Cigna Group 10-K 2019-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the transition period from ______________ to ______________

Commission file number 001-38769

Cigna Corporation

(Exact name of registrant as specified in its charter)

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 28, 2019 was approximately $59.4 billion.

As of January 31, 2020, 372,043,094 shares of the registrant’s Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference information from the registrant’s definitive proxy statement related to the 2020 annual meeting of shareholders.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna’s current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning future financial or operating performance, including our ability to deliver affordable, personalized and innovative solutions for our customers and clients; future growth, business strategy, strategic or operational initiatives, including our organizational efficiency plan; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; strategic transactions, including the merger (“Merger”) with Express Scripts Holding Company and the sale of our Group Disability and Life business; and other statements regarding Cigna’s future beliefs, expectations, plans, intentions, financial condition or performance. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms.

Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical and pharmacy costs and price effectively; our ability to adapt to changes or trends in an evolving and rapidly changing industry; our ability to effectively differentiate our products and services from those of our competitors and maintain or increase market share; our ability to develop and maintain good relationships with physicians, hospitals, other health care providers, producers, consultants and pharmaceutical manufacturers; changes in the pharmacy provider marketplace or pharmacy networks; changes in drug pricing; the impact of modifications to our operations and processes; our ability to identify potential strategic acquisitions or transactions and realize the expected benefits (including anticipated synergies) of such transactions in full or within the anticipated time frame, including with respect to the Merger and sale of our Group Disability and Life business, as well as our ability to integrate or separate operations, resources and systems; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; the outcome of litigation, regulatory audits, investigations, actions or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; the effectiveness and security of our information technology and other business systems and those of our key suppliers or other third parties; the impact of our debt service obligations on the availability of funds for other business purposes; unfavorable industry, economic or political conditions, including foreign currency movements; acts of civil unrest, war, terrorism, natural disasters or pandemics; reinsurance credit risk; as well as more specific risks and uncertainties discussed in Part I, Item 1A – Risk Factors and Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K and as described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

PART I

OVERVIEW

Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”) is a global health service organization.

	Our Mission To improve the health, well-being and peace of mind of those we serve
	Our Strategy
Go Deeper: To expand and deepen our customer, client and partner relationships and create depth in targeted sub-segments and geographies
	Go Local: To ensure our solution suite and services meet customer, client and partner needs at a local market level
	Go Beyond: To innovate and further differentiate our businesses, the experiences we deliver and our overall social impact
	How We Win

Cigna is an enterprise uniquely capable of delivering affordability, predictability and simplicity of health care to those we serve. We have broad and deep capabilities that accelerate our strategy to achieve our mission of improving the health, well-being and peace of mind of those we serve. Cigna’s employees are champions for the people we serve and over the past decade, our focus has shifted to helping people thrive by offering solutions to prevent and better manage health challenges. When sickness or disability do occur, we support our customers’ ability to have broad choices in how they best access high quality, affordable care. We see three primary ways to help individuals maintain, improve or recover their physical or mental health: 1) behavioral and lifestyle changes – with over 1,000 health coaches helping individuals set and meet health goals; 2) pharmaceutical interventions – with our leading pharmacy services improving health and driving affordability; and 3) medical and surgical interventions – with a clear and proven strategy around partnerships and value-based care programs, powered by applied informatics and aligned incentives. We maximize use of evidence-based care, while delivering best-in-class quality of care for our customers with acute and chronic conditions through enhanced real-time data across an expanded platform with industry-leading solutions to support care decisions.

We offer a differentiated set of pharmacy, medical, behavioral, dental, disability, life and accident insurance and related products and services. Our capabilities include: 1) a broad portfolio of specialty services, some of which can be offered on a stand-alone basis; 2) integrated behavioral, medical and pharmacy management services; 3) leading specialty pharmacy expertise; and 4) advanced analytics that help us engage more meaningfully with individuals, plan sponsors we serve and our provider partners. These capabilities enhance Cigna’s ability to drive improved cost affordability, quality of care and predictability.

We put medicine within reach for patients and help providers improve access to prescription drugs by making them more affordable. We improve patient outcomes and better manage the cost of the pharmacy benefit by:

Identifying products and offering innovative solutions that improve patient outcomes and control costs

Evaluating medicines for efficacy, value and price to assist clients in selecting a cost-effective formulary

Offering home delivery and specialty services that save money for clients and customers while providing better and specialized clinical care

Leveraging purchasing volume to deliver discounts drive risk-sharing and value-based care across the pharmaceutical supply chain

Promoting the use of generics and lowest cost, clinically effective brands of medications

We work with key stakeholders across the health care system to improve health outcomes and patient satisfaction, increase efficiency in drug distribution and manage costs of the pharmacy benefit. In 2019, we launched three major initiatives: 1) the Patient AssuranceSM program that offers diabetic customers a low, fixed monthly out-of-pocket cost for insulin; 2) the Embarc Benefit ProtectionSM program that improves care, access and affordability for potentially life-changing medicines that are extremely costly and 3) our Digital Health Formulary that helps clients and customers get the most value from innovative digital health products. Plan sponsors and participants can achieve the best health and financial outcomes when they use our comprehensive set of solutions to manage drug spend.

We present the financial results of our businesses in the following segments:

Health Services includes pharmacy benefits management, specialty pharmacy services, clinical solutions, home delivery and health management services.

Integrated Medical offers a variety of health care solutions to employers and individuals.

The Commercial operating segment serves employers (also referred to as “clients”) and their employees (also referred to as “customers”) and other groups. This segment provides deeply integrated medical and specialty offerings including medical, pharmacy, behavioral health, dental, vision, health advocacy programs and other products and services to insured and self-insured clients.

The Government operating segment offers Medicare Advantage, Medicare Supplement, and Medicare Part D plans (including the acquired Express Scripts’ Medicare Part D business) for seniors, Medicaid plans and individual health insurance coverage both on and off the public exchanges.

International Markets includes supplemental health, life and accident insurance products and health care coverage in our international markets as well as health care benefits to globally mobile employees of multinational organizations.

Group Disability and Other contains the remainder of our business operations, consisting of the following:

****Group Disability and Life provides group long-term and short-term disability, group life, accident, voluntary and specialty insurance products and related services.

****Corporate-Owned Life Insurance (“COLI”) offers permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for financing employer-paid future benefit obligations.

****Run-off businesses:

****Reinsurance: predominantly comprised of guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) business effectively exited through reinsurance with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) in 2013.

****Settlement Annuity business in run-off.

****Individual Life Insurance and Annuity and Retirement Benefits Businesses: comprised of deferred gains from the sales of these businesses.

Other Information

The financial information included in this Form 10-K for the fiscal year ended December 31, 2019 is in conformity with accounting principles generally accepted in the United States of America (“GAAP”) unless otherwise indicated. In the segment discussions that follow, we use the terms “adjusted revenues” and “pre-tax adjusted income from operations” to describe segment results. See the introduction to the Management Discussion and Analysis section of this Form 10-K for definitions of those terms. Industry rankings and percentages set forth herein are for the year ended December 31, 2019 unless otherwise indicated. In addition, statements set forth in this document concerning our rank or position in an industry or particular line of business have been developed internally based on publicly available information unless otherwise noted.

Cigna Holding Company (formerly Cigna Corporation) was incorporated in Delaware in 1981. Halfmoon Parent, Inc. was incorporated in Delaware in March 2018. Halfmoon Parent, Inc. was renamed Cigna Corporation concurrent with the consummation of the combination with Express Scripts on December 20, 2018.

You can access our website at http://www.cign

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As a large global health service company operating in a complex industry, we encounter a variety of risks and uncertainties, which could have a material adverse effect on our business, liquidity, results of operations, financial condition or the trading price of our securities. You should carefully consider each of the risks and uncertainties discussed below, together with other information contained in this Annual Report on Form 10-K, including Management’s Discussion and Analysis of Results of Operations and Financial Condition. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect us. The following risk factors have been organized by category for ease of use; however many of the risks may have impacts in more than one category. These categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a limitation on the potential impact of the matters discussed. Risk factors are not necessarily listed in order of importance.

Strategic and Operational Risks

Future performance of our business will depend on our ability to execute our strategic and operational initiatives effectively.

The future performance of our business will depend in large part on our ability to effectively implement and execute our strategic and operational initiatives. Successfully executing on these initiatives depends on a number of factors, including our ability to:

• differentiate our products and services from those of our competitors;

• develop and introduce new and innovative products, solutions or programs that focus on improving patient outcomes and assist in controlling costs or are in response to government regulation and the increased focus on consumer-directed products;

• grow our product portfolio and identify and introduce the proper mix or integration of products that will be accepted by the marketplace;

• evaluate drugs for efficacy, value and price to assist clients in selecting a cost-effective formulary;

• offer cost-effective home delivery pharmacy and specialty services;

• access or continue accessing key drugs and successfully penetrate key treatment categories in our specialty business;

• leverage purchase volume to deliver discounts to health benefit providers;

• attract and retain sufficient numbers of qualified employees;

• attract, develop and maintain collaborative relationships with a sufficient number of qualified partners;

• attract new and maintain existing customer and client relationships;

• transition health care providers from volume-based fee-for-service arrangements to a value-based system;

• improve medical cost competitiveness in our targeted markets;

• manage our medical, pharmacy, administrative, and other operating costs effectively; and

• contract with pharmaceutical manufacturers and pharmacy providers on favorable terms.

For our strategic initiatives to succeed, we must effectively integrate our operations, including with Express Scripts and other acquired businesses, actively work to ensure consistency throughout the organization, and promote a global mind-set along with a focus on individual customers and clients. If we fail to do so, our business may be unable to grow as planned, or the result of expansion may be unsatisfactory. We will be unable to rapidly respond to competitive, economic and regulatory changes if we do not make important strategic and operational decisions quickly, define our appetite for risk, implement new governance, managerial and organizational processes smoothly and communicate roles and responsibilities clearly. If these initiatives fail or are not executed effectively, our consolidated financial position and results of operations could be negatively affected.

We operate in a highly competitive, evolving and rapidly changing industry and our failure to adapt could negatively impact our business.

The health service industry continues to be dynamic and rapidly evolving. Any significant shifts in the structure of the industry could alter industry dynamics and adversely affect our ability to attract or retain clients and customers. Industry shifts could result (and have resulted) from, among other things:

• a large intra- or inter-industry merger or industry consolidation;

• strategic alliances;

• new or alternative business models;

• continuing consolidation among physicians, hospitals and other health care providers, as well as changes in the organizational structures chosen by physicians, hospitals and health care providers;

• new market entrants, including those not traditionally in the health service industry;

• the ability of larger employers and clients to contract directly with providers;

• technological changes and rapid shifts in the use of technology, such as telemedicine;

• the impact or consequences of legislation or regulatory changes;

• changes in the United States Postal Service or the consolidation of shipping carriers;

• increased drug acquisition cost or unexpected changes to drug pricing trend;

• change in the generic drug market or the failure of new generic drugs to come to market;

• a change in drug utilization; or

• a change in utilization under risk-based contracts in the health benefit management market.

Our failure to anticipate or appropriately adapt to changes in the industry could negatively impact our competitive position and adversely affect our business and results of operations.

Our failure to compete effectively to differentiate our products and services from those of our competitors and maintain or increase market share could materially adversely affect our results of operations, financial position and cash flows.

We operate in a highly competitive environment and an industry subject to significant market pressures brought about by customer and client needs, legislative and regulatory developments and other market factors. In particular markets, our competitors may have greater, better or more established capabilities, resources, market share, reputation or business relationships, or lower profit margin or financial return expectations. Our clients are well informed and organized and can easily move between our competitors and us. Our Express Scripts client contracts generally have three-year terms. As described in greater detail in the description of our business in Item 1 of this Form 10-K, one of our key clients in the Health Services segment is the United States Department of Defense. If one or more of our large clients terminates or does not renew a contract for any reason, including as a result of being acquired, or if the provisions of a contract with a large client are modified, renewed or otherwise changed with terms less favorable to us, our results of operations could be adversely affected and we could experience a negative reaction in the investment community resulting in decreases in the trading price of our securities or other adverse effects.

Our success depends, in part, on our ability to compete effectively in our markets, set prices appropriately in highly competitive markets to keep or increase our market share, increase customers as planned, differentiate our business offerings by innovating and delivering products and services that provide enhanced value to our customers, provide quality and satisfactory levels of service, and retain accounts with favorable medical cost experience or more profitable products versus retaining or increasing our customer base in accounts with unfavorable medical cost experience or less profitable products.

We must remain competitive to attract new customers, retain existing customers, and further integrate additional product and service offerings. To succeed in this highly competitive marketplace, it is imperative that we maintain a strong reputation. The negative

reputatio

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None.

Our global real estate portfolio consists of approximately 12.9 million square feet of owned and leased properties. Our domestic portfolio has approximately 10.9 million square feet in 43 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Our international properties contain approximately 2.0 million square feet located throughout the following countries: Australia, Bahrain, Belgium, Canada, China, France, Germany, Hong Kong, India, Indonesia, Kenya, Kuwait, Lebanon, Malaysia, New Zealand, Oman, Singapore, South Korea, Spain, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, and the United Kingdom.

Our principal domestic office locations include the Wilde Building located at 900 Cottage Grove Road in Bloomfield, Connecticut (our corporate headquarters), Two Liberty Place located at 1601 Chestnut Street in Philadelphia, Pennsylvania, and Express Scripts’ corporate offices located at and around One Express Way in St. Louis, Missouri. The Wilde Building measures approximately 893,000 square feet and is owned. Express Scripts’ campus measures approximately 1.2 million square feet of leased space and Two Liberty Place measures approximately 322,000 square feet and is leased space.

The home delivery pharmacy operations of our Health Services segment consist of eight order processing pharmacies, eight patient contact centers and four high-volume automated home delivery dispensing pharmacies located throughout the United States. Health Services’ home delivery dispensing pharmacies are located in Arizona, Indiana, Missouri and New Jersey. Health Services also has seven specialty home delivery pharmacies and 38 specialty branch pharmacies.

We believe our properties are adequate and suitable for our business as presently conducted. The foregoing does not include information on investment properties.

The information contained under Litigation Matters and Regulatory Matters in Note 22 to the Financial Statements of this Form 10-K, is incorporated herein by reference.

Not Applicable.

Information about our Executive Officers

All officers are elected to serve for a one-year term or until their successors are elected. Principal occupations and employment histories are listed below.

MARK L. BOXER, 60, Executive Vice President and Chief Information Officer of Cigna beginning April 2011; Deputy Chief Information Officer, Xerox Corporation; and Group President, Government Health Care, for Xerox Corporation/Affiliated Computer Services from March 2009 until April 2011.

DAVID M. CORDANI, 54, Chief Executive Officer of Cigna beginning December 2009; Director since October 2009; President beginning June 2008; and Chief Operating Officer from June 2008 until December 2009.

BRIAN C. EVANKO, 43, President, Government Business beginning November 2017; President, U.S. Individual Business from August 2013 to November 2017; Business Financial Officer, Cigna Global Individual, Health, Life and Accident from September 2012 to August 2013; Chief Actuary, Cigna Global Individual, Health, Life and Accident from December 2008 to September 2012.

NICOLE S. JONES, 49, Executive Vice President and General Counsel of Cigna beginning June 2011; Senior Vice President and General Counsel of Lincoln Financial Group from May 2010 until June 2011; Vice President and Deputy General Counsel of Cigna from April 2008 until May 2010; and Corporate Secretary of Cigna from September 2006 until April 2010.

MATTHEW G. MANDERS, 58, President, Strategy and Solutions beginning November 2018; President, Government & Individual Programs and Group Insurance from February 2017 through November 2017; President, U.S. Markets from June 2014 until February 2017; President, Regional and Operations from November 2011 until June 2014; President, U.S. Service, Clinical and Specialty from January 2010 until November 2011; and President, Cigna HealthCare, Total Health, Productivity, Network & Middle Market from June 2009 until January 2010.

STEVEN B. MILLER, MD, 62, Executive Vice President and Chief Clinical Officer beginning December 2018; Senior Vice President and Chief Medical Officer, of Express Scripts from October 2007 through December 2018.

JOHN M. MURABITO, 61, Executive Vice President, Human Resources and Services of Cigna beginning August 2003.

ERIC P. PALMER, 43, Executive Vice President and Chief Financial Officer beginning June 2017; Deputy Chief Financial Officer from February 2017 until June 2017; Senior Vice President, Chief Business Financial Officer from November 2015 to February 2017; Vice President, Business Financial Officer, Health Care from April 2012 to November 2015; and Vice President, Business Financial Officer, U.S. Commercial Markets from June 2010 to April 2012.

JASON D. SADLER, 51, President, International Markets beginning June 2014; President, Global Individual Health, Life and Accident from July 2010 until June 2014; and Managing Director Insurance Business Hong Kong, HSBC Insurance Asia Limited from January 2007 until July 2010.

MICHAEL W. TRIPLETT, 58, President, U.S. Markets beginning February 2017; Regional Segment Lead from June 2009 to February 2017.

TIMOTHY C. WENTWORTH, 59, President, Health Services beginning February 2020; President, Express Scripts and Cigna Services from December 2018 until February 2020; Chief Executive Officer of Express Scripts from May 2016 until December 2018; President from February 2014 through December 2018; and Senior Vice President and President, Sales and Account Management from April 2012 until February 2014.

PART II

The information under the caption “Quarterly Financial Data – Stock and Dividend Data” appears on page 147 of this Form 10-K. As of December 31, 2019, the number of shareholders of record was 35,727. Cigna’s common stock is listed with, and trades on, the New York Stock Exchange under the symbol “CI”.

Issuer Purchases of Equity Securities

The following table provides information about Cigna’s share repurchase activity for the quarter ended December 31, 2019:

(1) Represents shares tendered by employees under the Company’s equity compensation plans as follows: 1) payment of taxes on vesting of restricted stock (grants and units) and strategic performance shares and 2) payment of the exercise price and taxes for certain stock options exercised. Employees tendered 1,169 shares in October, 2,444 shares in November and 5,978 shares in December 2019.

(2) Additionally, the Company maintains a share repurchase program, authorized by the Board of Directors. Under this program, the Company may repurchase shares from time to time, depending on market conditions and alternate uses of capital. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and alternate uses of capital. The share repurchase program may be effected through Rule 10b5-1 plans, open market purchases or privately negotiated transactions, each in compliance with Rule 10b-18 under the Exchange Act. The program may be suspended or discontinued at any time. In the fourth quarter of 2019, the Board increased repurchase authority by an additional $4.0 billion. The program does not have an expiration date. From January 1, 2020 through February 26, 2020, the Company repurchased 2.0 million shares for approximately $425 million, leaving repurchase authority at $3.5 billion as of February 26, 2020.

(3) Approximate dollar value of shares is as of the last date of the applicable month.

Stock Price Performance Graph

The graph below compares the cumulative total shareholder return on our common stock for the five years ended December 31, 2019 with the cumulative total return of the Standard & Poor’s 500 Index, the Standard & Poor’s 500 Health Care Providers & Services Index and the Standard & Poor’s Managed Health Care, Life & Health Insurance Indexes. The stock performance shown in the graph is not intended to forecast or be indicative of future performance.

The selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying notes included elsewhere herein.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition as of December 31, 2019 compared with December 31, 2018 and our results of operations for the year ended December 31, 2019 compared with 2018 and 2017. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K (“Form 10-K”) and the Risk Factors contained in Part 1A of this Form 10-K. For comparisons of our results of operations for the year ended December 31, 2018 with 2017 please refer to the previously filed MD&A included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Unless otherwise indicated, financial information in the MD&A is presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Note 2 to the Consolidated Financial Statements included in this Form 10-K for additional information regarding the Company’s significant accounting policies. In some of our financial tables in this MD&A, we present either percentage changes or “N/M” when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points (“bps”).

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

We use adjusted income from operations as our principal financial measure of operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. We define adjusted income from operations as shareholders’ net income (or income before taxes for the segment metric) excluding realized investment gains and losses, amortization of acquired intangible assets, results of Anthem and Coventry Health Care Inc. (“Coventry”) (collectively, the “transitioning clients”) (see the “Key Transactions and Developments” section of the MD&A for further discussion of transitioning clients) and special items. Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting are also excluded. Income or expense amounts excluded from adjusted income from operations because they are not indicative of underlying performance or the responsibility of operating segment management include:

**Realized investment gains (losses) including changes in market values of certain financial instruments between balance sheet dates, as well as gains and losses associated with invested asset sales.

**Amortization of acquired intangible assets because these relate to costs incurred for acquisitions.

**Results of transitioning clients because those results are not indicative of ongoing results.

**Special items, if any, that management believes are not representative of the underlying results of operations due to the nature or size of these matters. See Note 23 to the Consolidated Financial Statements for descriptions of special items.

The term “Adjusted revenues” is defined as total revenues excluding the following adjustments: revenue contributions from transitioning clients, special items and Cigna’s share of certain realized investment results of its joint ventures reported in the International Markets segment using the equity method of accounting. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business.

EXECUTIVE OVERVIEW

Cigna Corporation, together with its subsidiaries (either individually or collectively referred to as “Cigna,” the “Company,” “we,” “our” or “us”) is a global health service organization dedicated to a mission of helping those we serve improve their health, well-being and peace of mind. Our evolved strategy in support of our mission is Go Deeper, Go Local, Go Beyond using a differentiated set of pharmacy, medical, dental, disability, life and accident insurance and related products and services offered by our subsidiaries. For further information on our business and strategy, see Item 1, “Business” in this Form 10-K.

Results for the year ended December 31, 2019 included the results of Express Scripts’ business, whereas results for 2018 only reflected Express Scripts’ results for the period following the acquisition on December 20, 2018 and were not included in 2017. As discussed in Note 23 to the Consolidated Financial Statements, effective in the first quarter of 2019, compensation cost for stock options is now recorded by our segments. Prior year segment information has not been restated for this change.

Financial Summary

Summarized below are certain key measures of our performance for the years ended December 31:

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The information contained under the caption “Market Risk” in the MD&A section of this Form 10-K is incorporated by reference.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Cigna Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cigna Corporation and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessment

As described in Note 18 to the consolidated financial statements, as of December 31, 2019, goodwill is primarily reported in the Health Services segment ($33.7 billion), the Integrated Medical segment ($10.5 billion) and, to a lesser extent, the International Markets segment ($0.4 billion). Management evaluates goodwill for impairment at least annually during the third quarter at the reporting unit level and writes the goodwill balance down through shareholders’ net income if impaired. Fair value of a reporting unit is generally estimated based on either a market approach or a discounted cash flow analysis using assumptions that management believes a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit's weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within that reporting unit. Projections of future cash flows for each reporting unit are consistent with management’s annual planning process for revenues, pharmacy costs, benefits expenses, operating expenses, taxes, capital levels and long-term growth rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are there was significant judgment by management when determining the fair value measurement of the reporting units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s

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None.

**A.**Disclosure Controls and Procedures

Based on an evaluation of the effectiveness of Cigna’s disclosure controls and procedures conducted under the supervision and with the participation of Cigna's management (including Cigna’s Chief Executive Officer and Chief Financial Officer), Cigna’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, Cigna’s disclosure controls and procedures are effective to ensure that information required to be disclosed by Cigna in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to Cigna’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

**B.**Internal Control Over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

Management of Cigna Corporation is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company’s internal controls were designed to provide reasonable assurance that the Company’s consolidated published financial statements for external purposes were prepared in accordance with accounting principles generally accepted in the United States. The Company’s internal control over financial reporting includes those policies and procedures that:

(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on management’s assessment and the criteria set forth by COSO, it was determined that the Company’s internal controls over financial reporting are effective as of December 31, 2019.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting, as stated in their report located in Item 8 of this Form 10-K.

Change in Internal Control over Financial Reporting

During the period covered by this report, other than the changes resulting from the Express Scripts, Inc. acquisition discussed below, there have been no changes in Cigna's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, Cigna's internal control over financial reporting.

On December 20, 2018, the Company completed the acquisition of Express Scripts, Inc. During 2019, the Company has incorporated internal controls over significant processes specific to Express Scripts that it believes to be appropriate and necessary in consideration of the level of related integration. As the Company further integrates the Express Scripts business, it will continue to review the internal controls and may take further steps to ensure that the internal controls are effective and integrated appropriately.

None.

PART III

A.Directors of the Registrant

The information under the captions “Corporate Governance Matters – Process for Director Elections,” “– Board of Directors’ Nominees” and “– Board Meetings and Committees” (as it relates to Audit Committee disclosure) in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference.

**B.**Executive Officers of the Registrant

See PART I – “Information about our Executive Officers” on page 47 in this Form 10-K.

**C.**Code of Ethics and Other Corporate Governance Disclosures

The information under the caption “Corporate Governance Matters – Codes of Ethics” in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference. We intend to promptly disclose on our website, in accordance with applicable rules, any required disclosure of changes to or waivers, if any, of our Code of Ethics or our Director Code of Business Conduct and Ethics.

**D.**Delinquent Section 16(a) Reports

The information under the caption “Ownership of Cigna Common Stock – Delinquent Section 16(a) Reports”, if included in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders, is incorporated herein by reference.

The information under the captions “Corporate Governance Matters – Non-Employee Director Compensation,” “Corporate Governance Matters – Certain Transactions – Compensation Committee Interlocks and Inside Participation,” “Compensation Matters – Compensation Discussion and Analysis,” “– Report of the People Resources Committee” and “– Executive Compensation Tables” in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference.

The following table presents information regarding Cigna’s equity compensation plans as of December 31, 2019:

*(1)*Includes, in addition to outstanding stock options:

(i) 96,298 restricted stock units, 115,723 deferred shares, and 1,558,258 strategic performance shares that are reported at the maximum 200% payout rate granted under the Cigna Long-Term Incentive Plan, the Corporation Stock Plan and the Cigna Corporation Director Equity Plan; and

(ii) 789,459 shares of common stock underlying stock option awards and 488,127 restricted stock units granted under the Express Scripts Holding Company 2016 Long-Term Incentive Plan, 10,001 deferred shares granted under the Express Scripts, Inc. Executive Deferred Compensation Plan of 2005, 2,077,398 shares of common stock underlying stock option awards granted under the Express Scripts, Inc. 2011 Long-Term Incentive Plan, 1,759,907 shares of common stock underlying stock option awards and 3,300 restricted stock units granted under the Medco Health Solutions, Inc. 2002 Stock Incentive Plan, and 90,088 shares of common stock underlying stock option awards granted under the Accredo Health, Incorporated 2002 Long-Term Incentive Plan that were all approved by the applicable company’s shareholders before Cigna’s acquisition of Express Scripts in December 2018.

*(2)*The weighted-average exercise price is based only on outstanding stock options. The outstanding stock options assumed due to Cigna's acquisition of Express Scripts, in aggregate, have a weighted-average exercise price of $139.76. Excluding the assumed options from this acquisition results in a weighted-average exercise price of $133.69.

(3) Includes 225,338 shares of common stock available as of the close of business December 31, 2019 for future issuance under the Cigna Corporation Director Equity Plan, 23,231,054 shares of common stock available as of the close of business on December 31, 2019 for future issuance under the Cigna Long-Term Incentive Plan that includes 11,825,476 shares of common stock available assumed from the Express Scripts, Inc. 2016 Long-Term Incentive Plan, and 2,811,264 shares of common stock available as of the close of business December 31, 2019 for future issuance under the Express Scripts, Inc. Executive Deferred Compensation Plan of 2005. Because no further grants may be made under the Express Scripts, Inc. 2016 Long-Term Incentive Plan, the Express Scripts, Inc. 2011 Long-Term Incentive Plan, the Medco Health Solutions, Inc. 2002 Stock Incentive Plan, and the Accredo Health, Incorporated 2002 Long-Term Incentive Plan, shares available for issuance under these plans are not included.

The information under the captions “Ownership of Cigna Common Stock – Stock Held by Directors, Nominees and Executive Officers” and “Ownership of Cigna Common Stock – Stock Held by Certain Beneficial Owners” in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference.

The information under the captions “Corporate Governance Matters – Director Independence” and “– Certain Transactions” in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference.

The information under the captions “Audit Matters – Policy for the Pre-Approval of Audit and Non-Audit Services” and “– Fees to Independent Registered Public Accounting Firm” in Cigna’s definitive proxy statement related to the 2020 annual meeting of shareholders is incorporated herein by reference.

PART IV

(a)(1) The following Financial Statements begin on page 77:

Report of Independent Registered Public Accounting Firm.

Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017.

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017.

Consolidated Balance Sheets as of December 31, 2019 and 2018.

Consolidated Statements of Changes in Total Equity for the years ended December 31, 2019, 2018 and 2017.

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017.

Notes to the Consolidated Financial Statements.

(2) The financial statement schedules are listed in the Index to Financial Statement Schedules on page FS-1.

(b) The exhibits listed in the accompanying “Index to Exhibits” in this Item 15 are filed or incorporated by reference as part of this Annual Report on Form 10-K.

INDEX TO EXHIBITS

Exhibits 10.1 through 10.40 are identified as compensatory plans, management contracts or arrangements pursuant to Item 15 of Form 10-K.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs at the date they were made or at any other time.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 27, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of February 27, 2020.

CIGNA CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENT SCHEDULES

Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto.

FS-1

Report of Independent Registered Public Accounting Firm on

Financial Statement Schedules

To the Board of Directors and Shareholders of Cigna Corporation

Our audits of the consolidated financial statements referred to in our report dated February 27, 2020 (which report and consolidated financial statements are included under Item 8 in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed on page FS-1 in Item 15 of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 27, 2020

FS-2

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF INCOME

See Notes to Financial Statements on the following pages.

FS-3

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

BALANCE SHEETS

See Notes to Financial Statements on the following pages.

FS-4

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF CASH FLOWS

See Notes to Financial Statements on the following pages.

FS-5

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements should be read in conjunction with the Consolidated Financial Statements and the accompanying notes thereto contained in this Annual Report on Form 10-K (“Form 10-K”).

Note 1 – For purposes of these condensed financial statements, Cigna Corporation’s (the “Company”) wholly-owned and majority-owned subsidiaries are recorded using the equity method of accounting.

Note 2 – See Note 7 – Debt included in Part II, Item 8 of this Form 10-K for a description of the short-term and long-term debt obligations of Cigna Corporation and its subsidiaries.

Debt repayment. During 2019, the Company repaid the $3.0 billion term loan.

Exchange of Legacy Notes for Cigna Notes and Redemption of Medco Notes. In the fourth quarter of 2019, the Company completed an exchange of $12.7 billion of legacy Notes issued by Express Scripts, Medco and Old Cigna for new Notes issued by the Company with the same interest rates, maturities and other comparable terms. The exchange is reflected as a non-cash investing and financing activity. The Company entered into this exchange primarily to simplify its capital structure and reporting obligations. Additionally, in the fourth quarter of 2019, Medco, a subsidiary of the Company, fully redeemed all of the remaining outstanding Medco Notes. As a result of the exchange and redemption, guarantees of obligations under the remaining legacy Notes not exchanged, as well as under Notes issued by the Company in September 2018 to finance its acquisition of Express Scripts, were released and we are no longer required to separately present Condensed Consolidated Financial Information under Rule 3-10 of Regulation S-X.

Term Loan Credit Agreement. The Company borrowed $3.0 billion under its Term Loan Credit Agreement to finance the Merger and to pay fees and expenses of the Merger. As of December 31, 2019, the Company repaid the term loan in full and the agreement was terminated.

Notes issued to fund the Express Scripts acquisition. In the third quarter of 2018, the Company issued private placement Notes with registration rights to finance the Express Scripts acquisition. Total proceeds were approximately $20.0 billion. Interest on this debt is generally paid semi-annually except for quarterly interest payments on the floating rate notes. The Company completed an exchange offer to register such debt in the third quarter of 2019.

Maturity of the Company’s long-term debt is as follows:

Note 3 — Intercompany liabilities of the Company consist primarily of payables to Old Cigna of $2.3 billion as of December 31, 2019 and $4.3 billion as of and December 31, 2018. Interest was accrued at an average monthly rate of 2.58% for 2019 and 2.33% for 2018. Intercompany receivables of the Company consist primarily of net amounts due from Express Scripts Holdings of $3.9 billion (consisting of an $8.2 billion receivable offset by a $4.3 billion payable) as of December 31, 2019. Interest income on the receivable was accrued at an annual fixed rate of 5.5%. Interest expense on the payable was accrued at an average rate of 2.58%.

Note 4 — The Company had guarantees of approximately $48 million as of December 31, 2019. These guarantees are primarily related to outstanding letters of credit. In 2019, no payments have been made on these guarantees.

FS-6

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FS-7