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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-38769
Cigna Corporation
(Exact name of registrant as specified in its charter)
Delaware 82-4991898
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
900 Cottage Grove Road
Bloomfield, Connecticut 06002
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (860) 226-6000

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, Par Value $0.01 CI
New York Stock Exchange, Inc.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No _
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No _
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes _
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of October 29, 2021, 331,427,775 shares of the issuer’s common stock were outstanding.


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


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

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

Cigna Corporation
Consolidated Balance Sheets
Unaudited
As of
September 30, 		As of
December 31,
(In millions) 2021 2020
Assets
Cash and cash equivalents $ 3,483  $ 10,182 
Investments 1,374  1,331 
Accounts receivable, net 16,250  12,191 
Inventories 3,020  3,165 
Other current assets 1,360  930 
Total current assets 25,487  27,799 
Long-term investments 23,756  23,262 
Reinsurance recoverables 5,035  5,200 
Deferred policy acquisition costs 3,367  3,385 
Property and equipment 4,070  4,205 
Goodwill 46,056  44,648 
Other intangible assets 34,615  35,179 
Other assets 2,715  2,687 
Separate account assets 9,150  9,086 
TOTAL ASSETS $ 154,251  $ 155,451 
Liabilities
Current insurance and contractholder liabilities $ 5,917  $ 5,308 
Pharmacy and other service costs payable 14,705  13,347 
Accounts payable 5,659  5,478 
Accrued expenses and other liabilities 7,356  8,515 
Short-term debt 2,703  3,374 
Total current liabilities 36,340  36,022 
Non-current insurance and contractholder liabilities 16,576  16,844 
Deferred tax liabilities, net 8,832  8,939 
Other non-current liabilities 4,261  4,629 
Long-term debt 31,609  29,545 
Separate account liabilities 9,150  9,086 
TOTAL LIABILITIES 106,768  105,065 
Contingencies — Note 15
Redeemable noncontrolling interests 56  58 
Shareholders’ equity
Common stock (1)
4  4 
Additional paid-in capital 29,077  28,975 
Accumulated other comprehensive loss (1,153) (861)
Retained earnings 31,803  28,575 
Less: Treasury stock, at cost (12,316) (6,372)
TOTAL SHAREHOLDERS’ EQUITY 47,415  50,321 
Other noncontrolling interests 12  7 
Total equity 47,427  50,328 
Total liabilities and equity $ 154,251  $ 155,451 
(1)Par value per share, $0.01; shares issued, 394 million as of September 30, 2021 and 390 million as of December 31, 2020; authorized shares, 600 million.
The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
5

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

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

The accompanying Notes to the Consolidated Financial Statements (unaudited) are an integral part of these statements.
7

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

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

CIGNA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
Note Number Footnote Page
BUSINESS AND CAPITAL STRUCTURE
1
10
2
11
3
11
4
Mergers, Acquisitions and Divestitures
12
5
13
6
14
INSURANCE INFORMATION
7
16
8
18
INVESTMENTS
9
20
10
24
11
28
12
29
PROPERTY, LEASES AND OTHER ASSET BALANCES
13
30
COMPLIANCE, REGULATION AND CONTINGENCIES
14
30
15
30
RESULTS DETAILS
16
32

9

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 by making health care simple, affordable and predictable. Our subsidiaries offer a differentiated set of pharmacy, medical, dental and related products and services.
The majority of these products are offered through employers and other groups such as governmental and non-governmental organizations, unions and associations. Cigna also offers commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the United States and selected international markets. In addition to these ongoing operations, Cigna also has certain run-off operations.
The Company provides details of its reporting segments and recent changes below:
In connection with the sale of the U.S. Group Disability and Life business on December 31, 2020, the remainder of our operations previously referred to as "Group Disability and Other" in our 2020 Form 10-K is now referred to as "Other Operations". There were no changes to the underlying business included in this category. Our business that offers group voluntary products and services was not sold to New York Life Insurance Company ("New York Life") and results of this business are reported in the U.S. Medical segment.
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 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 administrative services only ("ASO") 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. Cigna entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc. ("Chubb") for $5.75 billion cash. Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a joint venture in Turkey in 2022.
The remainder of our business operations are reported in Other Operations, consisting of the following:
•Group Disability and Life. Prior to the sale of the U.S. Group Disability and Life business on December 31, 2020, this segment provided group long-term and short-term disability, group life, accident, voluntary and specialty insurance products and related services.
•Corporate-Owned Life Insurance (“COLI”) offers permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for the purpose of financing employer-paid future benefit obligations.
•Run-off businesses:
•Reinsurance: predominantly comprised of guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) business effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) in 2013.
•Settlement Annuity business in run-off.
•Individual Life Insurance and Annuity and Retirement Benefits businesses: deferred gains from the sales of these businesses.
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 enterprise wide project costs and intersegment eliminations for products and services sold between segments.
10

Note 2 – Summary of Significant Accounting Policies    
Basis of Presentation
The Consolidated Financial Statements include the accounts of Cigna Corporation and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment and receivable valuations, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment.

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

Recent Accounting Pronouncements
The Company's 2020 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted our financial statements or may impact them in the future. There have been no updates to accounting guidance not yet adopted or recently issued accounting pronouncements that have occurred since the Company filed its 2020 Form 10-K that would have a material impact to our financial statements. There were no new accounting standards adopted as of September 30, 2021 that had a material impact to our financial statements.
Note 3 – Accounts Receivable, Net

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

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

The Company's allowance for current expected credit losses was $57 million as of September 30, 2021 and $65 million as of December 31, 2020.
11

Note 4 – Mergers, Acquisitions and Divestitures
A.Acquisition of MDLIVE
On April 19, 2021, Cigna acquired 97% of MDLIVE, Inc. ("MDLIVE"), a 24/7 virtual care platform. Combined with Cigna's previously held equity investment, Cigna now owns 100% of MDLIVE. The acquisition of MDLIVE will enable Cigna's Evernorth segment to continue expanding access to virtual care and delivering a more affordable, convenient and connected care experience for consumers.

The purchase price of $2.0 billion consisted of cash consideration. In accordance with GAAP, the total consideration transferred has been allocated to the tangible and intangible net assets acquired based on management's preliminary estimates of their fair values and may change as additional information becomes available over the next several months. During the three months ended September 30, 2021, the Company made immaterial measurement period adjustments to the purchase price allocation. The estimated fair values of assets acquired and liabilities assumed as of the closing date were as follows:
(In millions)
Goodwill $ 1,438 
Acquired intangible assets 627 
Tangible assets acquired net of liabilities assumed 17 
Total consideration transferred 2,082 
Less: Fair value to Cigna's previously held equity interest (55)
Total purchase price $ 2,027 

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

The results of MDLIVE have been included in the Company's Consolidated Financial Statements from the date of the acquisition. Revenues from MDLIVE and their results of operations were not material to Cigna's consolidated results of operations for the three or nine months ended September 30, 2021. The pro forma effects of this acquisition for current and prior periods were not material to our consolidated results of operations.
B.Divestiture of U.S. Group Disability and Life business
On December 31, 2020, Cigna completed the sale of its U.S. Group Disability and Life business to New York Life Insurance Company for cash proceeds of $6.2 billion. The Company recognized a gain of $4.2 billion pre-tax ($3.2 billion after-tax), which included recognition of previously unrealized capital gains on investments sold.
C.Integration and Transaction-related Costs
In the first nine months of 2021, the Company incurred costs related to the acquisition of MDLIVE, the terminated merger with Anthem, Inc. (“Anthem”) and the sale of the U.S. Group Disability and Life business. In the first nine months of 2020, the Company incurred costs related to the acquisition and integration of Express Scripts Holding Company ("Express Scripts"), the terminated merger with Anthem, the sale of the U.S. Group Disability and Life insurance business and other transactions. These costs were $13 million pre-tax ($(35) million after-tax) for the three months and $58 million pre-tax ($1 million after-tax) for the nine months ended September 30, 2021, compared with $112 million pre-tax ($83 million after-tax) for the three months and $339 million pre-tax ($256 million after-tax) for the nine months ended September 30, 2020. These costs consisted primarily of certain projects to integrate or separate the Company’s systems, products and services, fees for legal, advisory and other professional services and certain employment-related costs. After-tax costs for the three and nine months ended September 30, 2021 included a tax benefit from the resolution of a tax matter related to the sold Group Disability and Life business.
12

Note 5 – Earnings Per Share (“EPS”)
Basic and diluted earnings per share were computed as follows:
Three Months Ended
September 30, 2021 September 30, 2020
(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of
Dilution 		Diluted Basic Effect of
Dilution 		Diluted
Shareholders’ net income $ 1,621  $ 1,621  $ 1,388  $ 1,388 
Shares:
Weighted average 335,166  335,166  364,427  364,427 
Common stock equivalents 2,413  2,413  2,763  2,763 
Total shares 335,166  2,413  337,579  364,427  2,763  367,190 
EPS $ 4.84  $ (0.04) $ 4.80  $ 3.81  $ (0.03) $ 3.78 
Nine Months Ended
September 30, 2021 September 30, 2020
(Shares in thousands, dollars in millions, except per share amounts) Basic Effect of
Dilution 		Diluted Basic Effect of
Dilution 		Diluted
Shareholders’ net income $ 4,249  $ 4,249  $ 4,323  $ 4,323 
Shares:
Weighted average 341,583  341,583  367,410  367,410 
Common stock equivalents 3,197  3,197  3,421  3,421 
Total shares 341,583  3,197  344,780  367,410  3,421  370,831 
EPS $ 12.44  $ (0.12) $ 12.32  $ 11.77  $ (0.11) $ 11.66 

The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Anti-dilutive options 1.5  4.6  1.5  4.2 

The Company held approximately 62.6 million shares of common stock in treasury at September 30, 2021, 35.5 million shares as of December 31, 2020 and 26.7 million shares as of September 30, 2020.
On August 23, 2021, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements (“ASR agreements”) with Morgan Stanley & Co. LLC and JP Morgan Chase Bank, N.A. (collectively, the “Counterparties”) to repurchase $2.0 billion of common stock in aggregate. On August 24, 2021, in accordance with the ASR agreements we remitted $2.0 billion to the Counterparties and received an initial delivery of 7.7 million shares of our common stock. The final number of shares to be received under the ASR agreements will be determined based on the daily volume-weighted average share price of our common stock over the term of the agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. We expect final settlement under the ASR agreements to occur in the fourth quarter of 2021. At final settlement, we may be entitled to receive additional shares of our common stock from the Counterparties or we may be required to make a payment. If we are obligated to make a payment, we may elect to satisfy such obligation in cash or shares of our common stock. We recorded the payments to the Counterparties as a reduction to stockholders’ equity, consisting of a $1.6 billion increase in treasury stock, which reflects the value of the initial 7.7 million shares received upon initial settlement, and a $400 million decrease in capital in excess of par value or Additional paid-in capital, which reflects the value of the stock held back by the Counterparties pending final settlement of the agreements. The $400 million recorded in Additional paid-in capital will be reclassified to treasury stock upon settlement of the ASR agreements. The initial delivery of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share on the effective date of the ASR agreements.
13

Note 6 – Debt
The outstanding amounts of debt and finance leases were as follows:
(In millions) September 30, 2021 December 31, 2020
Short-term debt
$78 million, 6.37% Notes due 6/2021
$ —  $ 78 
$1,000 million, Floating Rate Notes due 9/2021
—  999 
$1,250 million, 3.4% Notes due 9/2021
—  1,249 
Commercial paper 2,680  1,030 
Other, including finance leases 23  18 
Total short-term debt $ 2,703  $ 3,374 
Long-term debt
$277 million, 4% Notes due 2022
$ —  $ 276 
$973 million, 3.9% Notes due 2022
—  972 
$500 million, 3.05% Notes due 2022
494  490 
$17 million, 8.3% Notes due 2023
17  17 
$63 million, 7.65% Notes due 2023
63  63 
$700 million, Floating Rate Notes due 2023
699  698 
$1,000 million, 3% Notes due 2023
982  975 
$1,187 million, 3.75% Notes due 2023
1,185  2,181 
$500 million, 0.613% Notes due 2024
498  — 
$1,000 million, 3.5% Notes due 2024
982  977 
$900 million, 3.25% Notes due 2025
897  896 
$2,200 million, 4.125% Notes due 2025
2,192  2,191 
$1,500 million, 4.5% Notes due 2026
1,504  1,505 
$800 million, 1.25% Notes due 2026
796  — 
$1,500 million, 3.4% Notes due 2027
1,419  1,410 
$259 million, 7.875% Debentures due 2027
259  259 
$600 million, 3.05% Notes due 2027
596  595 
$3,800 million, 4.375% Notes due 2028
3,781  3,780 
$1,500 million, 2.4% Notes due 2030
1,490  1,489 
$1,500 million, 2.375% Notes due 2031 (1)
1,500  — 
$45 million, 8.3% Step Down Notes due 2033
45  45 
$190 million, 6.15% Notes due 2036
190  190 
$2,200 million, 4.8% Notes due 2038 (1)
2,192  2,180 
$750 million, 3.2% Notes due 2040
743  742 
$121 million, 5.875% Notes due 2041
119  119 
$448 million, 6.125% Notes due 2041
490  490 
$317 million, 5.375% Notes due 2042
315  315 
$1,500 million, 4.8% Notes due 2046
1,465  1,465 
$1,000 million, 3.875% Notes due 2047
988  988 
$3,000 million, 4.9% Notes due 2048
2,967  2,966 
$1,250 million, 3.4% Notes due 2050
1,235  1,235 
$1,500 million , 3.4% Notes due 2051
1,476  — 
Other, including finance leases 30  36 
Total long-term debt $ 31,609  $ 29,545 
(1)The Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments. See Note 9 for further information about the Company's interest rate risk management and these derivative instruments.
14

Debt Issuance and Redemption. In order to decrease future interest expense, mitigate future refinancing risk and raise proceeds for general corporate purposes, the Company entered into the following transactions during the nine months ended September 30, 2021:
•Debt issuance: On March 3, 2021, the Company issued $4.3 billion of new senior notes. The proceeds of this issuance were mainly used to redeem outstanding debt securities. The remaining proceeds are available for general corporate purposes. Interest on this debt is paid semi-annually.
Principal Maturity Date Interest Rate Net Proceeds
$500 million March 15, 2024 0.613% $499 million
$800 million March 15, 2026 1.250% $797 million
$1,500 million March 15, 2031 2.375% $1,492 million
$1,500 million March 15, 2051 3.400% $1,479 million
•Debt redemption: During the first nine months of 2021, the Company completed the redemption of a total of $4.5 billion in aggregate principal amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $141 million ($110 million after-tax), consisting primarily of premium payments.
Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed below. As of September 30, 2021, there were no outstanding balances under these revolving credit agreements.
In April 2021, Cigna entered into a $3.0 billion five-year revolving credit and letter of credit agreement that matures in April 2026 and a $1.0 billion three-year revolving credit agreement that matures in April 2024, which are diversified among 23 banks and replaced the five-year revolving credit and letter of credit agreement that was scheduled to mature in April 2023. Under the current agreements, Cigna can borrow up to $3.0 billion and $1.0 billion, respectively, for general corporate purposes, with up to $500 million available under the five-year facility for issuance of letters of credit. The revolving credit agreements also include an option to extend the termination date for an additional one-year period, subject to consent of the banks.
Additionally, in April 2021, Cigna entered into a $1.0 billion 364-day revolving credit agreement that will mature in April 2022 and is diversified among 23 banks. This agreement replaced the prior $1.0 billion 364-day revolving credit agreement that was scheduled to expire in October 2021. Pursuant to this revolving credit agreement, Cigna can borrow up to $1.0 billion for general corporate purposes. The agreement includes the option to “term out” any revolving loans that are outstanding at maturity by converting them into a term loan maturing on the one-year anniversary of conversion.
Each of the five-year facility, the three-year facility and the 364-day facility include an option to increase commitments in an aggregate amount of up to $1.5 billion across all three facilities. Each of the three facilities also contain customary covenants and restrictions including a financial covenant that the Company’s leverage ratio may not exceed 60%, subject to certain exceptions upon the consummation of an acquisition.

Commercial Paper. Under our commercial paper program we may issue short-term, unsecured commercial paper notes privately placed on a discounted basis through certain broker dealers at any time not to exceed an aggregate amount of $5.0 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes.
The Company was in compliance with its debt covenants as of September 30, 2021.
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Note 7 – Insurance and Contractholder Liabilities
A.Account Balances – Insurance and Contractholder Liabilities
The Company’s insurance and contractholder liabilities were comprised of the following:
September 30, 2021 December 31, 2020 September 30, 2020
(In millions) Current Non-current Total Current Non-current Total Total
Contractholder deposit funds $ 362  $ 6,717  $ 7,079  $ 350  $ 6,823  $ 7,173  $ 7,662 
Future policy benefits 307  9,183  9,490  327  9,317  9,644  10,102 
Unearned premiums 494  408  902  485  394  879  828 
Unpaid claims and claim expenses
U.S. Medical
3,825  21  3,846  3,166  18  3,184  3,200 
Other segments 929  247  1,176  980  292  1,272  6,235 
Total 28,027 
Insurance and contractholder liabilities classified as Liabilities of business held for sale (1)
(6,591)
Total insurance and contractholder liabilities $ 5,917  $ 16,576  $ 22,493  $ 5,308  $ 16,844  $ 22,152  $ 21,436 
(1)Amounts classified as Liabilities of business held for sale primarily include $5.2 billion of unpaid claims, $759 million of contractholder deposit funds and $646 million of future policy benefits as of September 30, 2020.
Insurance and contractholder liabilities expected to be paid within one year are classified as current.
B.Unpaid Claims and Claim Expenses – U.S. Medical
This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process) and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities.
The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was $3.6 billion at September 30, 2021 and $3.0 billion at September 30, 2020.
Activity, net of intercompany transactions, in the unpaid claims liability for the U.S. Medical segment for the nine months ended September 30 was as follows:
  Nine Months Ended
(In millions) September 30, 2021 September 30, 2020
Beginning balance $ 3,184  $ 2,892 
Less: Reinsurance and other amounts recoverable 224  303 
Beginning balance, net 2,960  2,589 
Incurred costs related to:
Current year 22,167  18,935 
Prior years (180) (126)
Total incurred 21,987  18,809 
Paid costs related to:
Current year 18,701  16,061 
Prior years 2,665  2,363 
Total paid 21,366  18,424 
Ending balance, net 3,581  2,974 
Add: Reinsurance and other amounts recoverable 265  226 
Ending balance $ 3,846  $ 3,200 
Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certain business for which the Company administers the plan benefits without any right of offset. See Note 8 for additional information on reinsurance.
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Variances in incurred costs related to prior years’ unpaid claims and claim expenses that resulted from the differences between actual experience and the Company’s key assumptions for the nine months ended September 30 were as follows:
Nine Months Ended
(Dollars in millions) September 30, 2021 September 30, 2020
$
%(1)
$
%(2)
Actual completion factors $ 56  0.2  % $ 47  0.2  %
Medical cost trend 124  0.5  79  0.3 
Total favorable variance $ 180  0.7  % $ 126  0.5  %
(1)Percentage of current year incurred costs as reported for the year ended December 31, 2020.
(2)Percentage of current year incurred costs as reported for the year ended December 31, 2019.
Favorable prior year development in both years reflects utilization of medical services that is lower than our estimates used to establish prior year reserves.
C.Unpaid Claims and Claim Expenses – International Markets and Other Operations
Liability balance details. The liability details for unpaid claims and claim expenses are as follows:
(In millions) September 30, 2021 September 30, 2020
Other Operations
Group Disability and Life $ —  $ 5,206 
Other Operations 267  162 
Total Other Operations
267  5,368 
International Markets
909  867 
Unpaid claims and claim expenses Other Operations and International Markets
$ 1,176  $ 6,235 
Activity, net of intercompany transactions, in the unpaid claims and claim expenses for International Markets and, prior to the sale, Group Disability and Life (see Note 4 for further information) is presented in the following table. Prior to the sale, the majority of the liability related to disability claims with long tailed payouts. See Note 9C to the Consolidated Financial Statements included in our 2020 Form 10-K for additional discussion of these disability reserves that are now sold. Liabilities associated with Other Operations are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.
Nine Months Ended
(In millions)
September 30, 2021
September 30, 2020 (1)
Beginning balance $ 963  $ 5,816 
Less: Reinsurance 59  184 
Beginning balance, net 904  5,632 
Incurred claims related to:
Current year 2,110  4,277 
Prior years:
Interest accretion —  118 
All other incurred (38) (12)
Total incurred 2,072  4,383 
Paid claims related to:
Current year 1,549  2,435 
Prior years 532  1,702 
Total paid 2,081  4,137 
Foreign currency (43) 5 
Ending balance, net 852  5,883 
Add: Reinsurance 57  190 
Ending balance $ 909  $ 6,073 
(1)Includes unpaid claims amounts classified as Liabilities of business held for sale.
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Reinsurance in the table above reflects amounts due from reinsurers related to unpaid claims liabilities. The Company’s insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses. See Note 8 for additional information on reinsurance.
Note 8 – Reinsurance
The Company’s insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance is also used to limit losses from large exposures and to permit recovery of a portion of direct or assumed losses. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.
A.Reinsurance Recoverables
The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Included in the table below are $214 million of current reinsurance recoverables that are reported in Other current assets as of September 30, 2021; as of December 31, 2020 there was $217 million of current reinsurance recoverables reported in Other current assets. The Company’s reinsurance recoverables as of September 30, 2021 are presented in the following table by range of external credit rating and collateral level:
(in millions)
Fair value of collateral contractually required to meet or exceed carrying value of recoverable
Collateral provisions exist that may mitigate risk of credit loss(3)
No collateral Total
Ongoing Operations
Upper-medium grade and higher (1)
$ —  $ —  $ 178  $ 178 
Lower-medium grade (2)
—  —  63  63 
Not rated 99  —  24  123 
Total recoverables related to ongoing operations 99  —  265  364 
Acquisition, disposition or runoff activities
Upper-medium grade and higher (1)
Lincoln National Life and Lincoln Life & Annuity of New York —  2,942  —  2,942 
Berkshire Hathaway Life Insurance Company of Nebraska 284  384  —  668 
Prudential Retirement Insurance and Annuity 583  —  —  583 
Life Insurance Company of North America —  451  —  451 
Other 223  16  17  256 
Not rated —  12  3  15 
Total recoverables related to acquisition, disposition or runoff activities 1,090  3,805  20  4,915 
Total $ 1,189  $ 3,805  $ 285  $ 5,279 
Allowance for uncollectible reinsurance (30)
Total reinsurance recoverables $ 5,249 
(1)Includes A- equivalent and higher current ratings certified by a nationally recognized statistical rating organization ("NRSRO")
(2)Includes BBB- to BBB+ equivalent current credit ratings certified by an NRSRO
(3)Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level
Collateral levels are defined internally based on the fair value of the collateral relative to the carrying amount of the reinsurance recoverable, the frequency at which collateral is required to be replenished and the potential for volatility in the collateral’s fair value.
The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables.

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B.Effects of Reinsurance
In the Company’s Consolidated Statements of Income, Premiums were reported net of amounts ceded to reinsurers and Medical costs and other benefit expenses were reported net of reinsurance recoveries in the following amounts:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Total ceded premiums $ 134  $ 122  $ 418  $ 367 
Total reinsurance recoveries $ 138  $ 117  $ 419  $ 397 

C.Effective Exit of GMDB and GMIB Business
The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction in 2013. Berkshire reinsured 100% of the Company’s future claim payments in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.2 billion remaining at September 30, 2021.
GMDB is accounted for as assumed and ceded reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below. GMIB assets are reported in Other current assets and Other assets and GMIB liabilities are reported in Accrued expenses and other liabilities and Other non-current liabilities. Assumptions used in fair value measurement for these assets and liabilities are discussed in Note 10 of the Company's 2020 Form 10-K.
GMDB
The GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death. The Company’s exposure arises when the guaranteed minimum death benefit exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death.
The following table presents the account value, net amount at risk and the number of contractholders for guarantees assumed by the Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded.
(Dollars in millions, excludes impact of reinsurance ceded) September 30, 2021 December 31, 2020
Account value $ 9,552  $ 9,523 
Net amount at risk $ 1,467  $ 1,570 
Number of contractholders (estimated) 170,000  185,000 

GMIB
The Company reinsured contracts with issuers of GMIB products. The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the related underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that can only occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”) for these contracts including retrocessional coverage from Berkshire.
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GMIB liabilities totaling $610 million as of September 30, 2021 and $729 million as of December 31, 2020 are classified as Level 3 because fair value inputs are largely unobservable. There were three reinsurers covering 100% of the GMIB exposures as of September 30, 2021 and December 31, 2020 as follows:
(In millions)
Line of Business Reinsurer September 30, 2021 December 31, 2020
Collateral and Other Terms at September 30, 2021
GMIB Berkshire $ 298  $ 353 
100% were secured by assets in a trust.
Sun Life Assurance Company of Canada 179  215 
Liberty Re (Bermuda) Ltd. 160  190 
100% were secured by assets in a trust.
Total GMIB recoverables reported in Other current assets and Other assets $ 637  $ 758 
All reinsurers are rated A- equivalent and higher by an NRSRO.

Note 9 – Investments
Cigna’s investment portfolio consists of a broad range of investments including debt securities, equity securities, commercial mortgage loans, policy loans, other long-term investments, short-term investments and derivative financial instruments. The sections below provide more detail regarding our investment balances and realized investment gains and losses. See Note 10 for information about the valuation of the Company’s investment portfolio. Further information about our accounting policies for investment assets can be found in Note 11 of the Company's 2020 Form 10-K.

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

A.Investment Portfolio

Debt Securities

The amortized cost and fair value by contractual maturity periods for debt securities were as follows at September 30, 2021:
(In millions) Amortized
Cost 		Fair
Value
Due in one year or less $ 914  $ 920 
Due after one year through five years 5,316  5,543 
Due after five years through ten years 5,799  6,161 
Due after ten years 3,975  4,759 
Mortgage and other asset-backed securities 457  474 
Total $ 16,461  $ 17,857 
Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepay obligations, with or without penalties.
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Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below:
(In millions) Amortized
Cost 		Allowance for Credit Loss Unrealized
Appreciation 		Unrealized
Depreciation 		Fair
Value
September 30, 2021
Federal government and agency $ 277  $ —  $ 105  $ —  $ 382 
State and local government 153  —  16  —  169 
Foreign government 2,317  —  235  (33) 2,519 
Corporate 13,257  (11) 1,136  (69) 14,313 
Mortgage and other asset-backed 457  —  21  (4) 474 
Total $ 16,461  $ (11) $ 1,513  $ (106) $ 17,857 
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)
$ 2,282  $ (3) $ 721  $ (9) $ 2,991 
December 31, 2020
Federal government and agency $ 334  $ —  $ 122  $ —  $ 456 
State and local government 150  —  17  —  167 
Foreign government 2,201  —  318  (8) 2,511 
Corporate 13,108  (19) 1,506  (33) 14,562 
Mortgage and other asset-backed 427  (7) 27  (12) 435 
Total $ 16,220  $ (26) $ 1,990  $ (53) $ 18,131 
Investments supporting liabilities of the Company’s run-off settlement annuity business (included in total above) (1)
$ 2,282  $ (5) $ 838  $ (3) $ 3,112 
(1)Net unrealized appreciation for these investments is excluded from accumulated other comprehensive income.

Review of declines in fair value. Management reviews impaired debt securities to determine whether a credit loss allowance is needed based on criteria that include:
•severity of decline;
•financial health and specific prospects of the issuer; and
•changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region.
The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded, by investment grade and the length of time these securities have been in an unrealized loss position. These debt securities are primarily corporate securities with a decline in fair value that reflects an increase in market yields since purchase. Our allowance for credit losses on debt securities was not material as of September 30, 2021 and December 31, 2020.
September 30, 2021 December 31, 2020
(Dollars in millions) Fair
Value 		Amortized
Cost 		Unrealized
Depreciation 		Number
of Issues 		Fair
Value 		Amortized
Cost 		Unrealized
Depreciation 		Number
of Issues
One year or less
Investment grade $ 2,583  $ 2,660  $ (77) 799 $ 1,026  $ 1,045  $ (19) 300 
Below investment grade 558  571  (13) 695 381  405  (24) 232 
More than one year
Investment grade 115  123  (8) 67 18  18  —  6 
Below investment grade 201  209  (8) 45 90  100  (10) 33 
Total $ 3,457  $ 3,563  $ (106) 1,606  $ 1,515  $ 1,568  $ (53) 571 

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

Commercial Mortgage Loans

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

The Company regularly evaluates and monitors credit risk from the initial mortgage loan underwriting and throughout the investment holding period. For more information on the Company's accounting policies and methodologies regarding these investments, see Note 11 to the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Loan-to-value and debt service coverage ratio are the two most significant contributors to the credit quality ratings that the Company uses to evaluate and monitor credit risk in its commercial mortgage loan portfolio. The following table summarizes the credit risk profile of the Company’s commercial mortgage loan portfolio as of September 30, 2021 and December 31, 2020:
(Dollars in millions) September 30, 2021 December 31, 2020
Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio Carrying Value Average Debt Service Coverage Ratio Average Loan-to-Value Ratio
Below 60% $ 563  2.18 $ 533  2.28
60% to 79% 839  1.84 751  2.08
80% to 100% 129  1.47 141  1.33
Allowance for credit losses (6) (6)
Total $ 1,525  1.93 61  % $ 1,419  2.08 61  %
All commercial mortgage loans in the Company's portfolio are current as of September 30, 2021 and December 31, 2020.

Other Long-Term Investments
Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.
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Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicate that the carrying value may not be recoverable. Additionally, statutory and other restricted deposits and foreign currency swaps carried at fair value are reported in the table below as Other. The following table provides the carrying value information for these investments:
Carrying value as of
(In millions) September 30, 2021 December 31, 2020
Real estate investments $ 1,161  $ 951 
Securities partnerships 2,098  1,737 
Other 170  144 
Total $ 3,429  $ 2,832 

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

The gross fair values of our derivative financial instruments are presented in Note 10. As of September 30, 2021 and December 31, 2020, the effects of derivative financial instruments used in these individual hedging strategies were not material to the Consolidated Financial Statements, including gains or losses reclassified from Accumulated other comprehensive income into Shareholders' net income, amounts excluded from the assessment of hedge effectiveness and fair values of assets posted or held as collateral supporting these fair values. The following table summarizes the types and notional quantity of derivative instruments held by the Company:
Notional Value as of
(In millions) September 30, 2021 December 31, 2020
Purpose Type of Instrument
Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.
Foreign currency swap contracts
$ 1,070  $ 925 
Fair value hedge: To convert a portion of the interest rate exposure on the Company's long-term debt from fixed to variable rates. This more closely aligns the Company's interest expense with the interest income received on its cash equivalent and short-term investment balances. The variable rates are benchmarked to SOFR.
Interest rate swap contracts $ 750  $ — 
Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros, Korean Won and Taiwan Dollar. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.
Foreign currency swap contracts
$ 526  $ 526 
Foreign currency forward contracts
$ 697  $ 636 
Economic hedge: To hedge the foreign exchange-related changes in fair value of U.S. dollar-denominated investment assets to reflect the local currency for the Company’s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged investments.
Foreign currency forward contracts
$ 671  $ 538 
Economic hedge: To hedge against the foreign exchange depreciation of certain foreign subsidiary earnings denominated in South Korean Won. The notional value of hedging instruments aligns with the U.S. dollar equivalent of hedged foreign-denominated earnings.
Average rate option contracts $ 120  $ — 
The Company implemented two new hedging strategies during the second quarter of 2021 that are described in the above table and are accounted for as follows:
• Fair value hedges of the interest rate exposure on the Company’s long-term debt: Using fair value hedge accounting, the fair values of the swap contracts are reported in Other assets or Other liabilities. The critical terms of these swaps match those of the long-term debt being hedged. As a result, the carrying value of the hedged debt is adjusted to reflect changes in its fair value driven by the Secured Overnight Financing Rate ("SOFR"). The effects of those adjustments on interest expense are offset by the effects of corresponding changes in the swaps' fair value. The net impact from the hedge reported in Interest
23

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

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

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

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

Note 10 – Fair Value Measurements
The Company carries certain financial instruments at fair value in the financial statements including debt securities, certain equity securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions, such as when impaired or when there are observable price changes for equity securities with no readily determinable fair value.
Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor.
The Company’s financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level of input that is significant to its measurement. For example, a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significant to the instrument’s fair value, even though the measurement may be derived using inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).

For a description of the policies, methods and assumptions that are used to estimate fair value and determine the fair value hierarchy for each class of financial instruments, see Note 12 "Fair Value Measurements" to the Company's 2020 Form 10-K.

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A.Financial Assets and Financial Liabilities Carried at Fair Value
The following table provides information as of September 30, 2021 and December 31, 2020 about the Company’s financial assets and liabilities carried at fair value. Separate account assets are also recorded at fair value on the Company’s Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generally accrue directly to policyholders.
(In millions) Quoted Prices in Active Markets for Identical Assets
(Level 1) 		Significant Other Observable Inputs
(Level 2) 		Significant Unobservable Inputs
(Level 3) 		Total
As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020
Financial assets at fair value
Debt securities
Federal government and agency $ 141  $ 207  $ 241  $ 249  $ —  $ —  $ 382  $ 456 
State and local government —  —  169  167  —  —  169  167 
Foreign government —  —  2,505  2,498  14  13  2,519  2,511 
Corporate
—  —  13,600  13,878  713  684  14,313  14,562 
Mortgage and other asset-backed —  —  333  309  141  126  474  435 
Total debt securities 141  207  16,848  17,101  868  823  17,857  18,131 
Equity securities (1)
23  50  165  165  31  31  219  246 
Short-term investments —  —  439  325  —  —  439  325 
Derivative assets (2)
—  —  126  72  —  —  126  72 
Financial liabilities at fair value
Derivative liabilities $ —  $ —  $ 49  $ 108  $ —  $ —  $ 49  $ 108 
(1)Excludes certain equity securities that have no readily determinable fair value.
(2)Derivative assets above include an immaterial amount as of September 30, 2021 and $34 million as of December 31, 2020 that are presented in the Short-term investments category disclosed in Note 9. See Note 9 for more information on our Derivative Financial Instruments.

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

Quantitative Information about Unobservable Inputs
The significant unobservable input used to value our corporate and government debt securities and mortgage and other asset-backed securities is an adjustment for liquidity. This adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security. The following table summarizes the fair value and significant unobservable inputs that were developed directly by the Company and used in pricing these debt securities as of September 30, 2021 and December 31, 2020. The range and weighted average basis point (“bps”) amounts for liquidity reflect the Company’s best estimates of the unobservable adjustments a market participant would make to calculate these fair values.
Fair Value as of Unobservable Adjustment Range (Weighted Average by Quantity) as of
(Fair value in millions ) September 30, 2021 December 31, 2020 Unobservable input September 30, 2021 September 30, 2021 December 31, 2020
Debt securities
Corporate and government debt securities $ 727  $ 696  Liquidity
60 - 2300 (460)
bps
60 - 1370 (470)
bps
Mortgage and other asset-backed securities 141  126  Liquidity
60 - 390 (90)
bps
60 - 380 (80)
bps
Securities not priced by the Company (1)
—  1 
Total Level 3 debt securities $ 868  $ 823 
(1)The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.
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A significant increase in liquidity spread adjustments would result in a lower fair value measurement, while a decrease would result in a higher fair value measurement.

Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value
The following table summarizes the changes in financial assets and financial liabilities classified in Level 3 for the three and nine months ended September 30, 2021 and 2020. Gains and losses reported in the table may include net changes in fair value that are attributable to both observable and unobservable inputs.
For the Three Months Ended
September 30, 		For the Nine Months Ended
September 30,
(In millions) 2021 2020 2021 2020
Debt and Equity Securities
Beginning balance $ 854  $ 860  $ 854  $ 555 
Total gains (losses) included in shareholders’ net income 3  (1) (8) 4 
Gains (losses) included in other comprehensive income 2  17  (7) (42)
Gains (losses) required to adjust future policy benefits for settlement annuities (1)
1  7  (6) 4 
Purchases, sales and settlements
Purchases 37  3  108  67 
Sales (36) (1) (36) (13)
Settlements (1) (8) (26) (15)
Total purchases, sales and settlements —  (6) 46  39 
Transfers into/(out of) Level 3
Transfers into Level 3 58  102  181  629 
Transfers out of Level 3 (19) (33) (161) (243)
Total transfers into/(out of) Level 3 39  69  20  386 
Ending balance $ 899  $ 946  $ 899  $ 946 
Total gains (losses) included in Shareholders’ net income attributable to instruments held at the reporting date $ (3) $ —  $ (3) $ (2)
Change in unrealized gains or losses included in Other comprehensive income for assets held at the end of the reporting period $ 2  $ 17  $ (8) $ (37)
(1)Amounts do not accrue to shareholders.

Total gains and losses included in Shareholders’ net income in the tables above are reflected in the Consolidated Statements of Income as Net realized investment gains (losses) and Net investment income.
Gains and losses included in Other comprehensive income in the tables above are reflected in Net unrealized appreciation (depreciation) on securities and derivatives in the Consolidated Statements of Comprehensive Income.
Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company’s best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Market activity typically decreases during periods of economic uncertainty and this decrease in activity reduces the availability of market observable data. As a result, the level of unobservable judgment that must be applied to the pricing of certain instruments increases and is typically observed through the widening of liquidity spreads. Transfers between Level 2 and Level 3 during 2021 and 2020 primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors. Transfers into and out of Level 3 were higher in 2020 due to significant fluctuations in unobservable inputs experienced as a result of the uncertainty over the economic impacts related to COVID-19. See discussion under Quantitative Information about Unobservable Inputs above for more information.

Separate Accounts
The investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company’s Consolidated Statements of Income and Cash Flows.

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Fair values of Separate account assets at September 30, 2021 and December 31, 2020 were as follows:
(In millions) Quoted Prices in Active Markets for Identical Assets
(Level 1) 		Significant Other Observable Inputs
(Level 2) 		Significant Unobservable Inputs
(Level 3) 		Total
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Guaranteed separate accounts (See Note 15)
$ 223  $ 226  $ 290  $ 297  $ —  $ —  $ 513  $ 523 
Non-guaranteed separate accounts (1)
1,982  1,925  5,463  5,600  345  355  7,790  7,880 
Subtotal $ 2,205  $ 2,151  $ 5,753  $ 5,897  $ 345  $ 355  8,303  8,403 
Non-guaranteed separate accounts priced at NAV as a practical expedient (1)
847  683 
Separate account assets per Consolidated Balance Sheets $ 9,150  $ 9,086 
(1)Non-guaranteed separate accounts included $4.4 billion as of September 30, 2021 and $4.2 billion as of December 31, 2020 in assets supporting the Company’s pension plans, including $0.3 billion classified in Level 3 as of September 30, 2021 and December 31, 2020.

Separate account assets classified in Level 3 primarily support Cigna’s pension plans and include certain newly-issued, privately-placed, complex or illiquid securities that are priced using methods discussed above, as well as commercial mortgage loans. Activity, including transfers into and out of Level 3, was not material for the three and nine months ended September 30, 2021 or 2020.
Separate account investments in securities partnerships, real estate and hedge funds are generally valued based on the separate account’s ownership share of the equity of the investee (NAV as a practical expedient) including changes in the fair values of its underlying investments. Substantially all of these assets support the Cigna Pension Plans. The following table provides additional information on these investments:
Fair Value as of Unfunded Commitment as of September 30, 2021 Redemption Frequency
(if currently eligible) 		Redemption Notice
Period
(In millions) September 30, 2021 December 31, 2020
Securities partnerships $ 534  $ 463  $ 253  Not applicable Not applicable
Real estate funds 309  215  —  Quarterly
30 - 90 days
Hedge funds 4  5  —  Up to annually, varying by fund
30 - 90 days
Total $ 847  $ 683  $ 253 
As of September 30, 2021, the Company does not have plans to sell any of these assets at less than fair value. These investments are structured to satisfy longer-term investment objectives. Securities partnerships are contractually non-redeemable and the underlying investment assets are expected to be liquidated by the fund managers within ten years after inception.

B.Assets and Liabilities Measured at Fair Value under Certain Conditions
Some financial assets and liabilities are not carried at fair value, such as commercial mortgage loans that are carried at unpaid principal, investment real estate that is carried at depreciated cost and equity securities with no readily determinable fair value when there are no observable market transactions. However, these financial assets and liabilities may be measured using fair value under certain conditions, such as when investments become impaired and are written down to their fair value, or when there are observable price changes from orderly market transactions of equity securities that otherwise had no readily determinable fair value.

For the nine months ended September 30, 2021 and 2020, no impairments were recognized requiring these assets to be measured at fair value. Realized investment gains and losses from these observable price changes for the nine months ended September 30, 2021 and September 30, 2020 were not material.

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C.Fair Value Disclosures for Financial Instruments Not Carried at Fair Value
The following table includes the Company’s financial instruments not recorded at fair value that are subject to fair value disclosure requirements at September 30, 2021 and December 31, 2020. In addition to universal life products and finance leases, financial instruments that are carried in the Company’s Consolidated Financial Statements at amounts that approximate fair value are excluded from the following table:
Classification in Fair Value Hierarchy September 30, 2021 December 31, 2020
(In millions) Fair Value Carrying Value Fair Value Carrying Value
Commercial mortgage loans Level 3 $ 1,563  $ 1,525  $ 1,456  $ 1,419 
Long-term debt, including current maturities, excluding finance leases Level 2 $ 35,794  $ 31,579  $ 37,676  $ 31,835 

Note 11 – Variable Interest Entities
We perform ongoing qualitative analyses of our involvement with variable interest entities to determine if consolidation is required. The Company determined it was not a primary beneficiary in any material variable interest entity as of September 30, 2021 or December 31, 2020. The Company’s involvement with variable interest entities for which it is not the primary beneficiary has not changed materially from December 31, 2020. For details of our accounting policy for variable interest entities and the composition of variable interest entities with which the Company is involved, refer to Note 13 in the Company's 2020 Form 10-K. The Company has not provided, and does not intend to provide, financial support to any of these variable interest entities in excess of its maximum exposure.
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Note 12 – Accumulated Other Comprehensive Income (Loss) (“AOCI”)
AOCI includes unrealized appreciation on securities and derivatives (excluding appreciation on investments supporting future policy benefit liabilities of the run-off settlement annuity business) (See Note 9), foreign currency translation and the net postretirement benefits liability adjustment. AOCI includes the Company’s share from unconsolidated entities reported on the equity method. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to Shareholders' net income in the same period that the related pre-tax AOCI reclassifications are recognized. Changes in the components of AOCI were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Securities and Derivatives
Beginning balance $ 749  $ 1,256  $ 900  $ 975 
Appreciation (depreciation) on securities and derivatives 59  159  (113) 499 
Tax (expense) benefit (16) (27) 9  (96)
Net appreciation (depreciation) on securities and derivatives 43  132  (104) 403 
Reclassification adjustment for (gains) losses included in Shareholders' net income (Net realized investment (gains) losses) (14) (16) (20) (3)
Reclassification adjustment for tax expense included in Shareholders’ net income 3  4  5  1 
Net (gains) losses reclassified from AOCI to Shareholders' net income (11) (12) (15) (2)
Other comprehensive income (loss), net of tax 32  120  (119) 401 
Ending balance $ 781  $ 1,376  $ 781  $ 1,376 
Translation of foreign currencies
Beginning balance $ (113) $ (374) $ (15) $ (275)
Translation of foreign currencies (118) 102  (216) 7 
Tax (expense) benefit (7) 7  (12) (3)
Other comprehensive income (loss), net of tax (125) 109  (228) 4 
Less: Net translation gain (loss) on foreign currencies attributable to noncontrolling interests (1) (4) (6) (10)
Shareholders' other comprehensive income (loss), net of tax (124) 113  (222) 14 
Ending balance $ (237) $ (261) $ (237) $ (261)
Postretirement benefits liability
Beginning balance $ (1,713) $ (1,670) $ (1,746) $ (1,641)
Reclassification adjustment for amortization of net prior actuarial losses and prior service costs (Interest expense and other) 21  18  60  54 
Reclassification adjustment for settlement (Interest expense and other) —  —  4  — 
Reclassification adjustment for tax (benefit) included in Shareholders’ net income (5) (4) (15) (13)
Net adjustments reclassified from AOCI to Shareholders' net income 16  14  49  41 
Valuation update —  —  —  (73)
Tax benefit —  —  —  17 
Net change due to valuation update —  —  —  (56)
Other comprehensive income (loss), net of tax 16  14  49  (15)
Ending balance $ (1,697) $ (1,656) $ (1,697) $ (1,656)

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Note 13 – Leases
Operating and finance lease Right-of-Use (“ROU”) assets and lease liabilities were as follows:
(In millions) September 30, 2021 December 31, 2020
Operating leases:
Operating lease ROU assets $ 519  $ 552 
Accrued expenses and other liabilities $ 145  $ 152 
Other non-current liabilities 460  491 
Total operating lease liabilities $ 605  $ 643 
Finance leases:
Property and equipment, gross $ 96  $ 98 
Accumulated depreciation (45) (46)
Property and equipment, net $ 51  $ 52 
Short-term debt $ 23  $ 18 
Long-term debt 30  36 
Total finance lease liabilities $ 53  $ 54 
Note 14 – Income Taxes
Income Tax Expense
The 21.7% effective tax rate for the nine months ended September 30, 2021 was higher than the 20.8% rate for the same period in 2020. This increase is primarily attributable to the absence of favorable items which reduced the rate in 2020, including settlements of uncertain tax positions and the remeasurement of deferred state income taxes due to changes in statutory rates and adjustments in apportionment factors, partially offset by the elimination of the nondeductible health insurance industry tax in 2021.
Note 15 – Contingencies and Other Matters
The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.
A.Financial Guarantees: Retiree and Life Insurance Benefits
The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business has the right to redirect the management of the related assets to provide for benefit payments. As of September 30, 2021, employers maintained assets that generally exceeded the benefit obligations under these arrangements of approximately $440 million. An additional liability is established if management believes that the Company will be required to make payments under the guarantees; there were no additional liabilities required for these guarantees, net of reinsurance, as of September 30, 2021. Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy.
The Company does not expect that these financial guarantees will have a material effect on the Company’s consolidated results of operations, liquidity or financial condition.
B.Certain Other Guarantees
The Company had indemnification obligations as of September 30, 2021 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, filing of tax returns, compliance with law or identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of
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the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were no liabilities for these indemnification obligations as of September 30, 2021.
C.Guaranty Fund Assessments
The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws. The Company’s exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.
There were no material charges or credits resulting from existing or new guaranty fund assessments for the nine months ended September 30, 2021.
D.Legal and Regulatory Matters
The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator’s filing of a complaint under court seal and other legal matters arising, for the most part, in the ordinary course of managing a global health service business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Disputed tax matters arising from audits by the Internal Revenue Service or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions.
Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss and certain other material litigation matters are described below. For those matters that the Company has identified with a reasonably possible material loss, the Company provides disclosure in the aggregate of accruals and range of loss, or a statement that such information cannot be estimated. The Company’s accruals for the matters discussed below under “Litigation Matters” and “Regulatory Matters” are not material. Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if any) for these matters at this time. In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company. An adverse outcome in one or more of these matters could be material to the Company’s results of operations, financial condition or liquidity for any particular period. The outcomes of lawsuits are inherently unpredictable and we may be unsuccessful in these ongoing litigation matters or any future claims or litigation.
Litigation Matters
Risk Corridors and CSR Litigation with the Federal Government. As a result of a Supreme Court decision in April 2020, the Company filed suit in early May 2020 against the United States in the U.S. Court of Federal Claims seeking to recover two types of payments the Federal Government owes Cigna under the risk corridors and cost-sharing reduction (“CSR”) programs of The Patient Protection and Affordable Care Act. In aggregate, the complaint sought to recover more than $315 million: $120 million in risk corridors payments and more than $195 million in CSR payments. We received $120 million in payments in September 2020, which resolved our risk corridors claim. Our claim seeking recovery for CSR payments remains pending.
Express Scripts Litigation with Anthem. In March 2016, Anthem filed a lawsuit in the United States District Court for the Southern District of New York alleging various breach of contract claims against Express Scripts relating to the parties’ rights and obligations under the periodic pricing review section of the pharmacy benefit management agreement between the parties including allegations that Express Scripts failed to negotiate new pricing concessions in good faith, as well as various alleged service issues. Anthem also requested that the court enter declaratory judgment that Express Scripts is required to provide Anthem competitive benchmark pricing, that Anthem can terminate the agreement and that Express Scripts is required to provide Anthem with post-termination services at competitive benchmark pricing for one year following any termination by Anthem. Anthem claims it is entitled to $13 billion in additional pricing concessions over the remaining term of the agreement, as well as $1.8 billion for one year following any contract termination by Anthem and $150 million damages for service issues (“Anthem’s Allegations”). On April 19, 2016, in response to Anthem’s complaint, Express Scripts filed its answer denying Anthem’s Allegations in their entirety and asserting affirmative defenses and counterclaims against Anthem. The court subsequently granted Anthem’s motion to dismiss two of six counts of Express Scripts’ amended counterclaims. Express Scripts filed its Motion for Summary Judgment on August 27, 2021. Anthem’s completed filing of its Response to Express Scripts’ Motion for Summary Judgment on October 16, 2021. Express Scripts’ Reply in Support of its Motion for Summary Judgment is due November 19, 2021. There is no tentative trial date.
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Regulatory Matters
Civil Investigative Demand. The U.S. Department of Justice (“DOJ”) is conducting industry-wide investigations of Medicare Advantage organizations’ risk adjustment practices under Medicare Parts C and D including medical chart reviews and health exams. For certain Medicare Advantage organizations, those investigations have resulted in litigation. The Company has received information requests (civil investigative demands) from the DOJ (U.S. Attorney’s Offices for the Eastern District of Pennsylvania and the Southern District of New York ("SDNY")). We are continuing to cooperate with the DOJ and have responded and continue to respond to its requests. Additionally, in relation to the SDNY’s investigation, a qui tam action that was filed by a relator in the United States District Court for the Southern District of New York in 2017 was unsealed on August 6, 2020. The action asserts claims related to risk adjustment practices arising from certain health exams conducted as part of Cigna’s Medicare Advantage business. The DOJ has not intervened in the case at this time. On September 29, 2021, the qui tam action was transferred to the United States District Court for the Middle District of Tennessee.
Note 16 – Segment Information
See Note 1 for a description of our segments. A description of our basis for reporting segment operating results is outlined below. Intersegment revenues primarily reflect pharmacy related transactions between the Evernorth and U.S. Medical segments.
The Company uses "pre-tax adjusted income from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes they best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability. We define pre-tax adjusted income from operations as income before taxes excluding net realized investment results, amortization of acquired intangible assets and special items. Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results.
The Company does not report total assets by segment because this is not a metric used to allocate resources or evaluate segment performance.
The Company defines adjusted revenues as total revenues excluding the following adjustments: 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. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.
The following tables present the special items recorded by the Company for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended Nine Months Ended
(In millions) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s) After-tax Before-tax After-tax Before-tax After-tax Before-tax After-tax Before-tax
Debt extinguishment costs $ —  $ —  $ —  $ —  $ 110  $ 141  $ 151  $ 199 
Integration and transaction-related (benefits) costs
 (Selling, general and administrative expenses) 		(35) 13  83  112  1  58  256  339 
(Benefits) charges associated with litigation matters
 (Selling, general and administrative expenses) 		—  —  —  —  (21) (27) 19  25 
Charge for organizational efficiency plan
 (Selling, general and administrative expenses) 		—  —  —  —  —  —  24  31 
Risk corridors recovery
 (Selling, general and administrative expenses) 		—  —  (76) (101) —  —  (76) (101)
Contractual adjustment for a former client
 (Pharmacy revenues) 		—  —  (89) (117) —  —  (155) (204)
Total impact from special items $ (35) $ 13  $ (82) $ (106) $ 90  $ 172  $ 219  $ 289 

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

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(In millions)
Evernorth
U.S. Medical
International Markets
Other Operations
Corporate and Eliminations
Total
Nine months ended September 30, 2021
Revenues from external customers $ 93,640  $ 28,879  $ 4,526  $ 175  $ 1  $ 127,221 
Inter-segment revenues 3,174  1,692  —  —  (4,866)
Net investment income 12  744  180  233  —  1,169 
Total revenues 96,826  31,315  4,706  408  (4,865) 128,390 
Net realized investment results from certain equity method investments
—  —  12  —  —  12 
Adjusted revenues $ 96,826  $ 31,315  $ 4,718  $ 408  $ (4,865) $ 128,402 
Income (loss) before taxes $ 2,752  $ 3,144  $ 685  $ 67  $ (1,178) $ 5,470 
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (21) —  (18) —  —  (39)
Net realized investment (gains) losses (1)
4  (172) 49  3  —  (116)
Amortization of acquired intangible assets 1,449  20  30  —  —  1,499 
Special items
Debt extinguishment costs —  —  —  —  141  141 
Integration and transaction-related (benefits) costs —  —  —  —  58  58 
(Benefits) charges associated with litigation matters —  —  —  —  (27) (27)
Pre-tax adjusted income (loss) from operations $ 4,184  $ 2,992  $ 746  $ 70  $ (1,006) $ 6,986 
(In millions)
Evernorth
U.S. Medical
International Markets
Other Operations
Corporate and Eliminations
Total
Nine months ended September 30, 2020
Revenues from external customers
$ 82,986  $ 26,999  $ 4,325  $ 3,506  $ —  $ 117,816 
Inter-segment revenues 2,785  1,448  —  17  (4,250)
Net investment income 30  279  104  458  2  873 
Total revenues 85,801  28,726  4,429  3,981  (4,248) 118,689 
Net realized investment results from certain equity method investments —  —  (87) —  —  (87)
Special item related to contractual adjustment for a former client (204) —  —  —  —  (204)
Adjusted revenues $ 85,597  $ 28,726  $ 4,342  $ 3,981  $ (4,248) $ 118,398 
Income (loss) before taxes $ 2,551  $ 3,529  $ 877  $ 298  $ (1,765) $ 5,490 
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) attributable to noncontrolling interests (12) —  (15) —  —  (27)
Net realized investment (gains) losses (1)
—  28  (75) (22) —  (69)
Amortization of acquired intangible assets 1,439  23  22  3  —  1,487 
Special items
Debt extinguishment costs —  —  —  —  199  199 
Integration and transaction-related (benefits) costs —  —  —  —  339  339 
(Benefits) charges associated with litigation matters —  —  —  —  25  25 
Charge for organizational efficiency plan —  —  —  —  31  31 
Risk corridors recovery —  (101) —  —  —  (101)
Contractual adjustment for a former client (204) —  —  —  —  (204)
Pre-tax adjusted income (loss) from operations $ 3,774  $ 3,479  $ 809  $ 279  $ (1,171) $ 7,170 
(1)Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.
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Revenue from external customers includes Pharmacy revenues, Premiums and Fees and other revenues. The following table presents these revenues by product, premium and service type for the three and nine months ended September 30:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Products (Pharmacy revenues) (ASC 606)
Network revenues $ 15,797  $ 13,968  $ 45,390  $ 39,200 
Home delivery and specialty revenues 13,515  12,422  38,987  36,319 
Other 1,701  1,412  4,708  3,945 
Total pharmacy revenues 31,013  27,802  89,085  79,464 
Insurance premiums (ASC 944)
U.S. Medical premiums
U.S. Commercial
Health Insurance 3,591  3,397  10,692  9,948 
Stop loss 1,225  1,146  3,613  3,459 
Other 320  281  938  853 
U.S. Government
Medicare Advantage 2,079  1,895  6,287  5,680 
Medicare Part D 315  360  1,175  1,242 
Other 1,241  1,117  3,606  3,246 
Total U.S. Medical premiums
8,771  8,196  26,311  24,428 
International Markets premiums
1,446  1,360  4,338  4,079 
Domestic disability, life and accident premiums —  1,106  —  3,346 
Other premiums 58  20  163  75 
Total premiums 10,275  10,682  30,812  31,928 
Services (ASC 606)
Fees 2,513  2,120  7,185  6,253 
Other external revenues 19  54  139  171 
Total services 2,532  2,174  7,324  6,424 
Total revenues from external customers $ 43,820  $ 40,658  $ 127,221  $ 117,816 

Evernorth may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive compensation if we fail to meet the guarantees. Actual performance is compared to the contractual guarantee for each measure throughout the period and the Company defers revenue for any estimated payouts within Accrued expenses and other liabilities (current). These estimates are adjusted at the end of the guarantee period. The performance guarantee liability was $1.0 billion as of September 30, 2021 and $1.1 billion as of December 31, 2020.
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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 September 30, 2021 compared with December 31, 2020 and our results of operations for the three and nine months ended September 30, 2021, compared with the same periods last year and is intended to help you understand the ongoing trends in our business. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2020 ("Form 10-K"). In particular, we encourage you to refer to the “Risk Factors” contained in Part I, Item 1A of the 2020 Form 10-K.

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 2 to the Consolidated Financial Statements in our 2020 Form 10-K for additional information regarding the Company's significant accounting policies and see Note 2 to the Consolidated Financial Statements in this Form 10-Q for updates to those policies resulting from adopting new accounting guidance, if any. The preparation of interim consolidated financial statements necessarily relies heavily on estimates. This and certain other factors call for caution in estimating full-year results based on interim results of operations. In some of our financial tables in this MD&A, we present either percentage changes or “N/M” when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points (“bps”).
In this MD&A, our consolidated measures “adjusted income from operations,” earnings per share on that same basis and “adjusted revenues” are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of “shareholders’ net income,” “earnings per share” and “total revenues.” We also use pre-tax adjusted income from operations and adjusted revenues to measure the results of our segments.
The Company uses "pre-tax adjusted income from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes they best reflect the underlying results of business operations and permit analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as shareholders’ net income (or income before taxes for the segment metric) excluding net realized investment results, amortization of acquired intangible assets and special items. Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders’ net income. See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to shareholders’ net income.
The Company defines adjusted revenues as total revenues excluding the following adjustments: 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. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a
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substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a reconciliation of consolidated adjusted revenues to total revenues.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna’s current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning future financial or operating performance, including our ability to deliver affordable, personalized and innovative solutions for our customers and clients, including in light of the challenges presented by the COVID-19 pandemic; future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; strategic transactions, including the sale of our international life, accident and supplemental benefits business; and other statements regarding Cigna’s future beliefs, expectations, plans, intentions, liquidity, cash flows, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.
Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our strategic and operational initiatives; our ability to adapt to changes in an evolving and rapidly changing industry; the scale, scope and duration of the COVID-19 pandemic and its potential impact on our business, operating results, cash flows or financial condition; our ability to compete effectively, differentiate our products and services from those of our competitors and maintain or increase market share; price competition and other pressures that could compress our margins or result in premiums that are insufficient to cover the cost of services delivered to our customers; the potential for actual claims to exceed our estimates related to expected medical claims; our ability to develop and maintain satisfactory relationships with physicians, hospitals, other health service providers and with producers and consultants; our ability to maintain relationships with one or more key pharmaceutical manufacturers or if payments made or discounts provided decline; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug pricing or industry pricing benchmarks; political, legal, operational, regulatory, economic and other risks that could affect our multinational operations; risks related to strategic transactions and realization of the expected benefits of such transactions, including with respect to the sale of our international life, accident and supplemental benefits business, as well as integration difficulties or underperformance relative to expectations; dependence on success of relationships with third parties; risk of significant disruption within our operations or among key suppliers or third parties; our ability to invest in and properly maintain our information technology and other business systems; our ability to prevent or contain effects of a potential cyberattack or other privacy or data security incident; potential liability in connection with managing medical practices and operating pharmacies, onsite clinics and other types of medical facilities; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; uncertainties surrounding participation in government-sponsored programs such as Medicare; the outcome of litigation, regulatory audits, investigations; compliance with applicable privacy, security and data laws, regulations and standards; potential failure of our prevention, detection and control systems; unfavorable economic and market conditions, stock market or interest rate declines, risks related to a downgrade in financial strength ratings of our insurance subsidiaries; the impact of our significant indebtedness and the potential for further indebtedness in the future; unfavorable industry, economic or political conditions; credit risk related to our reinsurers; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors of our 2020 Form 10-K, Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2020 Form 10-K, this MD&A and as described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).
You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.
EXECUTIVE OVERVIEW
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 by making health care simple, affordable and predictable. Our subsidiaries offer a differentiated set of pharmacy, medical, dental and related products and services. For further information on our business and strategy, see Item 1, "Business" in our 2020 Form 10-K.
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Financial Highlights
See Note 1 to the Consolidated Financial Statements for a description of our segments. The commentary provided below describes our results for the three and nine months ended September 30, 2021 compared with the same periods in 2020. Unless specified otherwise, commentary applies to both the three and nine month periods.
Summarized below are certain key measures of our performance by segment for the three and nine months ended September 30, 2021 and 2020:
Financial highlights by segment
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in millions, except per share amounts) 2021 2020 % Change 2021 2020 % Change
Revenues
Adjusted revenues by segment
Evernorth $ 33,614  $ 29,827  13  % $ 96,826  $ 85,597  13  %
U.S. Medical 10,497  9,629  9  31,315  28,726  9 
International Markets 1,588  1,440  10  4,718  4,342  9 
Other Operations 140  1,314  (89) 408  3,981  (90)
Corporate, net of eliminations (1,529) (1,409) (9) (4,865) (4,248) (15)
Adjusted revenues 44,310  40,801  9  128,402  118,398  8 
Net realized investment results from certain equity method investments (22) 37  N/M (12) 87  N/M
Special items —  117  N/M —  204  N/M
Total revenues $ 44,288  $ 40,955  8  % $ 128,390  $ 118,689  8  %
Shareholders’ net income $ 1,621  $ 1,388  17  % $ 4,249  $ 4,323  (2) %
Adjusted income from operations $ 1,936  $ 1,618  20  % $ 5,408  $ 5,528  (2) %
Earnings per share (diluted)
Shareholders’ net income $ 4.80  $ 3.78  27  % $ 12.32  $ 11.66  6  %
Adjusted income from operations $ 5.73  $ 4.41  30  % $ 15.69  $ 14.91  5  %
Pre-tax adjusted income (loss) from operations by segment
Evernorth $ 1,548  $ 1,443  7  % $ 4,184  $ 3,774  11  %
U.S. Medical 988  757  31  2,992  3,479  (14)
International Markets 250  208  20  746  809  (8)
Other Operations 33  70  (53) 70  279  (75)
Corporate, net of eliminations (308) (366) 16  (1,006) (1,171) 14 
Consolidated pre-tax adjusted income from operations 2,511  2,112  19  6,986  7,170  (3)
Income attributable to noncontrolling interests 16  10  60  39  27  44 
Net realized investment gains (losses) (1)
46  69  (33) 116  69  68 
Amortization of acquired intangible assets (501) (493) (2) (1,499) (1,487) (1)
Special items (13) 106  N/M (172) (289) 40 
Income before income taxes $ 2,059  $ 1,804  14  % $ 5,470  $ 5,490  —  %
(1)Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.

For further analysis and explanation of each segment’s results, see the “Segment Reporting” section of this MD&A.
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Consolidated Results of Operations (GAAP basis)
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(Dollars in millions) 2021 2020 % Change 2021 2020 % Change
Pharmacy revenues $ 31,013  $ 27,802  12  % $ 89,085  $ 79,464  12  %
Premiums 10,275  10,682  (4) 30,812  31,928  (3)
Fees and other revenues 2,532  2,174  16  7,324  6,424  14 
Net investment income 468  297  58  1,169  873  34 
Total revenues 44,288  40,955  8  128,390  118,689  8 
Pharmacy and other service costs 30,070  26,624  13  86,306  76,425  13 
Medical costs and other benefit expenses 8,330  8,429  (1) 24,819  23,863  4 
Selling, general and administrative expenses 3,093  3,301  (6) 9,368  10,106  (7)
Amortization of acquired intangible assets 501  493  2  1,499  1,487  1 
Total benefits and expenses 41,994  38,847  8  121,992  111,881  9 
Income from operations 2,294  2,108  9  6,398  6,808  (6)
Interest expense and other (303) (336) 10  (915) (1,101) 17 
Debt extinguishment costs —  —  N/M (141) (199) 29 
Net realized investment gains (losses) 68  32  113  128  (18) N/M
Income before income taxes 2,059  1,804  14  5,470  5,490  — 
Total income taxes 424  406  4  1,188  1,143  4 
Net income 1,635  1,398  17  4,282  4,347  (1)
Less: Net income attributable to noncontrolling interests 14  10  40  33  24  38 
Shareholders' net income $ 1,621  $ 1,388  17  % $ 4,249  $ 4,323  (2) %
Consolidated effective tax rate 20.6  % 22.5  % (190) bps 21.7  % 20.8  % 90  bps
Medical customers (in thousands)
U.S. Medical 15,305  15,314  —  %
International Markets 1,736  1,668  4 
Total 17,041  16,982  —  %
Reconciliation of Shareholders’ Net Income (GAAP) to Adjusted Income from Operations
Dollars in Millions Diluted Earnings Per Share
Three Months Ended
September 30, 		Nine Months Ended
September 30, 		Three Months Ended
September 30, 		Nine Months Ended
September 30,
2021 2020 2021 2020 2021 2020 2021 2020
Shareholders’ net income $ 1,621  $ 1,388  $ 4,249  $ 4,323  $ 4.80  $ 3.78  $ 12.32  $ 11.66 
After-tax adjustments required to reconcile to adjusted income from operations
Net realized investment (gains) losses (1)
(42) (64) (99) (75) (0.12) (0.17) (0.29) (0.20)
Amortization of acquired intangible assets 392  376  1,168  1,061  1.15  1.02  3.40  2.86 
Special items
Debt extinguishment costs —  —  110  151  —  —  0.32  0.41 
Integration and transaction-related (benefits) costs (35) 83  1  256  (0.10) 0.23  —  0.69 
(Benefits) charges associated with litigation matters —  —  (21) 19  —  —  (0.06) 0.05 
Charge for organizational efficiency plan —  —  —  24  —  —  —  0.06 
Risk corridors recovery —  (76) —  (76) —  (0.21) —  (0.20)
Contractual adjustment for a former client —  (89) —  (155) —  (0.24) —  (0.42)
Total special items (35) (82) 90  219  (0.10) (0.22) 0.26  0.59 
Adjusted income from operations $ 1,936  $ 1,618  $ 5,408  $ 5,528  $ 5.73  $ 4.41  $ 15.69  $ 14.91 
(1)Includes the Company's share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting.
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COVID-19 Update
As Cigna closely monitors the evolving dynamics of the COVID-19 pandemic, the Company’s commitment to the health and safety of its employees, customers and clients remains our primary focus. Cigna firmly believes COVID-19 vaccinations help control the spread of the virus, limit the severity of the disease and save lives. The Company continues its work to increase vaccinations by enabling, educating and encouraging vaccine acceptance across all eligible populations. Cigna continues to provide access to care and supportive resources to help everyone it serves knowledgeably navigate the pandemic and take care of their physical and mental health during this time.
For the third quarter of 2021, COVID-19 impacts are most notable in our U.S. Medical segment as net unfavorable COVID-19 related impacts increased as compared with the same period in 2020. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines as well as lower risk adjustment revenues in our Medicare Advantage business. For the nine months ended September 30, 2021 compared with the same period in 2020 the net unfavorable impacts reflect increased direct costs of COVID-19 testing, treatment and vaccines, the significant deferral of care by our customers in 2020, lower risk adjustment revenues in our Medicare Advantage business and increased disenrollment resulting from the economic effects of the pandemic. These impacts were partially offset by the absence of the premium relief programs implemented in the second quarter of 2020.
We continue to execute our business continuity plans over our operations such as optimizing purchasing volume across the pharmaceutical supply chain in order to mitigate risk of disruption with prescription drug supply due to ongoing global supply disruptions.
The situation surrounding COVID-19 remains fluid with continued uncertainty and a wide range of potential outcomes. We continue to actively manage our response and assess impacts to our financial position and operating results, as well as mitigate adverse developments in our business. There continues to be uncertainty surrounding the pace, duration and extent of the COVID-19 pandemic and its related impacts — including the vaccination efforts and new COVID-19 variants — on our results for the remainder of 2021 and beyond. We believe that such financial results may continue to be impacted by, among other things, vaccine related costs, higher medical costs to treat those affected by the virus, lower customer volumes due to a disrupted employment market, lower risk adjustment revenue due to disrupted care impeding appropriate documentation of customer risk profiles in our Medicare Advantage business, the pace at which costs return as well as the severity of costs for those who had previously deferred care, the potential for future deferral of care, or volatility in the economic markets.
For further information regarding the potential impact of COVID-19 on the Company, see “Risk Factors” contained in Part I, Item 1A of our 2020 Form 10-K.
Commentary: Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
The commentary presented below, and in the segment discussions that follow, compare results for the three and nine months ended September 30, 2021 with results for the three and nine months ended September 30, 2020. Unless otherwise specified, commentary applies to both the three and nine month periods.
Shareholders’ net income increased for the three months ended September 30, 2021 compared with the same period last year, primarily driven by higher adjusted income from operations (see below). For the nine months ended September 30, 2021, shareholders' net income decreased slightly compared with the same period last year, reflecting a decline in adjusted income from operations (see below). For the nine months ended September 30, 2021 shareholders' net income increased on a per-share basis compared with the same period last year due to the favorable effect of the share repurchase program.
Adjusted income from operations increased for the three months ended September 30, 2021 compared with the same period last year, primarily resulting from higher earnings across our reporting segments, partially offset by the absence of earnings from the sold Group Disability and Life business. The increase in earnings in the Evernorth segment was primarily attributable to effective management of supply chain and business growth; in the U.S. Medical and International segments, earnings growth largely reflected significantly higher net investment income (see net investment income discussion below). For the nine months ended September 30, 2021, adjusted income from operations declined compared with the same period last year, primarily due to lower earnings in U.S. Medical reflecting the unfavorable impacts of COVID-19 and the absence of earnings from the sold Group Disability and Life business. These unfavorable effects were partially offset by increased earnings in the Evernorth segment. For the nine months ended September 30, 2021, adjusted income from operations increased on a per-share basis compared with the same period last year due to the favorable effect of the share repurchase program.
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Medical customers were flat, reflecting growth in our Select, Individual, International Markets and Medicare Advantage businesses, offset by a lower customer base in our National Accounts and Middle Markets segments including disenrollment resulting from the economic impacts of the COVID-19 pandemic.
Pharmacy revenues increased, reflecting inflation on branded drugs and higher claim volume, primarily due to our collaboration with Prime Therapeutics. See the "Evernorth segment" section of this MD&A for further discussion of Pharmacy revenues.
Premiums were lower, reflecting the sale of the Group Disability and Life business. This effect was partially offset by an increase in U.S. Medical premiums resulting from increased customers in our insured businesses, higher premium rates due to anticipated underlying medical cost trend and, for the nine months ended September 30,2021 the absence of premium relief programs implemented in the second quarter of 2020 in response to deferred care due to the COVID-19 pandemic.
Fees and other revenues increased, primarily driven by growth in Evernorth's pharmacy services business.
Net investment income increased due to strong returns on our securities limited partnership investments, partially offset by lower average assets due to the sale of the Group Disability and Life business. See the "Investment Assets" section of this MD&A for further discussion.
Pharmacy and other service costs increased, reflecting inflation on branded drugs and higher claim volume, primarily due to our collaboration with Prime Therapeutics.
Medical costs and other benefit expenses decreased slightly for the three months ended September 30, 2021 compared with the same period last year, reflecting the sale of the Group Disability and Life business, largely offset by an increase in U.S. Medical due to higher costs of COVID-19 treatment, testing and vaccines and customer growth in our insured businesses. For the nine months ended September 30, 2021, the increase compared with the same period last year was due to higher medical costs in U.S. Medical for the reasons cited above and a significant reduction in deferred care in 2021 as compared to 2020. Most care was deferred in the second quarter of 2020, with claims returning to more normal levels beginning in the third quarter of 2020. These unfavorable effects were partially offset by the sale of the Group Disability and Life business.
Selling, general and administrative expenses decreased, primarily resulting from the sale of the Group Disability and Life business and the elimination of the health insurance industry tax. These favorable effects were partially offset by expense growth in Evernorth and U.S. Medical reflecting business growth.
Interest expense and other decreased due to lower levels of average outstanding debt resulting from debt repayments.
Debt extinguishment costs were lower for the nine months ended September 30, 2021 compared with the same period last year because the debt repaid in 2021 had lower interest rates than the debt repaid in 2020.
Realized investment results significantly improved, primarily due to favorable market value adjustments on equity securities in 2021 compared with 2020 and lower credit loss reserves on debt securities.
Effective tax rate. The decrease for the three months ended September 30, 2021 compared with the same period last year primarily reflects the repeal of the nondeductible health insurance industry tax in 2021. For the nine months ended September 30, 2021, the effective tax rate was higher than the same period last year, driven by recognition of certain incremental federal and state tax benefits in the first quarter of 2020, partially offset by the repeal of the nondeductible health insurance industry tax in 2021.

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Developments
Medicare Star Quality Ratings (“Star Ratings”)

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

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

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

Sale of Group Disability and Life Business
As discussed in Note 4 to the Consolidated Financial Statements, Cigna sold its 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.

Regulation
The "Business - Regulation" section of our 2020 Form 10-K provides a detailed description of The Patient Protection and Affordable Care Act (“ACA”) provisions and other legislative initiatives that impact our 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 Patient Protection and Affordable Care Act ("ACA")
ACA Litigation: As described in the “Business - Regulation” section of our 2020 Form 10-K, a federal district court ruled that the “individual mandate” in the ACA is unconstitutional and that the entire law must be struck down. On appeal, the Court of Appeals for the Fifth Circuit agreed that the “individual mandate” is unconstitutional but ordered the district court to reexamine whether the other provisions of the ACA can remain in effect, thereby leaving in doubt whether the entire ACA is unconstitutional until there is a final judicial determination on appeal. The California-led states and the U.S. House of Representatives filed petitions seeking to appeal the Fifth Circuit's ruling to the U.S. Supreme Court. The case was argued before the Supreme Court on November 10, 2020. On June 17, 2021, the Supreme Court issued its decision, upholding the ACA in its entirety. There are no changes to our business as a result of the decision.
Cost-Sharing Reduction Subsidies: The ACA provides for cost-sharing reductions that offset the amount that qualifying customers pay for deductibles, copays and coinsurance. The federal government stopped funding insurers for the cost-sharing reduction ("CSR”) subsidies in 2017. Certain insurers have sued the federal government for failure to pay cost-sharing reduction subsidies. In the first set of consolidated appeals, the Court of Appeals for the Federal Circuit issued a decision on August 14, 2020, finding that (i) the CSR reimbursement provision of the ACA imposes an obligation on the government to pay, but (ii) the insurers' damages must be reduced by the amount of additional premium tax credit payments that each insurer received as a result of the government’s termination of CSR payments. On February 19, 2021 two insurers filed a petition seeking Supreme Court review. On June 21, 2021, the Supreme Court declined the insurers’ petitions, which means the decision from the Court of Appeals for the Federal Circuit stands and will not
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be modified further. As described in Note 15 to the Consolidated Financial Statements, we filed a lawsuit in May 2020 against the federal government seeking payment of these subsidies. Our case remains pending. Our premium rates for the 2018, 2019, 2020 and 2021 plan years reflected a lack of government funding for cost-sharing reduction subsidies.
Corporate Tax Reform. Recent proposals related to corporate tax reform propose raising corporate taxes, among other things. Some proposed reforms could have a material impact on our future results of operations. We will continue to monitor developments.
Medicare Part D Rebate Rule. As disclosed in the “Regulation” section of our 2020 Form 10-K, the United States Department of Health and Human Services (“HHS”) and the HHS Office of Inspector General (“HHS-OIG”) released a final rule in November 2020 which eliminated an anti-kickback regulatory safe harbor protection for price concessions, including rebates, that are offered by pharmaceutical manufacturers to plan sponsors or pharmacy benefit managers under the Medicare Part D program and created two new safe harbors. The two new safe harbors cover (i) price reductions by manufacturers to plan sponsors under Medicare Part D and Medicaid managed care organizations that are reflected at the time of dispense and (ii) fixed-fee service arrangements between manufacturers and pharmacy benefit managers. HHS previously delayed the elimination of the aforementioned regulatory safe harbor to January 1, 2023 and, in March 2021, HHS-OIG delayed the effective date for the two new safe harbors to January 1, 2023.
Transparency in Coverage. As previously disclosed in our 2020 Form 10-K, in October 2020, the Departments of Health and Human Services, Labor and the Treasury issued a final rule that requires most group health plans and health insurance issuers in the individual and group markets to disclose price and cost-sharing information for all items and services to participants and enrollees (the “Rule”). On August 20, 2021, the agencies jointly released guidance regarding the implementation of the Rule. Importantly, the guidance announced that the agencies will (i) indefinitely defer enforcement of the Rule’s requirement that plans and issuers publish machine-readable files relating to prescription drug pricing pending further rulemaking and (ii) defer enforcement of the Rule’s requirement to publish the remaining machine-readable files until July 1, 2022.
Risk Adjustment. As discussed in the “Regulation” and “Risk Factors” sections of our 2020 Form 10-K, our MA business is subject to reviews, including risk adjustment data validation (“RADV”) audits by CMS and the Office of the Inspector General (“OIG”). We expect that CMS, OIG and other federal agencies will continue to closely scrutinize components of the Medicare program.
The “Regulation” section of our 2020 Form 10-K also discusses a proposed rule issued by CMS in 2018 for RADV audits of contract year 2011 and all subsequent years that included, among other things, extrapolation of the error rate related to RADV audit findings without applying the adjustment for underlying fee-for-service data errors as currently contemplated by CMS’ RADV audit methodology. RADV audits for our contract years 2011 through 2015 are currently in process. CMS has announced its intent to use third-party auditors to audit all MA contracts by either a comprehensive or a targeted RADV review for each contract year. If the proposed rule is adopted in its current form, it could result in some combination of degraded plan benefits, higher monthly premiums and reduced choice for the population served by all MA insurers. The Company, along with other MA organizations and additional interested parties, submitted comments to CMS on the proposed rule as part of the notice-and-comment rulemaking process. The comment period concluded on August 28, 2019 and CMS issued guidance on October 20, 2021 extending the timeline to finalize the proposed rule until November 2022. If CMS adopts the rule as proposed, there could be a material impact on the Company’s future results of operations, though we expect the rule would be subject to legal challenges. In addition, the Company is subject to OIG RADV audits that are in process.
Also, as described in Note 15 to the Consolidated Financial Statements, the U.S. Department of Justice is currently conducting an industry-wide investigation of risk adjustment data submission practices and business processes, which in the case of certain other MA organizations has resulted in litigation.


43

LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We maintain liquidity at two levels: the subsidiary level and the parent company level.
Cash 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.
Cash 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 certain foreign subsidiaries are subject to regulatory restrictions. See Note 19 to the Consolidated Financial Statements in our 2020 Form 10-K 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 nine months ended September 30 were as follows:
Nine Months Ended September 30,
(In millions) 2021 2020
Operating activities $ 2,916  $ 6,056 
Investing activities $ (3,734) $ (1,444)
Financing activities $ (5,841) $ (3,812)

The following discussion explains variances in the various categories of cash flows for the nine months ended September 30, 2021 compared with the same period in 2020.
Operating activities
Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs, premiums, fees, investment income, taxes, benefit costs and other expenses.
Cash flows from operating activities decreased, driven by increases in accounts receivable due to higher pharmacy claim volume and business growth, the timing of accounts payable and accrued liabilities, and approximately $800 million of tax payments related to the gain on sale of the Group Disability and Life business, partially offset by absence of the health insurance industry tax payment.
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Investing and Financing activities
Cash flows used in investing activities increased, primarily due to the acquisition of MDLIVE and lower investment sale activity.
Cash used in financing activities increased, primarily due to higher stock repurchases including shares purchased pursuant to the ASR agreements (described below) and an increase in dividends paid, partially offset by lower debt repayments.
We maintain a share repurchase program authorized by our Board of Directors, under which we may repurchase shares of our common stock from time to time. The timing and actual number of shares repurchased will depend on a variety of factors including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through open market purchases 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.
On August 23, 2021, as part of our existing share repurchase program, we entered into separate accelerated share repurchase agreements (“ASR agreements”) with Morgan Stanley & Co. LLC and JP Morgan Chase Bank, N.A. (collectively, the “Counterparties”) to repurchase $2.0 billion of common stock in aggregate. On August 24, 2021, in accordance with the ASR agreements we remitted $2.0 billion to the Counterparties and received an initial delivery of 7.7 million shares of our common stock. The final number of shares to be received under the ASR agreements will be determined based on the daily volume-weighted average share price of our common stock over the term of the agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. We expect final settlement under the ASR agreements to occur in the fourth quarter of 2021. At final settlement, we may be entitled to receive additional shares of our common stock from the Counterparties or we may be required to make a payment. If we are obligated to make a payment, we may elect to satisfy such obligation in cash or shares of our common stock.
For the nine months ended September 30, 2021, we repurchased 26.5 million shares for approximately $6.3 billion including the $2.0 billion paid under the ASR agreements. Share repurchase authority was $6.6 billion as of November 3, 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 the parent company. Dividends from U.S. regulated subsidiaries were $2.1 billion and $1.6 billion for the nine months ended September 30, 2021 and 2020, respectively. Non-regulated subsidiaries also generate significant cash flow from operating activities, which is typically available immediately to the parent company for general corporate purposes.
We prioritize our use of capital resources to:
•Invest in capital expenditures, primarily related to technology to support innovative solutions for our customers, provide 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 September 30, 2021, our debt-to-capitalization ratio was 42.0%, an increase from 39.5% at December 31, 2020, reflecting an increase in short term debt levels in conjunction with the execution of the ASR agreements.
Sale of life, accident and supplemental benefits businesses in seven countries. Cigna entered into a definitive agreement in October 2021 to sell its life, accident and supplemental benefits businesses in seven countries to Chubb INA Holdings, Inc. ("Chubb") for $5.75 billion cash. Subject to applicable regulatory approvals and customary closing conditions, we expect to complete the sale of our life, accident and supplemental benefits businesses in Hong Kong, Indonesia, New Zealand, South Korea, Taiwan, Thailand and our interest in a joint venture in Turkey in 2022. Cigna estimates it will receive approximately $5.4 billion of net after-tax proceeds from this transaction and expects to utilize the after-tax proceeds from the transaction primarily for share repurchases.
MDLIVE Acquisition. In April 2021, Cigna completed its acquisition of MDLIVE, Inc. We funded this acquisition with cash on hand and commercial paper borrowings.
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Group Disability and Life Sale. In connection with the sale of this business that closed on December 31, 2020, we deployed approximately $3.0 billion to debt repayment by: (i) repaying in full our $1.4 billion 364-Day Term Loan Credit Agreement entered into on April 1, 2020, on December 31, 2020; (ii) redeeming in 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 balances of our outstanding commercial paper in January 2021.
Commercial Paper Program. Cigna maintains a commercial paper program and may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time not to exceed an aggregate amount of $5.0 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes.
Revolving Credit Agreements. Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above.
Cigna's revolving credit agreements include a $3.0 billion five-year revolving credit and letter of credit agreement that expires in April 2026; a $1.0 billion three-year revolving credit agreement that expires in April 2024; and a $1.0 billion 364-day revolving credit agreement that will expire in April 2022.
See Note 6 to the Consolidated Financial Statements for further information on 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 September 30, 2021, we had $5.0 billion of undrawn committed capacity under our revolving credit agreements (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $2.3 billion of remaining capacity under our commercial paper program and $3.9 billion in cash and short-term investments, approximately $810 million of which was held by the parent company or certain non-regulated 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 6 to the Consolidated Financial Statements.
For the first nine months of 2021, Cigna declared and paid quarterly cash dividends of $1.00 per share of Cigna common stock. On October 27, 2021 the Board of Directors declared a quarterly cash dividend of $1.00 per share of Cigna common stock to be paid on December 22, 2021 to shareholders of record on December 7, 2021. Cigna currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of Cigna and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board of Directors may deem relevant.
Risks to our 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 our 2020 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 $875 million from its subsidiaries without further approvals as of September 30, 2021.
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Guarantees and Contractual Obligations
We are contingently liable for various contractual obligations entered into in the ordinary course of business. See Note 15 to the Consolidated Financial Statements for discussion of various guarantees.
We have updated long-term debt obligations and purchase obligations as of September 30, 2021 which were previously provided in our 2020 Form 10-K. Investment commitments are described in Note 9 to the Consolidated Financial Statements. There have been no material changes to other information presented in our table of guarantees and contractual obligations set forth in our 2020 Form 10-K.
(In millions, on an undiscounted basis) Total 2021 2022 to 2023 2024 to 2025 Thereafter
On-Balance Sheet
Long-term debt (1)
$ 48,499  $ 319  $ 5,876  $ 6,735  $ 35,569 
Off-Balance Sheet
Purchase Obligations $ 3,428  $ 918  $ 1,628  $ 563  $ 319 
(1)Amounts include scheduled interest payments, current maturities of long-term debt and finance leases.

CRITICAL ACCOUNTING ESTIMATES
The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements. Management considers an accounting estimate to be critical if:
•it requires assumptions to be made that were uncertain at the time the estimate was made; and
•changes in the estimate or different estimates that could have been selected could have a material effect on our consolidated results of operations or financial condition.
Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosures presented in the 2020 Form 10-K. We regularly evaluate items that may impact critical accounting estimates.
Our most critical accounting estimates, as well as the effect of hypothetical changes in material assumptions used to develop each estimate, are described in the 2020 Form 10-K. As of September 30, 2021, there were no significant changes to the critical accounting estimates from what was reported in our 2020 Form 10-K.
Goodwill and Other Intangible Assets
Our annual evaluations of goodwill and other intangible assets for impairments were completed during the third quarter of 2021. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses or market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins.
Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations and in certain situations, could have a material adverse effect on liquidity and our financial condition.

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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 and special items. Ratios presented in this segment discussion exclude the same items as pre-tax adjusted income from operations. See Note 16 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 16 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.
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 our 2020 Form 10-K for additional information on revenue and cost recognition policies for this segment.
•As our clients’ claim volumes increase or decrease, our resulting revenues and cost of revenues correspondingly increase or decrease. Our gross profit could also increase or decrease as a result of changes in purchasing discounts.
•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. Types of drugs can have an impact on our pharmacy revenues, pharmacy and other service costs and gross profit, including amounts payable under certain financial and performance guarantees with our clients. In addition to the types of drugs, the mix of generic claims (i.e., generic fill rate) also impacts our gross profit. Furthermore, our gross profit differs among network, home delivery and specialty distribution methods and can impact our profitability.
•Our client contract pricing is impacted by our ongoing ability to negotiate supply chain contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates. 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.
48

Results of Operations
Financial Summary Three Months Ended
September 30, 		Change Favorable
(Unfavorable) 		Nine Months Ended
September 30, 		Change Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Total revenues $ 33,614  $ 29,944  12 % $ 96,826  $ 85,801  13  %
Less: Contractual adjustment for a former client —  (117) N/M —  (204) N/M
Adjusted revenues(1)
$ 33,614  $ 29,827  13 % $ 96,826  $ 85,597  13  %
Gross profit $ 2,161  $ 2,107  3 % $ 6,079  $ 5,589  9  %
Adjusted gross profit(1)
$ 2,161  $ 1,990  9 % $ 6,079  $ 5,385  13  %
Pre-tax adjusted income from operations $ 1,548  $ 1,443  7 % $ 4,184  $ 3,774  11  %
Pre-tax adjusted margin 4.6  % 4.8  % (20) bps 4.3  % 4.4  % (10) bps
Three Months Ended September 30, Change Favorable
(Unfavorable) 		Nine Months Ended September 30, Change Favorable
(Unfavorable)
(Dollars and adjusted scripts in millions) 2021 2020 2021 2020
Selected Financial Information(1)
Pharmacy revenue by distribution channel
Adjusted network revenues $ 16,488  $ 14,522  14  % $ 47,792  $ 41,179  16  %
Adjusted home delivery and specialty revenues 13,796  12,699  9  39,911  37,111  8 
Other revenues 1,701  1,412  20  4,708  3,946  19 
Total adjusted pharmacy revenues $ 31,985  $ 28,633  12  % $ 92,411  $ 82,236  12  %
Pharmacy script volume
Adjusted network scripts(2)
340  309  10  % 1,002  890  13  %
Adjusted home delivery and specialty scripts(2)
71  72  (1) 212  215  (1)
Total adjusted scripts(2)
411  381  8  % 1,214  1,105  10  %
Generic fill rate
Network 86.3  % 87.0  % (70) bps 86.3  % 87.9  % (160) bps
Home delivery 85.9  % 85.3  % 60  bps 85.8  % 85.1  % 70  bps
Overall generic fill rate 86.3  % 86.9  % (60) bps 86.3  % 87.6  % (130) bps
(1)Amounts exclude special items.
(2)Non-specialty network scripts filled through 90-day programs and home delivery scripts are multiplied by three. All other network and specialty scripts are counted as one script.
Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
Adjusted network revenues. The increases reflected increased prices, primarily due to inflation on branded drugs and higher claims volume, primarily due to our collaboration with Prime Therapeutics. These increases were partially offset by claims mix, primarily due to an increase in the generic fill rate when excluding the impact of COVID-19 vaccines.
Adjusted home delivery and specialty revenues. The increases reflected increased prices, primarily due to inflation on branded drugs, as well as higher specialty claims volume due in part to our collaboration with Prime Therapeutics. These increases were partially offset by lower home delivery claims volume and claims mix due to an increase in the generic fill rate.
Other revenues. The increases reflected higher volume from our CuraScript Specialty Distribution business.

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

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

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U.S. Medical Segment
U.S. Medical includes Cigna’s U.S. Commercial and U.S. Government businesses that provide comprehensive medical and coordinated solutions to clients and customers to support whole-person health needs. U.S. Commercial products and services include medical, pharmacy, behavioral health, dental, vision, health advocacy programs and other products and services for insured and administrative services only ("ASO") clients. U.S. Government solutions include Medicare Advantage, Medicare Supplement and Medicare Part D 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
Financial Summary Three Months Ended September 30, Change Favorable
(Unfavorable) 		Nine Months Ended September 30, Change Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Adjusted revenues $ 10,497  $ 9,629  9 % $ 31,315  $ 28,726  9  %
Pre-tax adjusted income from operations $ 988  $ 757  31  % $ 2,992  $ 3,479  (14) %
Pre-tax adjusted margin 9.4  % 7.9  % 150  bps 9.6  % 12.1  % (250) bps
Medical care ratio 84.4  % 82.6  % (180) bps 83.9  % 77.2  % (670) bps
Expense ratio 20.1  % 21.8  % 170  bps 20.0  % 22.2  % 220  bps

Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
Adjusted revenues increased for the three months and nine months ended September 30, 2021 compared with the same periods in 2020 reflecting customer growth in our Medicare Advantage and Individual businesses, higher premium rates due to anticipated underlying medical cost trend and higher net investment income. The nine months ended increase also reflects the absence of the premium relief programs for clients implemented in the 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 increased for the three months ended September 30, 2021 compared with the same period in 2020. The increase is due to higher net investment income, increased specialty contributions and the repeal of the health insurance industry tax; partially offset by net unfavorable COVID-19 related impacts. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines as well as lower risk adjustment revenues in our Medicare Advantage business. Pre-tax adjusted income from operations decreased for the nine months ended September 30, 2021 compared with the same period in 2020. The decrease is due to net unfavorable COVID-19 related impacts; partially offset by higher net investment income, increased specialty contributions and the repeal of the health insurance industry tax. The unfavorable COVID-19 related impacts include increased direct costs of COVID-19 testing, treatment and vaccines, the significant deferral of care by our customers in 2020, lower risk adjustment revenues in our Medicare Advantage business and increased disenrollment resulting from the economic effects of the pandemic. These impacts were partially offset by the absence of the premium relief programs implemented in the second quarter of 2020. COVID-19 impacts for the remainder of 2021 and beyond may vary as discussed in the "COVID-19 Update" section of this MD&A.
The medical care ratio increased for the three months and nine months ended September 30, 2021 compared with the same periods in 2020, reflecting COVID-19 related impacts and the repeal of the health insurance industry tax. The unfavorable COVID-19 related impacts primarily reflect higher direct COVID-19 testing, treatment and vaccine costs. The nine months ended September 30, 2021 increase also reflects the impact of the COVID-19 related deferred utilization experienced in the second quarter of 2020; partially offset by the absence of the premium relief programs.
The expense ratio decreased for the three months and nine months ended September 30, 2021 compared with the same periods in 2020, reflecting the repeal of the health insurance industry tax and increased revenue.
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Medical Customers
As of September 30,
(In thousands) 2021 2020 % Change
U.S. Commercial
2,135  2,120  1  %
U.S. Government
1,517  1,413  7  %
Insured 3,652  3,533  3  %
Service 11,653  11,781  (1) %
Total 15,305  15,314  —  %

Our medical customer base was flat at September 30, 2021 compared with the same period in 2020, reflecting a lower customer base in our National Accounts and Middle Markets segments including disenrollment resulting from the economic impacts of the COVID-19 pandemic; partially offset by growth in our Select segment as well as our Individual and Medicare Advantage businesses.
A medical customer is defined as a person meeting any one of the following criteria:
•is covered under a medical insurance policy, managed care arrangement or service agreement issued by us;
•has access to our provider network for covered services under their medical plan; or
•has medical claims that are administered by us.
Unpaid Claims and Claim Expenses
(In millions) As of September 30, 2021 As of December 31, 2020 % Change
Unpaid claims and claim expenses – U.S. Medical
$ 3,846  $ 3,184  21  %

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

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

Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
Adjusted revenues increased primarily due to business growth, higher net investment income, and the absence of COVID-19 related premium relief programs for the three months ended September 30, 2021. For the nine months ended September 30, 2021, adjusted revenues increased primarily due to favorable foreign currency movements, business growth, higher net investment income, and the absence of COVID-19 related premium relief programs.
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Pre-tax adjusted income from operations increased reflecting higher net investment income and lower expense ratios, partially offset by higher loss ratios for the three months ended September 30, 2021. For the nine months ended September 30, 2021, pre-tax adjusted income from operations decreased reflecting higher loss and acquisition ratios, partially offset by higher net investment income, favorable foreign currency movements, lower expense ratios, and business growth. The loss, acquisition and expense ratios for both the three and nine months ended September 30, 2020 reflected the unfavorable impact of COVID-19 related premium relief programs.
The segment’s loss ratio increased reflecting higher claims largely due to the impact of the COVID-19 pandemic, including the absence of the favorable impact of lower medical utilization in 2020 and the direct costs of COVID-19 testing and treatment.
The acquisition cost ratio decreased reflecting lower amortization expenses in Asia and the absence of the unfavorable impact of COVID-19 related premium relief programs for the three months ended September 30, 2021. For the nine months ended September 30, 2021, the acquisition cost ratio increased reflecting the absence of the favorable impact from a refinement to the accounting for acquisition costs, largely offset by lower amortization expenses in Asia.
The expense ratio (excluding acquisition costs) decreased mainly driven by lower spend across markets.
Other Items Related to International Markets Results
South Korea is the single largest geographic market for our International Markets segment. For the nine months ended September 30, 2021, South Korea generated 38% of the segment’s adjusted revenues and 63% of the segment’s pre-tax adjusted income from operations.
Other Operations
Prior to the sale of the Group Disability and Life business on December 31, 2020, Other Operations included 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, for 2021 and 2020, 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 Other Operations is measured using pre-tax adjusted income from operations. Key factors affecting pre-tax adjusted income from operations are:
•premiums;
•net investment income;
•benefit expenses as a percentage of premiums (loss ratio); and
•selling, general and administrative expense as a percentage of revenues excluding net investment income (expense ratio).
Results of Operations
Financial Summary Three Months Ended September 30, Change
Favorable
(Unfavorable) 		Nine Months Ended
September 30, 		Change
Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 2021 2020
Adjusted revenues $ 140  $ 1,314  (89) % $ 408  $ 3,981  (90) %
Pre-tax adjusted income from operations $ 33  $ 70  (53) % $ 70  $ 279  (75) %
Pre-tax adjusted margin 23.6  % 5.3  % 1830  bps 17.2  % 7.0  % 1,020  bps

Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
Adjusted revenues and pre-tax adjusted income from operations decreased due to the sale of the Group Disability and Life business on December 31, 2020. Because the sold business constituted the vast majority of the segment's operations, we experienced a substantial decline in adjusted revenues and adjusted income from operations in this segment in 2021 as compared to 2020.
Corporate
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, severance, certain overhead and project costs and intersegment eliminations
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for products and services sold between segments.
Financial Summary Three Months Ended
September 30, 		Change Favorable (Unfavorable) Nine Months Ended September 30, Change Favorable (Unfavorable)
(In millions) 2021 2020 2021 2020
Pre-tax adjusted (loss) from operations $ (308) $ (366) 16  % $ (1,006) $ (1,171) 14  %

Three and Nine Months Ended September 30, 2021 versus Three and Nine Months Ended September 30, 2020
Pre-tax adjusted loss from operations was lower, reflecting lower interest expense.
INVESTMENT ASSETS
The following table presents our investment asset portfolio excluding separate account assets as of September 30, 2021 and December 31, 2020. Additional information regarding our investment assets is included in Notes 9, 10, 11 and 12 to the Consolidated Financial Statements.
(In millions) September 30,
2021 		December 31, 2020
Debt securities $ 17,857  $ 18,131 
Equity securities 551  501 
Commercial mortgage loans 1,525  1,419 
Policy loans 1,329  1,351 
Other long-term investments 3,429  2,832 
Short-term investments 439  359 
Total $ 25,130  $ 24,593 
Investment Assets related to the international life, accident and supplemental benefits businesses subject to the recently announced divestiture (described in the Developments section of this MD&A) were approximately $4.9 billion as of September 30, 2021.
Debt Securities
Investments in debt securities include publicly-traded 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 10 to the Consolidated Financial Statements. More detailed information about debt securities by type of issuer and maturity dates is included in Note 9 to the Consolidated Financial Statements.
The following table reflects our portfolio of debt securities by type of issuer as of September 30, 2021 and December 31, 2020:
(In millions) September 30,
2021 		December 31,
2020
Federal government and agency $ 382  $ 456 
State and local government 169  167 
Foreign government 2,519  2,511 
Corporate
14,313  14,562 
Mortgage and other asset-backed 474  435 
Total $ 17,857  $ 18,131 
Our debt securities portfolio decreased slightly during the first nine months of 2021 reflecting a decrease in valuations due to increasing yields, offset by net purchase activity.
As of September 30, 2021, $15.3 billion, or 86% of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $2.6 billion were below investment grade. The majority of the bonds that are below investment grade are rated at the higher end of the non-investment grade spectrum. These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.
Investments in debt securities are diversified by issuer, geography and industry. On an aggregate basis, the debt securities portfolio continues to perform according to original investment expectations. However, due to the economic impacts of the COVID-19 pandemic, there are certain issuers, particularly within the aviation, energy and hospitality sectors, that are showing signs of distress, primarily in the form of requests for temporary covenant relief. There were no material unrealized losses in any of these sectors as of the reporting date. We continue to monitor the economic environment and its effect on our portfolio and consider the impact of various
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factors in determining the allowance for credit losses on debt securities, which is discussed in Note 9 to the Consolidated Financial Statements.
Foreign government obligations are concentrated in Asia, primarily South Korea and Taiwan, consistent with our risk management practice and local regulatory requirements of our international business operations. We expect the amount of these foreign government obligations to decrease significantly during 2022 upon the close of our sale of certain International Markets businesses as discussed in the "Developments" section of this MD&A. Debt securities include private placement assets of $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 September 30, 2021, the $1.5 billion commercial mortgage loan portfolio consisted of approximately 50 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 in the property generally ranging between 30 and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key loan metrics, see Note 9 to the Consolidated Financial Statements.
Loans are secured by high quality commercial properties, located in strong institutional markets and are generally made at less than 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.
Our annual in-depth review of our commercial mortgage loan investments is the primary mechanism for monitoring the overall quality rating of the mortgage portfolio. We completed the annual in-depth review in the second quarter of 2021 that included an analysis of each underlying property’s most recent annual financial statements, rent rolls, operating plans, a physical inspection of the property and a review of applicable market reports. The results of this annual review confirmed that the overall credit quality of our portfolio remains strong and was generally in line with the previous year’s results.

COVID-19 has negatively impacted commercial real estate 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 $3.4 billion as of September 30, 2021 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 primarily driven by net additional funding activity and value creation in the underlying funds. These limited partnership entities typically invest in mezzanine debt or equity of privately-held 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 200 separate partnerships and approximately 100 general partners who manage one or more of these partnerships. Also, the underlying investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 4% of our securities and real estate limited partnership portfolio.
Income from our limited partnership investments is generally reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments. Our net investment income increased significantly versus the first nine months of 2020 driven by the strong performance of assets underlying our limited partnership investments. The broad recovery has resulted in strong corporate earnings and higher public and private asset valuations and valuation recovery through the second quarter of 2021 is generally reflected in third quarter results consistent with the financial information reporting lag. We expect volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions.

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture on the equity method of accounting and report our share of the net assets of $0.9 billion in Other assets. Our 50% share of the investment portfolio supporting the joint venture's business is approximately $7.4 billion, primarily invested in Chinese corporate and government debt
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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 September 30, 2021.
Investment Outlook
The general optimism globally fueled by business re-opening combined with unprecedented monetary and fiscal support from the U.S. government supports expectations for continued economic growth. U.S. treasury rates have increased from their historic lows during 2020, but they remain well below long-term historical averages. In addition, the wider market credit spreads experienced during 2020 have narrowed meaningfully, resulting in yields for investment grade assets that also remain well below historical averages. While this continues to pressure the income we earn on our fixed income investments, it has been more than offset by our limited partnership results, which are reflecting improved growth prospects. We continue to actively monitor the economic impact of the pandemic, including supply chain, labor market and inflation dynamics, as well as fiscal and monetary responses and their potential impact on the portfolio. Over the balance of 2021, we expect net investment income and investment valuations will reflect the optimism within public and private markets for the continued economic recovery, along with the potential for increasing market volatility with resulting net investment income and asset valuation impacts. Future realized and unrealized investment results will be driven largely by market conditions that exist when a transaction occurs or at the reporting date. These future conditions are not reasonably predictable; however, we believe that the vast majority of our investments will continue to perform under their contractual terms. Based on our strategy to match the duration of invested assets to the duration of insurance and contractholder liabilities, we expect to hold a significant portion of these assets for the long-term. Although future declines in investment fair values resulting from interest rate movements and credit deterioration due to both investment-specific and the global economic uncertainties discussed above remain possible, we do not expect these losses to have a material adverse effect on our financial condition or liquidity.
MARKET RISK
Financial Instruments
Our assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Our primary market risk exposures are interest rate risk and foreign currency exchange rate risk. We encourage you to read this in conjunction with “Market Risk – Financial Instruments” included in the MD&A section of our 2020 Form 10-K. As of September 30, 2021 there were no material changes in our risk exposures from those reported in our 2020 Form 10-K.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responsive to this item is contained under the caption “Market Risk” in Item 2 above, Management’s Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
Item 4. CONTROLS AND PROCEDURES
Based on an evaluation of the effectiveness of Cigna’s disclosure controls and procedures conducted under the supervision and with the participation of Cigna’s management (including Cigna’s Chief Executive Officer and Chief Financial Officer), Cigna's Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, Cigna’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Cigna in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to Cigna’s management, including Cigna’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, Cigna's internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information contained under “Litigation Matters” and “Regulatory Matters” in Note 15 to the Consolidated Financial Statements is incorporated herein by reference. For information regarding legal proceedings terminated during the quarter ended June 30, 2021, refer to Note 15 to the Consolidated Financial Statements contained in Part I of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
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Item 1A. RISK FACTORS
For information regarding factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information about Cigna’s share repurchase activity for the quarter ended September 30, 2021:
Period
Total # of shares purchased (1)
Average price paid per share (1)
Total # of shares purchased as part of
publicly announced program (2)
Approximate dollar value of shares
that may yet be purchased as part
of publicly announced program (3)
July 1-31, 2021 1,538,889  $ 232.43  1,536,623  $ 3,842,810,336 
August 1-31, 2021 8,747,861  (1) 8,745,737  $ 1,619,335,337 
September 1-30, 2021 1,854  $ 208.07  —  $ 1,619,335,337 
Total 10,288,604  (1) 10,282,360  N/A
(1)Includes shares tendered by employees under the Company’s equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered 2,266 shares in July, 2,124 shares in August and 1,854 shares in September 2021. Amount purchased in August 2021 also reflects the initial delivery of 7.7 million shares pursuant to the ASR agreements discussed in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2. Such repurchase was made pursuant to the Company's share repurchase program described in note (2) below. Average price paid per share for the period August 1-31, 2021 for shares not purchased pursuant to the ASR agreements was $214.11.
(2)Additionally, the Company maintains a share repurchase program authorized by the Board of Directors. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases, each in compliance with Rule 10b-18 under the Exchange Act, or privately negotiated transactions. The program may be suspended or discontinued at any time and does not have an expiration date. In October 2021, the Board increased repurchase authority by an additional $5 billion. Share repurchase authority was $6.6 billion as of November 3, 2021.
(3)Approximate dollar value of shares is as of the last date of the applicable month.
Item 5. OTHER INFORMATION
Amended and Restated By-laws

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

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

Executive Officer Retirements

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

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

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

Mr. Manders and Mr. Wentworth have each also entered into an Advisory Services Agreement (each, an “Advisory Services Agreement”) with the Company, pursuant to which each will provide advice and counsel to senior management on business planning and strategy. Each will be paid $10,000 per day for each day during which he performs advisory services. The Advisory Services Agreements expire on December 31, 2022.
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Item 6. EXHIBITS
INDEX TO EXHIBITS
Number Description Method of Filing
3.1 Filed herewith.
31.1 Filed herewith.
31.2 Filed herewith.
32.1 Furnished herewith.
32.2 Furnished herewith.
101
The following materials from Cigna Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Total Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements
Filed herewith.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Filed herewith.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 4, 2021
CIGNA CORPORATION
/s/ Brian C. Evanko
Brian C. Evanko
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and Authorized Signatory)

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