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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For
2、the transition period from _ to _Commission File Number 001-38769The Cigna Group(Exact name of registrant as specified in its charter)Delaware82-4991898(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)900 Cottage Grove RoadBloomfield,Connecticut 06002(
3、Address of principal executive offices)(Zip Code)(860)226-6000(Registrants telephone number,including area code)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 classTrading Symbol(s)
4、Name of each exchange on which registeredCommon Stock,Par Value$0.01CINew 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 thepreceding 12 months(or for such shorter
5、period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulatio
6、nS-T during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerginggrowth company
7、.See definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule 12b-2 of theExchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by
8、check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of th
9、e Exchange Act).Yes NoAs of July 31,2023,295,980,135 shares of the issuers common stock were outstanding.THE CIGNA GROUPTABLE OF CONTENTSPagePART IFINANCIAL INFORMATIONItem 1.Financial Statements(Unaudited)3Consolidated Statements of Income3Consolidated Statements of Comprehensive Income4Consolidate
10、d Balance Sheets5Consolidated Statements of Changes in Total Equity6Consolidated Statements of Cash Flows8Notes to the Consolidated Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations38Item 3.Quantitative and Qualitative Disclosures About
11、Market Risk53Item 4.Controls and Procedures54PART IIOTHER INFORMATIONItem 1.Legal Proceedings55Item 1A.Risk Factors55Item 2.Unregistered Sales of Equity Securities,Use of Proceeds and Issuer Purchases of Equity Securities55Item 5.Other Information55Item 6.Exhibits56SIGNATURE57As used herein,the term
12、 Company refers to one or more of The Cigna Group and its consolidated subsidiaries.Part I.FINANCIAL INFORMATIONItem 1.FINANCIAL STATEMENTSThe Cigna GroupConsolidated Statements of IncomeUnauditedUnauditedThree Months Ended June 30,Six Months Ended June 30,(In millions,except per share amounts)20232
13、022 20232022 RevenuesPharmacy revenues$33,964$31,972$66,108$62,669 Premiums11,039 10,426 22,064 20,782 Fees and other revenues3,305 2,755 6,376 5,294 Net investment income278 325 555 739 TOTAL REVENUES48,586 45,478 95,103 89,484 Benefits and expensesPharmacy and other service costs33,442 31,150 64,9
14、01 60,963 Medical costs and other benefit expenses9,034 8,192 18,080 16,464 Selling,general and administrative expenses3,434 3,264 6,972 6,539 Amortization of acquired intangible assets455 501 914 959 TOTAL BENEFITS AND EXPENSES46,365 43,107 90,867 84,925 Income from operations2,221 2,371 4,236 4,55
15、9 Interest expense and other(363)(301)(721)(600)Net realized investment gains(losses)26(89)(30)(411)Income before income taxes1,884 1,981 3,485 3,548 TOTAL INCOME TAXES374 411 669 766 Net income1,510 1,570 2,816 2,782 Less:Net income attributable to noncontrolling interests50 13 89 28 SHAREHOLDERS N
16、ET INCOME$1,460$1,557$2,727$2,754 Shareholders net income per shareBasic$4.96$4.94$9.24$8.69 Diluted$4.92$4.89$9.15$8.61 Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Statemen
17、ts for furtherinformation.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(1)(1)3The Cigna GroupConsolidated Statements of Comprehensive IncomeUnauditedUnauditedThree Months Ended June 30,Six Months Ended June 30,(In millions)2023
18、2022 20232022 Net income$1,510$1,570$2,816$2,782 Other comprehensive income(loss),net of taxNet unrealized appreciation(depreciation)on securities and derivatives20(670)214(1,513)Net long-duration insurance and contractholder liabilities measurement adjustments(117)6(448)465 Net translation losses o
19、n foreign currencies(19)(207)(3)(270)Postretirement benefits liability adjustment7 27 17 40 Other comprehensive loss,net of tax(109)(844)(220)(1,278)Total comprehensive income1,401 726 2,596 1,504 Comprehensive income(loss)attributable to noncontrolling interestsNet income attributable to redeemable
20、 noncontrolling interests45 2 79 5 Net income attributable to other noncontrolling interests5 11 10 23 Other comprehensive loss attributable to redeemable noncontrolling interests(1)(3)Total comprehensive income attributable to noncontrolling interests50 12 89 25 SHAREHOLDERS COMPREHENSIVE INCOME$1,
21、351$714$2,507$1,479 Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Statements for furtherinformation.The accompanying Notes to the Consolidated Financial Statements(unaudited)a
22、re an integral part of these statements.(1)(1)(1)4The Cigna GroupConsolidated Balance SheetsUnauditedAs ofJune 30,As ofDecember 31,(In millions)20232022 AssetsCash and cash equivalents$9,585$5,924 Investments872 905 Accounts receivable,net18,333 17,218 Inventories4,514 4,777 Other current assets1,40
23、7 1,298 Total current assets34,711 30,122 Long-term investments18,967 16,288 Reinsurance recoverables5,143 5,416 Property and equipment3,884 3,774 Goodwill45,811 45,811 Other intangible assets31,713 32,492 Other assets2,501 2,704 Separate account assets7,324 7,278 TOTAL ASSETS$150,054$143,885 Liabil
24、itiesCurrent insurance and contractholder liabilities$7,539$5,409 Pharmacy and other service costs payable18,617 17,070 Accounts payable8,072 7,775 Accrued expenses and other liabilities8,499 7,978 Short-term debt4,618 2,993 Total current liabilities47,345 41,225 Non-current insurance and contractho
25、lder liabilities11,575 11,976 Deferred tax liabilities,net7,594 7,786 Other non-current liabilities2,575 2,766 Long-term debt28,115 28,100 Separate account liabilities7,324 7,278 TOTAL LIABILITIES104,528 99,131 Contingencies Note 16Redeemable noncontrolling interests62 66 Shareholders equityCommon s
26、tock 4 4 Additional paid-in capital30,436 30,233 Accumulated other comprehensive loss(1,878)(1,658)Retained earnings39,936 37,940 Less:Treasury stock,at cost(23,053)(21,844)TOTAL SHAREHOLDERS EQUITY45,445 44,675 Other noncontrolling interests19 13 Total equity45,464 44,688 Total liabilities and equi
27、ty$150,054$143,885 Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Statements for furtherinformation.Par value per share,$0.01;shares issued,399 million as of June 30,2023 and 3
28、98 million as of December 31,2022;authorized shares,600 million.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(2)(1)(2)5The Cigna GroupConsolidated Statements of Changes in Total EquityUnauditedThree Months Ended June 30,2023(In
29、 millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInterestsTotal EquityRedeemableNoncontrollingInterestsBalance at March 31,2023$4$30,332$(1,769)$38,841$(22,906)$44,502$16$44,518$78 Effects of issuing
30、stock for employee benefitsplans106(1)105 105 Other comprehensive loss(109)(109)(109)Net income1,460 1,460 5 1,465 45 Common dividends declared(per share:$1.23)(365)(365)(365)Repurchase of common stock(146)(146)(146)Other transactions impacting noncontrollinginterests(2)(2)(2)(4)(61)Balance at June
31、30,2023$4$30,436$(1,878)$39,936$(23,053)$45,445$19$45,464$62 Three Months Ended June 30,2022(In millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInterestsTotal EquityRedeemableNoncontrollingInterestsBa
32、lance at March 31,2022,as retrospectivelyrestated 429,736(1,500)33,464(15,581)46,123 22 46,145 55 Effect of issuing stock for employee benefitplans194(1)193 193 Other comprehensive loss(843)(843)(843)(1)Net income1,557 1,557 11 1,568 2 Common dividends declared(per share:$1.12)(353)(353)(353)Repurch
33、ase of common stock(1,006)(1,006)(1,006)Other transactions impacting noncontrollinginterests (3)(3)(11)Balance at June 30,2022$4$29,930$(2,343)$34,668$(16,588)$45,671$30$45,701$45 Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contract
34、s in 2023.See Note 2 to the Consolidated Financial Statements for furtherinformation.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(1)(1)6The Cigna GroupConsolidated Statements of Changes in Total EquityUnauditedSix Months Ended
35、 June 30,2023(In millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInterestsTotal EquityRedeemableNoncontrollingInterestsBalance at December 31,2022,asretrospectively restated$4$30,233$(1,658)$37,940$(2
36、1,844)$44,675$13$44,688$66 Effect of issuing stock for employee benefitplans205(105)100 100 Other comprehensive loss(220)(220)(220)Net income2,727 2,727 10 2,737 79 Common dividends declared(per share:$2.46)(731)(731)(731)Repurchase of common stock(1,104)(1,104)(1,104)Other transactions impacting no
37、ncontrollinginterests(2)(2)(4)(6)(83)Balance at June 30,2023$4$30,436$(1,878)$39,936$(23,053)$45,445$19$45,464$62 Six Months Ended June 30,2022(In millions)CommonStockAdditionalPaid-inCapitalAccumulated OtherComprehensive(Loss)RetainedEarningsTreasuryStockShareholdersEquityOther Non-controllingInter
38、estsTotal EquityRedeemableNoncontrollingInterestsBalance at December 31,2021,asretrospectively restated 4 29,574(1,068)32,623(14,175)46,958 18 46,976 54 Effect of issuing stock for employee benefitplans356(73)283 283 Other comprehensive loss(1,275)(1,275)(1,275)(3)Net income2,754 2,754 23 2,777 5 Co
39、mmon dividends declared(per share:$2.24)(709)(709)(709)Repurchase of common stock(2,340)(2,340)(2,340)Other transactions impacting noncontrollinginterests (11)(11)(11)Balance at June 30,2022$4$29,930$(2,343)$34,668$(16,588)$45,671$30$45,701$45 Amounts have been restated to reflect the adoption of Ta
40、rgeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Statements for furtherinformation.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(1)(1)(1)7The Cigna GroupConsolid
41、ated Statements of Cash FlowsUnauditedSix Months Ended June 30,(In millions)20232022 Cash Flows from Operating ActivitiesNet income$2,816$2,782 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization1,504 1,476 Realized investment losses,net30 4
42、11 Deferred income tax benefit(207)(164)Net changes in assets and liabilities,net of non-operating effects:Accounts receivable,net(1,144)(2,769)Inventories263(59)Reinsurance recoverable and Other assets109 530 Insurance liabilities1,727(8)Pharmacy and other service costs payable1,547 1,124 Accounts
43、payable and Accrued expenses and other liabilities638(34)Other,net237(15)NET CASH PROVIDED BY OPERATING ACTIVITIES7,520 3,274 Cash Flows from Investing ActivitiesProceeds from investments sold:Debt securities and equity securities646 1,239 Investment maturities and repayments:Debt securities and equ
44、ity securities502 863 Commercial mortgage loans82 69 Other sales,maturities and repayments(primarily short-term and other long-term investments)313 745 Investments purchased or originated:Debt securities and equity securities(3,339)(2,024)Commercial mortgage loans(59)(84)Other(primarily short-term a
45、nd other long-term investments)(685)(849)Property and equipment purchases,net(805)(612)Divestitures,net of cash sold27(57)Other,net(79)(22)NET CASH USED IN INVESTING ACTIVITIES(3,397)(732)Cash Flows from Financing ActivitiesDeposits and interest credited to contractholder deposit funds96 84 Withdraw
46、als and benefit payments from contractholder deposit funds(100)(94)Net change in short-term debt183(244)Repayment of long-term debt(80)Net proceeds on issuance of long-term debt1,491 Repurchase of common stock(1,116)(2,374)Issuance of common stock59 217 Common stock dividend paid(730)(709)Other,net(
47、275)33 NET CASH USED IN FINANCING ACTIVITIES(472)(3,087)Effect of foreign currency rate changes on cash,cash equivalents and restricted cash9(80)Net increase(decrease)in cash,cash equivalents and restricted cash3,660(625)Cash,cash equivalents and restricted cash January 1,5,976 5,548 Cash,cash equiv
48、alents and restricted cash,June 30,9,636 4,923 Cash and cash equivalents reclassified to Assets of businesses held for sale(455)Cash,cash equivalents and restricted cash June 30,per Consolidated Balance Sheets$9,636$4,468 Supplemental Disclosure of Cash Information:Income taxes paid,net of refunds$9
49、26$911 Interest paid$632$615 Amounts have been restated to reflect the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Statements for furtherinformation.Includes$425 million reported in Assets of businesses held for sal
50、e as of January 1,2022.Restricted cash and cash equivalents were reported in other long-term investments.The accompanying Notes to the Consolidated Financial Statements(unaudited)are an integral part of these statements.(1)(2)(3)(1)(2)(3)8THE CIGNA GROUPNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
51、(UNAUDITED)TABLE OF CONTENTSNote NumberFootnotePageBUSINESS AND CAPITAL STRUCTURE1Description of Business102Summary of Significant Accounting Policies103Accounts Receivable,Net124Supplier Finance Program125Mergers,Acquisitions and Divestitures126Earnings Per Share137Debt148Common and Preferred Stock
52、16INSURANCE INFORMATION9Insurance and Contractholder Liabilities1610Reinsurance21INVESTMENTS11Investments2312Fair Value Measurements2613Variable Interest Entities3014Accumulated Other Comprehensive Income(Loss)30COMPLIANCE,REGULATION AND CONTINGENCIES15Income Taxes3216Contingencies and Other Matters
53、32RESULTS DETAILS17Segment Information349Note 1 Description of BusinessThe Cigna Group,together with its subsidiaries(either individually or collectively referred to as the Company,we,us or our),is a global health companywith a mission of helping those we serve improve their health and vitality.Our
54、subsidiaries offer a differentiated set of pharmacy,medical,behavioral,dental andrelated 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 Healthcare also offers co
55、mmercial health and dental insurance and Medicare products to individuals in the United States and selected international markets.In addition to these ongoing operations,The Cigna Group also has certain run-off operations.A full description of our segments follows:Evernorth Health Services includes
56、a broad range of coordinated and point solution health services and capabilities,as well as those from partners across the healthcare system,in Pharmacy Benefits,Home Delivery Pharmacy,Specialty Pharmacy,Distribution and Care Delivery and Management Solutions,which are providedto health plans,employ
57、ers,government organizations and health care providers.Cigna Healthcare includes the U.S.Commercial,U.S.Government and International Health operating segments which provide comprehensive medical andcoordinated solutions to clients and customers.U.S.Commercial products and services include medical,ph
58、armacy,behavioral health,dental and other products andservices for insured and self-insured clients.U.S.Government solutions include Medicare Advantage,Medicare Supplement and Medicare Part D plans for seniorsand individual health insurance plans.International Health solutions include health care co
59、verage in our international markets,as well as health care benefits forglobally mobile individuals and employees of multinational organizations.Other Operations comprises the remainder of our business operations,which includes ongoing businesses and exited businesses.Our ongoing businesses includeco
60、ntinuing business(corporate-owned life insurance(COLI)and our run-off businesses.Our run-off businesses include(i)variable annuity reinsurance business(also referred to as guaranteed minimum death benefit(GMDB)and guaranteed minimum income benefit(GMIB)business)that was effectively exited throughrei
61、nsurance with Berkshire Hathaway Life Insurance Company of Nebraska(Berkshire)in 2013,(ii)settlement annuity business,and(iii)individual lifeinsurance and annuity and retirement benefits businesses comprised of deferred gains from the sales of these businesses.Our exited businesses include our inter
62、estin a joint venture in Trkiye,which was sold in December 2022 and the international life,accident and supplemental benefits businesses sold in July 2022(theChubb transaction).Corporate reflects amounts not allocated to operating segments,including net interest expense(defined as interest on corpor
63、ate debt less net investment income oninvestments 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 intersegment eliminations for
64、 products and services sold between segments.Note 2 Summary of Significant Accounting Policies Basis of PresentationThe Consolidated Financial Statements include the accounts of The Cigna Group and its consolidated subsidiaries.Intercompany transactions and accounts havebeen eliminated in consolidat
65、ion.These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the UnitedStates of America(GAAP).Certain amounts in prior years have been reclassified to conform to the current year presentation.Amounts recorded in the Consolidated Financial
66、Statements necessarily reflect managements estimates and assumptions about medical costs,investment andreceivable valuations,interest rates and other factors.Significant estimates are discussed throughout these Notes;however,actual results could differ from thoseestimates.The impact of a change in e
67、stimate 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 ofmanagement,for a fair statement of financial position and results of opera
68、tions for the periods reported.The interim Consolidated Financial Statements and Notesshould be read in conjunction with the Consolidated Financial Statements and Notes included in the 2022 Annual Report on Form 10-K(2022 Form 10-K).Thepreparation of interim Consolidated Financial Statements necessa
69、rily relies heavily on estimates.This and other factors,including the seasonal nature of portions ofthe health care and related benefits business,as well as competitive and other market conditions,call for caution in estimating full-year results based on interimresults of operations.10Recent Account
70、ing PronouncementsThe Companys 2022 Form 10-K includes discussion of significant recent accounting pronouncements that either have impacted or may impact our financialstatements in the future.The following information provides updates on recently adopted accounting pronouncements that have occurred
71、since the Company filedits 2022 Form 10-K.There are no significant accounting pronouncements not yet adopted as of June 30,2023.Targeted Improvements to the Accounting for Long-Duration Contracts(LDTI),Accounting Standards Update(ASU)2018-12 and related amendmentsThe Cigna Group adopted LDTI January
72、 1,2023,which includes the following key provisions:Changes to the measurement of the future policy benefits liability for traditional and limited-pay insurance contracts:Assumptions used to measure cash flows(such as mortality,morbidity and lapse assumptions)are updated at least annually with the e
73、ffect ofchanges in those assumptions remeasured retrospectively and reflected in current period net income.Discount rate assumptions are updated quarterly based on market-level yields for low credit risk fixed income instruments(upper-medium gradefixed income instrument),with any changes reflected i
74、n other comprehensive income.The upper-medium grade fixed income instrument yield isinterpreted to mean A-rated.Deferred policy acquisition costs(DAC)related to long-duration insurance contracts are amortized on a constant-level basis over the expected term ofthe related contracts.Other related defe
75、rred or capitalized balances(such as unearned revenue liability and value of business acquired)may use thissimplified amortization method.Market risk benefits(MRB),defined as protecting the contractholder from other-than-nominal capital market risk and exposing the insurer to that risk,are measured
76、at fair value,with changes in fair value recognized in net income each period,except for the effect of the Companys change innonperformance risk(own credit risk),which is recognized in other comprehensive income.Additional disclosures,including disaggregated roll forwards for the liability for futur
77、e policy benefits,market risk benefits,separate account liabilitiesand DAC,as well as information about significant inputs,judgments,assumptions and methods used in measurement.The transition methods applied at adoption were:The liability for future policy benefits was remeasured using a modified re
78、trospective approach applied to all outstanding contracts as of thebeginning of the earliest period presented and was recognized in the opening balance of retained earnings.The impact of remeasuring the futurepolicy benefits liability for the discount rate was recorded through accumulated other comp
79、rehensive income.DAC followed the transition method used for future policyholder benefits.Market risk benefits were remeasured at fair value at the beginning of the earliest period presented.The difference between this fair value andcarrying value was recognized in the opening balance of retained ea
80、rnings,excluding the effect of the Companys change in nonperformance risk(own credit risk),which is recognized in accumulated other comprehensive income.Effects of adoption:The new guidance applies to our long-duration insurance products predominantly within the Cigna Healthcare segment and Other Op
81、erations.The cumulative effects of adopting the new standard were immaterial.The impacts were a decrease to January 1,2021 Shareholders equity of$139million and an increase to Shareholders net income for the year ended December 31,2022 and December 31,2021 of$36 million and$5 million,respectively.Th
82、e corresponding impact to diluted earnings per share was an increase of$0.11 and$0.02 for the year ended December 31,2022 andDecember 31,2021,respectively.The prior periods within our Consolidated Statements of Income,Consolidated Statements of Comprehensive Income,Consolidated Balance Sheets,Consol
83、idated Statements of Changes in Total Equity and Consolidated Statements of Cash Flows were restated to conform to the current presentation.Prior period balances in the Companys footnote disclosures have been updated to reflect adjustments resulting from the adoption of this standard.Refer toNote 9
84、to the Consolidated Financial Statements for the Companys updated accounting policies.It is possible that our income recognition pattern could change on a prospective basis for several reasons:Applying periodic assumption updates,versus the locked-in model,may change our timing of profit or loss rec
85、ognition.11DAC amortization is on a constant level basis over the expected term of the related contracts and no longer tied to the emergence of profit on suchcontracts.Additionally,in December 2022,the Financial Accounting Standards Board(FASB)published ASU 2022-05,which simplified the retrospective
86、 adoption ofLDTI by permitting companies to make an accounting policy election to exclude contracts that are sold and removed from the balance sheet prior to the effectivedate of the standard from the retrospective adoption of LDTI.The Cigna Group made this policy election for the contracts sold in
87、the Chubb transaction and ourdivested interest in a joint venture in Trkiye.Note 3 Accounts Receivable,NetThe following amounts were included within Accounts receivable,net:(In millions)June 30,2023December 31,2022Pharmaceutical manufacturers receivables$7,922$7,108 Noninsurance customer receivables
88、7,799 6,899 Insurance customer receivables2,360 2,963 Other receivables252 248 Total$18,333$17,218 These receivables are reported net of our allowances of$2.8 billion as of June 30,2023 and$1.9 billion as of December 31,2022.These allowances includecontractual allowances for certain rebates receivab
89、le with pharmaceutical manufacturers and certain receivables from third-party payors,discounts and claimsadjustments issued to customers in the form of client credits,an allowance for current expected credit losses and other non-credit adjustments.The Companys allowance for current expected credit l
90、osses was$99 million as of June 30,2023 and$86 million as of December 31,2022.Note 4 Supplier Finance ProgramThe Company facilitates a voluntary supplier finance program(the program)that provides suppliers the opportunity to sell their receivables due from us(i.e.,ourpayment obligations to the suppl
91、iers)to a financial institution,on a non-recourse basis,in order to be paid earlier than our payment terms require.The Cigna Groupis not a party to the program and agrees to commercial terms with its suppliers independently of their participation in the program.Amounts due to suppliers thatparticipa
92、te in the program are generally paid within one month following the invoice date.A suppliers participation in the program has no impact on the Companyspayment terms and the Company has no economic interest in a suppliers decision to participate in the program.The suppliers,at their sole discretion,d
93、eterminewhich invoices,if any,to sell to the financial institution.No guarantees or pledged assets are provided by the Company or any of our subsidiaries under theprogram.As of June 30,2023 and December 31,2022,$1.6 billion and$1.3 billion,respectively,of the Companys outstanding payment obligations
94、 were confirmed as validwithin the program by the financial institution and reflected in Accounts payable in the Consolidated Balance Sheets.The amounts confirmed as valid for bothperiods are predominately associated with one supplier.We have been informed by the financial institution that$263 milli
95、on as of June 30,2023 of the Companysoutstanding payment obligations were voluntarily elected by suppliers to be sold to the financial institution under the program.Note 5 Mergers,Acquisitions and DivestituresA.Investment in CarepathRx Health Systems SolutionsIn July 2023,Evernorth Health,Inc.became
96、 a minority owner in CarepathRx Health Systems Solutions(CHSS),through a$437 million equity methodinvestment in CHSS JV LLC(a holding company for the CHSS business and a CarepathRx company).CarepathRx provides integrated hospital pharmacy solutionsto support patients across their complete health car
97、e journey.By pairing Evernorth Health Services diverse specialty and care expertise with CHSS robustpharmacy and infusion management capabilities,technology solutions and health system relationships,we can further improve,expand and accelerate pharmacycare delivery for the growing number of patients
98、 with chronic and complex care needs.12B.Divestiture of International BusinessesIn July 2022,the Company completed the sale of its life,accident and supplemental benefits businesses in six countries(Hong Kong,Indonesia,New Zealand,South Korea,Taiwan and Thailand)(the Chubb transaction)for approximat
99、ely$5.4 billion in cash.The Company recognized a gain of$1.7 billion pre-tax($1.4 billion after-tax),which includes recognition of previously unrealized capital losses on investments sold and translation loss on foreign currencies.InDecember 2022,the Company also divested its ownership interest in a
100、 joint venture in Trkiye.C.Integration and Transaction-related CostsIn the first six months of 2023 and 2022,the Company incurred net costs related to the Chubb transaction and continued strategic realignment.In 2022,theCompany also incurred net costs related to the sale of the Group Disability and
101、Life business and acquisition of MDLIVE,Inc.These net costs were$6 million pre-tax($5 million after-tax)for the three months ended and$7 million pre-tax($6 million after-tax)for the six months ended June 30,2023,compared with$36million pre-tax($26 million after-tax)for the three months ended and$88
102、million pre-tax($63 million after-tax)for the six months ended June 30,2022.Thesecosts consisted primarily of certain projects to separate or integrate the Companys systems,products and services,fees for legal,advisory and other professionalservices and certain employment-related costs.Note 6 Earnin
103、gs Per ShareBasic and diluted earnings per share were computed as follows:Three Months EndedJune 30,2023June 30,2022(Shares in thousands,dollars in millions,except per share amounts)BasicEffect ofDilutionDilutedBasicEffect ofDilutionDilutedShareholders net income$1,460$1,460$1,557$1,557 Shares:Weigh
104、ted average294,512 294,512 315,122 315,122 Common stock equivalents2,367 2,367 3,182 3,182 Total shares294,512 2,367 296,879 315,122 3,182 318,304 Earnings per share$4.96$(0.04)$4.92$4.94$(0.05)$4.89 Six Months EndedJune 30,2023June 30,2022(Shares in thousands,dollars in millions,except per share am
105、ounts)BasicEffect ofDilutionDilutedBasicEffect ofDilutionDilutedShareholders net income$2,727$2,727$2,754$2,754 Shares:Weighted average295,105 295,105 316,795 316,795 Common stock equivalents2,831 2,831 2,989 2,989 Total shares295,105 2,831 297,936 316,795 2,989 319,784 Earnings per share$9.24$(0.09
106、)$9.15$8.69$(0.08)$8.61 Amounts reflected above for the three and six months ended June 30,2022 have been restated to reflect the impact of adopting amended accounting guidance forlong-duration insurance contracts(discussed in Note 2 to the Consolidated Financial Statements).The following outstandin
107、g employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive:Three Months Ended June 30,Six Months Ended June 30,(In millions)2023202220232022Anti-dilutive options0.9 1.3 0.9 2.0 The Company held approximately 103.3 million shares
108、 of common stock in treasury at June 30,2023,99.1 million shares as of December 31,2022 and 81.3million shares as of June 30,2022.13Note 7 DebtThe outstanding amounts of debt,net of issuance costs,discounts or premiums,and finance leases were as follows:(In millions)June 30,2023December 31,2022Short
109、-term debtCommercial paper$200$17 million,8.300%Notes due January 2023 17$63 million,7.650%Notes due March 2023 63$700 million,Floating Rate Notes due July 2023700 700$1,000 million,3.000%Notes due July 20231,000 994$1,187 million,3.750%Notes due July 20231,187 1,186$500 million,0.613%Notes due Marc
110、h 2024499$1,000 million,3.500%Notes due June 2024993 Other,including finance leases39 33 Total short-term debt$4,618$2,993 Long-term debt$500 million,0.613%Notes due March 2024 499$1,000 million,3.500%Notes due June 2024 990$900 million,3.250%Notes due April 2025870 872$2,200 million,4.125%Notes due
111、 November 20252,196 2,195$1,500 million,4.500%Notes due February 20261,503 1,503$800 million,1.250%Notes due March 2026798 797$700 million,5.685%Notes due March 2026697$1,500 million,3.400%Notes due March 20271,444 1,436$259 million,7.875%Debentures due May 2027259 259$600 million,3.050%Notes due Oc
112、tober 2027597 597$3,800 million,4.375%Notes due October 20283,786 3,785$1,500 million,2.400%Notes due March 20301,492 1,492$1,500 million,2.375%Notes due March 2031 1,383 1,380$45 million,8.080%Step Down Notes due January 2033 45 45$800 million,5.400%Notes due March 2033794$190 million,6.150%Notes d
113、ue November 2036190 190$2,200 million,4.800%Notes due August 20382,192 2,192$750 million,3.200%Notes due March 2040743 743$121 million,5.875%Notes due March 2041119 119$448 million,6.125%Notes due November 2041488 488$317 million,5.375%Notes due February 2042315 315$1,500 million,4.800%Notes due Jul
114、y 20461,466 1,466$1,000 million,3.875%Notes due October 2047989 989$3,000 million,4.900%Notes due December 20482,969 2,968$1,250 million,3.400%Notes due March 20501,236 1,236$1,500 million,3.400%Notes due March 20511,478 1,478 Other,including finance leases66 66 Total long-term debt$28,115$28,100 Th
115、e Company has entered into interest rate swap contracts hedging a portion of these fixed-rate debt instruments.See Note 11 in the Companys 2022 Form 10-K for further information about theCompanys interest rate risk management and these derivative instruments.Interest rate step down to 8.080%effectiv
116、e January 15,2023.Long-term debtDebt Issuance.On March 7,2023,the Company issued$1.5 billion of new senior notes.The proceeds of this issuance will be used for general corporate purposes,and may include repayment of outstanding debt securities.Interest on this debt is paid semi-annually.PrincipalMat
117、urity DateInterest RateNet Proceeds$700 million March 15,20265.685%$698 million$800 million March 15,20335.400%$796 million Redeemable at any time discounted at the U.S.Treasury rate plus 20 basis points.Redeemable at par on or after March 15,2024.Redeemable at any time discounted at the U.S.Treasur
118、y rate plus 25 basis points.Redeemable at par on or after December 15,2032.(1)(1)(2)(1)(2)(1)(2)(1)(2)14Short-term and Credit Facilities DebtRevolving Credit Agreements.Our revolving credit agreements provide us with the ability to borrow amounts for general corporate purposes,including providingliq
119、uidity support if necessary under our commercial paper program discussed below.As of June 30,2023,there were no outstanding balances under these revolvingcredit agreements.In April 2023,The Cigna Group entered into the following revolving credit agreements(the Credit Agreements):a$4.0 billion five-y
120、ear revolving credit and letter of credit agreement that will mature in April 2028 with an option to extend the maturity date foradditional one-year periods,subject to consent of the banks.The Company can borrow up to$4.0 billion under the credit agreement for general corporatepurposes,with up to$50
121、0 million available for issuance of letters of credit.a$1.0 billion 364-day revolving credit agreement that will mature in April 2024.The Company can borrow up to$1.0 billion under the credit agreementfor general corporate purposes.This agreement includes the option to term out any revolving loans t
122、hat are outstanding at maturity by converting theminto a term loan maturing on the one-year anniversary of conversion.Each of the Credit Agreements include an option to increase commitments in an aggregate amount of up to$1.5 billion across both facilities for a maximum totalcommitment of$6.5 billio
123、n.The Credit Agreements allow for borrowings at either a base rate or an adjusted term Secured Overnight Funding Rate(SOFR)plus,in each case,an applicable margin based on the Companys senior unsecured credit ratings.Each of the two facilities is diversified among 21 large commercial banks,all of whi
124、ch had an A-equivalent or higher rating by at least one Nationally RecognizedStatistical Rating Organization as of June 30,2023.Each facility also contains customary covenants and restrictions,including a financial covenant that theCompanys leverage ratio,as defined in the Credit Agreements,may not
125、exceed 60%subject to certain exceptions upon the consummation of an acquisition.The Credit Agreements replaced a prior$3.0 billion five-year revolving credit and letter of credit agreement maturing in April 2027;a$1.0 billion three-yearrevolving credit agreement maturing in April 2025;and a$1.0 bill
126、ion 364-day revolving credit agreement maturing in April 2023.Commercial Paper.Under our commercial paper program,we may issue short-term,unsecured commercial paper notes privately placed on a discounted basisthrough certain broker-dealers at any time not to exceed an aggregate amount of$5.0 billion
127、.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 average interest rate of ourcommercial paper was 5.41%at June 30,2023.Debt Covenants.The Company was in
128、 compliance with its debt covenants as of June 30,2023.Interest ExpenseInterest expense on long-term and short-term debt was$350 million for the three months ended and$695 million for the six months ended June 30,2023,comparedwith$316 million for the three months ended and$630 million for the six mo
129、nths ended June 30,2022.15Note 8 Common and Preferred StockDividendsIn the first six months of 2023,The Cigna Group declared quarterly cash dividends of$1.23 per share of the Companys common stock.In the first six months of2022,The Cigna Group declared quarterly cash dividends of$1.12 per share of t
130、he Companys common stock.The following table provides details of the Companys dividend payments:Record DatePayment DateAmount per ShareTotal Amount Paid(in millions)2023March 8,2023March 23,2023$1.23$368June 7,2023June 22,2023$1.23$3622022March 9,2022March 24,2022$1.12$357June 8,2022June 23,2022$1.1
131、2$352On July 26,2023,the Board of Directors declared the third quarter cash dividend of$1.23 per share of The Cigna Group common stock to be paid onSeptember 21,2023 to shareholders of record on September 6,2023.The Company currently intends to pay regular quarterly dividends,with future declaration
132、ssubject to approval by its Board of Directors and the Boards determination that the declaration of dividends remains in the best interests of The Cigna Group and itsshareholders.The decision of whether to pay future dividends and the amount of any such dividends will be based on the Companys financ
133、ial position,results ofoperations,cash flows,capital requirements,the requirements of applicable law and any other factors the Board may deem relevant.Note 9 Insurance and Contractholder LiabilitiesA.Account Balances Insurance and Contractholder LiabilitiesThe Companys insurance and contractholder l
134、iabilities were comprised of the following:June 30,2023December 31,2022June 30,2022(In millions)CurrentNon-currentTotalCurrentNon-currentTotalTotalUnpaid claims and claim expensesCigna Healthcare$5,257$79$5,336$4,117$59$4,176$4,490 Other Operations110 187 297 107 177 284 709 Future policy benefitsCi
135、gna Healthcare60 535 595 43 544 587 634 Other Operations297 3,290 3,587 150 3,442 3,592 7,512 Contractholder deposit fundsCigna Healthcare13 145 158 14 157 171 185 Other Operations364 6,283 6,647 351 6,358 6,709 6,801 Market risk benefits35 1,034 1,069 51 1,217 1,268 1,403 Unearned premiums1,403 22
136、1,425 576 22 598 985 Total22,719Insurance and contractholder liabilities classifiedas Liabilities of businesses held for sale(4,427)Total insurance and contractholder liabilities$7,539$11,575$19,114$5,409$11,976$17,385$18,292 Amounts classified as Liabilities of businesses held for sale primarily in
137、clude$3.6 billion of Future policy benefits,$0.4 billion of Unpaid claims and$0.4 billion of Unearned premiums as of June 30,2022.Insurance and contractholder liabilities expected to be paid within one year are classified as current.The Company adopted amended accounting guidance for long-duration i
138、nsurance contracts on January 1,2023,discussed further in Note 2 to the Consolidated Financial Statements,which resulted in restatement of prior periodamounts.Additionally,see below updated accounting policies and incremental disclosures associated with future policy benefits(Note 9C),contractholder
139、 depositfunds(Note 9D),and market risk benefits(Note 9E).(1)(1)16B.Unpaid Claims and Claim Expenses Cigna HealthcareThis liability reflects estimates of the ultimate cost of claims that have been incurred but not reported,including expected development on reported claims,thosethat have been reported
140、 but not yet paid(reported claims in process)and other medical care expenses and services payable that are primarily comprised of accrualsfor incentives and other amounts payable to health care professionals and facilities.The total of incurred but not reported liabilities plus expected development
141、on reported claims,including reported claims in process,was$5.0 billion at June 30,2023 and$4.1 billion at June 30,2022.Activity,net of intercompany transactions,in the unpaid claims liability for the Cigna Healthcare segment was as follows:Six Months Ended(In millions)June 30,2023June 30,2022Beginn
142、ing balance$4,176$4,261 Less:Reinsurance and other amounts recoverable221 261 Beginning balance,net3,955 4,000 Incurred costs related to:Current year17,974 15,751 Prior years(202)(268)Total incurred17,772 15,483 Paid costs related to:Current year13,408 11,900 Prior years3,199 3,290 Total paid16,607
143、15,190 Ending balance,net5,120 4,293 Add:Reinsurance and other amounts recoverable216 197 Ending balance$5,336$4,490 Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims of certainbusiness for which the
144、Company administers the plan benefits without any right of offset.See Note 10 to the Consolidated Financial Statements for additionalinformation on reinsurance.Variances in incurred costs related to prior years unpaid claims and claim expenses that resulted from the differences between actual experi
145、ence and the Companyskey assumptions were as follows:Six Months EndedJune 30,2023June 30,2022(Dollars in millions)$%$%Actual completion factors$29 0.1%$84 0.2%Medical cost trend173 0.5 184 0.6 Total favorable variance$202 0.6%$268 0.8%Percentage of current year incurred costs as reported for the yea
146、r ended December 31,2022.Percentage of current year incurred costs as reported for the year ended December 31,2021.Favorable prior year development in both years reflects lower than expected utilization of medical services as compared to our assumptions.C.Future Policy BenefitsAccounting Policy.Futu
147、re policy benefits represent the present value of estimated future obligations,estimated using actuarial methods,for long-duration insurancepolicies and annuity products currently in force,consisting primarily of reserves for annuity contracts,life insurance benefits,and certain supplemental healthp
148、roducts that are guaranteed renewable beyond one year.Contracts are grouped at a level no higher than issue year,based on the original contract issue date,and at lower levels of disaggregation within each issue year forcertain businesses to reflect factors including product type,plan type and curren
149、cy.Management estimates these obligations based on assumptions for premiums,interest rates,mortality or morbidity,future claim adjudication expenses and surrenders.Mortality,morbidity and surrender assumptions are based on theCompanys own experience and published actuarial tables,and are updated at
150、least annually,to the extent changes in circumstances require.Interest rate(1)(2)(1)(2)17assumptions are based on market-level yields for low credit risk fixed income instruments(upper-medium grade fixed income instrument).For interest accretionpurposes,interest rates are fixed at the year of the co
151、horts inception,however for purposes of liability measurement,are updated to the current rate quarterly,withall changes in the interest rate from inception to current period reported through Accumulated other comprehensive loss.For contracts issued domestically,we useobservable inputs from a publish
152、ed spot rate curve for terms up to 30 years and extrapolate for longer terms using a constant forward rate approach.For contractsissued by foreign operating entities with functional currencies other than the U.S.dollar,we use observable inputs to approximate a risk free rate and add a creditspread a
153、djustment to align with a low credit risk fixed income instrument.For terms beyond the last observable risk free rates,which vary by international market,we extrapolate to the ultimate forward rate assuming a constant credit spread.For the annuity business,the premium paying period is shorter than t
154、he benefit coverage period,and a deferred profit liability(DPL)is reported in future policybenefits representing gross premium received in excess of net premiums.DPL is amortized based on expected future benefit payments.Cigna HealthcareThe weighted average interest rates applied and duration for fu
155、ture policy benefits in the Cigna Healthcare segment,consisting primarily of supplemental healthproducts including individual Medicare supplement,limited benefit health products and individual private medical insurance,were as follows:As ofJune 30,2023June 30,2022Interest accretion rate2.20%2.72%Cur
156、rent discount rate5.36%4.87%Weighted average duration7.8 years7.2 years18The net liability for future policy benefits for the segments supplemental health products represents the present value of benefits expected to be paid topolicyholders,net of the present value of expected net premiums,which is
157、the portion of expected future gross premium expected to be collected frompolicyholders that is required to provide for all expected future benefits and expenses.The present values of expected net premiums and expected future policybenefits for the Cigna Healthcare segment are as follows:Six Months
158、Ended(In millions)June 30,2023June 30,2022Present value of expected net premiumsBeginning balance$8,557$9,314 Reversal of effect of beginning of period discount rate assumptions1,537(367)Effect of assumption changes and actual variances from expected experience51 Issuances and lapses570 434 Net prem
159、iums collected(658)(623)Interest and other 106 89 Ending balance at original discount rate10,163 8,847 Effect of end of period discount rate assumptions(1,491)(923)Ending balance$8,672$7,924 Present value of expected policy benefitsBeginning balance$8,945$9,794 Reversal of effect of discount rate as
160、sumptions1,611(379)Effect of assumption changes and actual variances from expected experience54 Issuances and lapses558 565 Benefit payments(661)(768)Interest and other 121 105 Ending balance at original discount rate10,628 9,317 Effect of discount rate assumptions(1,565)(958)Ending balance$9,063$8,
161、359 Liability for future policy benefits$391$435 Other204 199 Total liability for future policy benefits$595$634 Includes the foreign exchange rate impact of translating from transactional and functional currency to United States dollar and the impact of flooring the liability at zero.The flooring i
162、mpact iscalculated at the cohort level after discounting the reserves at the current discount rate.As of June 30,2023 and June 30,2022,respectively,undiscounted expected future gross premiums were$17.7 billion and$13.7 billion.As of June 30,2023 and June 30,2022,respectively,discountedexpected futur
163、e gross premiums were$12.3 billion and$10.2 billion.As of June 30,2023 and June 30,2022,respectively,undiscounted expected future policy benefits were$12.9 billion and$11.2 billion.The liability for future policyholder benefits includes immaterial businesses shown as reconciling items above,most of
164、which are in run-off.$154 million and$150 million of reinsurance recoverable asset reported in the Consolidated Balance Sheets as of June 30,2023 and June 30,2022,respectively,relate to the liability for future policybenefits.Other OperationsThe weighted average interest rates applied and duration f
165、or future policy benefits in Other Operations,consisting of annuity and life insurance products,were asfollows:As ofJune 30,2023June 30,2022Interest accretion rate5.64%5.64%Current discount rate5.02%4.52%Weighted average duration11.7 years12.4 yearsObligations for annuities represent discounted peri
166、odic benefits to be paid to an individual or groups of individuals over their remaining lives.Other Operationstraditional insurance contracts,which are in run-off,have no premium remaining to be collected;therefore,future policy benefit reserves represent the present valueof expected future policy b
167、enefits,discounted using the current discount rate and the remaining amortizable DPL.Future policy benefits for Other Operations includes DPL of$386 million as of June 30,2023 and$380 million as of June 30,2022.Future policy benefitsexcluding DPL were$3.2 billion as of both June 30,2023 and December
168、 31,2022 and$3.5 billion and(1)(2)(1)(3)(4)(5)(1)(2)(3)(4)(5)19$4.3 billion as of June 30,2022 and December 31,2021,respectively.These balances exclude amounts classified as Liabilities of businesses held for sale of$3.6 billion as of June 30,2022 and$3.8 billion as of December 31,2021.The change in
169、 future policy benefits reserves year-to-date was primarily driven bychanges in the current discount rate.Undiscounted expected future policy benefits were$4.5 billion as of June 30,2023 and$4.7 billion as of June 30,2022.As of June 30,2023 and June 30,2022,$1.0 billion and$1.1 billion of the future
170、 policy benefit reserve was recoverable through treaties with external reinsurers.D.Contractholder Deposit FundsAccounting Policy.Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-related and universal lifeproducts as well as investment ea
171、rnings on their fund balances in Other Operations.These liabilities are adjusted to reflect administrative charges and,for universallife fund balances,mortality charges.Interest credited on these funds is accrued ratably over the contract period.Contractholder deposit fund liabilities within Other O
172、perations were$6.6 billion as of June 30,2023 and$6.7 billion as of December 31,2022 and$6.8 billion and$6.9 billion as of June 30,2022 and December 31,2021,respectively.Approximately 38%of the balance is reinsured externally.Activity in these liabilities ispresented net of reinsurance in the Consol
173、idated Statements of Cash Flows.The net year-to-date decrease in contractholder deposit fund liabilities generally relatesto withdrawals and benefit payments from contractholder deposit funds,partially offset by deposits and interest credited to contractholder deposit funds.As of June 30,2023,the we
174、ighted average crediting rate,net amount at risk and cash surrender value for contractholder deposit fund liabilities not externallyreinsured were 3.26%,$3.2 billion and$2.8 billion,respectively.The comparative amounts as of June 30,2022 were 3.20%,$3.4 billion and$2.8 billion,respectively.As of bot
175、h June 30,2023 and June 30,2022,more than 99%of the$4.1 billion liability not reinsured externally is for contracts with guaranteedinterest rates of 3%-4%,and approximately$1.2 billion represented contracts with policies at the guarantee.At both of these same period ends,$1.2 billion was50-150 basis
176、 points(bps)above the guarantee and the remaining$1.7 billion represented contracts above the guarantee that pay the policyholder based on thegreater of a guaranteed minimum cash value or the actual cash value.More than 90%of these contracts have actual cash values of at least 110%of the guaranteedc
177、ash value.E.Market Risk BenefitsLiabilities for market risk benefits consist of variable annuity reinsurance contracts(also referred to as GMDB and GMIB contracts)in Other Operations.Theseliabilities arise under annuities and riders to annuities written by ceding companies that guarantee the benefit
178、 received at death and,for a subset of policies,alsoprovide contractholders the option,within 30 days of a policy anniversary after the appropriate waiting period,to elect minimum income payments.The Companyscapital market risk exposure on variable annuity reinsurance contracts arises when the reins
179、ured guaranteed minimum benefit exceeds the contractholders accountvalue in the related underlying mutual funds at the time the insurance benefit is payable under the respective contract.The Company receives and pays premiumperiodically based on the terms of the reinsurance agreements.Accounting Pol
180、icy.Variable annuity reinsurance liabilities are measured as MRBs at fair value,net of nonperformance risk,with fluctuations in value gross ofreinsurer nonperformance risk reported in benefit expenses while fluctuations in the Companys own nonperformance risk(own credit risk)are reported inAccumulat
181、ed other comprehensive loss.Nonperformance risk reflects risk that a party might default and therefore not fulfill its obligations(i.e.nonpayment risk).The nonperformance risk adjustment reflects a market participants view of nonpayment risk by adding an additional spread to the discount rate in the
182、 calculation ofboth(a)the variable annuity reinsurance liabilities to be paid by the Company and(b)the variable annuity reinsurance assets to be paid by the reinsurers,afterconsidering collateral.The Company classifies variable annuity assets and liabilities in Level 3 of the fair value hierarchy de
183、scribed in Note 12 to the ConsolidatedFinancial Statements because assumptions related to future annuitant behavior are largely unobservable.As discussed further in Note 10 to the ConsolidatedFinancial Statements,due to the reinsurance agreements covering these liabilities,the liabilities do not gen
184、erally impact net income except for the change innonperformance risk on the reinsurance recoverable,which is reported in benefit expenses and does not offset the nonperformance risk valuation on the liability.Variable annuity liabilities are established using capital market assumptions and assumptio
185、ns related to future annuitant behavior(including mortality,lapse andannuity election rates).20Market risk benefits activity was as follows:Six Months Ended(In millions)June 30,2023June 30,2022Balance,beginning of year$1,268$1,824 Balance,beginning of year,before the effect of nonperformance risk(ow
186、n credit risk)1,379 1,949 Changes due to expected run-off(14)(33)Changes due to capital markets versus expected(194)(441)Changes due to policyholder behavior versus expected8(8)Assumption changes(32)39 Balance,end of period,before the effect of changes in nonperformance risk(own credit risk)1,147 1,
187、506 Nonperformance risk(own credit risk),end of period(78)(103)Balance,end of period$1,069$1,403 Reinsured market risk benefit,end of period$1,143$1,500 The following table presents the net amount at risk and the average attained age of contractholders(weighted by exposure)for contracts assumed by t
188、he Company.The net amount at risk is the amount the Company would have to pay to contractholders if all deaths or annuitizations occurred as of the earliest possible date inaccordance with the insurance contract.The Company should be reimbursed in full for these payments unless the Berkshire reinsur
189、ance limit is exceeded,asdiscussed further in Note 10 to the Consolidated Financial Statements.(Dollars in millions,excludes impact of reinsurance ceded)June 30,2023June 30,2022Net amount at risk$1,871$2,728 Average attained age of contractholders(weighted by exposure)76.3 years74.2 yearsNote 10 Rei
190、nsuranceThe Companys insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and to permit recovery of aportion of incurred losses.Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not
191、being acquired.Reinsurance does not relieve the originating insurer of liability.Therefore,reinsured liabilities must continue to be reported along with the related reinsurancerecoverables.The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its cr
192、edit risk.A.Reinsurance RecoverablesThe majority of the Companys reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was notacquired.The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to m
193、eet their reinsurance obligations to the Company.The Company reviews its reinsurance arrangements and establishes reserves against the recoverables primarily for expected credit losses.21The Companys reinsurance recoverables as of June 30,2023 are presented at amount due by range of external credit
194、rating and collateral level in the followingtable,with reinsurance recoverables that are market risk benefits separately presented at fair value:(In millions)Fair value of collateralcontractually required tomeet or exceed carryingvalue of recoverableCollateral provisionsexist that may mitigaterisk o
195、f credit loss No collateralTotalOngoing OperationsA-equivalent and higher current ratings$95$95 BBB-to BBB+equivalent current credit ratings 59 59 Not rated150 1 90 241 Total recoverables related to ongoing operations 150 1 244 395 Acquisition,disposition or run-off activitiesBBB+equivalent and high
196、er current ratings Lincoln National Life and Lincoln Life&Annuity of New York 2,750 2,750 Empower Annuity Insurance Company 130 130 Prudential Insurance Company of America364 364 Life Insurance Company of North America 382 382 Other179 29 15 223 Not rated 8 4 12 Total recoverables related to acquisi
197、tion,disposition or run-off activities543 3,169 149 3,861 Total reinsurance recoverables before market risk benefits$693$3,170$393$4,256 Allowance for uncollectible reinsurance(35)Market risk benefits 1,143 Total reinsurance recoverables$5,364 Certified by a Nationally Recognized Statistical Rating
198、Organization(NRSRO).Includes$221 million of current reinsurance recoverables that are reported in Other current assets.Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.Total Berkshire and cer
199、tain Other recoverables reflected under acquisition,disposition or run-off activities in the Companys 2022 Form 10-K that relate to the Companys variable annuity reinsuranceproducts discussed in section B below are now reported at fair market value as MRBs,as further discussed in Note 9 to the Conso
200、lidated Financial Statements.At December 31,2022,we reported$711million of recoverables related to the GMDB variable annuity reinsurance product.The restated December 31,2022 variable annuity reinsurance recoverable balance is$1.4 billion,which also includesthe GMIB variable annuity reinsurance prod
201、uct that was classified in Other assets prior to the adoption of LDTI.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 whichcollateral is required to be replenished and the potential for
202、 volatility in the collaterals fair value.B.Effective Exit of Variable Annuity Reinsurance BusinessThe Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance transaction in 2013.Variableannuity contracts are accounted for as a
203、ssumed and ceded reinsurance and categorized as market risk benefits as discussed in Note 9 to the Consolidated FinancialStatements.Berkshire reinsured 100%of the Companys future cash flows in this business,net of other reinsurance arrangements existing at that time.Thereinsurance agreement is subje
204、ct to an overall limit with approximately$3.1 billion remaining at June 30,2023.As a result of the reinsurance transaction,amountspayable are offset by a corresponding reinsurance recoverable,provided the increased recoverable remains within the overall Berkshire limit.(3)(1)(1)(2)(1)(4)(2)(1)(2)(3)
205、(4)22(In millions)Reinsurer June 30,2023December 31,2022Collateral and Other Termsat June 30,2023Berkshire$917$1,116 95%were secured by assets in a trust.Sun Life Assurance Company of Canada105 115 Liberty Re(Bermuda)Ltd.115 128 100%were secured by assets in a trust.SCOR SE31 39 75%were secured by a
206、 letter of credit.Market risk benefits$1,168$1,398 All reinsurers are rated A-equivalent and higher by an NRSRO.Includes IBNR and outstanding claims of$28 million offset by premium due of$3 million.These amounts are excluded from market risk benefits at June 30,2023 in Note 9 and Note 10A to theCons
207、olidated Financial Statements.At December 31,2022,IBNR and outstanding claims of$27 million offset by premium due of$3 million were excluded from the market risk benefits as restated due tothe adoption of LDTI.The impact of nonperformance risk(i.e.the risk that a counterparty might default)on the va
208、riable annuity reinsurance asset was immaterial for the three and sixmonths ended June 30,2023 and June 30,2022.Note 11 InvestmentsThe Cigna Groups investment portfolio consists of a broad range of investments including debt securities,equity securities,commercial mortgage loans,policyloans,other lo
209、ng-term investments,short-term investments and derivative financial instruments.The sections below provide more detail regarding our investmentbalances and realized investment gains and losses.See Note 12 to the Consolidated Financial Statements for information about the valuation of the Companysinv
210、estment portfolio.Further information about our accounting policies for investment assets can be found in Note 11 in the Companys 2022 Form 10-K.The following table summarizes the Companys investments by category and current or long-term classification:June 30,2023December 31,2022(In millions)Curren
211、tLong-termTotalCurrentLong-termTotalDebt securities$574$8,894$9,468$654$9,218$9,872 Equity securities42 3,320 3,362 45 577 622 Commercial mortgage loans104 1,483 1,587 67 1,547 1,614 Policy loans 1,232 1,232 1,218 1,218 Other long-term investments 4,038 4,038 3,728 3,728 Short-term investments152 15
212、2 139 139 Total$872$18,967$19,839$905$16,288$17,193 A.Investment PortfolioDebt SecuritiesAccounting policy.Our accounting policy for debt securities(including bonds,mortgage and other asset-backed securities and preferred stocks redeemable by theinvestor)remains materially consistent with the policy
213、 disclosed in the Companys 2022 Form 10-K.However,with the adoption of amended accounting guidancefor long-duration insurance contracts on January 1,2023(discussed in Note 2 to the Consolidated Financial Statements),net unrealized appreciation on debtsecurities supporting the Companys run-off settle
214、ment annuity business is no longer reported in Non-current insurance and contractholder liabilities but rather isreported in Accumulated other comprehensive loss.See Note 14 to the Consolidated Financial Statements for the retrospectively restated Accumulated othercomprehensive loss.(1)(2)(1)(2)23Th
215、e amortized cost and fair value by contractual maturity periods for debt securities were as follows as of June 30,2023:(In millions)AmortizedCostFairValueDue in one year or less$605$591 Due after one year through five years3,892 3,649 Due after five years through ten years3,069 2,732 Due after ten y
216、ears2,336 2,131 Mortgage and other asset-backed securities406 365 Total$10,308$9,468 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 prepayobligations,with or without penalties.Gross unrealized
217、 appreciation(depreciation)on debt securities by type of issuer is shown below:(In millions)AmortizedCostAllowance forCredit LossUnrealizedAppreciationUnrealizedDepreciationFairValueJune 30,2023Federal government and agency$276$26$(11)$291 State and local government41 (2)39 Foreign government361 10(
218、20)351 Corporate9,224(39)99(862)8,422 Mortgage and other asset-backed406 1(42)365 Total$10,308$(39)$136$(937)$9,468 December 31,2022Federal government and agency$292$32$(12)$312 State and local government43 (2)41 Foreign government375 11(21)365 Corporate9,742(44)89(981)8,806 Mortgage and other asset
219、-backed390 1(43)348 Total$10,842$(44)$133$(1,059)$9,872 Review of declines in fair value.Management reviews impaired debt securities to determine whether a credit loss allowance is needed based on criteria thatinclude:severity of decline;financial health and specific prospects of the issuer;andchang
220、es in the regulatory,economic or general market environment of the issuers 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,byinvestment grade and the length of tim
221、e these securities have been in an unrealized loss position.Unrealized depreciation on these debt securities is primarily due todeclines in fair value resulting from increasing interest rates since these securities were purchased.June 30,2023December 31,2022(Dollars in millions)FairValueAmortizedCos
222、tUnrealizedDepreciationNumberof IssuesFairValueAmortizedCostUnrealizedDepreciationNumberof IssuesOne year or lessInvestment grade$1,687$1,751$(64)706$5,533$6,127$(594)1,659 Below investment grade251 257(6)882887 964(77)1,287 More than one yearInvestment grade4,768 5,538(770)1,4431,151 1,487(336)462
223、Below investment grade717 814(97)845330 382(52)369 Total$7,423$8,360$(937)3,876$7,901$8,960$(1,059)3,777 24Equity SecuritiesThe following table provides the values of the Companys equity security investments as of June 30,2023 and December 31,2022:June 30,2023December 31,2022(In millions)CostCarryin
224、g Value CostCarrying ValueEquity securities with readily determinable fair values$671$75$673$138 Equity securities with no readily determinable fair value3,181 3,287 380 484 Total$3,852$3,362$1,053$622 In 2023,we became a minority owner in VillageMD by investing$2.7 billion in VillageMD preferred eq
225、uity.VillageMD is a provider of primary,multi-specialtyand urgent care services that is majority-owned by Walgreens Boots Alliance,Inc.These securities are included in Equity securities with no readily determinablefair value in the above table.A dividend of 5.5%accrues annually on$2.2 billion of the
226、se shares.Consistent with our strategy to invest in targeted startup andgrowth-stage companies in the health care industry,approximately 95%of our investments in equity securities are in the health care sector.Commercial Mortgage LoansMortgage loans held by the Company are made exclusively to commer
227、cial borrowers and are diversified by property type,location and borrower.Loans aregenerally issued at fixed rates of interest and are secured by high quality,primarily completed and substantially leased operating properties.The Company regularly evaluates and monitors credit risk from the initial m
228、ortgage loan underwriting and throughout the investment holding period.For moreinformation on the Companys accounting policies and methodologies regarding these investments,see Note 11 in the Companys 2022 Form 10-K.The following table summarizes the credit risk profile of the Companys commercial mo
229、rtgage loan portfolio:(Dollars in millions)June 30,2023December 31,2022Loan-to-Value RatioCarrying ValueAverage DebtService CoverageRatioAverage Loan-to-Value RatioCarrying ValueAverage DebtService CoverageRatioAverage Loan-to-Value RatioBelow 60%$826 2.22$901 2.1260%to 79%595 1.78564 1.7380%to 100%
230、166 1.14149 1.17Total$1,587 1.9362%$1,614 1.8960%Other Long-Term InvestmentsOther long-term investments include investments in unconsolidated entities,including certain limited partnerships and limited liability companies holding realestate,securities or loans.These investments are carried at cost p
231、lus the Companys ownership percentage of reporting income or loss,based on the financialstatements 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 thetiming of when financial information is received
232、 from the general partner or manager of the investments.Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicatethat the carrying value may not be recoverable.Additionally,statutory and other re
233、stricted deposits and foreign currency swaps carried at fair value are reported inthe table below as Other.The following table provides the carrying value information for these investments:Carrying Value as of(In millions)June 30,2023December 31,2022Real estate investments$1,464$1,319 Securities par
234、tnerships2,351 2,166 Other223 243 Total$4,038$3,728 25B.Derivative Financial InstrumentsThe Company uses derivative financial instruments to manage the characteristics of investment assets(such as duration,yield,currency and liquidity)to meet thevarying demands of the related insurance and contracth
235、older liabilities.The Company also uses derivative financial instruments to hedge the risk of changes in thenet assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.As of June 30,2023,there have
236、been no material changes to the Companys derivative financial instruments.The effects of derivative financial instruments used inour individual hedging strategies were not material to the Consolidated Financial Statements as of June 30,2023 and December 31,2022.The gross fair values ofour derivative
237、 financial instruments are presented in Note 12 to the Consolidated Financial Statements.Please refer to the Companys 2022 Form 10-K for further discussion of the types of derivative financial instruments and associated accounting policies.C.Realized Investment Gains and LossesAccounting policy.Real
238、ized investment gains and losses are based on specifically identified assets and result from sales,investment asset write-downs,change inthe fair value of certain derivatives and equity securities and changes in allowances for credit losses on debt securities and commercial mortgage loan investments
239、.With the adoption of amended accounting guidance for long-duration insurance contracts on January 1,2023(discussed in Note 2 to the Consolidated FinancialStatements),realized investment gains and losses no longer exclude amounts that were previously required to adjust future policy benefits for the
240、 run-off settlementannuity business.Prior period net realized investment losses have been updated to reflect the impact of adopting LDTI.The following realized gains and losses on investments exclude realized gains and losses attributed to the Companys separate accounts because those gains andlosses
241、 generally accrue directly to separate account policyholders:Three Months Ended June 30,Six Months Ended June 30,(In millions)2023202220232022Net realized investment gains(losses),excluding credit loss expense and asset write-downs$31$(65)$(20)$(387)Credit loss(expense)recoveries(1)(24)2(24)Other in
242、vestment asset write-downs(4)(12)Net realized investment gains(losses),before income taxes$26$(89)$(30)$(411)Net realized investment losses for the six months ended June 30,2023 and June 30,2022 were primarily due to mark-to-market losses on a strategic health careequity securities investment.Note 1
243、2 Fair Value MeasurementsThe Company carries certain financial instruments at fair value in the financial statements including debt securities,certain equity securities,short-term investmentsand derivatives.Other financial instruments are measured at fair value only under certain conditions,such as
244、when impaired or when there are observable pricechanges 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 liabilitysfair value is defi
245、ned 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 thecreditor.The Companys financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP.The hierar
246、chy gives the highestranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities(Level 1)and the lowest ranking to fair valuesdetermined using methodologies and models with unobservable inputs(Level 3).An assets or a liabilitys classificati
247、on is based on the lowest level of input that issignificant to its measurement.For example,a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significantto the instruments fair value,even though the measurement may be derived using inputs
248、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 financialinstruments,see Note 12 in the Companys 2022 Form 10-K.26A.Financial Asse
249、ts and Financial Liabilities Carried at Fair ValueThe following table provides information about the Companys financial assets and liabilities carried at fair value.Further information regarding insurance assetsand liabilities carried at fair value is provided in Note 9E to the Consolidated Financia
250、l Statements.Separate account assets are also recorded at fair value on theCompanys Consolidated Balance Sheets and are reported separately in the Separate Accounts section below as gains and losses related to these assets generallyaccrue directly to contractholders:(In millions)Quoted Prices in Act
251、ive Markets forIdentical Assets(Level 1)Significant Other Observable Inputs(Level 2)Significant Unobservable Inputs(Level 3)TotalJune 30,2023December 31,2022June 30,2023December 31,2022June 30,2023December 31,2022June 30,2023December 31,2022Financial assets at fair valueDebt securitiesFederal govern
252、ment andagency$147$147$144$165$291$312 State and local government 39 41 39 41 Foreign government 351 365 351 365 Corporate 8,018 8,394 404 412 8,422 8,806 Mortgage and other asset-backed 315 313 50 35 365 348 Total debt securities147 147 8,867 9,278 454 447 9,468 9,872 Equity securities 5 6 70 132 7
253、5 138 Short-term investments 152 139 152 139 Derivative assets 192 230 1 192 231 Excludes certain equity securities that have no readily determinable fair value.Level 3 Financial Assets and Financial LiabilitiesCertain inputs for instruments classified in Level 3 are unobservable(supported by little
254、 or no market activity)and significant to their resulting fair valuemeasurement.Unobservable inputs reflect the Companys best estimate of what hypothetical market participants would use to determine a transaction price for theasset or liability at the reporting date.Additionally,as discussed in Note
255、 9 to the Consolidated Financial Statements,the Company classifies variable annuity assetsand liabilities in Level 3 of the fair value hierarchy.Quantitative Information about Unobservable InputsThe significant unobservable input used to value our corporate and government debt securities and mortgag
256、e and other asset-backed securities is an adjustment forliquidity.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 wer
257、e developed directly by the Company and used in pricing these debtsecurities.The range and weighted average basis point amounts for liquidity reflect the Companys best estimates of the unobservable adjustments a marketparticipant would make to calculate these fair values.Fair Value as ofUnobservable
258、 Adjustment Range(WeightedAverage by Quantity)as of(Fair value in millions)June 30,2023December 31,2022Unobservable Input June 30,2023June 30,2023December 31,2022Debt securitiesCorporate$404$412 Liquidity60-1060(300)bps60-1060(270)bpsMortgage and other asset-backed securities50 35 Liquidity100-595(2
259、70)bps105-520(310)bpsTotal Level 3 debt securities$454$447 A significant increase in liquidity spread adjustments would result in a lower fair value measurement,while a decrease would result in a higher fair valuemeasurement.(1)(1)27Changes in Level 3 Financial Assets and Financial Liabilities Carri
260、ed at Fair ValueThe following table summarizes the changes in financial assets and financial liabilities classified in Level 3.Gains and losses reported in the table may include netchanges in fair value that are attributable to both observable and unobservable inputs.For the Three Months EndedJune 3
261、0,For the Six Months EndedJune 30,(In millions)2023202220232022Debt and Equity SecuritiesBeginning balance$471$686$447$796(Losses)gains included in Shareholders net income(1)(2)10 Losses included in Other comprehensive loss(5)(24)(51)Purchases,sales and settlementsPurchases 27 4 76 Settlements(18)(7
262、1)(27)(152)Total purchases,sales and settlements(18)(44)(23)(76)Transfers into/(out of)Level 3Transfers into Level 332 17 71 118 Transfers out of Level 3(25)(121)(41)(285)Total transfers into/(out of)Level 37(104)30(167)Ending balance$454$512$454$512 Total losses included in Shareholders net income
263、attributable to instruments held at the reporting date$(1)$(3)$(2)Change in unrealized gain or(loss)included in Other comprehensive loss for assets held at the end of the reportingperiod$(6)$(11)$(5)$(25)Total gains and losses included in Shareholders net income in the tables above are reflected in
264、the Consolidated Statements of Income as Net realized investmentgains(losses)and Net investment income.Gains and losses included in Other comprehensive loss,net of tax in the tables above are reflected in Net unrealized appreciation(depreciation)on securities andderivatives in the Consolidated State
265、ments of Comprehensive Income.Transfers into or out of the Level 3 category occur when unobservable inputs,such as the Companys best estimate of what a market participant would use todetermine a current transaction price,become more or less significant to the fair value measurement.Market activity t
266、ypically decreases during periods of economicuncertainty and this decrease in activity reduces the availability of market observable data.As a result,the level of unobservable judgment that must be applied tothe pricing of certain instruments increases and is typically observed through the widening
267、of liquidity spreads.Transfers between Level 2 and Level 3 during 2023and 2022 primarily reflected changes in liquidity estimates for certain private placement issuers across several sectors.See discussion under QuantitativeInformation about Unobservable Inputs above for more information.Separate Ac
268、countsThe investment income and fair value gains and losses of Separate account assets generally accrue directly to the contractholders and,together with their depositsand withdrawals,are excluded from the Companys Consolidated Statements of Income and Cash Flows.The separate account activity for th
269、e six months endedJune 30,2023 and 2022 was primarily driven by changes in the market values of the underlying separate account investments.28Fair values of Separate account assets were as follows:Quoted Prices in Active Marketsfor Identical Assets(Level 1)Significant Other ObservableInputs(Level 2)
270、Significant Unobservable Inputs(Level 3)Total(In millions)June 30,2023December 31,2022June 30,2023December 31,2022June 30,2023December 31,2022June 30,2023December 31,2022Guaranteed separate accounts(See Note 16)$218$203$347$382$565$585 Non-guaranteed separate accounts210 211 5,623 5,522 224 203 6,05
271、7 5,936 Subtotal$428$414$5,970$5,904$224$203 6,622 6,521 Non-guaranteed separate accounts priced atnet asset value(NAV)as a practicalexpedient 702 757 Total$7,324$7,278 Non-guaranteed separate accounts include$4.0 billion as of June 30,2023 and December 31,2022 in assets supporting the Companys pens
272、ion plans,including$0.2 billion classified in Level 3 as ofJune 30,2023 and December 31,2022.Separate account assets classified in Level 3 primarily support the Companys pension plans and include certain newly-issued,privately-placed,complex or illiquidsecurities that are priced using methods discus
273、sed above,as well as commercial mortgage loans.Activity,including transfers into and out of Level 3,was notmaterial for the three and six months ended June 30,2023 or 2022.Separate account investments in securities partnerships,real estate and hedge funds are generally valued based on the separate a
274、ccounts ownership share of theequity of the investee(NAV as a practical expedient),including changes in the fair values of its underlying investments.Substantially all of these assets support theCompanys pension plans.The following table provides additional information on these investments:Fair Valu
275、e as ofUnfunded Commitment asof June 30,2023Redemption Frequency(if currently eligible)Redemption NoticePeriod(In millions)June 30,2023December 31,2022Securities partnerships$425$451$211 Not applicableNot applicableReal estate funds273 302 Quarterly30-90 daysHedge funds4 4 Up to annually,varying by
276、fund30-90 daysTotal$702$757$211 As of June 30,2023,the Company does not have plans to sell any of these assets at less than fair value.These investments are structured to satisfy longer-terminvestment objectives.Securities partnerships are contractually non-redeemable and the underlying investment a
277、ssets are expected to be liquidated by the fundmanagers within ten years after inception.B.Assets and Liabilities Measured at Fair Value under Certain ConditionsSome financial assets and liabilities are not carried at fair value,such as commercial mortgage loans that are carried at unpaid principal,
278、investment real estate thatis carried at depreciated cost and equity securities with no readily determinable fair value when there are no observable market transactions.However,thesefinancial assets and liabilities may be measured using fair value under certain conditions,such as when investments be
279、come impaired and are written down to theirfair 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 six months ended June 30,2023 and 2022,impairments recognized requiring these assets to
280、 be measured at fair value were not material.Realizedinvestment gains and losses from these observable price changes for the three and six months ended June 30,2023 and June 30,2022 were not material.(1)(1)(1)29C.Fair Value Disclosures for Financial Instruments Not Carried at Fair ValueThe following
281、 table includes the Companys financial instruments not recorded at fair value but for which fair value disclosure is required.In addition to universallife products and finance leases,financial instruments that are carried in the Companys Consolidated Balance Sheets at amounts that approximate fair v
282、alue areexcluded from the following table:Classification in FairValue HierarchyJune 30,2023December 31,2022(In millions)Fair ValueCarrying ValueFair ValueCarrying ValueCommercial mortgage loansLevel 3$1,460$1,587$1,491$1,614 Long-term debt,including current maturities,excluding finance leasesLevel 2
283、$30,313$32,428$28,653$30,994 Note 13 Variable Interest EntitiesWe perform ongoing qualitative analyses of our involvement with variable interest entities to determine if consolidation is required.The Company determined thatit was not a primary beneficiary in any material variable interest entity as
284、of June 30,2023 or December 31,2022.For details of our accounting policy for variableinterest entities and the composition of variable interest entities with which the Company is involved,refer to Note 13 in the Companys 2022 Form 10-K.TheCompany has not provided,and does not intend to provide,finan
285、cial support to any of these variable interest entities in excess of its maximum exposure.TheCompanys maximum exposure to loss from securities limited partnerships and real estate limited partnerships is$5.2 billion as of June 30,2023 compared to$4.8 billion as of December 31,2022 and the maximum ex
286、posure from real estate joint ventures is$0.8 billion as of June 30,2023 compared to$0.6 billion as ofDecember 31,2022.Note 14 Accumulated Other Comprehensive Income(Loss)(AOCI)AOCI includes net unrealized(depreciation)appreciation on securities and derivatives,change in discount rate and instrument
287、 specific credit risk for certain long-duration insurance contractholder liabilities(Note 9 to the Consolidated Financial Statements),foreign currency translation and the net postretirement benefitsliability adjustment.AOCI includes the Companys share from unconsolidated entities reported on the equ
288、ity method.Generally,tax effects in AOCI are establishedat the currently enacted tax rate and reclassified to Shareholders net income in the same period that the related pre-tax AOCI reclassifications are recognized.Shareholders other comprehensive(loss),net of tax,for both the three and six months
289、ended June 30,2023 and June 30,2022,is primarily driven by the change indiscount rates for certain long duration liabilities and unrealized changes in the market values of securities and derivatives,including the impacts fromunconsolidated entities reported on the equity method.30Changes in the comp
290、onents of AOCI,including the restatement for amended accounting guidance for long-duration insurance contracts(discussed in Note 2 to theConsolidated Financial Statements),are as follows:Three Months Ended June 30,Six Months Ended June 30,(In millions)2023202220232022Securities and DerivativesBeginn
291、ing balance,as retrospectively restated$(138)$423$(332)$1,266 Unrealized appreciation(depreciation)on securities and derivatives7(869)259(1,934)Tax(expense)benefit(12)169(66)400 Net unrealized(depreciation)appreciation on securities and derivatives(5)(700)193(1,534)Reclassification adjustment for lo
292、sses included in Shareholders net income(Net realized investmentgains(losses)31 38 26 27 Reclassification adjustment for tax(benefit)included in Shareholders net income(6)(8)(5)(6)Net losses reclassified from AOCI to Shareholders net income25 30 21 21 Other comprehensive income(loss),net of tax20(67
293、0)214(1,513)Ending balance$(118)$(247)$(118)$(247)Net long-duration insurance and contractholder liabilities measurement adjustments Beginning balance$(587)$(306)$(256)$(765)Current period change in discount rate for certain long duration liabilities(147)20(558)604 Tax benefit(expense)36 9 137(121)N
294、et current period change in discount rate for certain long duration liabilities(111)29(421)483 Current period change in instrument-specific credit risk for market risk benefits(7)(28)(33)(22)Tax benefit1 5 6 4 Net current period change in instrument-specific credit risk for market risk benefits(6)(2
295、3)(27)(18)Other comprehensive(loss)income,net of tax(117)6(448)465 Ending balance$(704)$(300)$(704)$(300)Translation of foreign currenciesBeginning balance,as retrospectively restated$(138)$(294)$(154)$(233)Translation of foreign currencies(20)(182)(5)(242)Tax benefit(expense)1(25)2(28)Net translati
296、on of foreign currencies(19)(207)(3)(270)Less:Net translation(loss)on foreign currencies attributable to noncontrolling interests(1)(3)Shareholders other comprehensive(loss),net of tax(19)(206)(3)(267)Ending balance$(157)$(500)$(157)$(500)Postretirement benefits liabilityBeginning balance$(906)$(1,3
297、23)$(916)$(1,336)Reclassification adjustment for amortization of net prior actuarial losses and prior service costs(Interestexpense and other)11 17 24 33 Reclassification adjustment for tax(benefit)included in Shareholders net income(3)(4)(6)(7)Net adjustments reclassified from AOCI to Shareholders
298、net income8 13 18 26 Valuation update(2)18(2)18 Tax benefit(expense)1(4)1(4)Net change due to valuation update(1)14(1)14 Other comprehensive income,net of tax7 27 17 40 Ending balance$(899)$(1,296)$(899)$(1,296)Total Accumulated other comprehensive lossBeginning balance,as retrospectively restated$(
299、1,769)$(1,500)$(1,658)$(1,068)Shareholders other comprehensive(loss),net of tax(109)(843)(220)(1,275)Ending balance$(1,878)$(2,343)$(1,878)$(2,343)Established upon the adoption of Targeted Improvements to the Accounting for Long-Duration Contracts in 2023.See Note 2 to the Consolidated Financial Sta
300、tements for further information.(1)(1)31Note 15 Income TaxesIncome Tax ExpenseThe 19.9%effective tax rate for the three months ended June 30,2023 and the 19.2%effective tax rate for the six months ended June 30,2023 were each lowerthan the 20.7%rate for the three months ended June 30,2022 and the 21
301、.6%rate for the six months ended June 30,2022.These decreases are driven largely byfavorable results relative to the Companys foreign operations and the release of uncertain tax positions resulting from favorable audit developments.As of June 30,2023,we had approximately$274 million in deferred tax
302、assets(DTAs)associated with unrealized investment losses that are partially recorded inAccumulated other comprehensive loss.We have determined that a valuation allowance against the DTAs is not currently required based on the Companys abilityto carry back losses and our ability and intent to hold ce
303、rtain securities until recovery.We continue to monitor and evaluate the need for any valuation allowance inthe future.Note 16 Contingencies and Other MattersThe Company,through its subsidiaries,is contingently liable for various guarantees provided in the ordinary course of business.A.Financial Guar
304、antees:Retiree and Life Insurance BenefitsThe Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits.For the majority of these benefits,thesponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these
305、 benefits and are required to maintain assets that exceed a certainpercentage 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 themanagement of the related assets to provide for benefit payments.A
306、s of June 30,2023,employers maintained assets that generally exceeded the benefit obligationsunder these arrangements of approximately$420 million.An additional liability is established if management believes that the Company will be required to makepayments under the guarantees;there were no additi
307、onal liabilities required for these guarantees,net of reinsurance,as of June 30,2023.Separate account assetssupporting 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 Com
308、panys consolidated results of operations,liquidity or financialcondition.B.Certain Other GuaranteesThe Company had indemnification obligations as of June 30,2023 in connection with acquisition and disposition transactions.These indemnification obligationsare triggered by the breach of representation
309、s or covenants provided by the Company,such as representations for the presentation of financial statements,filing oftax returns,compliance with law or identification of outstanding litigation.These obligations are typically subject to various time limitations,defined by thecontract or by operation
310、of law,such as statutes of limitation.In some cases,the maximum potential amount due is subject to contractual limitations based on apercentage of the transaction purchase price,while in other cases limitations are not specified or applicable.The Company does not believe that it is possible todeterm
311、ine 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 June 30,2023.C.Guaranty Fund AssessmentsThe Company operates in a regulator
312、y environment that may require its participation in assessments under state insurance guaranty association laws.TheCompanys exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business writtenin the relevant jurisdi
313、ctions.There were no material charges or credits resulting from existing or new guaranty fund assessments for the six months ended June 30,2023.D.Legal and Regulatory MattersThe Company is routinely involved in numerous claims,lawsuits,regulatory inquiries and audits,government investigations,includ
314、ing under the federal FalseClaims Act and state false claims acts initiated by a government investigating body or by a qui tam relators filing of a complaint under court seal,and other legalmatters arising,for the most part,in the ordinary course of managing a global health services business.Additio
315、nally,the Company has received and is cooperatingwith subpoenas or similar processes from various governmental agencies requesting information,all arising in the normal course of its business.Disputed taxmatters arising32from audits by the Internal Revenue Service or other state and foreign jurisdic
316、tions,including those resulting in litigation,are accounted for under GAAP guidancefor 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 litigationmatters are described below.
317、For those matters that the Company has identified with a reasonably possible material loss,the Company provides disclosure in theaggregate of accruals and range of loss,or a statement that such information cannot be estimated.The Companys accruals for the matters discussed below underLitigation Matt
318、ers and Regulatory Matters are not material.Due to numerous uncertain factors presented in these cases,it is not possible to estimate anaggregate 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 ultimateresol
319、ution 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 Companysresults of operations,financial condition or liquidity for any particular period.The outcomes of lawsuits are inherently unpredictable and we may be
320、unsuccessful inthese ongoing litigation matters or any future claims or litigation.Litigation MattersExpress Scripts Litigation with Elevance.In March 2016,Elevance filed a lawsuit in the United States District Court for the Southern District of New Yorkalleging various breach of contract claims aga
321、inst Express Scripts relating to the parties rights and obligations under the periodic pricing review section of thepharmacy benefit management agreement between the parties including allegations that Express Scripts failed to negotiate new pricing concessions in good faith,aswell as various alleged
322、 service issues.Elevance also requested that the court enter declaratory judgment that Express Scripts is required to provide Elevancecompetitive benchmark pricing,that Elevance can terminate the agreement and that Express Scripts is required to provide Elevance with post-termination servicesat comp
323、etitive benchmark pricing for one year following any termination by Elevance.Elevance claimed it is entitled to$13 billion in additional pricingconcessions over the remaining term of the agreement,as well as$1.8 billion for one year following any contract termination by Elevance and$150 milliondamag
324、es for service issues(Elevances Allegations).On April 19,2016,in response to Elevances complaint,Express Scripts filed its answer denying ElevancesAllegations in their entirety and asserting affirmative defenses and counterclaims against Elevance.The court subsequently granted Elevances motion to di
325、smisstwo of six counts of Express Scripts amended counterclaims.Express Scripts filed its Motion for Summary Judgment on August 27,2021.Elevance completedfiling of its Response to Express Scripts Motion for Summary Judgment on October 16,2021.Express Scripts filed its Reply in Support of its Motion
326、for SummaryJudgment on November 19,2021.On March 31,2022,the court granted summary judgment in favor of Express Scripts on all of Elevances pricing claims fordamages totaling$14.8 billion and on most of Elevances claims relating to service issues.Elevances only remaining service claims relate to the
327、 review orprocessing of prior authorizations.On June 10,2022,Express Scripts filed a Motion for Partial Summary Judgment seeking to limit Elevances remaining priorauthorization claims and a Motion to Exclude certain opinions offered by its experts.Elevance filed its opposition to both motions,and a
328、cross-motion to submit asupplemental expert report,on July 9,2022.Express Scripts pending Motions were fully briefed at the end of July 2022.On March 8,2023,the Court grantedExpress Scripts Motion for Partial Summary Judgment,excluding in full the testimony of four of Elevances experts and in part t
329、he testimony of two additionalexperts,and granted Elevance leave to submit a supplemental expert report.On April 5,2023,the Court entered a scheduling order setting a trial on Elevancesremaining prior authorization claims to commence on December 4,2023.Medicare Advantage.A qui tam action that was fi
330、led by a private individual(the relator)on behalf of the government in the United States District Court for theSouthern District of New York in 2017 was unsealed on August 6,2020.The action asserts claims related to risk adjustment practices arising from certain healthexams conducted as part of the
331、Companys Medicare Advantage business.In September 2021,the qui tam action was transferred to the United States District Courtfor the Middle District of Tennessee.On January 11,2022,the U.S.Department of Justice(DOJ)(U.S.Attorneys Offices for the Southern District of New Yorkand the Middle District o
332、f Tennessee)filed a motion to partially intervene,which was granted on August 2,2022.On October 14,2022,the DOJ filed its complaint-in-intervention alleging that certain diagnoses made during in-home exams were invalid for risk adjustment purposes,seeking unspecified damages and penaltiesunder the f
333、ederal False Claims Act.The Companys motion to dismiss the DOJs complaint is fully briefed and pending before the court.The Companys motion todismiss relators complaint was denied as moot after relator asked for and was granted permission to amend his complaint.Relator filed an amended complaint onJuly 28,2023.The Companys response to the complaint is due September 11,2023.Regulatory MattersCivil