# The Cigna Group (NYSE: CI) — Company Narrative, Third Quarter 2026 Period covered: the quarter and nine months ended September 30, 2026. Business, risk and full-year discussion come from the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (accession 0001739940-26-000006). Current-quarter material comes from the Form 10-Q for the quarter ended September 30, 2026 (accession 0001739940-26-000071) and the third-quarter earnings release furnished on Form 8-K (accession 0001140361-26-042030). All amounts are in US dollars. "Adjusted" figures are the company's non-GAAP measures, which exclude net investment gains and losses, amortization of acquired intangibles and special items. --- ## Business *Source: FY2025 Form 10-K, accession 0001739940-26-000006 (Item 1 and Item 7).* The Cigna Group is a US health company that earns most of its revenue by managing prescription drug benefits, and much of the rest by running medical benefit plans for employers. It has two operating segments. **Evernorth Health Services** runs the Express Scripts pharmacy benefit manager (PBM), the Accredo specialty pharmacy, a specialty drug distributor and care-management businesses, and sells to health plans, employers and government programs. **Cigna Healthcare** offers medical, dental, behavioral and stop-loss coverage, mainly to US employers and mostly on a self-funded, fee-for-service basis, along with an international health business. In 2025 total revenues were $274.9 billion. Pharmacy revenues were $216.7 billion of that, premiums $40.3 billion, and fees and other revenues $16.9 billion. Evernorth produced $235.0 billion of adjusted revenues and $7.2 billion of pre-tax adjusted income from operations. Cigna Healthcare produced $47.2 billion and $4.2 billion. The company reported more than 185 million customer relationships in more than 30 markets and jurisdictions and about 67,700 employees at December 31, 2025. **Segments and how they make money:** - **Evernorth — Pharmacy Benefit Services.** This unit adjudicates drug claims, administers retail pharmacy networks (more than 65,000 participating pharmacies), manages formularies and negotiates manufacturer rebates. It also runs Express Scripts home-delivery pharmacies, plus the EnGuide Pharmacy for GLP-1 patients, which was established in 2025. Express Scripts says it passed through over 95% of the formulary rebates it received in 2025 to integrated pharmacy benefit clients, and more than two-thirds of those clients received 100% of rebates. Most clients take the greater of a minimum rebate guarantee or a contractual percentage. In some contracts Express Scripts bears the risk of securing enough rebate value to meet the guarantee. FY2025 adjusted revenues were $132.1 billion (+18%) and pre-tax adjusted income was $3.5 billion (−2%). - **Evernorth — Specialty and Care Services.** This unit includes the Accredo specialty pharmacy (35 licensed pharmacies), CuraScript SD specialty distribution to clinics and hospitals, EviCore benefits management and MD Live virtual care. FY2025 adjusted revenues were $102.8 billion (+14%) and pre-tax adjusted income was $3.7 billion (+8%). - **Cigna Healthcare — U.S. Healthcare and International Health.** These units provide employer medical plans across National Accounts, Middle Market, Select and Small segments, along with ACA individual and family plans (IFP) in 11 states, stop-loss, dental and behavioral coverage. International Health serves multinational employers, globally mobile individuals and local markets including China, Singapore, Hong Kong, Spain and India. Administrative-services-only (ASO) arrangements made up about 32% of 2025 segment revenues but 79% of medical customers. Insured guaranteed-cost and experience-rated business made up about 68% of revenues and 21% of customers. The company had 18.1 million medical customers at year-end 2025. Its U.S. network had about 1.7 million physicians and more than 6,000 hospitals. - **Other Operations and Corporate.** Other Operations holds corporate-owned life insurance and run-off blocks (settlement annuities, reinsured variable annuity reinsurance, and life and retirement businesses sold through reinsurance). Corporate carries net interest expense, frozen pension costs and intersegment eliminations. **Concentration and key relationships.** Evernorth names three clients that each drive significant segment revenue: - **Centene:** a multiyear pharmacy benefit agreement that began January 1, 2024. - **Prime Therapeutics:** network, specialty pharmacy and manufacturer-value agreements. - **TRICARE:** the US military health program, now under the Department of War. A single pharmacy benefit client accounted for about 19% of total revenue from external customers in 2025 (16% in 2024). The 10-K says contracts with the business's three largest clients have been renewed or extended through the end of the decade. On the supply side, Evernorth buys about half of its pharmaceuticals through one wholesaler. **Portfolio changes that shape the business today:** - **Medicare exit.** On March 19, 2025 Cigna sold its Medicare Advantage, stand-alone Part D, Medicare supplemental and CareAllies businesses to Health Care Service Corporation (HCSC). Final purchase price and cash proceeds were $4.9 billion, most of it used for share repurchases. - **Shields Health Solutions.** In the third quarter of 2025 Cigna invested $3.5 billion in preferred stock of Shields Health Solutions, a specialty pharmacy management company. The investment was partly funded by a $2.0 billion term loan, repaid in September 2025. Cigna records the compounding dividend on the preferred stock in fees and other revenues. - **China joint venture.** Cigna holds a 50% interest in an insurance joint venture in China, accounted for under the equity method. - **Rebate-free pharmacy model.** Evernorth has announced a model that makes manufacturer discounts available to patients at the pharmacy counter. Cigna Healthcare will adopt it for fully insured customers beginning in 2027, and it becomes the standard Evernorth offering for PBM clients beginning in 2028. **Regulatory backdrop.** The Consolidated Appropriations Act, 2026, enacted in February 2026, contains PBM provisions with staggered start dates: - **August 2028:** PBMs serving ERISA employer plans must remit 100% of certain rebates, fees and other remuneration to plan sponsors. - **January 2028:** in Medicare Part D, PBM compensation can no longer be linked to drug list prices and is limited to bona fide service fees. - **January 2029:** Part D plan sponsors must contract with any pharmacy willing to meet standard terms. The company says the full impact cannot yet be determined. The 10-K also notes that one state has enacted a law barring PBMs from owning pharmacies in the state; that law is in litigation. The enhanced ACA premium subsidies expired on December 31, 2025. --- ## Risk Factors *Source: FY2025 Form 10-K, accession 0001739940-26-000006 (Item 1A).* The risks that bear most directly on Cigna's earnings fall into four groups. **Pricing, competition and the PBM model:** - **Medical cost pricing.** Premiums are set for a year and priced well in advance. Small errors in predicting utilization or unit cost swing results. The 10-K flags IFP exchange business specifically for mix and volume uncertainty. - **PBM price competition and client concentration.** Express Scripts contracts generally run three years and are periodically renegotiated. Clients routinely rebid through consultants, and the loss or repricing of a large client could materially hurt results. Competition has pushed PBMs to pass more rebates to clients. The company says failing to respond effectively, including through its rebate-free model, could hurt margins. - **Drug pricing benchmarks and government negotiation.** Contracts rely on third-party pricing benchmarks. The Inflation Reduction Act lets CMS negotiate prices for high-cost Part D and Part B drugs, and manufacturers' resulting pricing changes can ripple through commercial markets. - **Manufacturer and pharmacy relationships.** Manufacturer contracts are nonexclusive and terminable on short notice, and the rebate-free commitment "may alter manufacturer contracting dynamics." The ten largest retail chains represent about 47% of stores in Cigna's largest pharmacy network, so losing a major chain could impair access and breach client guarantees. - **Reserve adequacy.** Medical claims reserves rest on judgment about completion factors and cost trend. The 10-K's sensitivity: a 100-basis-point rise in medical cost trend would add about $115 million to Cigna Healthcare's unpaid claims liability, and a 50-basis-point fall in completion factors about $180 million. **Regulation, litigation and government programs:** - **PBM and insurance regulation.** Federal and state PBM, drug-pricing and insurance-market reforms could force changes to how the business operates. - **FTC insulin case.** In September 2024 the FTC filed an administrative complaint against Express Scripts and other PBMs over insulin rebate practices. In February 2026 Cigna settled all FTC matters without a monetary penalty or admission of liability, but agreed to change certain business practices on medication affordability. - **Medicare indemnification.** Cigna may still owe indemnification for regulatory audits of the sold Medicare businesses that were open when the HCSC deal closed. - **Government funding.** Government clients and programs depend on appropriations and can cancel on short notice. **Operations, data and technology:** - **Cyber and data security.** Cigna handles large volumes of protected health information. The ransomware attack on Change Healthcare, a service provider for some of its pharmacy benefit services, caused limited disruption to certain Cigna services in February 2024. - **Artificial intelligence.** The company is currently defending litigation alleging improper use of AI in claims evaluation, and new AI regulation could restrict how it uses these tools. - **Third-party dependence.** Cigna relies on vendors, suppliers, manufacturers and shipping carriers for key functions, including claims processing and prescription dispensing. A vendor failure or contract dispute, or a supply-chain disruption, could interrupt service. **Strategic and financial:** - **Goodwill and intangibles.** These totaled about $73.5 billion at December 31, 2025, or 47% of total assets, and are exposed to impairment if acquired businesses underperform. Cigna fully impaired its VillageMD investment in 2024, recording a $2.7 billion loss. - **Debt.** Total debt was about $31.5 billion at year-end 2025. That leverage limits flexibility and raises exposure to interest rates and to rating downgrades, which would also hurt insurance sales. - **Economy, investments and reinsurers.** Economic downturns, investment portfolio losses, pension funding needs and reinsurer credit risk are further exposures. Cigna stays liable to policyholders if a reinsurer defaults. --- ## Management's Discussion — Fiscal 2025 *Source: FY2025 Form 10-K, accession 0001739940-26-000006 (Item 7).* **Consolidated results.** Total revenues rose 11% to $274.9 billion in 2025. The main driver was a 17% rise in pharmacy revenues on customer growth in Evernorth, partly offset by a 12% fall in premiums after the HCSC sale. Shareholders' net income rose 73% to $5,957 million ($22.18 per diluted share), mainly because 2024 had carried the VillageMD impairment. Adjusted income from operations was $8,014 million ($29.84 per share, up 9%). The effective tax rate fell to 19.2% from 28.3%. **Evernorth Health Services.** Adjusted revenues rose 16% to $234,953 million, driven by higher prescription utilization from customer growth and by claims composition. Pre-tax adjusted income rose 3% to $7,221 million. Specialty pharmacy growth outweighed strategic investments in the PBM. Pre-tax margin fell to 3.1% from 3.5%, and pharmacy claims rose 5% to 2,222 million adjusted scripts. Management told investors to expect investment and transition costs for the rebate-free model, along with proactive contract renewals, to weigh on Evernorth earnings in the short term. **Cigna Healthcare.** Adjusted revenues fell 11% ($5,751 million) to $47,163 million. The HCSC sale removed $8,498 million, partly offset by higher employer-insured (+$1,276 million) and stop-loss (+$855 million) premiums. Pre-tax adjusted income fell 2% to $4,153 million on weaker IFP results. The medical care ratio (MCR) rose 120 basis points to 84.4%, driven by IFP medical costs. Medical customers fell 5% to 18.1 million. **Restructuring.** A strategic optimization program launched in the first quarter of 2025 cost $749 million pre-tax in 2025 and is expected to produce at least $500 million of annualized after-tax savings. **Cash and capital:** - **Cash flow.** Operating cash flow was $9,601 million, down from $10,363 million, reflecting large 2024 client onboardings and the timing of receivable factoring. - **Capital spending.** Capital expenditures were $1.2 billion, with about $1.3 billion planned for 2026. - **Leverage and liquidity.** Debt-to-capitalization was 43.0%. At year-end the company had $6.5 billion of undrawn revolver capacity (a facility maturing April 2030) and $7.9 billion of cash and short-term investments. - **Subsidiary dividends.** Dividends from US-regulated subsidiaries were $0.9 billion. Most Evernorth operations are not subject to regulatory dividend limits, which gives the parent flexibility. --- ## Current Quarter — Third Quarter 2026 *Sources: Form 10-Q for the quarter ended September 30, 2026, accession 0001739940-26-000071; third-quarter earnings release (Exhibit 99.1), accession 0001140361-26-042030.* **Headline.** Revenue kept growing and adjusted earnings held steady. Cigna Healthcare and specialty pharmacy earnings rose strongly, while the PBM's profit fell sharply because of large client contract renewals and strategic investments. - **Revenues.** Total revenues rose 6% to $73,683 million. Pharmacy revenues rose 5% on changes in claims composition, premiums 9% on rate increases, and net investment income 23% on real estate and partnership returns. - **GAAP earnings.** Shareholders' net income fell 23% to $1,442 million ($5.47 per diluted share, versus $6.98). The 10-Q attributes the decline mainly to the absence of the after-tax gain on sale of businesses booked in the third quarter of 2025 (−13 points) and to lower net investment performance (−6 points). The effective tax rate rose to 19.1% from 14.0%, mainly because the prior-year quarter included a benefit from the HCSC sale. - **Adjusted earnings.** Adjusted income from operations was $2,104 million, versus $2,096 million. Adjusted EPS was $7.98, up 2% from $7.83. - **Nine months.** Shareholders' net income was $4,756 million ($18.02 per share, +3%). Adjusted income from operations was $6,216 million ($23.55 per share, +8%). **Evernorth Health Services.** Adjusted revenues rose 6% to $63,774 million, but pre-tax adjusted income fell 4% to $1,829 million. Margin narrowed to 2.9% from 3.2%. The two units moved in opposite directions: - **Pharmacy Benefit Services.** Revenue rose 9% to $37,276 million on drug mix, while pre-tax adjusted income fell 22% to $765 million. The release attributes the drop to large client contract renewals and strategic investments. In the 10-Q's attribution of Evernorth's total change, client- and customer-focused initiatives in the PBM (renewals, rebate-free model investment and Inflation Reduction Act recontracting) subtracted 13 points. - **Specialty and Care Services.** Revenue grew 1% to $26,498 million, as strong specialty distribution growth was offset by lower specialty pharmacy revenue from biosimilar and specialty-generic adoption. Pre-tax adjusted income rose 15% to $1,064 million on organic specialty growth. - **Volume.** Pharmacy claims fell 2% to 546 million adjusted scripts. **Cigna Healthcare.** Adjusted revenues rose 9% ($953 million) to $11,708 million. Higher premiums contributed $748 million, mostly employer-insured (+$313 million) and stop-loss (+$283 million). Pre-tax adjusted income rose 15% to $1,193 million on higher net investment income and a lower SG&A ratio (19.6% versus 19.9%). The MCR was 85.0% against 84.8%. A higher ratio in the U.S. Employer business, due to business mix (+80 basis points), was partly offset by a lower IFP ratio (−70 basis points). Medical customers rose 2% year over year to 18.45 million, led by Middle Market and Select. Favorable prior-year reserve development was $356 million pre-tax for the nine months, against $319 million a year earlier. **What changes the business ahead:** - **IFP exit.** As the 10-Q notes, the company announced in April 2026 that it will exit the Individual and Family Plans medical business as of January 1, 2027. IFP costs were the main driver of the 120-basis-point rise in Cigna Healthcare's medical care ratio in 2025. - **Cost program.** Announced at the September 2026 Investor Day, "Accelerate to One" is described in the 10-Q as a multi-year enterprise modernization and productivity initiative to generate cost savings through 2030. Part of the savings is to be reinvested in growth and part is meant to benefit operating results; the company says timing and size will vary. - **Restructuring costs.** The 2025 strategic optimization program continues as a discrete restructuring program under the new initiative and is expected to run through 2028. It cost $85 million pre-tax in the quarter and $535 million year to date, mostly severance, for $1,284 million program-to-date. - **Litigation charges.** Special items included $60 million pre-tax of litigation charges in the quarter ($126 million year to date). The 10-Q does not describe the matters individually. **Cash, capital and balance sheet:** - **Cash flow.** Nine-month operating cash flow was $3,281 million, versus $3,452 million. The 10-Q cites an unfavorable net cash impact from the Inflation Reduction Act and lower insurance liabilities, largely offset by receivables timing and lower inventory purchases. - **Debt.** Cigna repaid $550 million of 1.250% notes at their March 2026 maturity. It had $0.5 billion of commercial paper outstanding at September 30, and debt-to-capitalization improved to 41.8% from 43.0% at year-end. - **Shareholder returns.** Repurchases slowed sharply: 1.8 million shares for about $500 million in the first nine months, versus 8.2 million shares for $2.6 billion a year earlier. About $6.23 billion of authorization remained at September 30. - **Liquidity.** Cash and short-term investments were $6.5 billion, of which about $1.2 billion sat at the parent or non-regulated subsidiaries. Subsidiary dividends to the parent were $1.0 billion year to date. --- ## Subsequent Events *Source: Form 10-Q for the quarter ended September 30, 2026, accession 0001739940-26-000071 (Note 5 and cover page).* The 10-Q has no separate subsequent-events note, and it discloses no acquisitions, divestitures, new borrowings or debt issuances after September 30, 2026. It discloses two post-quarter items: - **Dividend.** On October 28, 2026 the Board declared a fourth-quarter cash dividend of $1.56 per share, payable December 17, 2026 to shareholders of record on December 3, 2026. - **Share count.** 263,502,561 common shares were outstanding as of October 30, 2026.