Other intangible assets primarily include purchased customer and producer relationships, trademarks, and provider networks. The fair value of purchased customer relationships and the amortization method were determined as of the dates of purchase using an income approach that relies on projected future net cash flows, including key assumptions for customer attrition and discount rates. The Company's definite-lived intangible assets are amortized on an accelerated or straight-line basis, reflecting their pattern of economic benefits, over periods from 6 to 30 years. Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value. Costs incurred to renew or extend the terms of these intangible assets are generally expensed as incurred.

The Company's amortized intangible assets are tested for impairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. If the total of the expected future undiscounted cash flows generated by the underlying asset group is less than the carrying amount of the asset group, the Company recognizes an impairment charge equal to the difference between the carrying value of the asset group and its estimated fair value. The Company's indefinite-lived intangible assets are reviewed for impairment at least annually by comparing their fair value with their carrying value. If the carrying value exceeds fair value, that excess is recognized as an impairment loss.

Components of Other Assets, Including Other Intangibles. Other intangible assets were comprised of the following:

(1) Includes $20 million and $77 million of Other intangible assets classified as assets of businesses held for sale as of December 31, 2024 and December 31, 2023, respectively.

(2) Includes $69 million of VOBA classified as assets of businesses held for sale as of both December 31, 2024 and December 31, 2023.

The Company has indefinite-lived intangible assets totaling $8.5 billion at both December 31, 2024 and December 31, 2023, largely consisting of the Express Scripts trade name.

C. Property and Equipment

Accounting Policy. Property and equipment is carried at cost less accumulated depreciation. Cost includes interest, real estate taxes and other costs incurred during construction when applicable. Internal-use software that is acquired, developed or modified solely to meet the Company's internal needs, with no plan to market externally, is also included in this category. Costs directly related to acquiring, developing or modifying internal-use software are capitalized.

The Company calculates depreciation and amortization principally using the straight-line method generally based on the estimated useful life of each asset as follows: buildings and improvements,10 to 40 years; purchased and internally developed software,3 to 5 years; and furniture and equipment (including computer equipment),3 to 10 years. Improvements to leased facilities are depreciated overthe lesser of the remaining lease term or the estimated life of the improvement. The Company considers events and circumstances that would indicate the carrying value of property, equipment or capitalized software might not be recoverable. An impairment charge is recorded if the Company determines the carrying value of any of these assets is not recoverable. The Company also reviews and shortens the estimated useful lives of these assets, if necessary.

Components of Property and Equipment. Property and equipment was comprised of the following:

(1)Includes $302 million and $176 million of Property and equipment net carrying value classified as assets of businesses held for sale as of December 31, 2024 and December 31, 2023, respectively.

Components of Depreciation and Amortization. Depreciation and amortization expense was comprised of the following:

The Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar years to be as follows: