# Cigna Group (CI) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Cigna Group's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1739940/000173994025000009/ci-20241231.htm
Accession: 0001739940-25-000009
Filing date: 2025-02-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/CI/
All MD&A years: /company/CI/mda/
Previous year: /company/CI/mda/fy2023/ (FY 2023)
Next year: /company/CI/mda/fy2025/ (FY 2025)

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

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating the financial condition of The Cigna Group as of December 31, 2024 compared with December 31, 2023 and our results of operations for 2024 compared with 2023 and 2022 and is intended to help you understand the ongoing trends in our business. For comparisons of our results of operations for 2023 compared with 2022, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2023. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K ("Form 10-K") and the "Risk Factors" contained in Part I, Item 1A of this Form 10-K.

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 this Form 10-K for additional information regarding the Company's significant accounting policies. In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points ("bps").

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

The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. We define adjusted income (loss) from operations as shareholders' net income (or income (loss) before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net investment gains/losses, amortization of acquired intangible assets and special items. The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare 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 The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a reconciliation of consolidated adjusted revenues to total revenues.

EXECUTIVE OVERVIEW

The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our"), is a global health company committed to creating a better future for every individual and every community. Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental, and related products and services. For further information on our business and strategy, see Part I, Item 1 "Business" of this Form 10-K.

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Financial Highlights

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(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.

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(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.

40

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(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.

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

Commentary: 2024 versus 2023

The commentary presented below, and the segment commentaries that follow, compare results for the year ended December 31, 2024 with results for the year ended December 31, 2023. Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.

Shareholders' net income decreased 34%, or $1,730 million, primarily reflecting increased net investment losses (-$2,415 million) driven by the impairment of VillageMD equity securities, as well as the absence of the foreign deferred tax benefits recorded in 2023 (-$1,155 million). These unfavorable items were partially offset by lower net losses on sale of businesses (+$1,431 million) and higher adjusted income from operations (+$293 million). See further discussion of these drivers below.

Adjusted income from operations increased 4%, primarily reflecting higher earnings in Evernorth Health Services, partially offset by lower earnings in Cigna Healthcare.

Medical customers decreased 3%, primarily reflecting a decrease in Individual and Family Plans ("IFP") customers.

Pharmacy revenues increased 35%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.

Premiums increased 4%, primarily reflecting higher premium rates in our U.S. Healthcare operating segment.

41

Fees and other revenues increased 17%, primarily reflecting growth in affordability services within our Pharmacy Benefit Services operating segment.

Net investment income decreased 17%, primarily due to a $182 million impairment of dividend receivable in the third quarter of 2024 related to VillageMD accrued dividends.

Pharmacy and other service costs increased 36%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.

Medical costs and other benefit expenses increased 7%, primarily reflecting higher medical costs in our U.S. Healthcare operating segment.

Selling, general and administrative ("SG&A") expenses were flat, primarily reflecting increases in strategic investments to support both business growth and continued advancement of our digital capabilities and solutions (3%), offset by the absence of costs reported in 2023 for an organizational efficiency plan (-2%) and litigation settlements (-1%).

Net gain (loss) on sale of businesses. The gain reported in 2024 reflects the sale of a portion of an equity method investment, partially offset by an estimated loss on sale (primarily goodwill impairment) related to the HCSC transaction (defined below). The loss reported in 2023 primarily reflects a goodwill impairment related to the HCSC transaction. See Note 5 and Note 14 to the Consolidated Financial Statements for further discussion of the HCSC transaction and the equity method investment sale, respectively.

Investment results primarily reflect the impairment of VillageMD equity securities in 2024. See Note 11 to the Consolidated Financial Statements for further discussion of the impairment of VillageMD equity securities.

The effective tax rate increased, primarily driven by the absence of foreign deferred tax benefits recorded in 2023 and a valuation allowance related to the impairment of VillageMD equity securities, partially offset by the absence of the impact of the valuation allowance resulting from the HCSC transaction recorded in 2023. See Note 20 to the Consolidated Financial Statements for further discussion of these matters.

Key Transactions and Business Developments

Sale of Medicare Advantage and Related Businesses

In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S. Healthcare operating segment to Health Care Service Corporation ("HCSC") ("HCSC transaction"). The initial $3.3 billion purchase price is anticipated to increase at closing, reflecting higher statutory surplus for the legal entities that will convey to HCSC. The transaction is expected to close in the first quarter of 2025. See Note 5 to the Consolidated Financial Statements for further information.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

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

Subsidiary 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 durations of investments to estimated durations for the related insurance and contractholder liabilities; selling investments; and borrowing from affiliates, subject to applicable regulatory limits.

Parent Level. 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.

42

Regulatory Restrictions. 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 this Form 10-K for additional information regarding these restrictions. Most of the Evernorth Health Services segment operations are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to The Cigna Group.

Investment Portfolio. We support the liquidity needs of our businesses by managing the duration of invested assets to be consistent with the duration of liabilities. We manage the portfolio to both optimize returns in the current economic environment and meet our liquidity needs.

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

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The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2024 compared with the same period in 2023.

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.

Operating cash flows decreased for the year ended December 31, 2024 due to higher insurance claims and related payments as well as higher accounts receivable as a result of organic business growth and timing. These decreases were partially offset by the favorable net cash flow impacts of new clients in Evernorth Health Services, higher pharmacy and service costs payable, and lower income tax payments.

Investing Activities. The decrease in cash used in investing activities during the year ended December 31, 2024 was primarily due to lower purchases of equity securities.

Financing Activities. The Company had higher share repurchases, including the completed ASR Agreements (described below), partially offset by net cash provided by debt financing activities in 2024.

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 flows from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends received from U.S.- regulated subsidiaries were $2.4 billion for the year ended December 31, 2024 and $1.2 billion for the year ended December 31, 2023. Non-regulated subsidiaries also generate significant cash flows from operating activities, which is typically available immediately to the parent company for general corporate purposes.

We prioritize our use of capital resources to (i) invest in capital expenditures (primarily related to technology to support innovative solutions for our clients and 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; (ii) pay dividends to shareholders; (iii) consider acquisitions and investments that are strategically and economically advantageous; and (iv) return capital to shareholders through share repurchases.

Funds Available

Commercial Paper Program. The commercial paper program had approximately $0.9 billion outstanding at December 31, 2024.

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

As of December 31, 2024, we had $6.5 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), $5.6 billion of

43

remaining capacity under our commercial paper program and $7.6 billion in cash and short-term investments, approximately $0.8 billion of which was held by the parent company or certain nonregulated subsidiaries.

Our debt-to-capitalization ratio (calculated as Short-term debt and Long-term debt ("Total debt") as a percentage of Total shareholders' equity and Total debt ("Total capitalization")) was 43.8% and 40.1% at December 31, 2024 and 2023, respectively. We actively monitor our debt obligations and engage in issuance or redemption activities as needed in accordance with our capital management strategy.

Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.8 billion from its subsidiaries without further approvals as of December 31, 2024.

Use of Capital Resources

Capital Expenditures. Capital expenditures for property, equipment and computer software were $1.4 billion in 2024 compared to $1.6 billion in the year ended December 31, 2023. We expect to deploy approximately $1.4 billion in capital expenditures in 2025, which will be funded primarily from operating cash flows.

Dividends. The Company 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 The Cigna Group and its shareholders. See Note 8 to the Consolidated Financial Statements for further information regarding the dividend payments declared and paid during 2024, as well as the first quarter 2025 declared cash dividend.

Share Repurchases. The Company maintains a share repurchase program authorized by the Board of Directors, under which it may repurchase shares of its 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 (the "Exchange Act"), including through Rule 10b5-1 trading plans or privately negotiated transactions. The program may be suspended or discontinued at any time.

Including the Accelerated Share Repurchase agreements (discussed further in Note 8 to the Consolidated Financial Statements) (the "ASR Agreements"), we repurchased 20.9 million shares for approximately $7.0 billion during the year ended December 31, 2024, compared to 7.8 million shares for approximately $2.3 billion during the year ended December 31, 2023. In December 2024, the Board of Directors approved an increase of $6.0 billion in incremental share repurchase authorization, bringing the company's total share repurchase authority to $10.3 billion as of December 31, 2024. From January 1, 2025 through February 26, 2025, we repurchased 3.0 million shares for approximately $901 million. Share repurchase authority was $9.4 billion as of February 26, 2025.

Other Sources of Funds and Uses of Capital Resources

Divestiture. As discussed in the "Key Transactions and Business Developments" section above, the HCSC transaction is expected to close in the first quarter of 2025. We anticipate use of the proceeds in alignment with our capital deployment priorities, with the majority allocated to share repurchases.

Risks to Liquidity and Capital Resources

Risks to our liquidity and capital resources outlook include cash projections that may not be realized, and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the "Risk Factors" section of this Form 10-K.

Guarantees and Contractual Obligations

We are contingently liable for various contractual obligations and financial and other guarantees entered into in the ordinary course of business. See Note 21 to the Consolidated Financial Statements for discussion of various guarantees.

On Balance Sheet:

Long-Term Debt. Total scheduled payments on long-term debt are $48.5 billion (of which $3.5 billion relate to the fiscal year ending December 31, 2025), which include scheduled interest payments and maturities of long-term debt. See Note 7 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.

44

Other Non-Current Liabilities. These include other long-term liabilities reflected in our Consolidated Balance Sheets as of December 31, 2024, including obligations associated with other postretirement and postemployment benefit obligations, reinsurance liabilities, supplemental and deferred compensation plans, and interest rate and foreign currency swap contracts.

Uncertain Tax Positions. In the event we are unable to sustain all of our $1.5 billion of uncertain tax positions, it could result in future tax payments of approximately $1.0 billion. We are adequately reserved for such positions. As a result, there is minimal direct risk to earnings should we fail to sustain our positions. We cannot reasonably estimate the timing of such future payments. See Note 20 to the Consolidated Financial Statements for additional information on uncertain tax positions.

Off-Balance Sheet:

Purchase Obligations. These include agreements to purchase goods or services that are enforceable and legally binding. Purchase obligations exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of goods or services to be purchased. As of December 31, 2024, purchase obligations consisted of a total of $4.2 billion of estimated payments required under contractual arrangements (of which we expect $1.6 billion of purchase obligations to be paid within the next 12 months beginning January 1, 2025). This includes the following:

•$2.7 billion of investment commitments (of which we expect $0.9 billion of the committed amounts to be disbursed in 2025). See Note 11 of the Consolidated Financial Statements for additional information on investment commitments.

•$1.5 billion of future service commitments (of which we expect $0.7 billion of the committed amounts to be disbursed in 2025), primarily comprised of contracts for certain outsourced business processes and information technology maintenance and support.

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 this Form 10-K. We regularly evaluate items that may impact critical accounting estimates.

In addition to the estimates described below, the Notes to the Consolidated Financial Statements describe other estimates that management has made in preparation of the financial statements. Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on liquidity and our financial condition. The information below presents the adverse impacts of certain possible changes in assumptions. The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of operations, liquidity or financial condition, except for assessing impairment of goodwill.

Goodwill and Other Intangible Assets

Nature of Critical Accounting Estimate. Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the acquisition date. Intangible assets primarily reflect the value of customer relationships and other intangibles acquired in business combinations.

Fair values of reporting units are estimated based on discounted cash flow analysis and market approach models using assumptions that we believe a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value primarily include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within each reporting unit. Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections. Future cash flows for the Evernorth Health Services reporting units are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates. Future cash flows for our other reporting units are primarily driven by forecasted revenues, benefit expenses, operating expenses and long-

45

term growth rates.

The fair value of intangibles and the amortization method were determined using an income approach that relies on projected future cash flows, including key assumptions for customer attrition and discount rates. Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value.

The Company conducts its quantitative evaluation for goodwill impairment at least annually during the third quarter at the reporting unit level and performs qualitative impairment assessments on a quarterly basis to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value.

Excluding amounts classified as held for sale, Goodwill and other intangibles as of December 31, 2024 were $44,370 million and $29,417 million, respectively, and as of December 31, 2023, were $44,259 million and $30,863 million, respectively. See Note 18 to the Consolidated Financial Statements for additional discussion of our goodwill and other intangible assets. 

Effect if Different Assumptions Used. We completed our normal annual evaluations for impairment of goodwill and intangible assets during the third quarter of 2024. The evaluations support that as of December 31, 2024, the fair value estimates of our reporting units exceed their carrying values by substantial margins. Changes in assumptions concerning future financial results or other underlying assumptions, including macroeconomic factors, government legislation, changes in the competitive landscape or other market conditions, could impact our ability to achieve profitability projections. If we consistently do not achieve our earnings and cash flow projections or our cost of capital rises significantly, the assumptions and estimates underlying the goodwill and intangible asset impairment evaluations could be adversely affected and result in future impairment charges that would negatively impact our operating results and financial position.

Income Taxes - Uncertain Tax Positions

Nature of Critical Accounting Estimate. We evaluate tax positions to determine whether the benefits are more likely than not to be sustained on audit based on their technical merits. The Company establishes a liability if the probability that the position will be sustained is 50% or less. For uncertain positions that management believes are more likely than not to be sustained, the Company recognizes a liability based upon management's estimate of the most likely settlement outcome with the taxing authority. These amounts primarily relate to federal and state uncertain positions of the value and timing of deductions and uncertain positions of attributing taxable income to states.

Balances that are included in the Consolidated Balance Sheets within Accrued expenses and other liabilities were $1,477 million and $1,399 million as of December 31, 2024 and December 31, 2023, respectively. See Note 20 to the Consolidated Financial Statements for additional discussion around uncertain tax positions and the Liquidity and Capital Resources section of this MD&A for a discussion of their potential impact on liquidity.

Effect if Different Assumptions Used. The factors that could impact our estimates of uncertain tax positions include the likelihood of sustaining our tax position (and related assumed interest and penalties) under audit. If our positions are upheld upon audit, our net income would increase.

Income Taxes - Valuation Allowance

Nature of Critical Accounting Estimate. Deferred income taxes in the Consolidated Balance Sheets reflect differences between the financial and income tax reporting bases of the Company's underlying assets and liabilities, and are established based upon enacted tax rates and laws. Deferred income tax assets are recognized when available evidence indicates that realization is more likely than not and a valuation allowance is established to the extent this standard is not met. It is possible that the realization of deferred tax assets may be impacted by changes in forecasted future earnings in various foreign jurisdictions or the Company's ability to generate future capital gains.

Valuation allowances that are included in the Consolidated Balance Sheets within Deferred tax liabilities, net were $2,332 million and $1,498 million as of December 31, 2024 and December 31, 2023, respectively. See Note 20 to the Consolidated Financial Statements for additional discussion around valuation allowances.

Effect if Different Assumptions Used. The factors that could impact our estimates of valuation allowances include changes in forecasted future earnings in foreign jurisdictions, potential international tax reform as a result of Organization for Economic Cooperation and Development initiatives, and the Company's future ability to generate capital gains. Decreases in our valuation allowance would increase net income, while increases in our valuation allowance would decrease net income.

46

Unpaid Claims and Claims Expenses - Cigna Healthcare

Nature of Critical Accounting Estimate. Unpaid claims and claim expenses reflect estimates of the ultimate cost of claims that have been incurred but not reported, expected development on reported claims, claims 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. 

Unpaid claims and claim expenses in Cigna Healthcare are primarily impacted by assumptions related to completion factors and medical cost trend. Variation of actual results from either assumption could impact the unpaid claims balance as noted below. A large number of factors may cause the medical cost trend to vary from the Company's estimates, including changes in health management practices, changes in the level and mix of benefits offered and services utilized, and changes in medical practices. Completion factors may be affected if actual claims submission rates from providers differ from estimates (that can be influenced by a number of factors, including provider mix and electronic versus manual submissions), or if changes to the Company's internal claims processing patterns occur. 

Unpaid claims and claim expenses for the Cigna Healthcare segment, both gross and net of reinsurance and other recoverables, as of December 31, 2024 were $5,018 million gross and $4,859 million net and as of December 31, 2023 were $5,092 million gross and $4,856 million net. See Note 9 to the Consolidated Financial Statements for additional information regarding assumptions and methods used to estimate this liability.

Effect if Different Assumptions Used. Based on studies of our claim experience, it is reasonably possible that a 100 basis point change in the medical cost trend and a 50 basis point change in completion factors could occur in the near term. A 100 basis point increase in the medical cost trend rate would increase this liability by approximately $110 million, resulting in a decrease in net income of approximately $85 million after-tax, and a 50 basis point decrease in completion factors would increase this liability by approximately $185 million, resulting in a decrease in net income of approximately $145 million after-tax.

Valuation of Debt Security Investments

Nature of Critical Accounting Estimate. Most debt securities are classified as available for sale and are carried at fair value with changes in fair value recorded in Accumulated other comprehensive loss within Shareholders' equity. 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.

Determining fair value for a financial instrument requires management judgment. The degree of judgment involved generally correlates to the level of pricing readily observable in the markets. Financial instruments with quoted prices in active markets or with market-observable inputs to determine fair value, such as public securities, generally require less judgment. Conversely, private placements including more complex securities that are traded infrequently are typically measured using pricing models that require more judgment as to the inputs and assumptions used to estimate fair value. There may be a number of alternative inputs to select based on an understanding of the issuer, the structure of the security and overall market conditions. In addition, these factors are inherently variable in nature as they change frequently in response to market conditions. Approximately 60% of our debt securities are public securities and approximately 40% are private placement securities.

Typically, the most significant input in the measurement of fair value is the market interest rate used to discount the estimated future cash flows of the instrument. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset.

Balances that are included in the Consolidated Balance Sheets within Investments and Long-term investments, inclusive of amounts held for sale, were $9,423 million and $9,855 million as of December 31, 2024 and December 31, 2023, respectively. See Notes 11A and 12 to the Consolidated Financial Statements for a discussion of our fair value measurements, the procedures performed by management to determine that the amounts represent appropriate estimates and our accounting policy regarding unrealized appreciation on debt securities.

Effect if Different Assumptions Used. If the derived market rates used to calculate fair value increased by 100 basis points, the fair value of the total debt security portfolio of $9.4 billion would decrease by approximately $0.5 billion, resulting in an after-tax decrease to shareholders' equity of approximately $0.4 billion as of December 31, 2024.

47

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 further description of our segments.

In segment discussions, we present "adjusted revenues" and "pre-tax adjusted income (loss) from operations," defined as income (loss) before income taxes excluding pre-tax income (loss) attributable to noncontrolling interests, net investment gains/losses, amortization of acquired intangible assets and special items. The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. The Cigna Group share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management, including the chief operating decision maker, believes are not representative of the underlying results of operations due to their nature or size. Ratios presented in this segment discussion exclude the same items as adjusted revenues and pre-tax adjusted income (loss) from operations. See Note 22 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income (loss) before income taxes to pre-tax adjusted income (loss) from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 22 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate.

In these segment discussions, we also present "pre-tax margin," calculated as pre-tax adjusted income (loss) from operations divided by adjusted revenues.

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

Evernorth Health Services Segment

Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities, as well as those from partners across the health care system, within our Pharmacy Benefit Services and Specialty and Care Services operating segments. As described in the introduction to Segment Reporting, Evernorth Health Services' performance is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.

Key Factors Affecting Segment Performance

The key factors that impact the performance of Evernorth Health Services Pharmacy Benefit Services and Specialty and Care Services revenues and income from operations are volume, mix of claims, price and contract affordability services. Specialty and Care Services revenues are also impacted by specialty distribution customer growth and client growth. These key factors are discussed further below. Certain of the key factors impact both operating segments as services are offered through an integrated client contract. See Note 2 to the Consolidated Financial Statements included in this Form 10-K for additional information on revenue and cost recognition policies for this segment.

Key factors that impact both Pharmacy Benefit Services and Specialty and Care Services:

•Pharmacy claim volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and dispensing prescription claims from our home delivery and specialty pharmacies, along with other claims. Pharmacy claim volume (utilization) is impacted by new clients or organic customer growth through the expansion of existing clients.

•The mix of claims generally considers the type of drug and distribution method used for dispensing and fulfilling. In addition to the types of drugs, the mix of generic or biosimilar claims also impacts our results. Generally, a higher mix of generic and biosimilar drugs reduces revenues and increases income from operations, as generic and biosimilar drugs are typically priced lower than the branded drugs they replace, providing positive impacts or our clients, our customers and us.

•Pharmaceutical manufacturer 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 continue to be significant drivers of our revenues and cost of revenues in the current environment.

•Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing and manufacturer rebates on our clients' behalf (also referred to as affordability improvements). Through these affordability services, we seek to improve the effectiveness of our integrated and fee-for-service solutions, for the benefit of our new and existing clients, by continuously innovating, improving affordability and implementing drug purchasing contract initiatives. Our continued affordability improvements further reduce drug costs for the benefit of our consumers and clients, and we share in the value delivered, which generally results in a favorable impact on our income from operations.

48

Key factors that impact Specialty and Care Services:

•Customer growth generally results in increased revenues and income from operations. This generally includes both organic customer growth through the expansion of existing business and new business, as well as higher volume in our specialty distribution services where we deliver pharmaceuticals and medical supplies directly to health care providers, clinics and hospitals, primarily to physicians who regularly order costly specialty pharmaceuticals. This business provides competitive pricing on pharmaceuticals and medical supplies and leverages our distribution platform to improve our results.

•Client growth, both organic and new business, in our Care Services business generally results in increased revenues and income from operations. This includes client movement in our virtual care, in-home care, physical primary care, benefits management and behavioral health services as we expand our businesses and build upon our cross-enterprise leverage.

Results of Operations

[[GREPCENT_TABLE]]
[["Financial Summary"],["","","","","","For the Years Ended December 31,","","Change","Change"],["(Dollars in millions)","","","","","","","2024","","2023","","2022","","2024 vs. 2023","2023 vs. 2022"],["Adjusted revenues (1)","","","","","","","$","202,155","","","$","153,499","","","$","140,335","","","$","48,656","","","32","","%","$","13,164","","","9","","%"],["Pre-tax adjusted income from operations (1)","","","","","","","$","7,001","","","$","6,442","","","$","6,127","","","$","559","","","9","","%","$","315","","","5","","%"],["Pre-tax margin (1)(2)","","","","","","","3.5","","%","4.2","","%","4.4","","%","","","(70)","","bps","","","(20)","","bps"],["SG&A expense ratio (3)","","","","","","","1.9","","%","2.2","","%","2.0","","%","","","(30)","","bps","","","20","","bps"]]
[[/GREPCENT_TABLE]]

(1)See Note 22 to the Consolidated Financial Statements for reconciliation of adjusted revenues and pre-tax adjusted income from operations to Total revenues and Income before income taxes, respectively.

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

(3)SG&A expense ratio is calculated as segment selling, general and administrative expenses divided by adjusted revenues. See Note 22 to the Consolidated Financial Statements for further details.

In this selected financial information, we present adjusted revenues and pre-tax income from operations by our two operating segments, Pharmacy Benefit Services and Specialty and Care Services.

[[GREPCENT_TABLE]]
[["Selected Financial Information"],["","","","","For the Years Ended December 31,","Change","Change"],["(Dollars and adjusted scripts in millions)","","","","","","2024","","2023","2022","2024 vs. 2023","2023 vs. 2022"],["Total adjusted revenues"],["Pharmacy Benefit Services","","","","","","","","$","111,822","","","$","76,792","","","$","75,801","","","46","","%","1","","%"],["Specialty and Care Services","","","","","","","","90,333","","","76,707","","","64,534","","","18","","","19"],["Total adjusted revenues","","","","","","","","$","202,155","","","$","153,499","","","$","140,335","","","32","","%","9","","%"],["Pre-tax adjusted income from operations"],["Pharmacy Benefit Services","","","","","","","","$","3,577","","","$","3,469","","","$","3,616","","","3","","%","(4)","","%"],["Specialty and Care Services","","","","","","","","3,424","","","2,973","","","2,511","","","15","","","18"],["Total pre-tax adjusted income from operations","","","","","","","","$","7,001","","","$","6,442","","","$","6,127","","","9","","%","5","","%"],["Pharmacy claim volume (1)","","","","","","","","2,120","","","1,585","","","1,575","","","34","","%","1","","%"]]
[[/GREPCENT_TABLE]]

(1)Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims. All other network and specialty prescriptions are counted as one claim.

2024 versus 2023

Commentary in parentheses regarding percentage changes represents the driver's impact on the overall category.

Adjusted revenues increased 32%, primarily reflecting higher utilization of prescription drugs from customer growth in both Pharmacy Benefit Services (+24%) and Specialty and Care Services (+7%).

Pre-tax adjusted income from operations increased 9%, primarily reflecting customer growth in Specialty and Care Services (+10%) and continued affordability improvements in Pharmacy Benefit Services (+5%). These increases were partially offset by strategic investments to support business growth and continued advancement of our capabilities and solutions (-3% in Specialty and Care Services and -2% in Pharmacy Benefit Services).

The SG&A expense ratio decreased 30 bps, primarily reflecting higher adjusted revenues as discussed above.

49

Cigna Healthcare Segment

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

In January 2024, the Company entered into a definitive agreement to sell the Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S. Healthcare operating segment. See "Key Transactions and Business Developments" for further discussion.

Key Factors Affecting Segment Performance

The key factors that impact Cigna Healthcare revenues and income from operations include revenue growth, customer growth, medical cost trend, percentage of Medicare Advantage customers in plans eligible for quality bonus payments, the medical care ratio ("MCR") and the SG&A expense ratio. These key factors are discussed further below. See Note 2 to the Consolidated Financial Statements included in this Form 10-K for additional information on revenue and cost-recognition policies for this segment.

•Revenue growth includes increases to premium rates in consideration of anticipated medical cost increases, customer growth driven by new clients and customers, and increased fee revenue from the expansion of products and services to existing clients and customers, including solutions provided by Evernorth Health Services.

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

•Prior to the divestiture of our Medicare Advantage and related businesses to HCSC, the percentage of Medicare Advantage customers in bonus-eligible plans impacts the amount of quality bonus payments we receive.

•MCR represents medical costs as a percentage of premiums for our segment's insured businesses, and it is impacted by medical cost trend and premium rates. Affordability initiatives that serve to mitigate medical cost inflation also impact the MCR.

•The SG&A expense ratio represents the segment's selling, general and administrative expenses divided by adjusted revenues.

Results of Operations

[[GREPCENT_TABLE]]
[["Financial Summary"],["","","","","","","For the Years Ended December 31,","","Change","Change"],["(Dollars in millions)","","","","","","","2024","2023","2022","2024 vs. 2023","2023 vs. 2022"],["Adjusted revenues (1)","","","","","","","","$","52,914","","","$","51,205","","","$","45,037","","","$","1,709","","","3","","%","$","6,168","","","14","","%"],["Pre-tax adjusted income from operations (1)","","","","","","","","$","4,229","","","$","4,478","","","$","4,099","","","$","(249)","","","(6)","","%","$","379","","","9","","%"],["Pre-tax margin (1)(2)","","","","","","","","8.0","%","","8.7","%","","9.1","%","","","","(70)","","bps","","","(40)","","bps"],["Medical care ratio","","","","","","","","83.2","%","","81.3","%","","81.7","%","","","","190","","bps","","","(40)","","bps"],["SG&A expense ratio (3)","","","","","","","","20.4","%","","21.6","%","","21.8","%","","","","(120)","","bps","","","(20)","","bps"]]
[[/GREPCENT_TABLE]]

(1)See Note 22 to the Consolidated Financial Statements for reconciliation of adjusted revenues and pre-tax adjusted income from operations to Total revenues and Income before income taxes, respectively.

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

(3)SG&A expense ratio is calculated as segment selling, general and administrative expenses divided by adjusted revenues. See Note 22 to the Consolidated Financial Statements for further details.

50

2024 versus 2023

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

Adjusted revenues increased 3%, or $1,709 million, primarily due to higher premiums within employer insured (+$1,086 million), stop loss (+$601 million) and Medicare Part D (+$595 million), reflecting premium rate increases across those businesses, partially offset by lower premiums within IFP (-$1,137 million), reflecting a decrease in customers.

Pre-tax adjusted income from operations decreased 6%, or $249 million, primarily due to higher medical costs (-$2,209 million), partially offset by higher adjusted revenues (+$1,709 million) and lower SG&A expenses (+$250 million), primarily reflecting ongoing efficiencies. The impact of higher premiums in adjusted revenues and medical costs are reflected in the medical care ratio calculation.

The medical care ratio increased 190 bps for the year ended and 570 bps for the three months ended December 31, 2024. The increases for both periods were primarily due to higher stop loss medical costs.

The SG&A expense ratio decreased 120 bps, primarily due to revenue growth outpacing volume-related expenses (-60 bps), as well as ongoing efficiencies (-30 bps).

Medical Customers

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

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

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

•has medical claims that are administered by us.

[[GREPCENT_TABLE]]
[["Cigna Healthcare Medical Customers"],["","","As of December 31,","","Change","Change"],["(In thousands)","","2024","","2023","","2022","","2024 vs. 2023","2023 vs. 2022"],["U.S. Healthcare","","3,853","","","4,280","","","3,587","","","(427)","","","(10)","","","693","","","19"],["International Health (1)","","1,211","","","1,184","","","1,169","","","27","","","2","","","15","","","1"],["Insured","","5,064","","","5,464","","","4,756","","","(400)","","","(7)","","%","708","","","15","","%"],["U.S. Healthcare","","13,649","","","13,890","","","12,619","","","(241)","","","(2)","","","1,271","","","10"],["International Health (1)","","434","","","426","","","629","","","8","","","2","","","(203)","","","(32)"],["Administrative services only","","14,083","","","14,316","","","13,248","","","(233)","","","(2)","","","1,068","","","8"],["Total","","19,147","","","19,780","","","18,004","","","(633)","","","(3)","","%","1,776","","","10","","%"]]
[[/GREPCENT_TABLE]]

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

Total medical customers decreased 3%, primarily due to a decline in IFP customers. See Part I, Item 1 of this Form 10-K for definitions of Cigna Healthcare market segments.

Unpaid Claims and Claim Expenses

[[GREPCENT_TABLE]]
[["","","As of December 31,","","Change","Change"],["(In millions)","","2024","","2023","","2022","","2024 vs. 2023","2023 vs. 2022"],["Unpaid claims and claim expenses","","$","5,018","","","$","5,092","","","$","4,176","","","$","(74)","","","(1)","","%","$","916","","","22","","%"]]
[[/GREPCENT_TABLE]]

Our unpaid claims and claim expenses liability decreased 1%, driven by a decrease in IFP customers (-$300 million), partially offset by an increase related to the Medicare businesses (+$175 million).

51

Other Operations

Other Operations includes corporate-owned life insurance ("COLI"), the Company's run-off operations and other non-strategic businesses. As described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax adjusted income from operations.

Results of Operations

[[GREPCENT_TABLE]]
[["Financial Summary"],["","","","","","","","For the Years Ended December 31,","Change","Change"],["(Dollars in millions)","","","","","","","2024","2023","2022","2024 vs. 2023","2023 vs. 2022"],["Adjusted revenues","","","","","","","$","828","","","$","596","","","$","2,263","","","$","232","","","39","","%","$","(1,667)","","","(74)","","%"],["Pre-tax adjusted (loss) income from operations","","","","","","","$","(9)","","","$","96","","","$","509","","","$","(105)","","","N/M","%","$","(413)","","","(81)","","%"],["Pre-tax margin","","","","","","","(1.1)","","%","16.1","","%","22.5","","%","","","(1,720)","","bps","","","(640)","","bps"]]
[[/GREPCENT_TABLE]]

2024 versus 2023

Adjusted revenues primarily reflect premiums and net investment income associated with COLI and our run-off operations and revenues from other non-strategic businesses.

Pre-tax adjusted (loss) income from operations decreased primarily driven by unfavorable margins in our non-strategic businesses.

Corporate

Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs, and eliminations for products and services sold between segments.

[[GREPCENT_TABLE]]
[["Financial Summary"],["","","","","","","For the Years Ended December 31,","","Change","Change"],["(In millions)","","","","","","","","2024","","2023","","2022","","2024 vs. 2023","2023 vs. 2022"],["Pre-tax adjusted loss from operations","","","","","","","","$","(1,688)","","","$","(1,698)","","","$","(1,466)","","","$","10","","","(1)","","%","$","(232)","","","16","","%"]]
[[/GREPCENT_TABLE]]

2024 versus 2023

Commentary regarding percentage changes represents the driver's impact on the overall category.

Pre-tax adjusted loss from operations decreased 1%, primarily due to lower pension and operating costs (-7%), partially offset by higher interest rates on our indebtedness (+6%).

INVESTMENT ASSETS

Information regarding our investment assets is included in Notes 11, 12, 13 and 15 to the Consolidated Financial Statements.

Investment Outlook

Future realized and unrealized investment results will be driven largely by market conditions, and these future conditions are not reasonably predictable. We believe that the vast majority of our investments will continue to perform under their contractual terms. We manage the portfolio for long-term economics and therefore we expect to hold a significant portion of these assets for the long term. Although future declines in investment fair values remain possible due to interest rate movements and credit deterioration due to both investment-specific uncertainties and global economic uncertainties as discussed below, we do not expect these losses to have a material unfavorable effect on our financial condition or liquidity. The below discussion addresses the strategies and risks associated with our various classes of investment assets. See Item 1A "Risk Factors" for additional information regarding risks associated with our investment portfolio.

52

Debt Securities

The carrying value of our debt securities portfolio decreased from $9.9 billion as of December 31, 2023 to $9.4 billion as of December 31, 2024, primarily reflecting net sales activity. Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years.

As of December 31, 2024, $8.1 billion, or 86%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.3 billion were below investment grade. The majority of the bonds that are below investment grade were 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 expectations, which includes a long-term economic investment strategy. Primary risks facing many of the issuers in our portfolio include ongoing geopolitical events and economic conditions, including expectations for a longer period of higher inflation and interest rates. To date, most issuers have been successful in managing these issues without a meaningful change in credit quality. We continue to monitor the economic environment and its effect on our portfolio; we also continue to consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.

Commercial Mortgage Loans

As of December 31, 2024, our $1.4 billion commercial mortgage loan portfolio consisted of approximately 45 fixed-rate loans, diversified by property type, location and borrower. These loans are carried in our Consolidated Balance Sheets at their unpaid principal balance, net of an allowance for expected credit losses. As a result of increasing market interest rates since the majority of these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2024. 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 credit quality indicators, see Note 11 to the Consolidated Financial Statements.

Office sector fundamentals have been and continue to be weak, and values are experiencing stress due to multiple headwinds: expanded work-from-home flexibility, shorter term leases, elevated tenant improvement allowances and corporate migration to lower cost states. Additionally, the current macroeconomic headwinds are impacting capital markets and reducing investor appetite for capital-intensive assets (e.g., offices and regional shopping malls). Our commercial mortgage loan portfolio has no exposure to regional shopping malls and approximately 25% exposure to office properties. Although future losses remain possible due to further credit deterioration, we do not expect these losses to have a material unfavorable effect on our results of operations, financial condition or liquidity.

Other Long-Term Investments

Other long-term investments of $4.6 billion as of December 31, 2024 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. 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 by industry sector or property type and geographic region. No single partnership investment exceeded 3% of our securities and real estate limited partnership portfolio.

We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less than 4% of our other long-term investments are exposed to real estate in the office sector.

Unconsolidated Subsidiary Investments Portfolio

We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture under the equity method of accounting. Our 50% share of the investment portfolio supporting the joint venture's liabilities was approximately $15.6 billion as of December 31, 2024. These investments were comprised of approximately 75% debt securities, including government and corporate debt diversified by issuer, industry and geography; 15% equities, including mutual funds, equity securities and private equity partnerships; and 10% long-term deposits and policy loans. We continuously review the joint venture's investment strategy and its execution. There were no investments with a material unrealized loss as of December 31, 2024. See Note 14 to the Consolidated Financial Statements for additional information regarding unconsolidated subsidiaries.

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MARKET RISK

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 exposure from financial instruments is our interest-rate risk exposure to fixed-rate, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.

Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for financial instruments: changes in the fair values of insurance-related assets and liabilities as disclosed in Note 9 to the Consolidated Financial Statements (because their primary risks are insurance rather than market risk); changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets); and changes in the fair values of other significant assets and liabilities, such as goodwill, taxes and various accrued liabilities (because they are not financial instruments, their primary risks are other than market risks).

Our Management of Market Risks

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

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

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

Effect of Market Fluctuations

We determine the sensitivity of market risk for our fixed income financial instruments, including debt securities and commercial mortgage loans, by estimating the present value of future cash flows using duration modeling and applying a 100 basis point increase in interest rates. The effect of these hypothetical changes in market rates or prices on the fair value of certain noninsurance financial instruments would have been as follows:

[[GREPCENT_TABLE]]
[["Market scenario for certain noninsurance financial instruments"],["","","Loss in Fair Value"],["(in billions)","","December 31, 2024","","December 31, 2023"],["100 basis point increase in interest rates (excluding the Company's long-term debt)","","$","0.6","","","$","0.7"]]
[[/GREPCENT_TABLE]]

In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $1.8 billion at both December 31, 2024 and December 31, 2023. Changes in the fair value of our long-term debt do not impact our financial position or operating results since long-term debt is not required to be recorded at fair value. See Note 7 to the Consolidated Financial Statements for additional information about the Company's debt.