Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements


			Page
Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022			104

Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022			105

Consolidated Balance Sheets as of December 31, 2024 and 2023			106

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022			107

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023 and 2022			109

Notes to Consolidated Financial Statements			110

Reports of Independent Registered Public Accounting Firm (Public Company Accounting Oversight Board ID: 42)			189

Index to Consolidated Financial Statements

Consolidated Statements of Operations


	For the Years Ended December 31,
In millions, except per share amounts	2024		2023		2022
Revenues:
Products	$	231,521	$	245,138	$	226,616
Premiums	122,896		99,192		85,330
Services	16,239		12,293		9,683
Net investment income	2,153		1,153		838
Total revenues	372,809		357,776		322,467
Operating costs:
Cost of products sold	206,287		217,098		196,892
Health care costs	115,121		86,247		71,073
Operating expenses	41,606		39,832		38,212
Restructuring charges	1,179		507		—
Opioid litigation charges	100		—		5,803
Loss on assets held for sale	—		349		2,533


Total operating costs	364,293		344,033		314,513
Operating income	8,516		13,743		7,954
Interest expense	2,958		2,658		2,287
Gain on early extinguishment of debt	(491)		—		—
Other income	(99)		(88)		(169)
Income before income tax provision	6,148		11,173		5,836
Income tax provision	1,562		2,805		1,509


Net income	4,586		8,368		4,327
Net (income) loss attributable to noncontrolling interests	28		(24)		(16)
Net income attributable to CVS Health	$	4,614	$	8,344	$	4,311

Net income per share attributable to CVS Health:


Basic	$	3.67	$	6.49	$	3.29
Diluted	$	3.66	$	6.47	$	3.26
Weighted average shares outstanding:


Basic	1,259		1,285		1,312
Diluted	1,262		1,290		1,323

See accompanying notes to consolidated financial statements.

Index to Consolidated Financial Statements

Consolidated Statements of Comprehensive Income


	For the Years Ended December 31,
In millions	2024		2023		2022
Net income	$	4,586	$	8,368	$	4,327
Other comprehensive income (loss), net of tax:
Net unrealized investment gains (losses)	30		1,090		(2,317)
Change in discount rate on long-duration insurance reserves	113		(67)		870
Foreign currency translation adjustments	(4)		—		—
Net cash flow hedges	(15)		5		17
Pension and other postretirement benefits	53		(61)		(168)
Other comprehensive income (loss)	177		967		(1,598)
Comprehensive income	4,763		9,335		2,729
Comprehensive (income) loss attributable to noncontrolling interests	28		(24)		(16)
Comprehensive income attributable to CVS Health	$	4,791	$	9,311	$	2,713

See accompanying notes to consolidated financial statements.

Index to Consolidated Financial Statements

Consolidated Balance Sheets


	At December 31,
In millions, except per share amounts	2024		2023
Assets:
Cash and cash equivalents	$	8,586	$	8,196
Investments	2,407		3,259
Accounts receivable, net	36,469		35,227
Inventories	18,107		18,025

Other current assets	3,076		3,151
Total current assets	68,645		67,858
Long-term investments	28,934		23,019
Property and equipment, net	12,993		13,183
Operating lease right-of-use assets	15,944		17,252
Goodwill	91,272		91,272
Intangible assets, net	27,323		29,234
Separate accounts assets	3,311		3,250
Other assets	4,793		4,660
Total assets	$	253,215	$	249,728

Liabilities:
Accounts payable	$	15,892	$	14,897
Pharmacy claims and discounts payable	24,166		22,874
Health care costs payable	15,064		12,049

Accrued expenses and other current liabilities	20,810		23,515
Other insurance liabilities	1,183		1,141
Current portion of operating lease liabilities	1,751		1,741
Short-term debt	2,119		200
Current portion of long-term debt	3,624		2,772

Total current liabilities	84,609		79,189
Long-term operating lease liabilities	14,899		16,034
Long-term debt	60,527		58,638
Deferred income taxes	3,806		4,311
Separate accounts liabilities	3,311		3,250
Other long-term insurance liabilities	4,902		5,459
Other long-term liabilities	5,431		6,211
Total liabilities	177,485		173,092
Commitments and contingencies (Note 18)

Shareholders’ equity:
Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding	—		—
Common stock, par value $0.01: 3,200 shares authorized; 1,778 shares issued and 1,260 shares outstanding at December 31, 2024 and 1,768 shares issued and 1,288 shares outstanding at December 31, 2023 and capital surplus	49,661		48,992
Treasury stock, at cost: 518 and 480 shares at December 31, 2024 and 2023	(36,818)		(33,838)
Retained earnings	62,837		61,604
Accumulated other comprehensive loss	(120)		(297)
Total CVS Health shareholders’ equity	75,560		76,461
Noncontrolling interests	170		175
Total shareholders’ equity	75,730		76,636
Total liabilities and shareholders’ equity	$	253,215	$	249,728

See accompanying notes to consolidated financial statements.

Index to Consolidated Financial Statements

Consolidated Statements of Cash Flows


	For the Years Ended December 31,
In millions	2024		2023		2022
Cash flows from operating activities:
Cash receipts from customers	$	357,995	$	345,464	$	313,662
Cash paid for inventory, prescriptions dispensed and health services rendered	(197,726)		(208,848)		(189,766)
Insurance benefits paid	(109,464)		(84,097)		(69,728)
Cash paid to other suppliers and employees	(38,821)		(34,735)		(32,662)
Interest and investment income received	1,735		1,584		1,026
Interest paid	(2,909)		(2,418)		(2,239)
Income taxes paid	(1,703)		(3,524)		(4,116)
Net cash provided by operating activities	9,107		13,426		16,177

Cash flows from investing activities:
Proceeds from sales and maturities of investments	10,353		7,729		6,729
Purchases of investments	(15,191)		(9,043)		(7,746)
Purchases of property and equipment	(2,781)		(3,031)		(2,727)

Acquisitions (net of cash and restricted cash acquired)	(95)		(16,612)		(139)
Proceeds from sale of subsidiaries (net of cash and restricted cash sold of $2,854 in 2022)	—		—		(1,249)
Other	101		68		85
Net cash used in investing activities	(7,613)		(20,889)		(5,047)

Cash flows from financing activities:
Commercial paper borrowings (repayments), net	1,919		200		—
Proceeds from issuance of short-term loan	—		5,000		—
Repayment of short-term loan	—		(5,000)		—
Proceeds from issuance of long-term debt	7,913		10,898		—
Repayments of long-term debt	(4,773)		(3,166)		(4,211)

Repurchase of common stock	(3,023)		(2,012)		(3,500)
Dividends paid	(3,373)		(3,132)		(2,907)
Proceeds from exercise of stock options	361		277		551
Payments for taxes related to net share settlement of equity awards	(185)		(181)		(370)
Other	26		(201)		(79)
Net cash provided by (used in) financing activities	(1,135)		2,683		(10,516)

Net increase (decrease) in cash, cash equivalents and restricted cash	359		(4,780)		614
Cash, cash equivalents and restricted cash at the beginning of the period	8,525		13,305		12,691
Cash, cash equivalents and restricted cash at the end of the period	$	8,884	$	8,525	$	13,305

Index to Consolidated Financial Statements


	For the Years Ended December 31,
In millions	2024		2023		2022
Reconciliation of net income to net cash provided by operating activities:
Net income	$	4,586	$	8,368	$	4,327
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,597		4,366		4,224
Loss on assets held for sale	—		349		2,533




Stock-based compensation	540		588		447
Restructuring charges (impairment of long-lived assets)	840		152		—
Gain on sale of subsidiaries	—		—		(475)
Gain on early extinguishment of debt	(491)		—		—
Deferred income taxes	(572)		(676)		(2,029)
Other items	(502)		264		332
Change in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	(1,301)		(6,260)		(2,971)
Inventories	(102)		1,233		(1,435)
Other assets	(38)		(510)		(491)
Accounts payable and pharmacy claims and discounts payable	2,335		3,618		4,260
Health care costs payable and other insurance liabilities	2,757		394		992
Other liabilities	(3,542)		1,540		6,463
Net cash provided by operating activities	$	9,107	$	13,426	$	16,177

See accompanying notes to consolidated financial statements.

Index to Consolidated Financial Statements

Consolidated Statements of Shareholders’ Equity


			Attributable to CVS Health
	Number of shares outstanding		Common Stock and Capital Surplus (2)						Accumulated Other Comprehensive Income (Loss)		Total CVS Health Shareholders’ Equity				Total Shareholders’ Equity
In millions	Common Shares	Treasury Shares (1)	Treasury Stock (1)		Retained Earnings		Noncontrolling Interests
Balance at December 31, 2021	1,744	(422)	$	47,377	$	(28,173)	$	54,997	$	334	$	74,535	$	306	$	74,841
Net income	—	—	—		—		4,311		—		4,311		16		4,327
Other comprehensive loss (Note 15)	—	—	—		—		—		(1,598)		(1,598)		—		(1,598)

Stock option activity, stock awards and other	14	—	816		—		—		—		816		—		816
Purchase of treasury shares, net of ESPP issuances	—	(36)	—		(3,685)		—		—		(3,685)		—		(3,685)
Common stock dividends ($2.20 per share)	—	—	—		—		(2,910)		—		(2,910)		—		(2,910)

Other decreases in noncontrolling interests	—	—	—		—		—		—		—		(22)		(22)
Balance at December 31, 2022	1,758	(458)	48,193		(31,858)		56,398		(1,264)		71,469		300		71,769

Net income	—	—	—		—		8,344		—		8,344		24		8,368
Other comprehensive income (Note 15)	—	—	—		—		—		967		967		—		967

Stock option activity, stock awards and other	10	—	795		—		—		—		795		—		795
Purchase of treasury shares, net of ESPP issuances	—	(22)	(12)		(1,980)		—		—		(1,992)		—		(1,992)
Common stock dividends ($2.42 per share)	—	—	—		—		(3,138)		—		(3,138)		—		(3,138)
Acquisition of noncontrolling interests	—	—	—		—		—		—		—		66		66
Other increases (decreases) in noncontrolling interests	—	—	16		—		—		—		16		(215)		(199)
Balance at December 31, 2023	1,768	(480)	48,992		(33,838)		61,604		(297)		76,461		175		76,636

Net income	—	—	—		—		4,614		—		4,614		(28)		4,586
Other comprehensive income (Note 15)	—	—	—		—		—		177		177		—		177
Stock option activity, stock awards and other	10	—	700		—		—		—		700		—		700
Purchase of treasury shares, net of ESPP issuances	—	(38)	(22)		(2,980)		—		—		(3,002)		—		(3,002)
Common stock dividends ($2.66 per share)	—	—	—		—		(3,381)		—		(3,381)		—		(3,381)

Other increases (decreases) in noncontrolling interests	—	—	(9)		—		—		—		(9)		23		14

Balance at December 31, 2024	1,778	(518)	$	49,661	$	(36,818)	$	62,837	$	(120)	$	75,560	$	170	$	75,730

(1)Treasury shares include 1 million shares held in trust for each of the years ended December 31, 2024, 2023 and 2022. Treasury stock includes $29 million related to shares held in trust for each of the years ended December 31, 2024, 2023 and 2022. See Note 1 ‘‘Significant Accounting Policies’’ for additional information.

(2)Common stock and capital surplus includes the par value of common stock of $18 million as of December 31, 2024, 2023 and 2022.

See accompanying notes to consolidated financial statements.

Index to Consolidated Financial Statements

Notes to Consolidated Financial Statements

**1.**Significant Accounting Policies

Description of Business

CVS Health Corporation, together with its subsidiaries (collectively, “CVS Health” or the “Company”), is a leading health solutions company building a world of health around every consumer it serves and connecting care so that it works for people wherever they are. As of December 31, 2024, the Company had more than 9,000 retail locations, more than 1,000 walk-in and primary medical clinics, a leading pharmacy benefits manager with approximately 90 million plan members and expanding specialty pharmacy solutions, and a dedicated senior pharmacy care business serving more than 800,000 patients per year. The Company also serves an estimated more than 36 million people through traditional, voluntary and consumer-directed health insurance products and related services, including expanding Medicare Advantage offerings and a leading standalone Medicare Part D prescription drug plan (“PDP”). The Company is creating new sources of value through its integrated model allowing it to expand into personalized, technology driven care delivery and health services, increasing access to quality care, delivering better health outcomes and lowering overall health care costs.

The Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other, which are described below.

Health Care Benefits Segment

The Health Care Benefits segment operates as one of the nation’s leading diversified health care benefits providers. The Health Care Benefits segment has the information and resources to help members, in consultation with their health care professionals, make more informed decisions about their health care. The Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, medical management capabilities, Medicare Advantage and Medicare Supplement plans, PDPs and Medicaid health care management services. The Health Care Benefits segment’s primary customers, its members, primarily access the segment’s products and services through employer groups, government-sponsored plans or individually. The Health Care Benefits segment also serves customers who purchase products and services that are ancillary to its health insurance products. The Company refers to insurance products (where it assumes all or a majority of the risk for medical and dental care costs) as “Insured” and administrative services contract products (where the plan sponsor assumes all or a majority of the risk for medical and dental care costs) as “ASC.” The Company sold Insured plans directly to individual consumers through the individual public health insurance exchanges (“Public Exchanges”) in 17 states as of December 31, 2024.

Health Services Segment

The Health Services segment provides a full range of pharmacy benefit management (“PBM”) solutions, delivers health care services in its medical clinics, virtually, and in the home, and offers provider enablement solutions. PBM solutions include plan design offerings and administration, formulary management, retail pharmacy network management services, and specialty and mail order pharmacy services. In addition, the Company provides clinical services, disease management services, medical spend management and pharmacy and/or other administrative services for providers and federal 340B drug pricing program covered entities (“Covered Entities”). The Company operates a group purchasing organization that negotiates pricing for the purchase of pharmaceuticals and rebates with pharmaceutical manufacturers on behalf of its participants and provides various administrative, management and reporting services to pharmaceutical manufacturers. During 2023, the Company completed the acquisition of two key health care delivery assets – Signify Health, Inc. (“Signify Health”), a leader in health risk assessments, value-based care and provider enablement services, and Oak Street Health, Inc. (“Oak Street Health”), a leading multi-payor operator of value-based primary care centers serving Medicare eligible patients. The Company also launched CordavisTM, a wholly owned subsidiary that works directly with pharmaceutical manufacturers to commercialize and/or co-produce high quality biosimilar products. The Health Services segment’s clients and customers are primarily employers, insurance companies, unions, government employee groups, health plans, PDPs, Medicaid managed care plans, the U.S. Centers for Medicare & Medicaid Services (“CMS”), plans offered on public and private health insurance exchanges and other sponsors of health benefit plans throughout the U.S., patients who receive care in the Health Services segment’s medical clinics, virtually or in the home, as well as Covered Entities.

Pharmacy & Consumer Wellness Segment

The Pharmacy & Consumer Wellness segment dispenses prescriptions in its retail pharmacies and through its infusion operations, provides ancillary pharmacy services including pharmacy patient care programs, diagnostic testing and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise. The segment also conducts long-term care pharmacy (“LTC”) operations, which distribute prescription drugs and provide related pharmacy

consulting and ancillary services to long-term care facilities and other care settings, and provides pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings. As of December 31, 2024, the Pharmacy & Consumer Wellness segment operated more than 9,000 retail locations, as well as online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services.

Corporate/Other Segment

The Company presents the remainder of its financial results in the Corporate/Other segment, which primarily consists of:

Management and administrative expenses to support the Company’s overall operations, which include certain aspects of executive management and the corporate relations, legal, compliance, human resources and finance departments, information technology, digital, data and analytics, as well as acquisition-related transaction and integration costs; and
Products for which the Company no longer solicits or accepts new customers such as its large case pensions and long-term care insurance products.

Basis of Presentation

The accompanying consolidated financial statements of CVS Health and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased. The Company invests in short-term money market funds, commercial paper and time deposits, as well as other debt securities that are classified as cash equivalents within the accompanying consolidated balance sheets, as these funds are highly liquid and readily convertible to known amounts of cash.

Restricted Cash

Restricted cash included in other current assets on the consolidated balance sheets primarily represents funds held on behalf of members and funds held in escrow in connection with agreements with accountable care organizations. Restricted cash included in other assets on the consolidated balance sheets represents amounts held in a trust in one of the Company’s captive insurance companies to satisfy collateral requirements associated with the assignment of certain insurance policies. All restricted cash is invested in demand deposits, time deposits and money market funds.

The following is a reconciliation of cash and cash equivalents on the consolidated balance sheets to total cash, cash equivalents and restricted cash on the consolidated statements of cash flows as of December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Cash and cash equivalents	$	8,586	$	8,196	$	12,945
Restricted cash (included in other current assets)	95		90		144
Restricted cash (included in other assets)	203		239		216
Total cash, cash equivalents and restricted cash in the consolidated statements of cash flows	$	8,884	$	8,525	$	13,305

Investments

Debt Securities

Debt securities consist primarily of U.S. Treasury and agency securities, mortgage-backed securities, corporate and foreign bonds and other debt securities. Debt securities are classified as either current or long-term investments based on their contractual maturities unless the Company intends to sell an investment within the next twelve months, in which case it is classified as current on the consolidated balance sheets. Debt securities are classified as available for sale and are carried at fair value. See Note 5 ‘‘Fair Value’’ for additional information on how the Company estimates the fair value of these investments.

If a debt security is in an unrealized loss position and the Company has the intent to sell the security, or it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis, the amortized cost basis of the security is written down to its fair value and the difference is recognized in net income. If a debt security is in an unrealized loss position and the Company does not have the intent to sell and it is more likely than not that the Company will not have to sell such security before recovery of its amortized cost basis, the Company bifurcates the impairment into credit-related and non-credit related (yield-related) components. In evaluating whether a credit related loss exists, the Company considers a variety of factors including: the extent to which the fair value is less than the amortized cost basis; adverse conditions specifically related to the issuer of a security, an industry or geographic area; the payment structure of the security; the failure of the issuer of the security to make scheduled interest or principal payments; and any changes to the rating of the security by a rating agency. The amount of the credit-related component is recorded as an allowance for credit losses and recognized in net income, and the amount of the non-credit related component is included in other comprehensive income (loss). Interest is not accrued on debt securities when management believes the collection of interest is unlikely.

The credit-related component is determined by comparing the present value of cash flows expected to be collected from the security, considering all reasonably available information relevant to the collectability of the security, with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the Company records an allowance for credit losses, which is limited by the amount that the fair value is less than amortized cost basis.

For mortgage-backed and other asset-backed securities, the Company recognizes income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The Company’s investment in the security is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the security, with adjustments recognized in net income.

Equity Securities

Equity securities with readily available fair values are measured at fair value with changes in fair value recognized in net income.

Mortgage Loans

Mortgage loan investments on the consolidated balance sheets are valued at the unpaid principal balance, net of an allowance for credit losses. Mortgage loans with a maturity date or a committed prepayment date within twelve months are classified as current on the consolidated balance sheets. The Company assesses whether its loans share similar risk characteristics and, if so, groups such loans in a risk pool when measuring expected credit losses. The Company considers the following characteristics when evaluating whether its loans share similar risk characteristics: loan-to-value ratios, property type (e.g., office, retail, apartment, industrial), geographic location, vacancy rates and property condition.

Credit loss reserves are determined using a loss rate method that multiplies the unpaid principal balance of each loan within a risk pool group by an estimated loss rate percentage. The loss rate percentage considers both the expected loan loss severity and the probability of loan default. For periods where the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions (e.g., gross domestic product, employment), the Company adjusts its expected loss rates to reflect these forecasted economic conditions. For periods beyond which the Company is able to make or obtain reasonable and supportable forecasts of expected economic conditions, the Company reverts to historical loss rates in determining expected credit losses.

Interest income on a potential problem loan (i.e., high probability of default) or restructured loan is accrued to the extent it is deemed to be collectible and the loan continues to perform under its original or restructured terms. Interest income on problem loans (i.e., more than 60 days delinquent, in bankruptcy or in process of foreclosure) is recognized on a cash basis. Cash payments on loans in the process of foreclosure are treated as a return of principal.

Other Investments

Other investments consist primarily of the following:

Private equity and hedge fund limited partnerships, which are accounted for using the equity method of accounting. Under this method, the carrying value of the investment is based on the value of the Company’s equity ownership of the underlying investment funds provided by the general partner or manager of the investments, the financial statements of which generally are audited. As a result of the timing of the receipt of the valuation information provided by the fund managers, these investments are generally reported on up to a three month lag. The Company reviews investments for impairment at least quarterly and monitors their performance throughout the year through discussions with the administrators, managers and/or general partners. If the Company becomes aware of an impairment of a limited partnership’s investments through its review or prior to receiving the limited partnership’s financial statements at the financial statement date, an impairment will be recognized by recording a reduction in the carrying value of the limited partnership with a corresponding charge to net investment income.
Investment real estate, which is carried on the consolidated balance sheets at depreciated cost, including capital additions, net of write-downs for other-than-temporary declines in fair value. Depreciation is calculated using the straight-line method based on the estimated useful life of each asset. If any real estate investment is considered held-for-sale, it is carried at the lower of its carrying value or fair value less estimated selling costs. The Company generally estimates fair value using net operating income and applying a capitalization rate in conjunction with comparable sales information. At the time of the sale, the difference between the sales price and the carrying value is recorded as a realized capital gain or loss.
Privately-placed equity securities, which are carried on the consolidated balance sheets using the measurement alternative, at cost less impairments, plus or minus subsequent adjustments for observable price changes. Additionally, as a member of the Federal Home Loan Bank of Boston (“FHLBB”), a subsidiary of the Company is required to purchase and hold shares of the FHLBB. These shares are restricted and carried at cost.

Net Investment Income

Net investment income on the Company’s investments is recorded when earned and is reflected in the Company’s net income (other than net investment income on assets supporting experience-rated products). Experience-rated products are products in the large case pensions business where the contract holder, not the Company, assumes investment and other risks, subject to, among other things, minimum guarantees provided by the Company. The effect of investment performance on experience-rated products is allocated to contract holders’ accounts daily, based on the underlying investment experience and, therefore, does not impact the Company’s net income (as long as the contract’s minimum guarantees are not triggered). Net investment income on assets supporting large case pensions’ experience-rated products is included in net investment income in the consolidated statements of operations and is credited to contract holders’ accounts through a charge to benefit costs. The contract holders’ accounts are reflected in accrued expenses and other current liabilities on the consolidated balance sheets.

Realized capital gains and losses on investments (other than realized capital gains and losses on investments supporting experience-rated products) are included as a component of net investment income in the consolidated statements of operations. Realized capital gains and losses are determined on a specific identification basis. Purchases and sales of debt and equity securities and alternative investments are reflected on the trade date. Purchases and sales of mortgage loans and investment real estate are reflected on the closing date.

Realized capital gains and losses on investments supporting large case pensions’ experience-rated products are not included in realized capital gains and losses in the consolidated statements of operations and instead are credited directly to contract holders’ accounts. The contract holders’ accounts are reflected in accrued expenses and other current liabilities on the consolidated balance sheets.

Unrealized capital gains and losses on investments (other than unrealized capital gains and losses on investments supporting experience-rated products) are reflected in shareholders’ equity, net of tax, as a component of accumulated other comprehensive income (loss). Unrealized capital gains and losses on investments supporting large case pensions’ experience-rated products are credited directly to contract holders’ accounts. The contract holders’ accounts are reflected in accrued expenses and other current liabilities on the consolidated balance sheets.

Derivative Financial Instruments

The Company uses derivative financial instruments in order to manage interest rate and foreign exchange risk and credit exposure. The Company’s use of these derivatives is generally limited to hedging risk and has principally consisted of using interest rate swaps, treasury rate locks, forward contracts, futures contracts, warrants, put options and credit default swaps.

Accounts Receivable

Accounts receivable are stated net of allowances for credit losses, customer credit allowances, contractual allowances and estimated terminations. Accounts receivable, net was composed of the following at December 31, 2024 and 2023:


In millions	2024		2023
Trade receivables	$	9,881	$	11,908
Vendor and manufacturer receivables	13,891		15,711
Premium receivables	4,731		3,714
Other receivables	7,966		3,894
Total accounts receivable, net	$	36,469	$	35,227

The Company’s allowance for credit losses was $407 million and $343 million as of December 31, 2024 and 2023, respectively. When developing an estimate of the Company’s expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The Company’s accounts receivable are short duration in nature and typically settle in less than 30 days.

Inventories

Inventories are valued at the lower of cost or net realizable value using the weighted average cost method. Physical inventory counts are taken on a regular basis in each retail store and pharmacy, and a continuous cycle count process is the primary procedure used to validate the inventory balances on hand in each distribution center and mail facility to ensure that the amounts reflected in the consolidated financial statements are properly stated. During the interim period between physical inventory counts, the Company accrues for anticipated physical inventory losses on a location-by-location basis based on historical results and current physical inventory trends.

Reinsurance Recoverables

The Company utilizes reinsurance agreements primarily to: (a) reduce required capital and (b) facilitate the acquisition or disposition of certain insurance contracts. Ceded reinsurance agreements permit the Company to recover a portion of its losses from reinsurers, although they do not discharge the Company’s primary liability as the direct insurer of the risks reinsured. Failure of reinsurers to indemnify the Company could result in losses; however, the Company does not expect charges for unrecoverable reinsurance to have a material effect on its consolidated operating results or financial condition. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of its reinsurers. At December 31, 2024, the Company’s reinsurance recoverables consisted primarily of amounts due from third parties that are rated consistent with companies that are considered to have the ability to meet their obligations. Reinsurance recoverables are recorded as other current assets or other assets on the consolidated balance sheets.

Health Care Contract Acquisition Costs

Insurance products included in the Health Care Benefits segment are cancellable by either the customer or the member monthly upon written notice. Acquisition costs related to prepaid health care and health indemnity contracts are generally expensed as incurred. For certain long-duration insurance contracts, acquisition costs directly related to the successful acquisition of a new or renewal insurance contract, including commissions, are deferred and are recorded as other current assets or other assets on the consolidated balance sheets. Contracts are grouped by product and issue year into cohorts consistent with the grouping used in estimating the associated liability and are amortized on a constant level basis based on the remaining in-force policies over the estimated term of the contracts to approximate straight-line amortization. Changes to the Company’s assumptions, including assumptions related to persistency, are reflected at the cohort level at the time of change and are recognized prospectively over the estimated terms of the contract. The amortization of deferred acquisition costs is recorded in operating expenses in the consolidated statements of operations.

The following is a roll forward of deferred acquisition costs for the years ended December 31, 2024 and 2023:


In millions	2024		2023
Deferred acquisition costs, beginning of the period	$	1,502	$	1,219
Capitalizations	544		548
Amortization expense	(299)		(265)

Deferred acquisition costs, end of the period	$	1,747	$	1,502

Property and Equipment

Property and equipment is reported at historical cost, net of accumulated depreciation. Property, equipment and improvements to leased premises are depreciated using the straight-line method over the estimated useful lives of the assets, or when applicable, the term of the lease, whichever is shorter. Estimated useful lives generally range from 1 to 40 years for buildings, building improvements and leasehold improvements and 3 to 10 years for fixtures, equipment and internally developed software. Repair and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Application development stage costs for significant internally developed software projects are capitalized and depreciated.

Property and equipment consisted of the following at December 31, 2024 and 2023:


In millions	2024		2023
Land	$	1,847	$	1,958
Building and improvements	4,632		4,571
Fixtures and equipment	11,716		11,024
Leasehold improvements	6,725		6,511
Software	11,520		9,818
Total property and equipment	36,440		33,882
Accumulated depreciation and amortization	(23,447)		(20,699)
Property and equipment, net	$	12,993	$	13,183

Depreciation expense (which includes the amortization of property and equipment under finance or capital leases) totaled $2.6 billion, $2.5 billion and $2.4 billion for the years ended December 31, 2024, 2023 and 2022, respectively. See Note 7 ‘‘Leases’’ for additional information about the Company’s finance leases.

Right-of-Use Assets and Lease Liabilities

The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date of the lease, renewal date of the lease or significant remodeling of the lease space based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and are reduced by lease incentives.

The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years each. For real estate leases, the options to extend are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic incentives of exercising the renewal options and regularly opens or closes stores to align with its operating strategy. Generally, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the right-of-use asset and lease liability. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets, and lease expense is recognized on a straight-line basis over the term of the short-term lease.

For real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases

contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

See Note 7 ‘‘Leases’’ for additional information about right-of-use assets and lease liabilities.

Goodwill

The Company accounts for business combinations using the acquisition method of accounting, which requires the excess cost of an acquisition over the fair value of net assets acquired and identifiable intangible assets to be recorded as goodwill. Goodwill is not amortized, but is subject to impairment reviews annually, or more frequently, if necessary, as further described in “Recoverability of Long-Lived Assets” below. See Note 6 ‘‘Goodwill and Other Intangibles’’ for additional information about goodwill.

Intangible Assets

The Company’s identifiable intangible assets consist primarily of trademarks, trade names, customer contracts/relationships, covenants not to compete, technology and provider networks. These intangible assets arise primarily from the determination of their respective fair market values at the date of acquisition. Amounts assigned to identifiable intangible assets, and their related useful lives, are derived from established valuation techniques and management estimates.

The Company’s definite-lived intangible assets are amortized over their estimated useful lives based upon the pattern of future cash flows attributable to the asset. Definite-lived intangible assets are amortized using the straight-line method. Indefinite-lived intangible assets are not amortized but are tested for impairment annually, or more frequently, if necessary, as further described in “Recoverability of Long-Lived Assets” below.

See Note 6 ‘‘Goodwill and Other Intangibles’’ for additional information about intangible assets.

Recoverability of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets, excluding goodwill and indefinite-lived intangible assets, which are tested for impairment using separate tests described below, whenever events or changes in circumstances indicate that the carrying value of such asset may not be recoverable. The Company groups and evaluates these long-lived assets for impairment at the lowest level at which individual cash flows can be identified. If indicators of impairment are present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted). If the estimated future cash flows used in the analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted).

During the year ended December 31, 2024, in connection with its enterprise-wide restructuring plan described in Note 3 ‘‘Restructuring’’, the Company recorded a store impairment charge of $607 million, consisting of a write down of $483 million related to operating and financing lease right-of-use assets and $124 million related to property and equipment. In addition, in connection with its enterprise-wide restructuring plan the Company recorded $269 million of other asset impairments and related charges associated with the discontinuation of certain non-core long-lived assets recorded as reductions to property and equipment, net and operating lease right-of-use assets. During the year ended December 31, 2023, in connection with its 2023 restructuring program, the Company recorded $152 million of asset impairment charges in connection with the termination of certain transformation initiatives.

See Note 3 ‘‘Restructuring’’ for additional information about the Company’s restructuring plan.

During the years ended December 31, 2024, 2023, and 2022, the Company recorded office real estate optimization charges of $30 million, $46 million, and $117 million, respectively, primarily related to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the planned reduction of corporate office real estate space in response to its ongoing flexible work arrangement.

See Note 7 ‘‘Leases’’ for additional information about the right-of-use asset charges.

When evaluating goodwill for potential impairment, the Company compares the fair value of its reporting units to their respective carrying amounts. The Company estimates the fair value of its reporting units using a combination of a discounted cash flow method and a market multiple method. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.

During the fourth quarter of 2024, the Company performed its required annual impairment test of goodwill and concluded there were no goodwill impairments as of the testing date. During the third quarter of 2024, the Company performed an interim goodwill impairment test of the Government reporting unit after determining there were indicators that the Government reporting unit’s goodwill may be impaired. The results of the interim impairment test showed that the fair value of the Government reporting unit exceeded its carrying value, therefore there was no impairment of goodwill as of the interim testing date.

During the fourth quarter of 2023 and the third quarter of 2022, the Company performed its required annual impairment test of goodwill and concluded there were no goodwill impairments as of the testing date or during the years ended December 31, 2023 and 2022.

Indefinite-lived intangible assets are tested for impairment by comparing the estimated fair value of the asset to its carrying value. The Company estimates the fair value of its indefinite-lived trademarks using the relief from royalty method under the income approach. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. There were no impairment losses recognized on indefinite-lived intangible assets in any of the years ended December 31, 2024, 2023 or 2022.

Separate Accounts

Separate Accounts assets and liabilities related to large case pensions products represent funds maintained to meet specific objectives of contract holders who bear the investment risk. These assets and liabilities are carried at fair value. Net investment income (including net realized capital gains and losses) accrue directly to such contract holders. The assets of each account are legally segregated and are not subject to claims arising from the Company’s other businesses. Deposits, withdrawals and net investment income (including net realized and net unrealized capital gains and losses) on Separate Accounts assets are not reflected in the consolidated statements of operations or cash flows. Management fees charged to contract holders are included in services revenue and recognized over the period earned.

Health Care Costs Payable

Health care costs payable within the Health Care Benefits segment consist principally of unpaid fee-for-service medical, dental and pharmacy claims, capitation costs, other amounts due to providers pursuant to risk-sharing arrangements related to the Health Care Benefits segment’s Insured Commercial, Medicare and Medicaid products and accruals for state assessments. Unpaid health care claims include an estimate of payments the Company will make for (i) services rendered to the Company’s Insured members but not yet reported to the Company and (ii) claims which have been reported to the Company but not yet paid, each as of the financial statement date (collectively, “IBNR”). Health care costs payable also include an estimate of the cost of services that will continue to be rendered after the financial statement date if the Company is obligated to pay for such services in accordance with contractual or regulatory requirements. Such estimates are developed using actuarial principles and assumptions which consider, among other things, historical and projected claim submission and processing patterns, assumed and historical medical cost trends, historical utilization of medical services, claim inventory levels, changes in Insured membership and product mix, seasonality and other relevant factors. The Company reflects changes in these estimates in benefit costs in the Company’s consolidated operating results in the period they are determined. Capitation costs represent contractual monthly fees paid to participating physicians and other medical providers for providing medical care, regardless of the volume of medical services provided to the Insured member. Amounts due under risk-sharing arrangements are based on the terms of the underlying contracts with the providers and consider claims experience under the contracts through the financial statement date. Within the Health Services segment, health care costs payable includes estimates of the Company’s obligations for medical care services that have been rendered by third parties on behalf of consumers for which the Company is contractually obligated to pay, but for which claims have either not yet been received, processed or paid.

The Company develops its estimate of IBNR using actuarial principles and assumptions that consider numerous factors. Of those factors, the Company considers the analysis of historical and projected claim payment patterns (including claims submission and processing patterns) and the assumed health care cost trend rate (the year-over-year change in per member per month health care costs) to be the most critical assumptions. In developing its IBNR estimate, the Company consistently applies

these actuarial principles and assumptions each period, with consideration to the variability of related factors. There have been no significant changes to the methodologies or assumptions used to develop the Company’s estimate of IBNR in 2024.

The Company analyzes historical claim payment patterns by comparing claim incurred dates (i.e., the date services were provided) to claim payment dates to estimate “completion factors.” The Company uses completion factors predominantly to estimate the ultimate cost of claims incurred more than three months before the financial statement date. The Company estimates completion factors by aggregating claim data based on the month of service and month of claim payment and estimating the percentage of claims incurred for a given month that are complete by each month thereafter. For any given month, substantially all claims are paid within six months of the date of service, but it can take up to 48 months or longer after the date of service before all of the claims are completely resolved and paid. These historically-derived completion factors are then applied to claims paid through the financial statement date to estimate the ultimate claim cost for a given month’s incurred claim activity. The difference between the estimated ultimate claim cost and the claims paid through the financial statement date represents the Company’s estimate of claims remaining to be paid as of the financial statement date and is included in the Company’s health care costs payable. The completion factors the Company uses reflect judgments and possible adjustments based on data such as claim inventory levels, claim submission and processing patterns and, to a lesser extent, other factors such as changes in health care cost trend rates, changes in Insured membership and changes in product mix. If claims are submitted or processed on a faster (slower) pace than prior periods, the actual claims may be more (less) complete than originally estimated using the Company’s completion factors, which may result in reserves that are higher (lower) than the ultimate cost of claims.

Because claims incurred within three months before the financial statement date are less mature, the Company uses a combination of historically-derived completion factors and the assumed health care cost trend rate to estimate the ultimate cost of claims incurred for these months. The Company applies its actuarial judgment and places a greater emphasis on the assumed health care cost trend rate for the most recent claim incurred dates as these months may be influenced by seasonal patterns and changes in membership and product mix.

The Company’s health care cost trend rate is affected by changes in per member utilization of medical services as well as changes in the unit cost of such services. Many factors influence the health care cost trend rate, including the Company’s ability to manage benefit costs through product design, negotiation of favorable provider contracts and medical management programs, as well as the mix of the Company’s business. The health status of the Company’s Insured members, aging of the population and other demographic characteristics, advances in medical technology and other factors continue to contribute to rising per member utilization and unit costs. Changes in health care practices, inflation, new technologies, increases in the cost of prescription drugs (including specialty pharmacy drugs), direct-to-consumer marketing by pharmaceutical companies, clusters of high-cost cases, claim intensity, changes in the regulatory environment, health care provider or member fraud and numerous other factors also contribute to the cost of health care and the Company’s health care cost trend rate.

For each reporting period, the Company uses an extensive degree of judgment in the process of estimating its health care costs payable. As a result, considerable variability and uncertainty is inherent in such estimates, particularly with respect to claims with claim incurred dates of three months or less before the financial statement date; and the adequacy of such estimates is highly sensitive to changes in assumed completion factors and the assumed health care cost trend rates. For each reporting period the Company recognizes the actuarial best estimate of health care costs payable considering the potential volatility in assumed completion factors and health care cost trend rates, as well as other factors. The Company believes its estimate of health care costs payable is reasonable and adequate to cover its obligations at December 31, 2024; however, actual claim payments may differ from the Company’s estimates. A worsening (or improvement) of the Company’s health care cost trend rates or changes in completion factors from those that the Company assumed in estimating health care costs payable at December 31, 2024 would cause these estimates to change in the near term, and such a change could be material.

Each quarter, the Company re-examines previously established health care costs payable estimates based on actual claim payments for prior periods and other changes in facts and circumstances. Given the extensive degree of judgment in this estimate, it is possible that the Company’s estimates of health care costs payable could develop either favorably (that is, its actual health care costs for the period were less than estimated) or unfavorably. The changes in the Company’s estimate of health care costs payable may relate to a prior quarter, prior year or earlier periods. For a roll forward of the Company’s health care costs payable, see Note 8 ‘‘Health Care Costs Payable.’’ The Company’s reserving practice is to consistently recognize the actuarial best estimate of its ultimate liability for health care costs payable.

Other Insurance Liabilities

Unpaid Claims

Unpaid claims consist primarily of reserves associated with certain short-duration group disability and term life insurance contracts, including an estimate for IBNR as of the financial statement date. Reserves associated with certain short-duration group disability and term life insurance contracts are based upon the Company’s estimate of the present value of future benefits, which is based on assumed investment yields and assumptions regarding mortality, morbidity and recoveries from the U.S. Social Security Administration. The Company develops its estimate of IBNR using actuarial principles and assumptions which consider, among other things, contractual requirements, claim incidence rates, claim recovery rates, seasonality and other relevant factors. The Company discounts certain claim liabilities related to group long-term disability and life insurance waiver of premium contracts. The discount rates generally reflect the Company’s expected investment returns for the investments supporting all incurral years of these liabilities. The discount rates for retrospectively-rated contracts are set at contractually specified levels. The Company’s estimates of unpaid claims are subject to change due to changes in the underlying experience of the insurance contracts, changes in investment yields or other factors, and these changes are recorded in current and future benefits in the consolidated statements of operations in the period they are determined. The Company estimates its reserve for claims IBNR for life products largely based on completion factors. The completion factors used are based on the Company’s historical experience and reflect judgments and possible adjustments based on data such as claim inventory levels, claim payment patterns, changes in business volume and other factors. If claims are submitted or processed on a faster (slower) pace than historical periods, the actual claims may be more (less) complete than originally estimated using completion factors, which may result in reserves that are higher (lower) than required to cover future life benefit payments. There have been no significant changes to the methodologies or assumptions used to develop the Company’s estimate of unpaid claims IBNR in 2024. As of December 31, 2024, unpaid claims balances of $280 million and $713 million were recorded in other insurance liabilities and other long-term insurance liabilities, respectively. As of December 31, 2023, unpaid claims balances of $285 million and $834 million were recorded in other insurance liabilities and other long-term insurance liabilities, respectively.

Substantially all life and disability insurance liabilities have been fully ceded to unrelated third parties through indemnity reinsurance agreements; however, the Company remains directly obligated to the policyholders.

Future Policy Benefits

Future policy benefits consist primarily of reserves for products for which the Company no longer solicits or accepts new customers, including limited payment pension and annuity contracts and long-term care insurance contracts. Contracts are grouped into cohorts by contract type and issue year. The liability for future policy benefits is adjusted for differences between actual and expected experience.

Reserves for limited payment pension and annuity contracts represent the Company’s estimate of the present value of future benefits to be paid to or on behalf of policyholders and are computed using actuarial principles that consider, among other things, assumptions reflecting anticipated mortality and retirement experience. On an annual basis, or more frequently if necessary, the Company reviews mortality assumptions against both industry standards and its experience.

Reserves for long-term care insurance contracts represent the Company’s estimate of the present value of future benefits and settlement costs to be paid to or on behalf of policyholders less the present value of future net premiums. The Company’s estimate of the present value of future benefits under such contracts is based upon mortality, morbidity, lapse and interest rate assumptions. On an annual basis, or more frequently if necessary, the Company reviews its mortality, morbidity and lapse assumptions against its experience. Annually, or each time the assumptions are changed, the net premium ratio used to calculate the future policy benefit liability is updated to reflect actual experience, as well as the impact of any change in assumptions on the Company’s future cash flows.

The Company discounts its future policy benefit liability using a curve of spot rates derived from Single A rated fixed income instruments. At each reporting date, the Company will measure its liability for future policy benefits using both the current spot rate curve and the locked-in discount rate at each cohort’s inception. Any difference between the measured liabilities is recorded in other comprehensive income (loss).

As of December 31, 2024, future policy benefits balances of $371 million and $4.2 billion were recorded in other insurance liabilities and other long-term insurance liabilities, respectively. As of December 31, 2023, future policy benefits balances of $393 million and $4.6 billion were recorded in other insurance liabilities and other long-term insurance liabilities, respectively.

Premium Deficiency Reserves

The Company evaluates its short-duration insurance contracts to determine if it is probable that a loss will be incurred. For purposes of determining premium deficiency losses, contracts are grouped consistent with the Company’s method of acquiring, servicing and measuring the profitability of such contracts. For each contract grouping, a premium deficiency reserve is recognized when it is probable that expected future incurred claims, including costs to maintain the contract grouping exceed anticipated future premiums and reinsurance recoveries. Anticipated investment income is not considered in the calculation of premium deficiency reserves. A premium deficiency is first recognized by charging any unamortized acquisition costs to operating expenses, and to the extent the premium deficiency is greater than the unamortized acquisition costs, a premium deficiency reserve liability is established and reflected in health care costs payable on the consolidated balance sheets. Losses recognized as a premium deficiency reserve result in a beneficial effect in subsequent periods as subsequent costs under these contracts are then charged to this previously established liability.

During the third quarter of 2024, the Company determined it had a premium deficiency in its Medicare product line related to the 2024 coverage year and, accordingly, recorded a premium deficiency reserve of $766 million. The premium deficiency reserve consisted of a $383 million write-off of unamortized acquisition costs, which was recorded in operating expenses, and $383 million recorded in health care costs which was subsequently utilized in the fourth quarter of 2024. The Company did not have any premium deficiency reserves related to its Medicare product line as of December 31, 2024.

Additionally, during the third quarter of 2024, the Company established a premium deficiency reserve of $270 million related to its individual exchange product line for the 2024 coverage year. The premium deficiency reserve consisted of an $11 million write-off of unamortized acquisition costs, which was recorded in operating expenses, and $259 million recorded in health care costs which was subsequently utilized in the fourth quarter of 2024. The Company did not have any premium deficiency reserves related to its individual exchange product line as of December 31, 2024.

The Company did not have any premium deficiency reserves as of December 31, 2024 or 2023.

Self-Insurance Liabilities

The Company is self-insured for certain losses related to general liability, workers’ compensation and auto liability. The Company obtains third party insurance coverage to limit exposure from these claims. The Company is also self-insured for certain losses related to health and medical liabilities. The Company’s self-insurance accruals, which include reported claims and claims incurred but not reported, are calculated using standard insurance industry actuarial assumptions and the Company’s historical claims experience. As of both December 31, 2024 and 2023, self-insurance liabilities totaled $1.1 billion and were recorded in accrued expenses and other current liabilities, as well as other long-term liabilities on the consolidated balance sheets.

Foreign Currency Translation and Transactions

For non-U.S. dollar functional currency locations, (i) assets and liabilities are translated at end-of-period exchange rates, (ii) revenues and expenses are translated at average exchange rates in effect during the period and (iii) equity is translated at historical exchange rates. The resulting cumulative translation adjustments are included as a component of accumulated other comprehensive loss.

For U.S. dollar functional currency locations, foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary balance sheet accounts which are remeasured at historical exchange rates. Revenues and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the nonmonetary balance sheet amounts which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in net income.

Gains and losses from foreign currency transactions and the effects of foreign currency remeasurements were not material in the years ended December 31, 2024, 2023 or 2022.

Revenue Recognition

Health Care Benefits Segment

Health Care Benefits revenue is principally derived from insurance premiums and fees billed to customers. Revenue is recognized based on customer billings, which, in the Company’s Commercial business, reflect contracted rates per member and

the number of covered members recorded in the Company’s records at the time the billings are prepared. Billings are generally sent monthly for coverage during the following month. Revenue related to the Company’s Government business is collected monthly from the U.S. federal government and various government agencies based on fixed payment rates and member eligibility.

The Company’s billings may be subsequently adjusted to reflect enrollment changes due to member terminations or other factors. These adjustments are known as retroactivity adjustments. In each period, the Company estimates the amount of future retroactivity and adjusts the recorded revenue accordingly. As information regarding actual retroactivity amounts becomes known, the Company refines its estimates and records any required adjustments to revenues in the period in which they arise.

Premium Revenue

Premiums are recognized as revenue in the month in which the enrollee is entitled to receive health care services. Premiums are reported net of an allowance for estimated terminations and uncollectible amounts. Additionally, premium revenue subject to the minimum medical loss ratio (“MLR”) rebate requirements of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (as amended, collectively, the “ACA”) is recorded net of the estimated minimum MLR rebates for the current calendar year. Premiums related to unexpired contractual coverage periods (unearned premiums) are reported as other insurance liabilities on the consolidated balance sheets and recognized as revenue when earned.

Some of the Company’s contracts allow for premiums to be adjusted to reflect actual experience or the relative health status of Insured members. Such adjustments are reasonably estimable at the outset of the contract, and adjustments to those estimates are made based on actual experience of the customer emerging under the contract and the terms of the underlying contract.

The ACA established a permanent risk adjustment program to transfer funds from qualified individual and small group insurance plans with below average risk scores to plans with above average risk scores. Based on the risk of the Company’s qualified plan members relative to the average risk of members of other qualified plans in comparable markets, as defined by the ACA, the Company estimates its ultimate risk adjustment receivable (recorded in accounts receivable) or payable (recorded in accrued expenses and other current liabilities) for the current calendar year and reflects the pro-rata year-to-date impact as an adjustment to premium revenue.

Services Revenue

Services revenue relates to contracts that can include various combinations of services or series of services which generally are capable of being distinct and accounted for as separate performance obligations. The Health Care Benefits segment’s services revenue primarily consists of ASC fees received in exchange for performing certain claim processing and member services for ASC members. ASC fee revenue is recognized over the period the service is provided. Some of the Company’s administrative services contracts include guarantees with respect to certain functions, such as customer service response time, claim processing accuracy and claim processing turnaround time, as well as certain guarantees that a plan sponsor’s benefit claim experience will fall within a certain range. With any of these guarantees, the Company is financially at risk if the conditions of the arrangements are not met, although the maximum amount at risk typically is limited to a percentage of the fees otherwise payable to the Company by the customer involved. Each period the Company estimates its obligations under the terms of these guarantees and records its estimate as an offset to services revenues.

Accounting for Medicare Part D

Revenues include insurance premiums earned by the Company’s PDPs, which are determined based on the PDP’s annual bid and related contractual arrangements with CMS. The insurance premiums include a beneficiary premium, which is the responsibility of the PDP member, and can be subsidized by CMS in the case of low-income members, and a direct premium paid by CMS. Premiums collected in advance are initially recorded within other insurance liabilities and are then recognized ratably as revenue over the period in which members are entitled to receive benefits.

Revenues also include a risk-sharing feature of the Medicare Part D program design referred to as the risk corridor. The Company estimates variable consideration in the form of amounts payable to, or receivable from, CMS under the risk corridor, and adjusts revenue based on calculations of additional subsidies to be received from or owed to CMS at the end of the reporting year.

In addition to Medicare Part D premiums, the Company receives additional payments each month from CMS related to catastrophic reinsurance, low-income cost-sharing subsidies and coverage gap benefits. If the subsidies received differ from the amounts earned from actual prescriptions transferred, the difference is recorded in either accounts receivable, net or accrued expenses.

Health Services Segment

Pharmacy Services

The Health Services segment sells prescription drugs directly through its specialty and mail order pharmacy offerings and indirectly through the Company’s retail pharmacy network. The Company’s pharmacy benefit arrangements are accounted for in a manner consistent with a master supply arrangement as there are no contractual minimum volumes and each prescription is considered a separate purchasing decision and distinct performance obligation transferred at a point in time. PBM services performed in connection with each prescription claim are considered part of a single performance obligation which culminates in the fulfillment of prescription drugs.

The Company recognizes revenue using the gross method at the contract price negotiated with its clients when the Company has concluded it controls the prescription drug before it is transferred to the client plan members. The Company controls prescriptions fulfilled indirectly through its retail pharmacy network because it has separate contractual arrangements with those pharmacies, has discretion in setting the price for the transaction and assumes primary responsibility for fulfilling the promise to provide prescription drugs to its client plan members while also performing the related PBM services.

Revenues include (i) the portion of the price the client pays directly to the Company, net of any discounts earned on brand name drugs or other discounts and refunds paid back to the client (see “Drug Discounts” and “Guarantees” below), (ii) the price paid to the Company by client plan members for mail order prescriptions and the price paid to retail network pharmacies by client plan members for retail prescriptions (“retail co-payments”), and (iii) claims based administrative fees for retail pharmacy network contracts. Sales taxes are not included in revenues.

The Company recognizes revenue when control of the prescription drugs is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those prescription drugs. The Company has established the following revenue recognition policies for the Health Services segment:

Revenues generated from prescription drugs sold by third party pharmacies in the Company’s retail pharmacy network and associated administrative fees are recognized at the Company’s point-of-sale, which is when the claim is adjudicated by the Company’s online claims processing system and the Company has transferred control of the prescription drug and completed all of its performance obligations.
Revenues generated from prescription drugs sold by specialty and mail order pharmacies are recognized when the prescription drug is delivered to the client plan member. At the time of delivery, the Company has performed substantially all of its performance obligations under its client contracts and does not experience a significant level of returns or reshipments.

For contracts under which the Company acts as an agent or does not control the prescription drugs prior to transfer to the client plan member, revenue is recognized using the net method.

Drug Discounts

The Company records revenue net of manufacturers’ rebates earned by its clients based on their plan members’ utilization of brand-name formulary drugs. The Company estimates these rebates at period-end based on actual and estimated claims data and its estimates of the manufacturers’ rebates earned by its clients. The estimates are based on the best available data at period-end and recent history for the various factors that can affect the amount of rebates due to the client. The Company adjusts its rebates payable to clients to the actual amounts paid when these rebates are paid or as significant events occur. Any cumulative effect of these adjustments is recorded against revenues at the time it is identified. Adjustments generally result from contract changes with clients or manufacturers that have retroactive rebate adjustments, differences between the estimated and actual product mix subject to rebates, or whether the brand name drug was included in the applicable formulary. The effect of adjustments between estimated and actual manufacturers’ rebate amounts has not been material to the Company’s operating results or financial condition.

Guarantees

The Company also adjusts revenues for refunds owed to clients resulting from pricing guarantees and performance against defined service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition.

Walk-In Medical Clinics

For services provided by the Company’s walk-in medical clinics, revenue recognition occurs for completed services provided to patients, with adjustments taken for third party payor contractual obligations and patient direct bill historical collection rates.

Primary Care Capitated Revenue

Capitated revenue related to the Company’s primary care operations consists primarily of capitated fees for medical services it provides under capitated or capitation arrangements directly made with various Medicare Advantage managed care payors or CMS. Under the risk contracts, the Company receives from the third-party payor a fixed payment per patient per month for a defined patient population, and the Company is then responsible for providing, managing and paying for healthcare services for that patient population, including those not provided by the Company. The Company recognizes revenue using the gross method as the Company is the principal in arranging, providing and controlling the managed healthcare services provided to the defined patient population. The Company considers all contracts with customers (enrolled patients) as a single performance obligation to stand ready to provide healthcare services. This performance obligation is satisfied over time as the Company stands ready to fulfill its obligation to enrolled patients.

In-Home Health Evaluations (“IHEs”)

Revenue generated from IHEs relates to the assessments performed either within the patient’s home, virtually or at a healthcare provider facility as well as certain in-home clinical evaluations performed by the Company’s mobile network of providers. Revenue is recognized when the IHEs are submitted to customers on a daily basis. Submission to the customer occurs after the IHEs are completed and coded, a process which may take one to several days after completion of the evaluation. The pricing for the IHEs is generally based on a fixed transaction fee, which is directly linked to the usage of the service by the customer during a distinct service period. Customers are invoiced for evaluations performed each month and remit payment accordingly. Each IHE represents a single performance obligation for which revenue is recognized at a point in time when control is transferred to the customer upon submission of the completed and coded evaluation.

Pharmacy & Consumer Wellness Segment

Retail Pharmacy

The Company’s retail drugstores recognize revenue at the time the customer takes possession of the merchandise. For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation, separate and distinct from other prescription claims under other retail network arrangements. Revenues are adjusted for refunds owed to third party payers resulting from pricing guarantees and performance against defined value-based service and performance metrics. The inputs to these estimates are not subject to a high degree of subjectivity or volatility. The effect of adjustments between estimated and actual pricing and performance refund amounts has not been material to the Company’s operating results or financial condition.

Revenue from Company gift cards purchased by customers is deferred as a contract liability until goods or services are transferred. Any amounts not expected to be redeemed by customers (i.e., breakage) are recognized based on historical redemption patterns.

Customer returns are not material to the Company’s operating results or financial condition. Sales taxes are not included in revenues.

Loyalty and Other Programs

The Company’s customer loyalty program, ExtraCare®, consists of two components, ExtraSavingsTM and ExtraBucks® Rewards. ExtraSavings are coupons that are recorded as a reduction of revenue when redeemed as the Company concluded that they do not represent a promise to the customer to deliver additional goods or services at the time of issuance because they are not tied to a specific transaction or spending level.

ExtraBucks Rewards are accumulated by customers based on their historical spending levels. Thus, the Company has determined that there is an additional performance obligation to those customers at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the ExtraBucks Rewards transaction based upon the relative standalone selling price, which considers historical redemption patterns for the rewards. Revenue allocated to ExtraBucks Rewards is recognized as those rewards are redeemed. At the end of each period, unredeemed ExtraBucks Rewards are reflected as a contract liability.

The Company also offers a subscription-based membership program, ExtraCare PlusTM, under which members are entitled to a suite of benefits delivered over the course of the subscription period, as well as a promotional reward that can be redeemed for

future goods and services. Subscriptions are paid for on a monthly or annual basis at the time of or in advance of the Company delivering the goods and services. Revenue from these arrangements is recognized as the performance obligations are satisfied.

Long-term Care

Revenue is recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. Each prescription claim represents a separate performance obligation of the Company, separate and distinct from other prescription claims under customer arrangements. A significant portion of long-term care revenue from sales of pharmaceutical and medical products is reimbursed by the federal Medicare Part D program and, to a lesser extent, state Medicaid programs. The Company monitors its revenues and receivables from these reimbursement sources, as well as long-term care facilities and other third-party insurance payors, and reduces revenue at the revenue recognition date to properly account for the variable consideration due to anticipated differences between billed and reimbursed amounts. Accordingly, the total revenues and receivables reported in the Company’s consolidated financial statements are recorded at the amount expected to be ultimately received from these payors.

Patient co-payments associated with Medicare Part D, certain state Medicaid programs, Medicare Part B and certain third-party payors typically are not collected at the time products are delivered or services are rendered, but are billed to the individuals as part of normal billing procedures and subject to normal accounts receivable collections procedures.

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by major source in each segment for the years ended December 31, 2024, 2023 and 2022:


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
2024
Major goods/services lines:
Pharmacy	$	—	$	162,527	$	100,687	$	—	$	(52,942)	$	210,272
Front Store	—		—		21,522		—		—		21,522
Premiums	122,849		—		—		47		—		122,896

Net investment income	1,473		285		—		395		—		2,153
Other	6,343		10,793		2,291		9		(3,470)		15,966
Total	$	130,665	$	173,605	$	124,500	$	451	$	(56,412)	$	372,809

Health Services distribution channel:
Pharmacy network (1)			$	91,650
Mail & specialty (2)			70,877
Net investment income			285
Other			10,793
Total			$	173,605

2023
Major goods/services lines:
Pharmacy	$	—	$	180,710	$	92,111	$	—	$	(49,369)	$	223,452
Front Store	—		—		22,458		—		—		22,458
Premiums	99,144		—		—		48		—		99,192

Net investment income (loss)	765		(1)		(5)		394		—		1,153
Other	5,737		6,134		2,199		9		(2,558)		11,521
Total	$	105,646	$	186,843	$	116,763	$	451	$	(51,927)	$	357,776

Health Services distribution channel:
Pharmacy network (1)			$	112,718
Mail & specialty (2)			67,992
Net investment income (loss)			(1)
Other			6,134
Total			$	186,843


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
2022
Major goods/services lines:
Pharmacy	$	—	$	166,793	$	83,480	$	—	$	(45,154)	$	205,119
Front Store	—		—		22,780		—		—		22,780
Premiums	85,274		—		—		56		—		85,330

Net investment income (loss)	476		—		(44)		406		—		838
Other	5,600		2,783		2,380		68		(2,431)		8,400
Total	$	91,350	$	169,576	$	108,596	$	530	$	(47,585)	$	322,467


Health Services distribution channel:
Pharmacy network (1)			$	102,968
Mail & specialty (2)			63,825

Other			2,783
Total			$	169,576

(1)Health Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies, as well as activity associated with Maintenance Choice®, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order.

(2)Health Services mail & specialty is defined as specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as mail order and specialty claims fulfilled by the Pharmacy & Consumer Wellness segment.

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, and include ExtraBucks Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

The following table provides information about receivables and contract liabilities from contracts with customers as of December 31, 2024 and 2023:


In millions	2024		2023
Trade receivables (included in accounts receivable, net)	$	9,881	$	11,908
Contract liabilities (included in accrued expenses and other current liabilities)	144		149

Cost of Products Sold

The Company accounts for cost of products sold as follows:

Health Services Segment

Cost of products sold includes: (i) the cost of prescription drugs sold during the reporting period directly through the Company’s specialty and mail order pharmacies and indirectly through the Company’s retail pharmacy network, (ii) the cost of care provided within the Company’s primary care centers, (iii) direct operating costs associated with generating revenues related to services provided, including fees paid to clinicians for performing IHEs, (iv) administrative service fees paid to the Pharmacy & Consumer Wellness segment for specialty and mail order pharmacy fulfillment services and (v) shipping and handling costs.

The cost of prescription drugs sold component of cost of products sold includes: (i) the cost of the prescription drugs purchased from manufacturers or distributors and shipped to members in clients’ benefit plans from the Company’s mail order pharmacies, net of any volume-related or other discounts (see “Vendor Allowances and Purchase Discounts” below) and (ii) the cost of prescription drugs sold (including retail co-payments) through the Company’s retail pharmacy network under contracts where the Company is the principal, net of any volume-related or other discounts.

The cost of care provided within the Company’s costs of products sold includes the costs incurred to operate the primary care centers and care model. These costs consist of care team and patient support employee-related costs, occupancy costs, patient transportation, medical supplies, insurance, fees paid to specialists and other operating costs.

Pharmacy & Consumer Wellness Segment

Cost of products sold includes: the cost of merchandise sold during the reporting period, including the costs of prescription drugs sold through its retail pharmacies, net of any volume-related or other discounts, the related purchasing costs, warehousing and delivery costs (including depreciation and amortization), the operating costs of the Company’s specialty and mail order pharmacy fulfillment operations and inventory losses.

Vendor Allowances and Purchase Discounts

The Company accounts for vendor allowances and purchase discounts as follows:

Health Services Segment

The Health Services segment receives purchase discounts on pharmaceutical products purchased. Contractual arrangements with vendors, including manufacturers, wholesalers and retail pharmacies, normally provide for the Health Services segment to receive purchase discounts from established list prices in one, or a combination, of the following forms: (i) a direct discount at the time of purchase, (ii) a discount for the prompt payment of invoices or (iii) when products are purchased indirectly from a manufacturer (e.g., through a wholesaler or retail pharmacy), a discount (or rebate) paid subsequent to dispensing. These rebates are recognized when prescriptions are dispensed and are generally calculated and billed to manufacturers within 30 days of the end of each completed quarter. Historically, the effect of adjustments resulting from the reconciliation of rebates recognized to the amounts billed and collected has not been material to the Company’s operating results or financial condition. The Company accounts for the effect of any such differences as a change in accounting estimate in the period the reconciliation is completed. The Health Services segment also receives additional discounts under its wholesaler contracts if it exceeds contractually defined purchase volumes. In addition, the Health Services segment receives fees from pharmaceutical manufacturers for administrative services. Purchase discounts and administrative service fees are recorded as a reduction of cost of products sold.

Pharmacy & Consumer Wellness Segment

Vendor allowances received by the Pharmacy & Consumer Wellness segment reduce the carrying cost of inventory and are recognized in cost of products sold when the related inventory is sold, unless they are specifically identified as a reimbursement of incremental costs for promotional programs and/or other services provided. Amounts that are directly linked to advertising commitments are recognized as a reduction of advertising expense (included in operating expenses) when the related advertising commitment is satisfied. Any amounts received in excess of the actual cost incurred also reduce the carrying cost of inventory. The total value of any upfront payments received from vendors that are linked to purchase commitments is initially deferred. The deferred amounts are then amortized to reduce cost of products sold over the life of the contract based upon sales volume. The total value of any upfront payments received from vendors that are not linked to purchase commitments is also initially deferred. The deferred amounts are then amortized to reduce cost of products sold on a straight-line basis over the life of the related contract. The total amortization of these upfront payments was not material to the Company’s consolidated financial statements in any of the periods presented.

Advertising Costs

Advertising costs, which are reduced by the portion funded by vendors, are expensed when the related advertising takes place. Net advertising costs, which are included in operating expenses, were $989 million, $985 million and $745 million in 2024, 2023 and 2022, respectively.

Stock-Based Compensation

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the

consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year or years in which the differences are expected to reverse. The effect of a change in the tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date of such change.

The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and the Company’s recent operating results. The Company establishes a valuation allowance when it does not consider it more likely than not that a deferred tax asset will be recovered.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Interest and/or penalties related to uncertain tax positions are recognized in the income tax provision.

Measurement of Defined Benefit Pension and Other Postretirement Employee Benefit Plans

The Company sponsors defined benefit pension plans (“pension plans”) and other postretirement employee benefit plans (“OPEB plans”) for its employees and retirees. The Company recognizes the funded status of its pension and OPEB plans on the consolidated balance sheets based on the year-end measurements of plan assets and benefit obligations. When the fair value of plan assets are in excess of the plan benefit obligations, the amounts are reported in other current assets and other assets. When the fair value of plan benefit obligations are in excess of plan assets, the amounts are reported in accrued expenses and other current liabilities and other long-term liabilities based on the amount by which the actuarial present value of benefits payable in the next twelve months included in the benefit obligation exceeds the fair value of plan assets. The net periodic benefit income for the Company’s pension and OPEB plans do not contain a service cost component as these plans have been frozen for an extended period of time. Non-service cost components of pension and postretirement net periodic benefit income are included in other income in the consolidated statements of operations.

Earnings per Share

Earnings per share is computed using the treasury stock method. The Company calculates basic earnings per share based on the weighted average number of common shares outstanding for the period. See Note 16 ‘‘Earnings Per Share’’ for additional information.

Shares Held in Trust

The Company maintains grantor trusts, which held approximately one million shares of its common stock at both December 31, 2024 and 2023. These shares are designated for use under various employee compensation plans. Since the Company holds these shares, they are excluded from the computation of basic and diluted shares outstanding.

VIEs

The Company has various investments that are considered VIEs. The Company does not have a future obligation to fund losses or debts on behalf of these investments; however, it may voluntarily contribute funds. In evaluating whether the Company is the primary beneficiary of a VIE, the Company considers several factors, including whether the Company has (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE.

VIEs - Primary Beneficiary

Red Oak Sourcing, LLC (“Red Oak”)

In 2014, the Company and Cardinal Health, Inc. (“Cardinal”) established Red Oak, a generic pharmaceutical sourcing entity in which the Company and Cardinal each own 50%. The Red Oak arrangement had an initial term of ten years. In 2021, the Red Oak arrangement was amended to extend the initial term an additional five years, for a total term of 15 years. Under this arrangement, the Company and Cardinal contributed their sourcing and supply chain expertise to Red Oak and agreed to source and negotiate generic pharmaceutical supply contracts for both companies through Red Oak; however, Red Oak does not own

or hold inventory on behalf of either company. No physical assets (e.g., property and equipment) were contributed to Red Oak by either company, and minimal funding was provided to capitalize Red Oak. The Company has determined that it is the primary beneficiary of this VIE because it has the ability to direct the activities of Red Oak. Consequently, the Company consolidates Red Oak in its consolidated financial statements within the Pharmacy & Consumer Wellness segment.

Cardinal is required to pay the Company quarterly payments, which began in October 2014 and will extend through June 2029. The Company received $126 million from Cardinal during the year ended December 31, 2024 and $183 million from Cardinal during each of the years ended December 31, 2023 and 2022. The payments reduce the Company’s carrying value of inventory and are recognized in cost of products sold when the related inventory is sold.

Physician Groups

The Company has entered into management and/or administrative services agreements with affiliated physician practice organizations (the “Physician Groups”). Physician Groups employ healthcare providers, contract with managed care payors and deliver healthcare services to patients in the markets that the Company serves. Oak Street Health, MSO LLC (“OSH MSO”), a wholly owned subsidiary of the Company, provides management services to the Physician Groups. Activities include but are not limited to operational support of the centers, marketing, information technology infrastructure and the sourcing and managing of health plan contracts. The Company concluded that it has variable interests in the Physician Groups on the basis of its administrative service agreement, which includes the reimbursement of costs and a management fee payable to the Company from the Physician Groups for the management services provided, which are eliminated in consolidation. The Physician Groups are considered VIEs as additional support is needed to finance their operations. Neither shareholders, employees nor their designees have the individual power to direct the activities of the Physician Groups that significantly impact its economic performance. The success or failure of OSH MSO in performing the activities impacting the growth of patients and management of healthcare services of the Physicians Groups’ patient base is significant to the economic performance of the Physician Groups. Therefore, the Company is the primary beneficiary of the Physician Groups and, consequently, consolidates the Physician Groups in its consolidated financial statements within the Health Services segment.

Physician Groups VIE assets and liabilities included on the consolidated balance sheet at December 31, 2024 and 2023 were as follows:


In millions	2024		2023
Total assets	$	2,144	$	1,515
Total liabilities	2,104		1,503

There are no restrictions on the Physician Groups’ assets or on the settlement of its liabilities. The assets of the Physician Groups are all current and can be used to settle obligations of the Company. The Physician Groups are included in the Company’s obligated group; thus, creditors of the Company have recourse to the assets owned by the Physician Groups. There are no liabilities for which creditors of the Physician Groups do not have recourse to the general credit of the Company. There are no restrictions placed on the retained earnings or net income of the Physician Groups with respect to potential dividend payments.

Physician Owned Entities

The Company’s consolidated VIEs include certain IHE related physician practices that require an individual physician to legally own the equity interests as certain state laws and regulations prohibit non-physician owned business entities from practicing medicine or employing licensed healthcare providers. The Company determined it was the primary beneficiary of these VIEs as it has the obligation to absorb the losses from and direct the activities of these operations. As a result, these VIEs are consolidated and any noncontrolling interest is not presented. The carrying amount of these VIEs’ assets and liabilities are not material to the consolidated balance sheets.

Accountable Care Organizations (“ACOs”)

The Company is the sole member of certain ACOs which are considered VIEs. CMS administers these programs where the goal of the program is to reward the ACO participants when specific quality metrics, established by the U.S. Department of Health and Human Services (“HHS”), are met and expenditures are lowered. These ACOs have a risk model such that the ACOs can either share in both savings and losses or share in only the savings. The governance structure of the VIEs does not provide the Company with the ultimate decision-making authority to direct the activities that most significantly impact the VIEs’ economic performance. For certain ACO VIEs, the Company is ultimately liable for losses incurred or is required to secure and have sole authority over all aspects of the repayment of any shared losses incurred in the program in exchange for a higher percentage of savings and, accordingly, the Company is taking on the risk to absorb losses, resulting in a financial responsibility to ensure that

these VIEs operate as designed. For these VIEs, the Company has determined it is the primary beneficiary and therefore consolidates the results of these ACOs. The carrying amount of these VIEs’ assets and liabilities are not material to the consolidated balance sheets.

VIEs - Other Variable Interest Holder

The Company has invested in certain VIEs for which it has determined that it is not the primary beneficiary, consisting of the following:

*•*Hedge fund and private equity investments - The Company invests in hedge fund and private equity investments in order to generate investment returns for its investment portfolio supporting its insurance businesses.

*•*Real estate partnerships - The Company invests in various real estate partnerships, including those that construct, own and manage low-income housing developments. For the low-income housing development investments, substantially all of the projected benefits to the Company are from tax credits and other tax benefits.

The Company is not the primary beneficiary of these VIEs because the nature of the Company’s involvement with the activities of these VIEs does not give the Company the power to direct the activities that most significantly impact their economic performance. The Company records the amount of its investment in these VIEs as long-term investments on the consolidated balance sheets and recognizes its share of each VIE’s income or losses in net income. The Company’s maximum exposure to loss from these VIEs is limited to its investment balances as disclosed below and the risk of recapture of previously recognized tax credits related to the real estate partnerships, which the Company does not consider significant.

Other variable interest holder VIE assets included in long-term investments on the consolidated balance sheets at December 31, 2024 and 2023 were as follows:


In millions	2024		2023
Hedge fund investments	$	1,246	$	859
Private equity investments	934		840
Real estate partnerships	438		319
Total	$	2,618	$	2,018

Related Party Transactions

During the year ended December 31, 2022, the Company made charitable contributions of $25 million to the CVS Health Foundation, a non-profit entity that focuses on health, education and community involvement programs. The charitable contributions were recorded as operating expenses in the consolidated statements of operations within the Corporate/Other segment for the year ended December 31, 2022. The Company did not make any charitable contributions to the CVS Health Foundation during the years ended December 31, 2024 or 2023.

Discontinued Operations

In connection with certain business dispositions completed between 1995 and 1997, the Company retained guarantees on store lease obligations for a number of former subsidiaries, including Linens ‘n Things and Bob’s Stores, each of which subsequently filed for bankruptcy. The Company’s loss from discontinued operations includes lease-related costs that the Company believes it will likely be required to satisfy pursuant to these lease guarantees. See “Lease Guarantees” in Note 18 ‘‘Commitments and Contingencies’’ for additional information.

Results from discontinued operations were immaterial for the years ended December 31, 2024, 2023 and 2022.

New Accounting Pronouncements Recently Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires the Company to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and are included within each reported measure of segment operating results. The standard also requires the Company to disclose the total amount of any other items included in segment operating results which were not deemed to be significant expenses for separate disclosure, along with a qualitative description of the composition of these other items. In

addition, the standard also requires disclosure of the CODM’s title and position, as well as detail on how the CODM uses the reported measure of segment operating results to evaluate segment performance and allocate resources. The standard also aligns interim segment reporting disclosure requirements with annual segment reporting disclosure requirements. The Company adopted the standard on January 1, 2024 for fiscal year reporting and the standard became effective for interim reporting periods in fiscal years beginning after December 15, 2024. The standard requires retrospective application to all prior periods presented. While the standard requires additional disclosures related to the Company’s reportable segments, the standard did not have any impact on the Company’s consolidated operating results, financial condition or cash flows as of the date of adoption. Refer to Note 19 ‘‘Segment Reporting’’ for the Company’s segment reporting disclosures, including those newly required by this standard.

New Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires the Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. The Company adopted the standard on January 1, 2025 for fiscal year reporting. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. While the standard requires additional disclosures related to the Company’s income taxes, the standard did not have any impact on the Company’s consolidated operating results, financial condition or cash flows.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard requires the Company to provide further disaggregated information of relevant expense captions within its consolidated statements of operations, including the purchases of inventory, employee compensation, depreciation and intangible asset amortization, as well as the inclusion of other specific expenses, gains and losses required by existing GAAP. The new standard also requires the Company to disclose its total selling expenses and, on an annual basis, provide a qualitative description of its selling expenses. The standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The standard may be applied prospectively or retrospectively. While the standard will require additional disclosures related to certain expenses included in the consolidated statements of operations, the standard is not expected to have any impact on the Company’s consolidated operating results, financial condition or cash flows.

**2.**Acquisitions, Divestitures and Asset Sales

Oak Street Health Acquisition

On May 2, 2023 (the “Oak Street Health Acquisition Date”), the Company acquired 100% of the outstanding shares and voting interest of Oak Street Health for cash (“Oak Street Health Acquisition”). Under the terms of the merger agreement, Oak Street Health stockholders received $39.00 per share in cash. The Company financed the transaction with borrowings of $5.0 billion from a term loan agreement entered into on May 1, 2023 as described in Note 10 ‘‘Borrowings and Credit Agreements’’ and cash on hand. Oak Street Health is a leading multi-payor, senior focused value-based primary care company. Oak Street Health is included within the Health Services segment. The Company acquired Oak Street Health to advance its value-based care strategy and broaden its platform into primary care.

The fair value of the consideration transferred on the date of acquisition consisted of the following:


In millions
Cash	$	9,579
Fair value of replacement equity awards for pre-combination services (3.9 million shares) (1)	118
Effective settlement of pre-existing relationship (2)	(29)
Total consideration transferred	$	9,668

(1)The fair value of the replacement equity awards issued by the Company was determined as of the Oak Street Health Acquisition Date. The fair value of the awards attributed to pre-combination services of $118 million is included in the consideration transferred and the fair value of the awards attributed to post-combination services of $165 million has been, or will be, included in the Company’s post-combination financial statements as compensation costs.

(2)The purchase price included $29 million of effectively settled liabilities the Company owed to Oak Street Health from their pre-existing relationship.

The transaction has been accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values at the date of acquisition. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:


In millions
Cash and cash equivalents	$	201
Investments	168
Accounts receivable	1,143
Other current assets	46
Property and equipment	180
Operating lease right-of-use assets	316
Goodwill	7,213
Intangible assets	4,233
Other long-term assets	7
Total assets acquired	13,507
Health care costs payable	1,098
Other current liabilities	444
Operating lease liabilities (current and long-term)	378
Debt (current and long-term)	1,028
Deferred income taxes	796
Other long-term liabilities	29
Total liabilities assumed	3,773
Noncontrolling interests	66
Total consideration transferred	$	9,668

The Company’s assessment of fair value of assets acquired and liabilities assumed was finalized during the second quarter of 2024. There were no measurement period adjustments to assets acquired and liabilities assumed during the year ended December 31, 2024.

Goodwill

Goodwill represents future economic benefits expected to arise from the Company’s expanded presence in the health services industry, the assembled workforce acquired, expected revenue and medical cost synergies, as well as operating efficiencies and cost savings. Goodwill was allocated to the Company’s business segments as follows:


In millions
Health Services	$	6,936
Pharmacy & Consumer Wellness	156
Health Care Benefits	121
Total goodwill	$	7,213

The amount of goodwill deductible for income tax purposes was not material.

Intangible Assets

The following table summarizes the fair values and weighted average useful lives for intangible assets acquired in the Oak Street Health Acquisition:


In millions, except weighted average useful life	Gross Fair Value		Weighted Average Useful Life (years)
Customer relationships (1)	$	3,620	19.9
Technology	143		3.0
Trademark (definite-lived)	470		8.0
Total intangible assets	$	4,233	18.0

(1) The substantial majority of the customer relationships intangible asset relates to relationships with health plan payors.

Deferred Income Taxes

The purchase price allocation includes net deferred tax liabilities of $796 million, primarily related to deferred tax liabilities established on the identifiable acquired intangible assets.

Consolidated Results of Operations

During the period from the Oak Street Health Acquisition Date through December 31, 2023, the Company’s consolidated results of operations included $2.1 billion of revenues and $520 million of operating losses, including $193 million of intangible asset amortization and $71 million of stock-based compensation, associated with the results of operations of Oak Street Health.

During the year ended December 31, 2023, the Company incurred transaction costs of $77 million associated with the Oak Street Health Acquisition, which were recorded in operating expenses.

Signify Health Acquisition

On March 29, 2023 (the “Signify Health Acquisition Date”), the Company acquired 100% of the outstanding shares and voting interest of Signify Health for cash (“Signify Health Acquisition”). Under the terms of the merger agreement, Signify Health stockholders received $30.50 per share in cash. The Company financed the transaction with cash on hand, which included approximately $6 billion of proceeds from the issuance of senior unsecured notes in February 2023. Signify Health is a leader in health risk assessments, value-based care and provider enablement services. Signify Health is included within the Health Services segment. The Company acquired Signify Health to advance its health care services strategy, growth in value-based care and new product offerings for other payers.

The fair value of the consideration transferred on the date of acquisition consisted of the following:


In millions
Cash	$	7,450
Fair value of replacement equity awards for pre-combination services (3.2 million shares) (1)	14
Effective settlement of pre-existing relationship (2)	(111)
Total consideration transferred	$	7,353

(1)The fair value of the replacement equity awards issued by the Company was determined as of the Signify Health Acquisition Date. The fair value of the awards attributed to pre-combination services of $14 million is included in the consideration transferred and the fair value of the awards attributed to post-combination services of $167 million has been, or will be, included in the Company’s post-combination financial statements as compensation costs.

(2)The purchase price included $111 million of effectively settled liabilities the Company owed to Signify Health from their pre-existing relationship.


In millions
Cash and cash equivalents	$	376
Accounts receivable	190
Other current assets (including restricted cash of $28)	147
Property and equipment	25
Goodwill	5,909
Intangible assets	1,920
Other long-term assets	23
Total assets acquired	8,590
Other current liabilities	606
Debt (current and long-term)	346
Deferred income taxes	259
Other long-term liabilities	26
Total liabilities assumed	1,237
Total consideration transferred	$	7,353

The Company’s assessment of the fair value of assets acquired and liabilities assumed was finalized during the fourth quarter of 2023. Measurement period adjustments to assets acquired and liabilities assumed during the year ended December 31, 2023 were not material.

Goodwill


In millions
Health Services	$	3,406
Health Care Benefits	2,473
Pharmacy & Consumer Wellness	30
Total goodwill	$	5,909

Approximately $1.7 billion of goodwill is deductible for income tax purposes.

Intangible Assets

The following table summarizes the fair values and weighted average useful lives for intangible assets acquired in the Signify Health Acquisition:


In millions, except weighted average useful life	Gross Fair Value		Weighted Average Useful Life (years)
Customer relationships	$	1,810	16.7
Technology	50		3.0
Trademark (definite-lived)	60		5.0
Total intangible assets	$	1,920	16.0

Deferred Income Taxes

The purchase price allocation includes net deferred tax liabilities of $259 million, primarily related to deferred tax liabilities established on the identifiable acquired intangible assets.

Consolidated Results of Operations

During the period from the Signify Health Acquisition Date through December 31, 2023, the Company’s consolidated results of operations included $797 million of revenues and $123 million of operating income, including $106 million of intangible asset amortization and $72 million of stock-based compensation, associated with the results of operations of Signify Health.

During the year ended December 31, 2023, the Company incurred transaction costs of $37 million associated with the Signify Health Acquisition, which were recorded in operating expenses.

Assets Held For Sale

The Company continually evaluates its portfolio for non-strategic assets. The Company determined that its Omnicare® long-term care business (“LTC business”), which is included within the Pharmacy & Consumer Wellness segment, was no longer a strategic asset and during the third quarter of 2022 committed to a plan to sell the LTC business. At that time, the LTC business met the criteria to be classified as held for sale.

During 2022, the carrying value of the LTC business was determined to be greater than its estimated fair value less costs to sell. Accordingly, the Company recorded total losses on assets held for sale of $2.5 billion during the year ended December 31, 2022. During the first quarter of 2023, an incremental loss on assets held for sale of $349 million was recorded to write-down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflects its estimated fair value less costs to sell. The loss on assets held for sale represents the write-down of long-lived assets and was recorded in the Company’s consolidated statement of operations within the Pharmacy & Consumer Wellness segment. During the third quarter of 2023, the Company determined it was no longer probable that a sale would be completed in the near term. At that time, the Company concluded that the LTC business no longer met the criteria to be classified as held for sale and, accordingly, the assets and liabilities associated with this business were reclassified to held and used at their respective fair values on the consolidated balance sheet.

Divestiture of bswift

In November 2022, the Company sold its wholly-owned subsidiary bswift LLC (“bswift”) for approximately $735 million. bswift offers software and services that streamline benefits and human resource administration. The results of this business have historically been recorded within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $250 million in the year ended December 31, 2022, which was reflected as a reduction of operating expenses in the Company’s consolidated statement of operations within the Health Care Benefits segment.

Divestiture of PayFlex

In June 2022, the Company sold PayFlex for approximately $775 million. PayFlex provides services to employers, their employees, and their former employees in the areas of tax-advantaged account reimbursement administration (flexible spending, health reimbursement, health savings, transit and parking), Consolidated Omnibus Budget Reconciliation Act administration and special-member billing administration. The results of this business have historically been reported within the Health Care Benefits segment. The Company recorded a pre-tax gain on the divestiture of $225 million in the year ended December 31, 2022, which was reflected as a reduction of operating expenses in the Company’s consolidated statement of operations within the Health Care Benefits segment.

Divestiture of Thailand Health Care Business

In March 2022, the Company reached an agreement to sell its international health care business domiciled in Thailand (“Thailand business”), comprised of approximately 266,000 medical members, which was included in the Commercial Business reporting unit within the Health Care Benefits segment. At that time, a portion of the Commercial Business goodwill was specifically allocated to the Thailand business. The net assets of the Thailand business were accounted for as assets held for sale at March 31, 2022. The carrying value of the Thailand business was determined to be greater than its estimated fair value less costs to sell and, accordingly, the Company recorded a $41 million loss on assets held for sale within the Health Care Benefits segment during the first quarter of 2022. The sale of the Thailand business closed in the second quarter of 2022, and the consideration received and ultimate loss on the sale were not material.

International Health Care Benefits Renewal Rights Asset Sale

In May 2022, the Company sold the renewal rights of approximately 200,000 international medical members outside of the Americas, Thailand and India in connection with an Asset Purchase Agreement. As part of this agreement, the Company introduced and helped migrate these existing international medical members to the purchaser upon renewal. The migration process was completed during 2023. The Company ceased writing any new or renewal business for international medical

members outside of the Americas during the fourth quarter of 2022. The consideration received related to this agreement was not material.

**3.**Restructuring

2024 Restructuring Program

During the third quarter of 2024, the Company finalized an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs to partially offset the expected return of certain variable expenses in 2025. In connection with this restructuring plan, during 2024, the Company recorded pre-tax restructuring charges of approximately $1.2 billion, comprised of a $607 million store impairment charge, $293 million of costs associated with corporate workforce optimization, including severance and employee-related costs, a $10 million stock-based compensation charge associated with the impacted employees, which was reflected as an adjustment to common stock and capital surplus on the consolidated balance sheets, and $269 million of other asset impairments and related charges associated with the discontinuation of certain non-core assets.

Store impairment charge

The Company evaluates its retail store right-of-use and property and equipment assets for impairment at the retail store level, which is the lowest level at which cash flows can be identified. For retail stores where there is an indicator of impairment present, the Company first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted). If the estimated undiscounted future cash flows used in the analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to its estimated fair value which is the greater of the asset group’s estimated future cash flows (discounted), or the consideration of what a market participant would pay to lease the assets, net of leasing costs. The Company’s estimate of fair value considers historical results, current operating trends, consolidated sales, profitability and cash flow results and forecasts. For assets which the Company has determined it will be able to sublease, the estimated future cash flows include the estimated sublease income, net of estimated leasing costs. When the carrying value of an asset group exceeds its estimated fair value, an impairment loss is recorded to reduce the value of the asset group to its estimated fair value. As the impaired assets are measured at fair value on a nonrecurring basis primarily using unobservable inputs as of the measurement date, the assets are classified in Level 3 of the fair value hierarchy.

During the third quarter of 2024, in connection with its enterprise-wide restructuring plan, the Company completed a strategic review of its retail business, which included evaluating changes in population, consumer buying patterns and future health requirements to ensure continued alignment of its retail footprint with consumer needs. In connection with this initiative the Company determined it plans to close 271 retail stores in 2025. As a result, management determined that there were indicators of impairment with respect to the impacted stores’ asset groups, including the associated operating or financing lease right-of-use assets and property and equipment.

A long-lived asset impairment test was performed during the third quarter of 2024, the results of which indicated that the fair value of certain retail store asset groups was lower than their respective carrying values. Accordingly, at that time, the Company recorded a store impairment charge of $607 million, consisting of a write down of $483 million related to operating and financing lease right-of-use assets and $124 million related to property and equipment. The charge associated with the store impairments was included in the restructuring charges within the Pharmacy & Consumer Wellness segment. Subsequent to the impairment loss, the fair value of the associated operating and financing lease right-of-use assets and property and equipment were $100 million and $39 million, respectively.

Corporate workforce optimization costs

Corporate workforce optimization costs, including severance and employee-related costs, consist primarily of salary continuation benefits, prorated annual incentive compensation, continuation of health care benefits and outplacement services. Severance and employee-related benefits are determined pursuant to the Company’s written severance plans and are recognized when the benefits are determined to be probable of being paid and are reasonably estimable.

In connection with its enterprise-wide restructuring plan, the Company recorded corporate workforce optimization costs of $293 million, which were recorded in accrued expenses and other current liabilities on the consolidated balance sheet. The Company made payments of $88 million related to these costs during the year ended December 31, 2024. This restructuring plan is expected to be substantially complete by the end of 2025. The restructuring charge associated with the corporate workforce optimization costs is reflected within the Corporate/Other segment.

Other asset impairment charges

In connection with its enterprise-wide restructuring plan, the Company also conducted a review of its various strategic assets and determined that it would discontinue the use of certain non-core assets, including certain virtual care services and compounding infusion pharmacies and branches. As a result, management determined that there were indicators of impairment with respect to the impacted long-lived assets and a long-lived asset impairment test was performed during the third quarter of 2024. The results of the long-lived asset impairment test indicated that the respective fair values of certain impacted assets were lower than their respective carrying values and, accordingly, the Company recorded $269 million of other asset impairments and related charges associated with the discontinuation of these assets. The asset impairment charges were recorded as reductions to property and equipment, net and operating lease right-of-use assets on the consolidated balance sheet. The other asset impairment charges were included in the restructuring charges within the Corporate/ Other and Pharmacy & Consumer Wellness segments. Subsequent to the impairment charges, the fair value of the associated long-lived assets was not material.

2023 Restructuring Program

During the second quarter of 2023, the Company developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In connection with the development of this plan and the completed acquisitions of Signify Health and Oak Street Health, the Company also conducted a strategic review of its various transformation initiatives and determined that it would terminate certain initiatives. In connection with the restructuring plan, during 2023, the Company recorded $507 million in pre-tax restructuring charges, comprised of $344 million of severance and employee-related costs associated with corporate workforce optimization, $152 million of asset impairment charges and an $11 million stock-based compensation charge associated with the impacted employees. These restructuring charges are reflected in the Corporate/Other segment. The severance and employee-related costs were recorded in accrued expenses and other current liabilities and the asset impairments were recorded as a reduction of property and equipment, net, while the stock-based compensation charge was reflected as an adjustment to common stock and capital surplus on the consolidated balance sheet.

Severance and employee-related costs consist primarily of salary continuation benefits, prorated annual incentive compensation, continuation of health care benefits and outplacement services. Severance and employee-related benefits are determined pursuant to the Company’s written severance plans and are recognized when the benefits are determined to be probable of being paid and are reasonably estimable. During the year ended December 31, 2023, the Company made payments of $194 million related to severance and employee-related costs associated with the 2023 restructuring program. During the year ended December 31, 2024, substantially all of the remaining liabilities were paid.

**4.**Investments

Total investments at December 31, 2024 and 2023 were as follows:


	2024						2023
In millions	Current		Long-term		Total		Current		Long-term		Total
Debt securities available for sale	$	2,256	$	23,777	$	26,033	$	3,131	$	18,582	$	21,713
Mortgage loans	151		1,354		1,505		128		1,183		1,311
Other investments	—		3,803		3,803		—		3,254		3,254
Total investments	$	2,407	$	28,934	$	31,341	$	3,259	$	23,019	$	26,278

At December 31, 2024 and 2023, the Company held investments of $269 million and $307 million, respectively, related to the 2012 conversion of an existing group annuity contract from a participating to a non-participating contract. These investments are included in the total investments of large case pensions supporting non-experience-rated products. Although these investments are not accounted for as Separate Accounts assets, they are legally segregated and are not subject to claims that arise out of the Company’s business and only support future policy benefits obligations under that group annuity contract.

Debt Securities

Debt securities available for sale at December 31, 2024 and 2023 were as follows:


In millions	Amortized Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2024
Debt securities:
U.S. government securities	$	2,826	$	7	$	(38)	$	2,795
States, municipalities and political subdivisions	712		4		(18)		698
U.S. corporate securities	13,043		94		(412)		12,725
Foreign securities	2,608		27		(111)		2,524
Residential mortgage-backed securities	792		2		(54)		740
Commercial mortgage-backed securities	1,731		9		(67)		1,673
Other asset-backed securities	4,834		35		(7)		4,862
Redeemable preferred securities	16		—		—		16
Total debt securities (2)	$	26,562	$	178	$	(707)	$	26,033

December 31, 2023
Debt securities:
U.S. government securities	$	2,071	$	19	$	(54)	$	2,036
States, municipalities and political subdivisions	2,219		31		(35)		2,215
U.S. corporate securities	10,156		133		(446)		9,843
Foreign securities	2,593		41		(122)		2,512
Residential mortgage-backed securities	862		8		(60)		810
Commercial mortgage-backed securities	1,066		9		(100)		975
Other asset-backed securities	3,294		26		(18)		3,302
Redeemable preferred securities	21		—		(1)		20
Total debt securities (2)	$	22,282	$	267	$	(836)	$	21,713

(1)There was no allowance for expected credit losses recorded on available-for-sale debt securities at December 31, 2024 or December 31, 2023.

(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At December 31, 2024, debt securities with a fair value of $543 million, gross unrealized capital gains of $5 million and gross unrealized capital losses of $30 million, and at December 31, 2023, debt securities with a fair value of $592 million, gross unrealized capital gains of $10 million and gross

unrealized capital losses of $28 million were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive loss.

The amortized cost and fair value of debt securities at December 31, 2024 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior to maturity.


In millions	Amortized Cost		Fair Value
Due to mature:
Less than one year	$	763	$	761
One year through five years	10,599		10,510
After five years through ten years	4,683		4,578
Greater than ten years	3,160		2,909
Residential mortgage-backed securities	792		740
Commercial mortgage-backed securities	1,731		1,673
Other asset-backed securities	4,834		4,862
Total	$	26,562	$	26,033

Mortgage-Backed and Other Asset-Backed Securities

All of the Company’s residential mortgage-backed securities at December 31, 2024 were issued by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and carry agency guarantees and explicit or implicit guarantees by the U.S. Government. At December 31, 2024, the Company’s residential mortgage-backed securities had an average credit quality rating of AA and a weighted average duration of 6.4 years.

The Company’s commercial mortgage-backed securities have underlying loans that are dispersed throughout the U.S. Significant market observable inputs used to value these securities include loss severity and probability of default. At December 31, 2024, these securities had an average credit quality rating of AAA and a weighted average duration of 4.9 years.

The Company’s other asset-backed securities have a variety of underlying collateral (e.g., automobile loans, credit card receivables, home equity loans and commercial loans). Significant market observable inputs used to value these securities include the unemployment rate, loss severity and probability of default. At December 31, 2024, these securities had an average credit quality rating of AA and a weighted average duration of less than one year.

Summarized below are the debt securities the Company held at December 31, 2024 and 2023 that were in an unrealized capital loss position, aggregated by the length of time the investments have been in that position:


	Less than 12 months					Greater than 12 months					Total
In millions, except number of securities	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
December 31, 2024
Debt securities:
U.S. government securities	266	$	1,053	$	18	155	$	394	$	20	421	$	1,447	$	38
States, municipalities and political subdivisions	100	181		3		137	201		15		237	382		18
U.S. corporate securities	3,119	4,144		64		2,602	3,395		348		5,721	7,539		412
Foreign securities	599	810		21		616	874		90		1,215	1,684		111
Residential mortgage-backed securities	89	267		5		361	342		49		450	609		54
Commercial mortgage-backed securities	186	628		11		237	464		56		423	1,092		67
Other asset-backed securities	139	414		5		62	58		2		201	472		7
Redeemable preferred securities	4	9		—		4	6		—		8	15		—
Total debt securities	4,502	$	7,506	$	127	4,174	$	5,734	$	580	8,676	$	13,240	$	707

December 31, 2023
Debt securities:
U.S. government securities	74	$	194	$	2	280	$	891	$	52	354	$	1,085	$	54
States, municipalities and political subdivisions	95	181		1		455	733		34		550	914		35
U.S. corporate securities	576	672		14		4,120	5,602		432		4,696	6,274		446
Foreign securities	160	243		4		964	1,407		118		1,124	1,650		122
Residential mortgage-backed securities	33	97		1		461	517		59		494	614		60
Commercial mortgage-backed securities	44	94		2		287	581		98		331	675		100
Other asset-backed securities	196	449		4		443	867		14		639	1,316		18
Redeemable preferred securities	4	2		—		8	18		1		12	20		1
Total debt securities	1,182	$	1,932	$	28	7,018	$	10,616	$	808	8,200	$	12,548	$	836

The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support the needs of the Company’s business. In performing this review, the Company considered factors such as the quality of the investment security based on research performed by the Company’s internal credit analysts and external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s current prospects for recovery. Unrealized capital losses at December 31, 2024 were generally caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. As of December 31, 2024, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis.

The maturity dates for debt securities in an unrealized capital loss position at December 31, 2024 were as follows:


	Supporting experience- rated products				Supporting remaining products				Total
In millions	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Due to mature:
Less than one year	$	—	$	—	$	420	$	4	$	420	$	4
One year through five years	120		3		5,462		149		5,582		152
After five years through ten years	86		6		2,681		138		2,767		144
Greater than ten years	166		20		2,132		259		2,298		279
Residential mortgage-backed securities	6		—		603		54		609		54
Commercial mortgage-backed securities	6		1		1,086		66		1,092		67
Other asset-backed securities	12		—		460		7		472		7
Total	$	396	$	30	$	12,844	$	677	$	13,240	$	707

Mortgage Loans

The Company’s mortgage loans are collateralized by commercial real estate. During the years ended December 31, 2024 and 2023, the Company had the following activity in its mortgage loan portfolio:


In millions	2024		2023
New mortgage loans	$	323	$	342
Mortgage loans fully repaid	104		43
Mortgage loans foreclosed	—		—

The Company assesses mortgage loans on a regular basis for credit impairments, and assigns a credit quality indicator to each loan. The Company’s credit quality indicator is internally developed and categorizes each loan in its portfolio on a scale from 1 to 7. These indicators are based upon several factors, including current loan-to-value ratios, current and future property cash flow, property condition, market trends, creditworthiness of the borrower and deal structure.

Category 1 - Represents loans of superior quality.
Categories 2 to 4 - Represent loans where credit risk is minimal to acceptable; however, these loans may display some susceptibility to economic changes.
Categories 5 and 6 - Represent loans where credit risk is not substantial, but these loans warrant management’s close attention.
Category 7 - Represents loans where collections are potentially at risk; if necessary, an impairment is recorded.

Based upon the Company’s assessments at December 31, 2024 and 2023, the amortized cost basis of the Company’s mortgage loans within each credit quality indicator by year of origination was as follows:


	Amortized Cost Basis by Year of Origination
In millions, except credit quality indicator	2024		2023		2022		2021		2020		Prior		Total
December 31, 2024
1	$	—	$	—	$	—	$	—	$	—	$	8	$	8
2 to 4	315		292		320		205		35		285		1,452
5 and 6	—		—		4		13		—		28		45
7	—		—		—		—		—		—		—
Total	$	315	$	292	$	324	$	218	$	35	$	321	$	1,505

December 31, 2023
1			$	—	$	—	$	—	$	—	$	11	$	11
2 to 4			302		346		225		35		354		1,262
5 and 6			—		—		13		—		19		32
7			—		—		6		—		—		6
Total			$	302	$	346	$	244	$	35	$	384	$	1,311

At December 31, 2024 scheduled mortgage loan principal repayments were as follows:


In millions
2025	$	151
2026	164
2027	249
2028	313
2029	297
Thereafter	331
Total	$	1,505

Net Investment Income

Sources of net investment income for the years ended December 31, 2024, 2023 and 2022 were as follows:


In millions	2024		2023		2022
Debt securities	$	1,136	$	841	$	702
Mortgage loans	76		59		51
Other investments	887		796		448
Gross investment income	2,099		1,696		1,201
Investment expenses	(63)		(46)		(43)
Net investment income (excluding net realized capital gains or losses)	2,036		1,650		1,158
Net realized capital gains (losses)	117		(497)		(320)
Net investment income	$	2,153	$	1,153	$	838

Excluding amounts related to experience-rated products, proceeds from the sale of available-for-sale debt securities and the related gross realized capital gains and losses in the years ended December 31, 2024, 2023 and 2022 were as follows:


In millions	2024		2023		2022
Proceeds from sales	$	6,489	$	5,031	$	4,243
Gross realized capital gains	37		9		24
Gross realized capital losses	(190)		420		177

**5.**Fair Value

The preparation of the Company’s consolidated financial statements requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values. The Company presents this information for those financial instruments that are measured at fair value for which the change in fair value impacts net income attributable to CVS Health or other comprehensive income (loss) separately from other financial assets and liabilities.

Financial Instruments Measured at Fair Value on the Consolidated Balance Sheets

Certain of the Company’s financial instruments are measured at fair value on the consolidated balance sheets. The fair values of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.
Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.

Financial assets and liabilities are classified based upon the lowest level of input that is significant to the valuation. When quoted prices in active markets for identical assets and liabilities are available, the Company uses these quoted market prices to determine the fair value of financial assets and liabilities and classifies these assets and liabilities in Level 1. In other cases where a quoted market price for identical assets and liabilities in an active market is either not available or not observable, the Company estimates fair value using valuation methodologies based on available and observable market information or by using a matrix pricing model. These financial assets and liabilities are classified in Level 2. If quoted market prices are not available, the Company determines fair value using broker quotes or an internal analysis of each investment’s financial performance and cash flow projections. Thus, financial assets and liabilities may be classified in Level 3 even though there may be some significant inputs that may be observable.

The following is a description of the valuation methodologies used for the Company’s financial assets and liabilities that are measured at fair value, including the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Cash and Cash Equivalents – The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months. When quoted prices are available in an active market, cash equivalents are classified in Level 1 of the fair value hierarchy. Fair values of cash equivalent instruments that do not trade on a regular basis in active markets are classified as Level 2.

Debt Securities – Where quoted prices are available in an active market, debt securities are classified in Level 1 of the fair value hierarchy. The Company’s Level 1 debt securities consist primarily of U.S. Treasury securities.

The fair values of the Company’s Level 2 debt securities are obtained using models, such as matrix pricing, which use quoted market prices of debt securities with similar characteristics or discounted cash flows to estimate fair value. The Company reviews these prices to ensure they are based on observable market inputs that include quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets and inputs that are observable that are not prices (such as interest rates and credit risks). The Company also reviews the methodologies and the assumptions used to calculate prices from these observable inputs. On a quarterly basis, the Company selects a sample of its Level 2 debt securities’ prices and compares them to prices provided by a secondary source. Variances over a

specified threshold are identified and reviewed to confirm the price provided by the primary source represents an appropriate estimate of fair value. In addition, the Company’s internal investment team consistently compares the prices obtained for select Level 2 debt securities to the team’s own independent estimates of fair value for those securities. The Company obtained one price for each of its Level 2 debt securities and did not adjust any of those prices at December 31, 2024 or 2023.

The Company also values certain debt securities using Level 3 inputs. For Level 3 debt securities, fair values are determined by outside brokers or, in the case of certain private placement securities, are priced internally. Outside brokers determine the value of these debt securities through a combination of their knowledge of the current pricing environment and market flows. The Company did not have any broker quoted debt securities for the years ended December 31, 2024 and 2023. For some private placement securities, the Company’s internal staff determines the value of these debt securities by analyzing spreads of corporate and sector indices as well as interest spreads of comparable public bonds. Examples of these private placement Level 3 debt securities include certain U.S. and foreign securities and certain tax-exempt municipal securities.

Equity Securities – The Company currently has two classifications of equity securities: those that are publicly traded and those that are privately placed. Publicly-traded equity securities are classified in Level 1 because quoted prices are available for these securities in an active market. For privately placed equity securities, there is no active market; therefore, these securities are classified in Level 3 because the Company prices these securities through an internal analysis of each investment’s financial statements and cash flow projections. Significant unobservable inputs consist of earnings and revenue multiples, discount for lack of marketability and comparability adjustments. An increase or decrease in any of these unobservable inputs would have resulted in a change in the fair value measurement.

There were no financial liabilities measured at fair value on a recurring basis on the consolidated balance sheets at December 31, 2024 or 2023. Financial assets measured at fair value on a recurring basis on the consolidated balance sheets at December 31, 2024 and 2023 were as follows:


In millions	Level 1		Level 2		Level 3		Total
December 31, 2024
Cash and cash equivalents	$	4,948	$	3,638	$	—	$	8,586
Debt securities:
U.S. government securities	2,777		18		—		2,795
States, municipalities and political subdivisions	—		698		—		698
U.S. corporate securities	—		12,687		38		12,725
Foreign securities	—		2,524		—		2,524
Residential mortgage-backed securities	—		740		—		740
Commercial mortgage-backed securities	—		1,673		—		1,673
Other asset-backed securities	—		4,862		—		4,862
Redeemable preferred securities	—		16		—		16
Total debt securities	2,777		23,218		38		26,033
Equity securities	234		—		126		360
Total	$	7,959	$	26,856	$	164	$	34,979

December 31, 2023
Cash and cash equivalents	$	2,174	$	6,022	$	—	$	8,196
Debt securities:
U.S. government securities	2,013		23		—		2,036
States, municipalities and political subdivisions	—		2,215		—		2,215
U.S. corporate securities	—		9,814		29		9,843
Foreign securities	—		2,512		—		2,512
Residential mortgage-backed securities	—		810		—		810
Commercial mortgage-backed securities	—		975		—		975
Other asset-backed securities	—		3,302		—		3,302
Redeemable preferred securities	—		20		—		20
Total debt securities	2,013		19,671		29		21,713
Equity securities	194		—		79		273
Total	$	4,381	$	25,693	$	108	$	30,182

The changes in the balances of Level 3 financial assets during the year ended December 31, 2024 were as follows:


In millions	Commercial mortgage- backed securities		U.S. corporate securities		Other asset- backed securities		Equity securities		Total
Beginning balance	$	—	$	29	$	—	$	79	$	108
Net realized and unrealized capital gains (losses):
Included in earnings	—		(5)		—		28		23
Included in other comprehensive loss	—		(1)		—		—		(1)
Purchases	52		15		15		19		101
Sales	—		—		—		—		—

Transfers out of Level 3, net	(52)		—		(15)		—		(67)
Ending balance	$	—	$	38	$	—	$	126	$	164

The change in net unrealized capital losses included in other comprehensive loss associated with Level 3 financial assets which were held as of December 31, 2024 was $1 million during the year ended December 31, 2024.

The changes in the balances of Level 3 financial assets during the year ended December 31, 2023 were as follows:


In millions	Commercial mortgage- backed securities		U.S. corporate securities		Foreign securities		Equity securities		Total
Beginning balance	$	—	$	61	$	8	$	60	$	129
Net realized and unrealized capital gains (losses):
Included in earnings	—		(8)		—		(2)		(10)
Included in other comprehensive income	—		1		—		—		1
Purchases	13		5		—		23		41
Sales	—		(1)		—		(2)		(3)

Transfers out of Level 3, net	(13)		(29)		(8)		—		(50)
Ending balance	$	—	$	29	$	—	$	79	$	108

The change in net unrealized capital losses included in other comprehensive income associated with Level 3 financial assets which were held as of December 31, 2023 was $9 million during the year ended December 31, 2023.

The total gross transfers into (out of) Level 3 during the years ended December 31, 2024 and 2023 were as follows:


In millions	2024		2023
Gross transfers into Level 3	$	—	$	—
Gross transfers out of Level 3	(67)		(50)
Net transfers out of Level 3	$	(67)	$	(50)

Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets

The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the consolidated balance sheets at adjusted cost or contract value at December 31, 2024 and 2023 were as follows:


	Carrying Value			Estimated Fair Value
In millions			Level 1			Level 2			Level 3			Total
December 31, 2024
Assets:
Mortgage loans	$	1,505		$	—		$	—		$	1,468		$	1,468
Equity securities (1)	490			N/A			N/A			N/A			N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	1			—			—			1			1
Without a fixed maturity	312			—			—			272			272
Long-term debt	64,151			58,724			—			—			58,724

December 31, 2023
Assets:
Mortgage loans	$	1,311		$	—		$	—		$	1,274		$	1,274
Equity securities (1)	534			N/A			N/A			N/A			N/A
Liabilities:
Investment contract liabilities:
With a fixed maturity	1			—			—			1			1
Without a fixed maturity	312			—			—			279			279
Long-term debt	61,410			58,451			—			—			58,451

(1)It was not practical to estimate the fair value of these investments as it represents shares of unlisted companies. See Note 1 ‘‘Significant Accounting Policies’’ for additional information regarding the valuation of investments accounted for under the measurement alternative method.

Separate Accounts Measured at Fair Value on the Consolidated Balance Sheets

Separate Accounts assets relate to the Company’s large case pensions products which represent funds maintained to meet specific objectives of contract holders. Since contract holders bear the investment risk of these assets, a corresponding Separate Accounts liability has been established equal to the assets. These assets and liabilities are carried at fair value. Net investment income and capital gains and losses on Separate Accounts assets accrue directly to such contract holders. The assets of each account are legally segregated and are not subject to claims arising from the Company’s other businesses. Deposits, withdrawals, net investment income and realized and unrealized capital gains and losses on Separate Accounts assets are not reflected in the consolidated statements of operations, shareholders’ equity or cash flows.

Separate Accounts assets include debt and equity securities. The valuation methodologies used for these assets are similar to the methodologies described above in this Note 5 ‘‘Fair Value.’’ Separate Accounts assets also include investments in common/collective trusts that are carried at fair value. Common/collective trusts invest in other investment funds otherwise known as the underlying funds. The Separate Accounts’ interests in the common/collective trust funds are based on the fair values of the investments of the underlying funds and therefore are classified in Level 2. The assets in the underlying funds primarily consist of equity securities, U.S. corporate securities and U.S. government securities. Investments in common/collective trust funds are valued at their respective net asset value (“NAV”) per share/unit on the valuation date.

Separate Accounts financial assets at December 31, 2024 and 2023 were as follows:


	December 31, 2024								December 31, 2023
In millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1	$	164	$	—	$	165	$	2	$	166	$	—	$	168
Debt securities	186		669		1		856		558		1,949		—		2,507

Common/collective trusts	—		2,478		—		2,478		—		529		—		529
Total (1)	$	187	$	3,311	$	1	$	3,499	$	560	$	2,644	$	—	$	3,204

(1)Excludes $188 million of other payables and $46 million of other receivables at December 31, 2024 and 2023, respectively.

During the years ended December 31, 2024 and 2023, the Company had no gross transfers of Separate Accounts financial assets into or out of Level 3.

**6.**Goodwill and Other Intangibles

Goodwill

Below is a summary of the changes in the carrying amount of goodwill by segment for the years ended December 31, 2024 and 2023:


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Total
Balance at December 31, 2022	$	44,159	$	23,615	$	10,376	$	78,150
Segment realignment	(109)		109		—		—
Acquisitions	2,594		10,342		186		13,122



Balance at December 31, 2023	46,644		34,066		10,562		91,272





Balance at December 31, 2024	$	46,644	$	34,066	$	10,562	$	91,272

There were no changes to the carrying amount of the Company’s goodwill during the year ended December 31, 2024.

During the year ended December 31, 2023, the increase in the carrying amount of goodwill was primarily driven by the acquisitions of Oak Street Health and Signify Health. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

During the fourth quarter of 2024 and 2023, and the third quarter of 2022, the Company performed its required annual impairment tests of goodwill. The results of these impairment tests indicated that there was no impairment of goodwill.

At December 31, 2024 and 2023, cumulative goodwill impairments were $6.6 billion.

Intangible Assets

The following table is a summary of the Company’s intangible assets as of December 31, 2024 and 2023:


In millions, except weighted average life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Life (years)
2024
Trademarks (indefinite-lived)	$	10,498	$	—	$	10,498	N/A
Customer contracts/relationships and covenants not to compete	26,904		(13,889)		13,015		14.2
Technology	1,250		(1,167)		83		3.0
Provider networks	4,203		(1,282)		2,921		20.0
Value of Business Acquired	590		(228)		362		20.0
Other	826		(382)		444		9.3
Total	$	44,271	$	(16,948)	$	27,323	14.5

2023
Trademarks (indefinite-lived)	$	10,498	$	—	$	10,498	N/A
Customer contracts/relationships and covenants not to compete	26,784		(12,241)		14,543		14.2
Technology	1,253		(1,104)		149		3.0
Provider networks	4,203		(1,072)		3,131		20.0
Value of Business Acquired	590		(201)		389		20.0
Other	838		(314)		524		9.3
Total	$	44,166	$	(14,932)	$	29,234	14.5

Amortization expense for intangible assets totaled $2.0 billion, $1.9 billion and $1.8 billion for the years ended December 31, 2024, 2023 and 2022, respectively. The projected annual amortization expense for the Company’s intangible assets for the next five years is as follows:


In millions
2025	$	1,981
2026	1,704
2027	1,590
2028	1,316
2029	1,239

**7.**Leases

The Company leases most of its retail stores, mail order facilities and primary care centers, as well as certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years.

In addition, the Company leases pharmacy space at the stores of another retail chain for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings. For these pharmacy lease arrangements, the Company concluded that for accounting purposes the lease term was the remaining estimated economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases.

The following table is a summary of the components of net lease cost for the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Operating lease cost	$	2,423	$	2,532	$	2,579
Finance lease cost:
Amortization of right-of-use assets	92		84		79
Interest on lease liabilities	71		73		68
Total finance lease costs	163		157		147
Short-term lease costs	33		22		27
Variable lease costs	635		635		610
Less: sublease income	(67)		(63)		(61)
Net lease cost	$	3,187	$	3,283	$	3,302

Supplemental cash flow information related to leases for the years ended December 31, 2024, 2023 and 2022 was as follows:


In millions	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	2,733	$	2,756	$	2,689
Operating cash flows paid for interest portion of finance leases	71		73		68
Financing cash flows paid for principal portion of finance leases	74		70		62
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	852		1,132		591
Finance leases	30		(4)		232

Supplemental balance sheet information related to leases as of December 31, 2024 and 2023 is as follows:


In millions, except remaining lease term and discount rate	2024			2023
Operating leases:
Operating lease right-of-use assets	$	15,944		$	17,252

Current portion of operating lease liabilities	$	1,751		$	1,741
Long-term operating lease liabilities	14,899			16,034
Total operating lease liabilities	$	16,650		$	17,775

Finance leases:
Property and equipment, gross	$	1,587		$	1,604
Accumulated depreciation	(447)			(375)
Property and equipment, net	$	1,140		$	1,229

Current portion of long-term debt	$	65		$	66
Long-term debt	1,295			1,325
Total finance lease liabilities	$	1,360		$	1,391

Weighted average remaining lease term (in years)
Operating leases	10.7			11.4
Finance leases	16.5			17.3

Weighted average discount rate
Operating leases	4.6		%	4.5		%
Finance leases	5.1		%	5.0		%

The following table summarizes the maturity of lease liabilities under finance and operating leases as of December 31, 2024:


In millions	Finance Leases		Operating Leases (1)		Total
2025	$	144	$	2,683	$	2,827
2026	135		2,528		2,663
2027	132		2,343		2,475
2028	129		2,167		2,296
2029	127		1,911		2,038
Thereafter	1,371		9,557		10,928
Total lease payments (2)	2,038		21,189		23,227
Less: imputed interest	(678)		(4,539)		(5,217)
Total lease liabilities	$	1,360	$	16,650	$	18,010

(1)Future operating lease payments have not been reduced by minimum sublease rentals of $297 million due in the future under noncancelable subleases.

(2)The Company leases pharmacy and clinic space from Target Corporation. Amounts related to such finance and operating leases are reflected above. Pharmacy lease amounts due in excess of the remaining estimated economic life of the buildings of approximately $2.2 billion are not reflected in this table since the estimated economic life of the buildings is shorter than the contractual term of the pharmacy lease arrangement.

Store Impairment Charges

During the year ended December 31, 2024, the Company recorded a store impairment charge of $483 million related to operating and financing lease right-of-use assets in connection with its enterprise-wide restructuring plan. See Note 3 ‘‘Restructuring’’ for additional information on the Company’s store impairment charges.

Office Real Estate Optimization Charges

The Company evaluates its corporate office real estate space in response to its ongoing flexible work arrangement and evaluates its current real estate space and changes in employee work arrangement requirements to ensure it has the appropriate space to support the business. As a result of this assessment, the Company determined that it would vacate and abandon certain leased corporate office spaces. During the year ended December 31, 2022, the Company recorded office real estate optimization charges of $117 million, primarily consisting of $71 million related to operating lease right-of-use assets and $44 million related to property and equipment. During the year ended December 31, 2023, the Company recorded $46 million of office real estate optimization charges, primarily consisting of $20 million related to operating lease right-of-use assets and $18 million related to property and equipment. During the year ended December 31, 2024, the Company recorded $30 million of office real estate optimization charges, primarily consisting of $14 million related to operating lease right-of-use assets and $14 million related to property and equipment. The office real estate optimization charges were recorded in operating expenses within each segment.

**8.**Health Care Costs Payable

The following is information about incurred and cumulative paid health care claims development as of December 31, 2024, net of reinsurance, and the total IBNR liabilities plus expected development on reported claims included within the net incurred claims amounts. See Note 1 ‘‘Significant Accounting Policies’’ for information on how the Company estimates IBNR reserves and health care costs payable as well as changes to those methodologies, if any. The Company’s estimate of IBNR liabilities is primarily based on trend and completion factors. Claim frequency is not used in the calculation of the Company’s liability. In addition, it is impracticable to disclose claim frequency information for health care claims due to the Company’s inability to gather consistent claim frequency information across its multiple claims processing systems. Any claim frequency count disclosure would not be comparable across the Company’s different claim processing systems and would not be consistent from period to period based on the volume of claims processed through each system. As a result, health care claim count frequency is not included in the disclosures below.

The information about incurred and paid health care claims development for the year ended December 31, 2023 is presented as required unaudited supplemental information.


In millions	Incurred Health Care Claims, Net of Reinsurance For the Years Ended December 31,
Date of Service	2023		2024
	(Unaudited)
2023	$	82,362	$	81,559
2024			109,458
	Total		$	191,017

In millions	Cumulative Paid Health Care Claims, Net of Reinsurance For the Years Ended December 31,
Date of Service	2023		2024
	(Unaudited)
2023	$	72,175	$	81,044
2024			97,155
	Total		$	178,199
All outstanding liabilities for health care costs payable prior to 2023, net of reinsurance			128
Total outstanding liabilities for health care costs payable, net of reinsurance			$	12,946

At December 31, 2024, the Company’s liabilities for IBNR plus expected development on reported claims totaled approximately $11.3 billion. Substantially all of the Company’s liabilities for IBNR plus expected development on reported claims at December 31, 2024 related to the current calendar year.

The reconciliation of the December 31, 2024 health care net incurred and paid claims development tables to the health care costs payable liability on the consolidated balance sheet were as follows:


In millions	December 31, 2024
Short-duration health care costs payable, net of reinsurance	$	12,946
Reinsurance recoverables	81

Insurance lines other than short duration	282
Other non-insurance health care costs payable	1,755
Total health care costs payable	$	15,064

The following table shows the components of the change in health care costs payable during the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Health care costs payable, beginning of period	$	12,049	$	10,142	$	8,678
Less: Reinsurance recoverables	5		5		8
Less: Impact of discount rate on long-duration insurance reserves (1)	(23)		8		—
Health care costs payable, beginning of period, net	12,067		10,129		8,670
Acquisition, net	—		1,098		—

Add: Components of incurred health care costs
Current year	115,774		86,639		71,399
Prior years	(947)		(685)		(654)
Total incurred health care costs (2)	114,827		85,954		70,745
Less: Claims paid
Current year	101,583		75,529		61,640
Prior years	10,327		9,585		7,646
Total claims paid	111,910		85,114		69,286

Health care costs payable, end of period, net	14,984		12,067		10,129
Add: Reinsurance recoverables	81		5		5
Add: Impact of discount rate on long-duration insurance reserves (1)	(1)		(23)		8
Health care costs payable, end of period	$	15,064	$	12,049	$	10,142

(1)Reflects the difference between the current discount rate and the locked-in discount rate on long-duration insurance reserves which is recorded within accumulated other comprehensive loss on the consolidated balance sheets.

(2)Total incurred health care costs for the years ended December 31, 2024, 2023 and 2022 in the table above exclude $107 million, $83 million and $79 million, respectively, of health care costs recorded in the Health Care Benefits segment that are included in other insurance liabilities on the consolidated balance sheets and $187 million, $210 million and $249 million, respectively, of health care costs recorded in the Corporate/Other segment that are included in other insurance liabilities on the consolidated balance sheets.

The Company’s estimates of prior years’ health care costs payable decreased by $947 million, $685 million and $654 million in 2024, 2023 and 2022, respectively, because claims were settled for amounts less than originally estimated (i.e., the amount of claims incurred was lower than originally estimated), primarily due to lower health care cost trends as well as the actual claim submission time being faster than originally assumed (i.e., the Company’s completion factors were higher than originally assumed) in estimating health care costs payable at the end of the prior year. This development does not directly correspond to an increase in the Company’s operating results as these reductions were offset by estimated current period health care costs when the Company established the estimate of the current year health care costs payable.

**9.**Other Insurance Liabilities and Separate Accounts

Future Policy Benefits

The following tables show the components of the change in the liability for future policy benefits, which is included in other insurance liabilities and other long-term insurance liabilities on the consolidated balance sheets, during the years ended December 31, 2024 and 2023:


	2024
In millions	Large Case Pensions		Long-Term Care
Present value of expected net premiums (1)
Liability for future policy benefits, beginning of period - current discount rate			$	293

Beginning liability for future policy benefits at original (locked-in) discount rate			$	288
Effect of changes in cash flow assumptions			—
Effect of actual variances from expected experience			16
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate			304

Interest accrual (using locked-in discount rate)			14
Net premiums (actual)			(38)

Ending liability for future policy benefits at original (locked-in) discount rate			280
Effect of changes in discount rate assumptions			(5)
Liability for future policy benefits, end of period - current discount rate			$	275

Present value of expected future policy benefits
Liability for future policy benefits, beginning of period - current discount rate	$	2,139	$	1,640

Beginning liability for future policy benefits at original (locked-in) discount rate	$	2,251	$	1,632
Effect of changes in cash flow assumptions	—		—
Effect of actual variances from expected experience	(27)		6
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate	2,224		1,638
Issuances	30		—
Interest accrual (using locked-in discount rate)	91		83
Benefit payments (actual)	(255)		(74)


Ending liability for future policy benefits at original (locked-in) discount rate	2,090		1,647
Effect of changes in discount rate assumptions	(173)		(95)
Liability for future policy benefits, end of period - current discount rate	$	1,917	$	1,552

Net liability for future policy benefits	$	1,917	$	1,277
Less: Reinsurance recoverable	—		—
Net liability for future policy benefits, net of reinsurance recoverable	$	1,917	$	1,277

(1)The present value of expected net premiums is equivalent to the present value of expected gross premiums for the long-term care insurance contracts as net premiums are set equal to gross premiums.


	2023
In millions	Large Case Pensions		Long-Term Care
Present value of expected net premiums (1)
Liability for future policy benefits, beginning of period - current discount rate			$	300

Beginning liability for future policy benefits at original (locked-in) discount rate			$	302
Effect of changes in cash flow assumptions			—
Effect of actual variances from expected experience			10
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate			312

Interest accrual (using locked-in discount rate)			15
Net premiums (actual)			(39)

Ending liability for future policy benefits at original (locked-in) discount rate			288
Effect of changes in discount rate assumptions			5
Liability for future policy benefits, end of period - current discount rate			$	293

Present value of expected future policy benefits
Liability for future policy benefits, beginning of period - current discount rate	$	2,253	$	1,566

Beginning liability for future policy benefits at original (locked-in) discount rate	$	2,425	$	1,613
Effect of changes in cash flow assumptions	—		—
Effect of actual variances from expected experience	(3)		8
Adjusted beginning liability for future policy benefits - original (locked-in) discount rate	2,422		1,621
Issuances	8		—
Interest accrual (using locked-in discount rate)	97		82
Benefit payments (actual)	(276)		(71)


Ending liability for future policy benefits at original (locked-in) discount rate	2,251		1,632
Effect of changes in discount rate assumptions	(112)		8
Liability for future policy benefits, end of period - current discount rate	$	2,139	$	1,640

Net liability for future policy benefits	$	2,139	$	1,347
Less: Reinsurance recoverable	—		—
Net liability for future policy benefits, net of reinsurance recoverable	$	2,139	$	1,347

(1)The present value of expected net premiums is equivalent to the present value of expected gross premiums for the long-term care insurance contracts as net premiums are set equal to gross premiums.

The Company did not have any material differences between the actual experience and expected experience for the significant assumptions used in the computation of the liability for future policy benefits.

The amount of undiscounted expected gross premiums and expected future benefit payments for long-duration insurance liabilities as of December 31, 2024 and 2023 were as follows:


In millions	2024		2023
Large case pensions
Expected future benefit payments	$	3,024	$	3,266
Expected gross premiums	—		—

Long-term care
Expected future benefit payments	$	3,189	$	3,224
Expected gross premiums	399		414

The weighted-average interest rate used in the measurement of the long-duration insurance liabilities as of December 31, 2024 and 2023 were as follows:


	2024	2023
Large case pensions
Interest accretion rate	4.20%	4.20%
Current discount rate	5.46%	4.93%

Long-term care
Interest accretion rate	5.11%	5.11%
Current discount rate	5.70%	5.08%

The weighted-average durations (in years) of the long-duration insurance liabilities as of December 31, 2024 and 2023 were as follows:


	2024	2023
Large case pensions	7.3	7.3
Long-term care	11.7	12.1

Separate Accounts

The following table shows the fair value of assets, by major investment category, supporting Separate Accounts as of December 31, 2024 and 2023:


In millions	2024		2023

Cash and cash equivalents	$	165	168
Debt securities:
U.S. government securities	186		573
States, municipalities and political subdivisions	14		28
U.S. corporate securities	524		1,632


Foreign securities	51		202
Residential mortgage-backed securities	71		51
Commercial mortgage-backed securities	3		6
Other asset-backed securities	7		15
Total debt securities	856		2,507

Common/collective trusts	2,478		529

Total (1)	$	3,499	$	3,204

(1)Excludes $188 million of other payables and $46 million of other receivables at December 31, 2024 and 2023, respectively.

The following table shows the components of the change in Separate Accounts liabilities during the years ended December 31, 2024 and 2023:


In millions	2024		2023

Separate Accounts liability, beginning of the period	$	3,250	$	3,228
Premiums and deposits	964		860

Surrenders and withdrawals	(277)		(9)
Benefit payments	(978)		(938)
Investment earnings	348		100
Net transfers from general account	13		7
Other	(9)		2
Separate Accounts liability, end of the period	$	3,311	$	3,250

Cash surrender value, end of the period	$	1,987	$	2,181

The Company did not recognize any gains or losses on assets transferred to Separate Accounts during the years ended December 31, 2024 or 2023.

**10.**Borrowings and Credit Agreements

The following table is a summary of the Company’s borrowings as of December 31, 2024 and 2023:


In millions	2024		2023
Short-term debt
Commercial paper	$	2,119	$	200

Long-term debt














3.375% senior notes due August 2024	—		650
2.625% senior notes due August 2024	—		1,000
3.5% senior notes due November 2024	—		750
5% senior notes due December 2024	—		299
4.1% senior notes due March 2025	724		950
3.875% senior notes due July 2025	2,828		2,828
5% senior notes due February 2026	1,500		1,500

2.875% senior notes due June 2026	1,750		1,750
3% senior notes due August 2026	750		750
3.625% senior notes due April 2027	750		750
6.25% senior notes due June 2027	372		372
1.3% senior notes due August 2027	2,250		2,250
4.3% senior notes due March 2028	5,000		5,000
5% senior notes due January 2029	1,000		1,000
5.4% senior notes due June 2029	1,000		—
3.25% senior notes due August 2029	1,750		1,750
5.125% senior notes due February 2030	1,500		1,500
3.75% senior notes due April 2030	1,500		1,500
1.75% senior notes due August 2030	1,250		1,250
5.25% senior notes due January 2031	750		750
1.875% senior notes due February 2031	1,250		1,250
5.55% senior notes due June 2031	1,000		—
2.125% senior notes due September 2031	1,000		1,000
5.25% senior notes due February 2033	1,750		1,750
5.3% senior notes due June 2033	1,250		1,250
5.7% senior notes due June 2034	1,250		—
4.875% senior notes due July 2035	652		652
6.625% senior notes due June 2036	771		771
6.75% senior notes due December 2037	533		533
4.78% senior notes due March 2038	5,000		5,000
6.125% senior notes due September 2039	447		447
4.125% senior notes due April 2040	602		1,000
2.7% senior notes due August 2040	367		1,250
5.75% senior notes due May 2041	133		133
4.5% senior notes due May 2042	500		500
4.125% senior notes due November 2042	226		500
5.3% senior notes due December 2043	750		750
4.75% senior notes due March 2044	375		375
6% senior notes due June 2044	750		—
5.125% senior notes due July 2045	3,500		3,500
3.875% senior notes due August 2047	537		1,000
5.05% senior notes due March 2048	8,000		8,000
4.25% senior notes due April 2050	399		750


5.625% senior notes due February 2053	1,250		1,250
5.875% senior notes due June 2053	1,250		1,250
6.05% senior notes due June 2054	1,000		—
6% senior notes due June 2063	750		750
6.75% series B junior subordinated notes due December 2054	750		—
7% series A junior subordinated notes due March 2055	2,250		—
Finance lease liabilities	1,360		1,391
Other	302		309
Total debt principal	66,747		62,160
Debt premiums	170		186
Debt discounts and deferred financing costs	(647)		(736)
	66,270		61,610
Less:
Short-term debt (commercial paper)	(2,119)		(200)
Current portion of long-term debt	(3,624)		(2,772)
Long-term debt	$	60,527	$	58,638

The following is a summary of the Company’s required repayments of long-term debt principal due during each of the next five years and thereafter, as of December 31, 2024:


In millions
2025	$	3,559
2026	4,007
2027	3,379
2028	5,007
2029	3,758
Thereafter	43,558
Subtotal	63,268
Commercial paper	2,119
Finance lease liabilities (1)	1,360
Total debt principal	$	66,747

(1)See Note 7 ‘‘Leases’’ for a summary of maturities of the Company’s finance lease liabilities.

Short-term Borrowings

Commercial Paper and Back-up Credit Facilities

The Company had $2.1 billion of commercial paper outstanding at a weighted average interest rate of 4.98% as of December 31, 2024. The Company had $200 million of commercial paper outstanding at a weighted interest rate of 4.31% as of December 31, 2023. In connection with its commercial paper program, the Company maintains a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 11, 2027, a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2028, and a $2.5 billion, five-year unsecured back-up revolving credit facility, which expires on May 16, 2029. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of December 31, 2024 and 2023, there were no borrowings outstanding under any of the Company’s back-up credit facilities.

Term Loan Agreement

On March 25, 2024, the Company entered into a 364-day $3.0 billion term loan credit agreement. The term loan credit agreement allowed for borrowings at various rates that were dependent, in part, on the Company’s public debt ratings. On May 9, 2024, following the issuance of the $5.0 billion in senior notes described under “Long-term Borrowings” below, the term

loan credit agreement terminated. There were no borrowings under the term loan credit agreement through the date of termination.

On May 1, 2023, the Company entered into a 364-day $5.0 billion term loan agreement. The term loan agreement allowed for borrowings at various rates that were dependent, in part, on the Company’s debt ratings. On May 2, 2023, the Company borrowed $5.0 billion at an interest rate of approximately 6.2% under the term loan agreement to fund a portion of the Oak Street Health acquisition purchase price. On June 2, 2023, the Company repaid the outstanding balance under the term loan agreement.

FHLBB

A subsidiary of the Company is a member of the FHLBB. As a member, the subsidiary has the ability to obtain cash advances, subject to certain minimum collateral requirements. The maximum borrowing capacity available from the FHLBB as of December 31, 2024 was approximately $1.2 billion. As of December 31, 2024 and 2023, there were no outstanding advances from the FHLBB.

Long-term Borrowings

2024 Notes

On December 10, 2024, the Company issued $2.25 billion aggregate principal amount of 7.0% fixed-to-fixed rate series A junior subordinated notes due March 2055 and $750 million aggregate principal amount of 6.75% fixed-to-fixed rate series B junior subordinated notes due December 2054 for total proceeds of approximately $3.0 billion, net of discounts and underwriting fees. The series A junior subordinated notes bear interest at 7.0% per year until March 10, 2030, at which time the rate will reset March 10th of every fifth year, provided that the interest rate will not reset below the initial interest rate. The series B junior subordinated notes bear interest at 6.75% per year until December 10, 2034, at which time the rate will reset December 10th of every fifth year, provided that the interest rate will not reset below the initial interest rate. The series A and series B junior subordinated notes pay interest semi-annually and may be redeemed at any time beginning 90 days prior to their respective first interest rate reset date and on any interest payment date thereafter, in whole or in part at a defined redemption price plus accrued interest. The net proceeds of these offerings were used for the early extinguishment of certain of the Company’s senior notes as described below and the remaining proceeds after the early extinguishment of debt were used for general corporate purposes.

On May 9, 2024, the Company issued $1.0 billion aggregate principal amount of 5.4% senior notes due June 2029, $1.0 billion aggregate principal amount of 5.55% senior notes due June 2031, $1.25 billion aggregate principal amount of 5.7% senior notes due June 2034, $750 million aggregate principal amount of 6.0% senior notes due June 2044 and $1.0 billion aggregate principal amount of 6.05% senior notes due June 2054 for total proceeds of approximately $5.0 billion, net of discounts and underwriting fees. The net proceeds of these offerings were used for general corporate purposes.

2023 Notes

On June 2, 2023, the Company issued $1.0 billion aggregate principal amount of 5.0% senior notes due January 2029, $750 million aggregate principal amount of 5.25% senior notes due January 2031, $1.25 billion aggregate principal amount of 5.3% senior notes due June 2033, $1.25 billion aggregate principal amount of 5.875% senior notes due June 2053 and $750 million aggregate principal amount of 6.0% senior notes due June 2063 for total proceeds of approximately $4.9 billion, net of discounts and underwriting fees. The net proceeds of these offerings were used, along with cash on hand, to repay the outstanding balance under the term loan agreement described above.

On February 21, 2023, the Company issued $1.5 billion aggregate principal amount of 5.0% senior notes due February 2026, $1.5 billion aggregate principal amount of 5.125% senior notes due February 2030, $1.75 billion aggregate principal amount of 5.25% senior notes due February 2033 and $1.25 billion aggregate principal amount of 5.625% senior notes due February 2053 for total proceeds of approximately $6.0 billion, net of discounts and underwriting fees. The net proceeds of these offerings were used to fund general corporate purposes, including a portion of the Signify Health Acquisition purchase price.

Oak Street Health Convertible Notes

Prior to the Oak Street Health Acquisition, Oak Street Health held 0% convertible senior notes with an aggregate principal amount of $920 million (the “Convertible Notes”), which were assumed by the Company in connection with the Oak Street Health Acquisition. The Oak Street Health Acquisition constituted a fundamental change in the Convertible Notes giving the holders the right to require the Company to repurchase the Convertible Notes. The repurchase price was an amount in cash equal to 100% of the principal amount of the Convertible Notes. On May 31, 2023, the Company issued a notice of repurchase to the holders of the Convertible Notes. In connection with this notice, $917 million of the Convertible Notes were submitted

for repurchase and settled on July 21, 2023. Substantially all of the remaining $3 million of the Convertible Notes were submitted for repurchase and settled on October 20, 2023.

Gain on Early Extinguishment of Debt

In December 2024, pursuant to a cash tender offer, the Company repaid approximately $2.6 billion of its outstanding senior notes for a cash payment of approximately $2.0 billion. The senior notes purchased include: $226 million of its 4.1% senior notes due March 2025, $398 million of its 4.125% senior notes due April 2040, $883 million of its 2.7% senior notes due August 2040, $274 million of its 4.125% senior notes due November 2042, $463 million of its 3.875% senior notes due August 2047 and $351 million of its 4.25% senior notes due April 2050. In connection with the purchase of such senior notes, the Company recognized a total gain on early extinguishment of debt of $491 million, net of unamortized deferred financing costs and incurred fees.

Debt Covenants

The Company’s back-up revolving credit facilities and unsecured senior notes contain customary restrictive financial and operating covenants. These covenants do not include an acceleration of the Company’s debt maturities in the event of a downgrade in the Company’s credit ratings. The Company does not believe the restrictions contained in these covenants materially affect its financial or operating flexibility. As of December 31, 2024, the Company was in compliance with all of its debt covenants.

**11.**Pension Plans and Other Postretirement Benefits

Defined Contribution Plans

As of December 31, 2024, the Company sponsors several active 401(k) savings plans that cover all employees who meet plan eligibility requirements.

The Company makes matching contributions consistent with the provisions of the respective plans. At the participant’s option, account balances, including the Company’s matching contribution, can be invested among various investment options under each plan. The CVS Health Future Fund 401(k) Plan offers CVS Health Corporation’s common stock fund as an investment option. The Company also maintains nonqualified, unfunded deferred compensation plans for certain key employees. The plans provide participants the opportunity to defer portions of their eligible compensation and for certain nonqualified plans, participants receive matching contributions equivalent to what they could have received under the CVS Health Future Fund 401(k) Plan absent certain restrictions and limitations under the Internal Revenue Code. The Company’s contributions under its defined contribution plans were $610 million, $581 million and $567 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Defined Benefit Pension Plans

The Company sponsors a tax-qualified defined benefit pension plan that was frozen in 2010 and a nonqualified supplemental pension plan that was frozen in 2007. The Company also sponsors several other defined benefit pension plans that are unfunded nonqualified supplemental retirement plans.

Pension Benefit Obligation and Plan Assets

The following tables outline the change in pension benefit obligation and plan assets over the specified periods:


In millions	2024		2023
Change in benefit obligation:
Benefit obligation, beginning of year	$	4,736	$	4,740

Interest cost	222		231
Actuarial loss (gain)	(262)		145
Benefit payments	(347)		(380)

Benefit obligation, end of year	4,349		4,736

Change in plan assets:
Fair value of plan assets, beginning of year	5,379		5,346

Actual return on plan assets	133		389
Employer contributions	23		24
Benefit payments	(347)		(380)

Fair value of plan assets, end of year	5,188		5,379

Funded status	$	839	$	643

The change in the pension benefit obligation during the years ended December 31, 2024 and 2023 was primarily driven by the change in the discount rate during each respective period.

The assets (liabilities) recognized on the consolidated balance sheets at December 31, 2024 and 2023 for the defined benefit pension plans consisted of the following:


In millions	2024		2023
Noncurrent assets reflected in other assets	$	1,030	$	856
Current liabilities reflected in accrued expenses and other current liabilities	(22)		(24)
Noncurrent liabilities reflected in other long-term liabilities	(169)		(189)
Net assets	$	839	$	643

Net Periodic Benefit Cost (Income)

The components of net periodic benefit cost (income) for the years ended December 31, 2024, 2023 and 2022 are shown below:


In millions	2024		2023		2022
Components of net periodic benefit cost (income):
Interest cost	$	222	$	231	$	132
Expected return on plan assets	(327)		(326)		(309)
Amortization of net actuarial loss	1		1		3
Settlement losses	—		—		1
Net periodic benefit cost (income)	$	(104)	$	(94)	$	(173)

Pension Plan Assumptions

The Company uses a series of actuarial assumptions to determine its benefit obligation and net periodic benefit income, the most significant of which include discount rates and expected return on plan assets assumptions.

Discount Rates - The discount rate is determined using a yield curve as of the annual measurement date. The yield curve consists of a series of individual discount rates, with each discount rate corresponding to a single point in time, based on high-quality bonds. Projected benefit payments are discounted to the measurement date using the corresponding rate from the yield curve that is consistent with the maturity profile of the expected liability cash flows.

Expected Return on Plan Assets - The expected long-term rate of return on plan assets is determined by using the plan’s target allocation and return expectations based on many factors including forecasted long-term capital market real returns and the inflationary outlook on a plan by plan basis. See “Pension Plan Assets” below for additional details regarding the pension plan assets as of December 31, 2024 and 2023.

The Company also considers other assumptions including mortality, interest crediting rate, termination and retirement rates, and cost of living adjustments.

The Company determined its benefit obligation based on the following weighted average assumptions as of December 31, 2024 and 2023:


			2024						2023
Discount rate			5.6		%				5.0		%

The Company determined its net periodic benefit cost (income) based on the following weighted average assumptions for the years ended December 31, 2024, 2023 and 2022:


	2024		2023		2022
Discount rate	4.9	%	5.1	%	2.3	%
Expected long-term rate of return on plan assets	6.3	%	6.3	%	4.8	%

Pension Plan Assets

The Company’s pension plan assets primarily include debt and equity securities held in separate accounts, common/collective trusts, as well as Private Real Estate, Farmland, Public Real Estate and Public Infrastructure (collectively referred to as “Real Assets”) and private credit. The valuation methodologies used to value these debt and equity securities and common/collective trusts are similar to the methodologies described in Note 5 “Fair Value.” Pension plan assets also include investments in other assets that are carried at fair value. The following is a description of the valuation methodologies used to value private real estate investments and these additional investments, including the general classification pursuant to the fair value hierarchy.

Private real estate - Private real estate investments are valued by independent third-party appraisers. The appraisals comply with the Uniform Standards of Professional Appraisal Practice, which include, among other things, the income, cost, and sales comparison approaches to estimating property value. Therefore, these investments are classified in Level 3.

Private equity, private credit and hedge fund limited partnerships - Private equity and hedge fund limited partnerships are carried at fair value which is estimated using the NAV per unit as reported by the administrator of the underlying investment fund as a practical expedient to fair value. Therefore, these investments have been excluded from the fair value table below.

Pension plan assets with changes in fair value measured on a recurring basis at December 31, 2024 were as follows:


In millions	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	32	$	67	$	—	$	99
Debt securities:
U.S. government securities	481		6		—		487
States, municipalities and political subdivisions	—		70		—		70
U.S. corporate securities	—		2,752		1		2,753
Foreign securities	—		98		—		98
Residential mortgage-backed securities	—		7		—		7
Commercial mortgage-backed securities	—		9		—		9
Other asset-backed securities	—		4		—		4
Redeemable preferred securities	—		1		—		1
Total debt securities	481		2,947		1		3,429
Equity securities:
U.S. domestic	30		—		—		30
International	12		—		—		12

Total equity securities	42		—		—		42
Other investments:
Private real estate	—		—		276		276
Common/collective trusts (1)	—		502		—		502
Derivatives	—		3		—		3
Total other investments	—		505		276		781
Total pension investments (2)	$	555	$	3,519	$	277	$	4,351

(1)The assets in the underlying funds of common/collective trusts consist of $288 million of equity securities and $214 million of debt securities.

(2)Excludes $267 million of other receivables as well as $290 million of private equity limited partnership investments and $280 million of hedge fund limited partnership investments as these amounts are measured at NAV per share or an equivalent and are not subject to leveling within the fair value hierarchy.

Pension plan assets with changes in fair value measured on a recurring basis at December 31, 2023 were as follows:


In millions	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	12	$	69	$	—	$	81
Debt securities:
U.S. government securities	518		4		—		522
States, municipalities and political subdivisions	—		94		—		94
U.S. corporate securities	—		2,649		—		2,649
Foreign securities	—		106		—		106
Residential mortgage-backed securities	—		17		—		17
Commercial mortgage-backed securities	—		9		—		9
Other asset-backed securities	—		8		—		8
Redeemable preferred securities	—		1		—		1
Total debt securities	518		2,888		—		3,406
Equity securities:
U.S. domestic	150		—		—		150
International	34		—		—		34

Total equity securities	184		—		—		184
Other investments:
Private real estate	—		—		290		290
Common/collective trusts (1)	—		405		—		405
Derivatives	—		(14)		—		(14)
Total other investments	—		391		290		681
Total pension investments (2)	$	714	$	3,348	$	290	$	4,352

(1)The assets in the underlying funds of common/collective trusts consist of $114 million of equity securities and $291 million of debt securities.

(2)Excludes $314 million of other receivables as well as $461 million of private equity limited partnership investments and $252 million of hedge fund limited partnership investments as these amounts are measured at NAV per share or an equivalent and are not subject to leveling within the fair value hierarchy.

The changes in the balances of Level 3 pension plan assets during the year ended December 31, 2024 were as follows:


In millions	Private real estate		U.S. corporate securities		Total
Beginning balance	$	290	$	—	$	290
Actual return on plan assets	1		—		1
Purchases, sales and settlements	(15)		1		(14)
Transfers out of Level 3	—		—		—
Ending balance	$	276	$	1	$	277

The changes in the balances of Level 3 pension plan assets during the year ended December 31, 2023 were as follows:


In millions	Private real estate
Beginning balance	$	325
Actual return on plan assets	(23)
Purchases, sales and settlements	(12)
Transfers out of Level 3	—
Ending balance	$	290

The Company’s pension plan invests in a diversified mix of assets designed to generate returns that will enable the plan to meet its future benefit obligations. The risk of unexpected investment and actuarial outcomes is regularly evaluated. This evaluation is performed through forecasting and assessing ranges of investment outcomes over short- and long-term horizons and by assessing the pension plan’s liability characteristics. Complementary investment styles and strategies are utilized by professional investment management firms to further improve portfolio and operational risk characteristics. Public and private equity investments are used primarily to increase overall plan returns. Real Assets investments are viewed favorably for their diversification benefits and above-average dividend generation. Fixed income investments provide diversification benefits and liability hedging attributes that are desirable, especially in falling interest rate environments.

At December 31, 2024, target investment allocations for the Company’s pension plan were: 7% in equity securities, 75% in fixed income and debt securities, 7% in Real Assets, 5% in private equity limited partnerships, 2% in private credit limited partnerships and 4% in hedge funds. Actual asset allocations may differ from target allocations due to tactical decisions to overweight or underweight certain assets or as a result of normal fluctuations in asset values. Asset allocations are consistent with stated investment policies and, as a general rule, periodically rebalanced back to target asset allocations. Asset allocations and investment performance are formally reviewed periodically throughout the year by the pension plan’s Investment Subcommittee. Forecasting of asset and liability growth is performed at least annually.

Cash Flows

The Company generally contributes to its tax-qualified pension plan based on minimum funding requirements determined under applicable federal laws and regulations. Employer contributions related to the nonqualified supplemental pension plans generally represent payments to retirees for current benefits. The Company contributed $23 million, $24 million and $27 million to its pension plans during 2024, 2023 and 2022, respectively. No contributions were required for the tax-qualified pension plan in 2024. The Company expects to make an immaterial amount of contributions for all other pension plans in 2025.

The Company estimates the following future benefit payments, which are calculated using the same actuarial assumptions used to measure the pension benefit obligation as of December 31, 2024:


In millions
2025	$	389
2026	384
2027	380
2028	380
2029	371
2030-2034	1,712

Multiemployer Pension Plans

The Company also contributes to a number of multiemployer pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer pension plans in the following respects: (i) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers, (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers, and (iii) if the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay those plans an amount based on the underfunded status of the applicable plan, which is referred to as a withdrawal liability.

None of the multiemployer pension plans in which the Company participates are individually significant to the Company. The Company’s contributions to multiemployer pension plans were $19 million, $19 million and $20 million in 2024, 2023 and 2022, respectively.

Other Postretirement Benefits

The Company provides postretirement health care and life insurance benefits to certain retirees who meet eligibility requirements. The Company’s funding policy is generally to pay covered expenses as they are incurred. For retiree medical plan accounting, the Company reviews external data and its own historical trends for health care costs to determine the health care cost trend rates. As of December 31, 2024 and 2023, the Company’s other postretirement benefits had an accumulated postretirement benefit obligation of $147 million and $155 million, respectively. Net periodic benefit costs related to these other postretirement benefits were $6 million, $6 million and $4 million in 2024, 2023 and 2022, respectively.

The Company estimates the following future benefit payments, which are calculated using the same actuarial assumptions used to measure the accumulated other postretirement benefit obligation as of December 31, 2024:


In millions
2025	$	12
2026	12
2027	12
2028	12
2029	12
2030-2034	59

Pursuant to various collective bargaining agreements, the Company also contributes to multiemployer health and welfare plans that cover certain union-represented employees. The plans provide postretirement health care and life insurance benefits to certain employees who meet eligibility requirements. The Company’s contributions to multiemployer health and welfare plans totaled $63 million, $60 million and $62 million in 2024, 2023 and 2022, respectively.

**12.**Income Taxes

The income tax provision consisted of the following for the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Current:
Federal	$	1,658	$	2,819	$	2,803
State	476		662		735
	2,134		3,481		3,538
Deferred:
Federal	(453)		(537)		(1,526)
State	(119)		(139)		(503)
	(572)		(676)		(2,029)
Total	$	1,562	$	2,805	$	1,509

The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2024, 2023 and 2022:


	2024		2023		2022
Statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	4.6		3.7		3.2

Legal charges	0.5		—		3.4
Basis difference upon disposition of subsidiary	—		—		1.6
Prior year refunds and unrecognized tax benefits	—		—		(2.6)
Tax credits	(1.2)		(0.3)		(0.6)
Other	0.5		0.7		(0.1)
Effective income tax rate	25.4	%	25.1	%	25.9	%

The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31, 2024 and 2023:


In millions	2024		2023
Deferred income tax assets:
Lease and rents	$	4,763	$	5,059
Legal charges	1,109		1,205
Inventory	68		94
Employee benefits	168		168
Bad debts and other allowances	593		606

Net operating loss and capital loss carryforwards	272		409
Deferred income	47		62
Insurance reserves	381		356
Investments	21		56

Other	486		372
Valuation allowance	(301)		(385)
Total deferred income tax assets	7,607		8,002
Deferred income tax liabilities:
Retirement benefits	172		112

Lease and rents	4,125		4,469
Depreciation and amortization	7,116		7,732
Total deferred income tax liabilities	11,413		12,313
Net deferred income tax liabilities	$	3,806	$	4,311

When evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the Company’s recent operating results. The Company established a valuation allowance of $301 million and $385 million as of December 31, 2024 and 2023, respectively, because it does not consider it more likely than not that certain deferred tax assets will be recovered.

As of December 31, 2024, the Company had net operating and capital loss carryovers of $272 million, a portion of which has an indefinite carryforward period, while the remainder expires between 2025 and 2044.

A reconciliation of the beginning and ending balance of unrecognized tax benefits in 2024, 2023 and 2022 is as follows:


In millions	2024		2023		2022
Beginning balance	$	436	$	446	$	782
Additions based on tax positions related to the current year	—		2		5
Additions based on tax positions related to prior years	67		46		42
Reductions for tax positions of prior years	(49)		(24)		(166)
Expiration of statutes of limitation	(29)		(34)		(4)
Settlements	(1)		—		(213)
Ending balance	$	424	$	436	$	446

CVS Health Corporation and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The IRS has completed its examinations of the Company’s consolidated U.S. federal income tax returns for tax years through 2016, 2018 and 2019. The IRS has substantially completed its examination of the Company’s consolidated U.S. federal income tax return for tax year 2017.

CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2024, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity.

Substantially all material state and local income tax matters have been concluded for fiscal years through 2015. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2025, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for certain previous years. An estimate of the range of the possible change cannot be made at this time.

The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $45 million, $31 million and $29 million in 2024, 2023 and 2022, respectively. The Company had approximately $165 million and $134 million accrued for interest and penalties as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $324 million, after considering the federal benefit of state income taxes.

**13.**Stock Incentive Plans

The terms of the CVS Health 2017 Incentive Compensation Plan (“ICP”) provide for grants of annual incentive and long-term performance awards to executive officers and other officers and employees of the Company or any subsidiary of the Company, as well as equity compensation to outside directors of CVS Health Corporation. Payment of such annual incentive and long-term performance awards will be in cash, stock, other awards or other property, at the discretion of the Management Planning and Development Committee (the “MP&D Committee”) of the Board. The ICP allows for a maximum of 92 million shares of CVS Health Corporation common stock to be reserved and available for grants. As of December 31, 2024, there were approximately 33 million shares of CVS Health Corporation common stock available for future grants under the ICP.

As of the Oak Street Health Acquisition Date, Oak Street Health common stock subject to awards outstanding under the Oak Street Health, Inc. Omnibus Incentive Plan (the “Oak Street Health Plan”) was converted into approximately 3.9 million shares of CVS Health Corporation underlying replacement equity awards. In addition, in accordance with the merger agreement, shares which were available for future issuance under the Oak Street Health Plan were converted into approximately 7 million shares of CVS Health common stock which were reserved and available for issuance pursuant to future awards as of December 31, 2023. Subsequent to the cancellation of the Oak Street Health plan on May 16, 2024, the ICP is the only compensation plan under which the Company grants stock options, restricted stock and other stock-based awards to its employees.

As of the Signify Health Acquisition Date, Signify Health common stock subject to awards outstanding under the Signify Health, Inc. 2021 Long-Term Incentive Plan (the “Signify Plan”) was converted into approximately 3.2 million shares of CVS Health Corporation underlying replacement equity awards. In addition, in accordance with the merger agreement, shares which were available for future issuance under the Signify Plan were converted into approximately 9 million shares of CVS Health common stock which were reserved and available for issuance pursuant to future awards as of December 31, 2023. Subsequent to the cancellation of the Signify Plan on May 16, 2024, the ICP is the only compensation plan under which the Company grants stock options, restricted stock and other stock-based awards to its employees.

Stock-Based Compensation Expense

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the stock award (generally three to five years) using the straight-line method. The following table is a summary of stock-based compensation for the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Restricted stock units and performance stock units	$	461	$	497	$	369
Stock options and stock appreciation rights (“SARs”) (1)	79		91		78
Total stock-based compensation (2)	$	540	$	588	$	447

(1)Includes the Employee Stock Purchase Plan (“ESPP”).

(2)Total stock-based compensation for the year ended December 31, 2024 included $60 million and $41 million of post-combination expense associated with replacement equity awards granted in connection with the Oak Street Health and Signify Health acquisitions, respectively. Total stock-based

compensation for the year ended December 31, 2023 included $71 million and $72 million of post-combination expense associated with replacement equity awards granted in connection with the Oak Street Health and Signify Health acquisitions, respectively.

Restricted Stock Units and Performance Stock Units

The Company’s restricted stock units and performance stock units are considered nonvested share awards and require no payment from the employee. The fair value of the restricted stock units is based on the market price of CVS Health Corporation common stock on the grant date and is recognized on a straight-line basis over the vesting period. For each restricted stock unit granted, employees receive one share of common stock, net of taxes, at the end of the vesting period.

The Company’s performance stock units contain performance vesting conditions in addition to a service vesting condition. Vesting of the Company’s performance stock units is dependent upon the degree to which the Company achieves its performance goals, which are generally set for a three-year performance period and are approved at the time of grant by the MP&D Committee.

The fair value of performance stock units granted with service and performance vesting conditions is based on the market price of CVS Health Corporation common stock on the grant date and is recognized over the vesting period. Certain of the performance stock units also contain a market vesting condition based on the performance of CVS Health Corporation common stock relative to a comparator group. The fair value of these performance stock units is determined using a Monte Carlo simulation as of the grant date and is recognized over the vesting period.

As of December 31, 2024, there was $829 million of total unrecognized compensation cost related to the Company’s restricted stock units and performance stock units that are expected to vest. These costs are expected to be recognized over a weighted-average period of 2.2 years. The total fair value of restricted stock units vested during 2024, 2023 and 2022 was $497 million, $525 million and $328 million, respectively.

The following table is a summary of the restricted stock unit and performance stock unit activity for the year ended December 31, 2024:


In thousands, except weighted average grant date fair value	Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year, nonvested	16,994	$	77.65
Granted	9,978	$	75.97
Vested (1)	(6,532)	$	76.08
Forfeited	(1,928)	$	78.71
Outstanding at end of year, nonvested	18,512	$	77.19

(1)Vested performance stock units have been included at target level performance. Based on actual performance, the number of restricted stock units and performance stock units vested during the year ended December 31, 2024 was 6.6 million.

Stock Options and SARs

All stock option and SARs grants are awarded at fair value on the date of grant. The fair value of stock options and SARs are estimated using the Black-Scholes option pricing model, and stock-based compensation is recognized on a straight-line basis over the requisite service period. Stock options and SARs granted generally become exercisable over a four-year period from the grant date. Stock options granted through 2018 generally expire seven years after the grant date. Stock options and SARs granted subsequent to 2018 generally expire ten years after the grant date.

The following table is a summary of stock option and SAR activity that occurred for the years ended December 31, 2024, 2023 and 2022:


In millions	2024		2023		2022
Cash received from stock options exercised (including ESPP)	$	361	$	277	$	551
Payments for taxes for net share settlement of equity awards	185		181		370
Intrinsic value of stock options and SARs exercised	33		31		118
Fair value of stock options and SARs vested	225		227		219

The fair value of each stock option and SAR is estimated using the Black-Scholes option pricing model based on the following assumptions at the time of grant:


	2024			2023			2022
Dividend yield (1)	4.29		%	3.27		%	2.18		%
Expected volatility (2)	28.36		%	28.15		%	27.34		%
Risk-free interest rate (3)	4.13		%	3.55		%	2.46		%
Expected life (in years) (4)	5.3			5.9			6.3
Weighted-average grant date fair value	$	11.31		$	21.78		$	24.15

(1)The dividend yield is based on annual dividends paid and the fair market value of CVS Health Corporation stock at the grant date.

(2)The expected volatility is estimated based on the historical volatility of CVS Health Corporation’s daily stock price over a period equal to the expected life of each option grant after adjustments for infrequent events such as stock splits.

(3)The risk-free interest rate is selected based on yields from U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options being valued.

(4)The expected life represents the number of years the options are expected to be outstanding from grant date based on historical option or SAR holder exercise experience.

As of December 31, 2024, unrecognized compensation expense related to unvested stock options and SARs totaled $44 million, which the Company expects to be recognized over a weighted-average period of 2.24 years. After considering anticipated forfeitures, the Company expects approximately 7 million of the unvested stock options and SARs to vest over the requisite service period.

The following table is a summary of the Company’s stock option and SAR activity for the year ended December 31, 2024:


In thousands, except weighted average exercise price and remaining contractual term	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	15,126	$	68.13
Granted	4,435	$	68.91
Exercised	(2,806)	$	59.61
Forfeited	(1,046)	$	79.05
Expired	(690)	$	78.69
Outstanding at end of year	15,019	$	68.69	5.10	$	3,279
Exercisable at end of year	7,579	$	65.01	3.25	1,939
Vested at end of year and expected to vest in the future	14,646	$	68.66	5.02	3,252

ESPP

The Company’s ESPP provides for the purchase of up to 60 million shares of CVS Health Corporation common stock. Under the ESPP, eligible employees may purchase common stock at the end of each six month offering period at a purchase price equal to 90% of the lower of the fair market value on the first day or the last day of the offering period. During 2024, approximately 4 million shares of common stock were purchased under the provisions of the ESPP at an average price of $58.57 per share. As of December 31, 2024, approximately 23 million shares of common stock were available for issuance under the ESPP.

The fair value of stock-based compensation associated with the ESPP is estimated on the date of grant (the first day of the six-month offering period) using the Black-Scholes option pricing model.

The following table is a summary of the assumptions used to value the ESPP awards for the years ended December 31, 2024, 2023 and 2022:


	2024			2023			2022
Dividend yield (1)	2.01		%	1.54		%	1.12		%
Expected volatility (2)	31.40		%	25.61		%	23.54		%
Risk-free interest rate (3)	5.31		%	5.17		%	1.42		%
Expected life (in years) (4)	0.5			0.5			0.5
Weighted-average grant date fair value	$	12.39		$	14.26		$	16.25

(1)The dividend yield is calculated based on semi-annual dividends paid and the fair market value of CVS Health Corporation stock at the grant date.

(2)The expected volatility is estimated based on the historical volatility of CVS Health Corporation’s daily stock price over the previous six month period.

(3)The risk-free interest rate is selected based on the Treasury constant maturity interest rate whose term is consistent with the expected term of ESPP purchases (i.e., six months).

(4)The expected life is based on the semi-annual purchase period.

**14.**Shareholders’ Equity

Share Repurchases

The following share repurchase programs have been authorized by the Board:


In billions Authorization Date	Authorized		Remaining as of December 31, 2024
November 17, 2022 (“2022 Repurchase Program”)	$	10.0	$	10.0
December 9, 2021 (“2021 Repurchase Program”)	10.0		1.5

Each of the share Repurchase Programs was effective immediately and permit the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase (“ASR”) transactions, and/or other derivative transactions. Both the 2022 and 2021 Repurchase Programs can be modified or terminated by the Board at any time.

During the years ended December 31, 2024, 2023 and 2022, the Company repurchased an aggregate of 39.7 million shares of common stock for approximately $3.0 billion, an aggregate of 22.8 million shares of common stock for approximately $2.0 billion and an aggregate of 34.1 million shares of common stock for approximately $3.5 billion, respectively, each pursuant to the 2021 Repurchase Program. This activity includes the share repurchases under the ASR transactions described below.

Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $3.0 billion fixed dollar ASR with Morgan Stanley & Co. LLC (“Morgan Stanley”). Upon payment of the $3.0 billion purchase price on January 4, 2024, the Company received a number of shares of CVS Health Corporation’s common stock equal to 85% of the $3.0 billion notional amount of the ASR or approximately 31.4 million shares, which were placed into treasury stock in January 2024. The ASR was accounted for as an initial treasury stock transaction for $2.6 billion and a forward contract for $0.4 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus. In March 2024, the Company received approximately 8.3 million shares of CVS Health Corporation’s common stock, representing the remaining 15% of the $3.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury and the forward contract was reclassified from capital surplus to treasury stock in March 2024.

Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $2.0 billion fixed dollar ASR with Citibank, N.A. Upon payment of the $2.0 billion purchase price on January 4, 2023, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $2.0 billion notional amount of the ASR or approximately 17.4 million shares, which were placed into treasury stock in January 2023. The ASR was accounted for as an initial treasury stock transaction for $1.6 billion and a forward contract for $0.4 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus. In February 2023, the Company received approximately 5.4 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $2.0 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2023.

Pursuant to the authorization under the 2021 Repurchase Program, the Company entered into a $1.5 billion fixed dollar ASR with Barclays Bank PLC. Upon payment of the $1.5 billion purchase price on January 4, 2022, the Company received a number of shares of CVS Health Corporation’s common stock equal to 80% of the $1.5 billion notional amount of the ASR or approximately 11.6 million shares, which were placed into treasury stock in January 2022. The ASR was accounted for as an initial treasury stock transaction for $1.2 billion and a forward contract for $0.3 billion. The forward contract was classified as an equity instrument and was recorded within capital surplus. In February 2022, the Company received approximately 2.7 million shares of CVS Health Corporation’s common stock, representing the remaining 20% of the $1.5 billion notional amount of the ASR, thereby concluding the ASR. These shares were placed into treasury stock and the forward contract was reclassified from capital surplus to treasury stock in February 2022.

At the time they were received, the initial and final receipt of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted average common shares outstanding for basic and diluted earnings per share.

Dividends

The quarterly cash dividend declared by the Board was $0.665, $0.605 and $0.55 per share in 2024, 2023 and 2022, respectively. CVS Health Corporation has paid cash dividends every quarter since becoming a public company. Future dividend payments will depend on the Company’s earnings, capital requirements, financial condition and other factors considered relevant by the Board.

Regulatory Requirements

The Company’s insurance business operations are conducted through subsidiaries that principally consist of health maintenance organizations (“HMOs”) and insurance companies. The Company’s HMO and insurance subsidiaries report their financial statements in accordance with accounting practices prescribed by state regulatory authorities which may differ from GAAP. The combined statutory net income for the years ended and estimated combined statutory and capital surplus at December 31, 2024, 2023 and 2022 for the Company’s insurance and HMO subsidiaries were as follows:


In millions	2024		2023		2022
Statutory net income (loss)	$	(1,185)	$	2,757	$	2,851
Estimated statutory capital and surplus	20,085		16,961		15,503

The Company’s insurance and HMO subsidiaries paid $755 million of gross dividends to the Company for the year ended December 31, 2024.

In addition to general state law restrictions on payments of dividends and other distributions to stockholders applicable to all corporations, HMOs and insurance companies are subject to further regulations that, among other things, may require those companies to maintain certain levels of equity and restrict the amount of dividends and other distributions that may be paid to their equity holders. In addition, in connection with the acquisition of Aetna, the Company made certain undertakings that require prior regulatory approval of dividends by certain of its HMOs and insurance companies. At December 31, 2024, these amounts were as follows:


In millions
Estimated minimum statutory surplus required by regulators	$	11,691
Investments on deposit with regulatory bodies	713
Estimated maximum dividend distributions permitted in 2025 without prior regulatory approval	1,561

Noncontrolling Interests

At December 31, 2024 and 2023, noncontrolling interests were $170 million and $175 million, respectively, primarily related to third party interests in the Company’s operating entities. The noncontrolling entities’ share is included in total shareholders’ equity on the consolidated balance sheets.

**15.**Other Comprehensive Income (Loss)

Shareholders’ equity included the following activity in accumulated other comprehensive loss in 2024, 2023 and 2022:


	At December 31,
In millions	2024		2023		2022
Net unrealized investment gains (losses):
Beginning of year balance	$	(429)	$	(1,519)	$	798

Other comprehensive income (loss) before reclassifications ($(177), $612 and $(3,021) pretax)	(170)		603		(2,556)
Amounts reclassified from accumulated other comprehensive income (loss) ($226, $566 and $315 pretax) (1)	200		487		239
Other comprehensive income (loss)	30		1,090		(2,317)
End of year balance	(399)		(429)		(1,519)

Change in discount rate on long-duration insurance reserves:
Beginning of period balance	152		219		(651)

Other comprehensive income (loss) before reclassifications ($146, $(92), and $1,126 pretax)	113		(67)		870
Other comprehensive income (loss)	113		(67)		870
End of period balance	265		152		219

Foreign currency translation adjustments:
Beginning of year balance	—		—		—
Other comprehensive loss before reclassifications	(4)		—		—

Other comprehensive loss	(4)		—		—
End of year balance	(4)		—		—

Net cash flow hedges:
Beginning of year balance	244		239		222
Other comprehensive income before reclassifications ($0, $25 and $38 pretax)	—		19		28
Amounts reclassified from accumulated other comprehensive income ($(20), $(19) and $(15) pretax) (2)	(15)		(14)		(11)
Other comprehensive income (loss)	(15)		5		17
End of year balance	229		244		239

Pension and other postretirement benefits:
Beginning of year balance	(264)		(203)		(35)
Other comprehensive income (loss) before reclassifications ($71, $(81) and $(229) pretax)	53		(61)		(170)
Amounts reclassified from accumulated other comprehensive loss ($0, $0 and $3 pretax) (3)	—		—		2
Other comprehensive income (loss)	53		(61)		(168)
End of year balance	(211)		(264)		(203)

Total beginning of year accumulated other comprehensive income (loss)	(297)		(1,264)		334

Total other comprehensive income (loss)	177		967		(1,598)
Total end of year accumulated other comprehensive loss	$	(120)	$	(297)	$	(1,264)

(1)Amounts reclassified from accumulated other comprehensive income (loss) for specifically identified debt securities are included in net investment income in the consolidated statements of operations.

(2)Amounts reclassified from accumulated other comprehensive income for specifically identified cash flow hedges are included within interest expense in the consolidated statements of operations. The Company expects to reclassify $16 million, net of tax, in net gains associated with its cash flow hedges into net income within the next 12 months.

(3)Amounts reclassified from accumulated other comprehensive loss for specifically identified pension and other postretirement benefits are included in other income in the consolidated statements of operations.

**16.**Earnings Per Share

Earnings per share is computed using the treasury stock method. Stock options and SARs to purchase 8 million, 8 million and 4 million shares of common stock were outstanding, but were excluded from the calculation of diluted earnings per share for the years ended December 31, 2024, 2023 and 2022, respectively, because their exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

The following is a reconciliation of basic and diluted earnings per share for the years ended December 31, 2024, 2023 and 2022:


In millions, except per share amounts	2024		2023		2022
Numerator for earnings per share calculation:



Net income attributable to CVS Health	$	4,614	$	8,344	$	4,311

Denominator for earnings per share calculation:
Weighted average shares, basic	1,259		1,285		1,312
Restricted stock units and performance stock units	2		3		6
Stock options and SARs	1		2		5
Weighted average shares, diluted	1,262		1,290		1,323

Earnings per share:
Basic	$	3.67	$	6.49	$	3.29
Diluted	$	3.66	$	6.47	$	3.26

**17.**Reinsurance

In January 2025, the Company entered into three four-year reinsurance agreements with an unrelated reinsurer that allow it to reduce required capital and provide collateralized excess of loss reinsurance coverage on a portion of the Health Care Benefits segment’s group Commercial Insured business.

Reinsurance recoverables (recorded as other current assets or other assets on the consolidated balance sheets) at December 31, 2024 and 2023 were as follows:


In millions	2024		2023
Reinsurer
Hartford Life and Accident Insurance Company	$	1,119	$	1,314
Lincoln Life & Annuity Company of New York	444		480
Individual State Reinsurance Programs	189		61
Fresenius Medical Care Reinsurance Company (Cayman) Ltd.	75		54
Resolution Life Group Holdings Ltd.	33		35
All Other	67		54
Total	$	1,927	$	1,998

Direct, assumed and ceded premiums earned for the years ended December 31, 2024, 2023 and 2022 were as follows:


In millions	2024		2023		2022
Direct	$	123,629	$	99,753	$	85,670
Assumed	471		350		432
Ceded	(1,204)		(911)		(772)
Net premiums	$	122,896	$	99,192	$	85,330

The impact of reinsurance on health care costs for the years ended December 31, 2024, 2023 and 2022 was as follows:


In millions	2024		2023		2022
Direct	$	115,974	$	86,738	$	71,357
Assumed	431		223		379
Ceded	(1,284)		(714)		(663)
Net health care costs	$	115,121	$	86,247	$	71,073

There is not a material difference between premiums on a written basis versus an earned basis.

The Company also has various agreements with unrelated reinsurers that do not qualify for reinsurance accounting under GAAP, and consequently are accounted for using deposit accounting. The Company entered into these contracts to reduce the risk of catastrophic loss which in turn reduces the Company’s capital and surplus requirements. Total deposit assets and liabilities related to reinsurance agreements that do not qualify for reinsurance accounting under GAAP were not material as of December 31, 2024 or 2023.

**18.**Commitments and Contingencies

Guarantees

The Company had the following significant guarantee arrangements at December 31, 2024:

ASC Claim Funding Accounts - The Company has arrangements with certain banks for the processing of claim payments for its ASC customers. The banks maintain accounts to fund claims of the Company’s ASC customers. The customer is responsible for funding the amount paid by the bank each day. In these arrangements, the Company guarantees that the banks will not sustain losses if the responsible ASC customer does not properly fund its account. The aggregate maximum exposure under these arrangements is generally limited to $300 million. The Company can limit its exposure to these guarantees by suspending the payment of claims for ASC customers that have not adequately funded the amount paid by the bank.
Separate Accounts Assets - Certain Separate Accounts assets associated with the large case pensions business in the Corporate/Other segment represent funds maintained as a contractual requirement to fund specific pension annuities that the Company has guaranteed. Minimum contractual obligations underlying the guaranteed benefits in these Separate Accounts were approximately $857 million and $834 million at December 31, 2024 and 2023, respectively. See Note 1 ‘‘Significant Accounting Policies’’ for additional information on Separate Accounts. Contract holders assume all investment and mortality risk and are required to maintain Separate Accounts balances at or above a specified level. The level of required funds is a function of the risk underlying the Separate Account’s investment strategy. If contract holders do not maintain the required level of Separate Accounts assets to meet the annuity guarantees, the Company would establish an additional liability. Contract holders’ balances in the Separate Accounts at December 31, 2024 exceeded the value of the guaranteed benefit obligation. As a result, the Company was not required to maintain any additional liability for its related guarantees at December 31, 2024.

Lease Guarantees

Between 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Bob’s Stores, Linens ‘n Things and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition. When the subsidiaries were disposed of and accounted for as discontinued operations, the Company’s guarantees remained in place, although each initial purchaser agreed to indemnify the Company for

any lease obligations the Company was required to satisfy. If any of the purchasers or any of the former subsidiaries fail to make the required payments under a store lease, the Company could be required to satisfy those obligations. As of December 31, 2024, the Company guaranteed 61 such store leases (excluding the lease guarantees related to Linens ‘n Things, which have been recorded as a liability on the consolidated balance sheets), with the maximum remaining lease term extending through 2035.

Guaranty Fund Assessments, Market Stabilization and Other Non-Voluntary Risk Sharing Pools

Under guaranty fund laws existing in all states, insurers doing business in those states can be assessed (in most states up to prescribed limits) for certain obligations of insolvent insurance companies to policyholders and claimants. The life and health insurance guaranty associations in which the Company participates that operate under these laws respond to insolvencies of long-term care insurers and life insurers as well as health insurers. The Company’s assessments generally are based on a formula relating to the Company’s health care premiums in the state compared to the premiums of other insurers. Certain states allow assessments to be recovered over time as offsets to premium taxes. Some states have similar laws relating to HMOs and/or other payors such as not-for-profit consumer-governed health plans established under the ACA.

In 2009, the Pennsylvania Insurance Commissioner placed long-term care insurer Penn Treaty Network America Insurance Company and one of its subsidiaries (collectively, “Penn Treaty”) in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. Penn Treaty was placed in liquidation in March 2017. The Company has recorded a liability for its estimated share of future assessments by applicable life and health insurance guaranty associations. It is reasonably possible that in the future the Company may record a liability and expense relating to other insolvencies which could have a material adverse effect on the Company’s operating results, financial condition and cash flows. While historically the Company has ultimately recovered more than half of guaranty fund assessments through statutorily permitted premium tax offsets, significant increases in assessments could lead to legislative and/or regulatory actions that limit future offsets.

HMOs in certain states in which the Company does business are subject to assessments, including market stabilization and other risk-sharing pools, for which the Company is assessed charges based on incurred claims, demographic membership mix and other factors. The Company establishes liabilities for these assessments based on applicable laws and regulations. In certain states, the ultimate assessments the Company pays are dependent upon the Company’s experience relative to other entities subject to the assessment, and the ultimate liability is not known at the financial statement date. While the ultimate amount of the assessment is dependent upon the experience of all pool participants, the Company believes it has adequate reserves to cover such assessments.

The Company’s total guaranty fund assessments liability was immaterial at both December 31, 2024 and 2023.

Litigation and Regulatory Proceedings

The Company has been involved or is currently involved in numerous legal proceedings, including litigation, arbitration, government investigations, audits, reviews and claims. These include routine, regular and special investigations, audits and reviews by CMS, state insurance and health and welfare departments, the U.S. Department of Justice (the “DOJ”), state Attorneys General, the U.S. Drug Enforcement Administration (the “DEA”), the U.S. Federal Trade Commission (the “FTC”) and other governmental authorities.

Legal proceedings, in general, and securities, class action and multi-district litigation, in particular, and governmental special investigations, audits and reviews can be expensive and disruptive. Some of the litigation matters may purport or be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. The Company also may be named from time to time in qui tam actions initiated by private third parties that could also be separately pursued by a governmental body. The results of legal proceedings, including government investigations, are often uncertain and difficult to predict, and the costs incurred in these matters can be substantial, regardless of the outcome.

The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability. Other than the controlled substances litigation accruals described below, none of the Company’s accruals for outstanding legal matters are material individually or in the aggregate to the Company’s consolidated balance sheets.

Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters described below, and the Company is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts already accrued for these matters. The Company believes that its defenses and assertions in pending legal proceedings have merit and does not believe that any of these pending matters, after consideration of applicable reserves and rights to indemnification, will have a material adverse effect on the Company’s financial position. Substantial unanticipated verdicts, fines and rulings, however, do sometimes occur, which could result in judgments against the Company, entry into settlements or a revision to its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on its results of operations. In addition, as a result of governmental investigations or proceedings, the Company may be subject to damages, civil or criminal fines or penalties, or other sanctions including possible suspension or loss of licensure and/or exclusion from participating in government programs. The outcome of such governmental investigations of proceedings could be material to the Company.

Usual and Customary Pricing Litigation

The Company is named as a defendant in a number of lawsuits that allege that the Company’s retail pharmacies overcharged for prescription drugs by not submitting the correct usual and customary price during the claims adjudication process. These actions are brought by a number of different types of plaintiffs, including plan members, private payors and government payors, and are based on different legal theories. Some of these cases are brought as putative class actions, and in some instances, classes have been certified. The Company is defending itself against these claims.

PBM Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its PBM practices.

The Company is facing multiple lawsuits, including by the FTC, state Attorneys General, governmental subdivisions, private parties and several putative class actions, regarding drug pricing and its rebate arrangements with drug manufacturers. These complaints, brought by a number of different types of plaintiffs under a variety of legal theories, generally allege that rebate agreements between the drug manufacturers and PBMs caused inflated prices for certain drug products. The majority of these cases have now been transferred into a multi-district litigation in the U.S. District Court for the District of New Jersey. The Company is defending itself against these claims. The Company has also received subpoenas, civil investigative demands (“CIDs”), and other requests for documents and information from, and is being investigated by, the DOJ, the HHS, the FTC and Attorneys General of several states and the District of Columbia regarding its PBM practices, including pharmacy contracting practices and reimbursement, pricing and rebates. While the FTC has released a number of interim staff reports related to its studies of PBM practices under Section 6(b) of the FTC Act, which allows the FTC to conduct studies, among other activities, it has not yet released a final report. The Company has been providing documents and information in response to these subpoenas, CIDs, and requests for information. In September 2024, the FTC filed an administrative complaint against the three largest PBMs (the “PBM Group”) and their affiliated group purchasing organizations, including subsidiaries of the Company. The complaint alleged that the PBM Group and their affiliated group purchasing organizations engaged in anti-competitive and unfair practices that “artificially” increased insulin costs. The Company is aggressively defending itself against the complaint. In November 2024, the PBM Group filed a complaint in the U.S. District Court for the Eastern District of Missouri challenging the constitutionality of the FTC’s administrative complaint.

United States ex rel. Behnke v. CVS Caremark Corporation, et al. (U.S. District Court for the Eastern District of Pennsylvania). In April 2018, the Court unsealed a complaint filed in February 2014. The government has declined to intervene in this case. The relator alleges that the Company submitted, or caused to be submitted, to Part D of the Medicare program Prescription Drug Event data and/or Direct and Indirect Remuneration reports that misrepresented true prices paid by the Company’s PBM to pharmacies for drugs dispensed to Part D beneficiaries with prescription benefits administered by the Company’s PBM. The Company is defending itself against these claims.

Controlled Substances Litigation, Audits and Subpoenas

Forty-five states, the District of Columbia, and all eligible United States territories are participating in a settlement resolving substantially all opioid claims against Company entities by participating states and political subdivisions but not private plaintiffs. A high percentage of eligible subdivisions within the participating states also have elected to join the settlement. The settlement agreement is available at nationalopioidsettlement.com. The Company has separately entered into settlement

agreements with four states – Florida, West Virginia, New Mexico and Nevada – and a high percentage of eligible subdivisions within those states also have elected to participate.

The final settlement agreement contains certain contingencies related to payment obligations. Because these contingencies are inherently unpredictable, the assessment requires judgments about future events. The amount of ultimate loss may differ from the amount accrued by the Company.

The State of Maryland has elected not to participate, and thus subdivisions within the State of Maryland may not participate, in the settlement. The State of Maryland has issued a civil subpoena for information from the Company, and litigation is pending with certain subdivisions within the State of Maryland as well as other non-participating subdivisions in other geographies, including the City of Philadelphia, and private parties such as hospitals and third-party payors. The Company is defending itself against the claims made in these cases.

In November 2021, the Company was among the chain pharmacies found liable by a jury in a trial in federal court in Ohio; in August 2022, the court issued a judgment jointly against the three defendants in the amount of $651 million to be paid over 15 years and also ordered certain injunctive relief. In December 2024, following an appeal by the Company, the Supreme Court of Ohio ruled that Ohio law precluded the claim on which the verdict and judgment were based.

Because of the many uncertainties associated with any settlement arrangement or other resolution of opioid-related litigation matters, and because the Company continues to actively defend ongoing litigation for which it believes it has defenses and assertions that have merit, the Company is not able to reasonably estimate the range of ultimate possible loss for all opioid-related litigation matters at this time. The outcome of these legal matters could have a material effect on the Company’s business, financial condition, operating results and/or cash flows.

In December 2024, the DOJ intervened in a previously sealed qui tam action and filed an amended complaint in the U.S. District Court for the District of Rhode Island, alleging, among other claims, violations of the federal Controlled Substances Act and the federal False Claims Act based on the filling of opioid and other controlled substance prescriptions at CVS Pharmacy locations nationwide. The Company is defending itself against the claims made in this case. Separately, the Company was served in December 2024 with a subpoena issued by the U.S. Attorney’s Office for the Western District of Virginia, seeking records related to, among other things, commercial arrangements between the Company’s PBM and opioid manufacturers.

Prescription Processing Litigation and Investigations

The Company is named as a defendant in a number of lawsuits and is subject to a number of investigations concerning its prescription processing practices, including related to billing government payors for prescriptions, and the following:

U.S. ex rel. Bassan et al. v. Omnicare, Inc. and CVS Health Corp. (U.S. District Court for the Southern District of New York). In December 2019, the U.S. Attorney’s Office for the Southern District of New York filed a complaint-in-intervention in this previously sealed qui tam case. The complaint alleges that for certain non-skilled nursing facilities, Omnicare improperly filled prescriptions beyond one year where a valid prescription did not exist and that these dispensing events violated the federal False Claims Act. The Company is defending itself against these claims.

U.S. ex rel. Gill et al. v. CVS Health Corp. et al. (U.S. District Court for the Northern District of Illinois). In July 2022, the Delaware Attorney General’s Office moved for partial intervention as to allegations under the Delaware false claims act related to not escheating alleged overpayments in this previously sealed qui tam case. The federal government and the remaining states declined to intervene on other additional theories in the relator’s complaint, except that the federal government filed a notice of intervention for the limited purpose of defending the constitutionality of the qui tam provisions of the False Claims Act. The Company is defending itself against all of the claims.

Provider Proceedings

The Company is named as a defendant in purported class actions and individual lawsuits arising out of its practices related to the payment of claims for services rendered to its members by providers with whom the Company has a contract and with whom the Company does not have a contract (“out-of-network providers”). Among other things, these lawsuits allege that the Company paid too little to its health plan members and/or providers for out-of-network services (including COVID-19 testing) and/or otherwise allege that the Company failed to timely or appropriately pay or administer claims and benefits (including the

Company’s post payment audit and collection practices). Other major health insurers are the subject of similar litigation or have settled similar litigation.

The Company also has received subpoenas and/or requests for documents and other information from, and been investigated by, state Attorneys General and other state and/or federal regulators, legislators and agencies relating to claims payments, and the Company is involved in other litigation regarding its out-of-network benefit payment and administration practices. It is reasonably possible that others could initiate additional litigation or additional regulatory action against the Company with respect to its out-of-network benefit payment and/or administration practices.

CMS Actions

CMS regularly audits the Company’s performance to determine its compliance with CMS’s regulations and its contracts with CMS and to assess the quality of services it provides to Medicare beneficiaries. CMS uses various payment mechanisms to allocate and adjust premium payments to the Company’s and other companies’ Medicare plans by considering the applicable health status of Medicare members as supported by information prepared, maintained and provided by providers. The Company collects claim and encounter data from providers and generally relies on providers to appropriately code their submissions to the Company and document their medical records, including the diagnosis data submitted to the Company with claims. CMS pays increased premiums to Medicare Advantage plans and Medicare PDP plans for members who have certain medical conditions identified with specific diagnosis codes. Federal regulators review and audit the providers’ medical records to determine whether those records support the related diagnosis codes that determine the members’ health status and the resulting risk-adjusted premium payments to the Company. In that regard, CMS has instituted risk adjustment data validation (“RADV”) audits of various Medicare Advantage plans, including certain of the Company’s plans, to validate coding practices and supporting medical record documentation maintained by providers and the resulting risk-adjusted premium payments to the plans. CMS may require the Company to refund premium payments if the Company’s risk-adjusted premiums are not properly supported by medical record data. The Office of the Inspector General of the U.S. Department of Health and Human Services (the “OIG”) also is auditing the Company’s risk adjustment-related data and that of other companies. The Company expects CMS and the OIG to continue these types of audits.

In 2012, in the “Notice of Final Payment Error Calculation for Part C Medicare Advantage Risk Adjustment Validation Data (“RADV”) Contract-Level Audits,” CMS revised its audit methodology for RADV contract-level audits to determine refunds payable by Medicare Advantage plans for contract year 2011 and forward. Under the revised methodology, among other things, CMS announced extrapolation of the error rate identified in the audit sample along with the application of a process to account for errors in the government’s traditional fee-for-service Medicare program (“FFS Adjuster”). For contract years prior to 2011, CMS did not extrapolate sample error rates to the entire contract, nor did CMS propose to apply a FFS adjuster. By applying the FFS Adjuster, Medicare Advantage organizations would have been liable for repayments only to the extent that their extrapolated payment errors exceeded the error rate in Original Medicare, which could have impacted the extrapolated repayments to which Medicare Advantage organizations are subject. This revised contract-level audit methodology increased the Company’s exposure to premium refunds to CMS based on incomplete medical records maintained by providers. In the RADV audit methodology CMS used from 2011-2013, CMS selected only a few of the Company’s Medicare Advantage contracts for various contract years for contract-level RADV audits. In October 2018, CMS in the proposed rule announced a new methodology for RADV audits targeting certain health conditions and members with many diagnostic conditions along with extrapolation for the error rates identified without use of a FFS Adjuster. While the rule was under proposal, CMS initiated contract-level RADV audits for the years 2014 and 2015 with this new RADV methodology without a final rule.

On January 30, 2023, CMS released the final rule (“RADV Audit Rule”), announcing it may use extrapolation for payment years 2018 forward, for both RADV audits and OIG contract level audits, and eliminated the application of a FFS Adjuster in Part C contract-level RADV audits of Medicare Advantage organizations. In the RADV Audit Rule, CMS indicated that it will use more than one audit methodology going forward and indicated CMS will audit contracts it believes are at the highest risk for overpayments based on its statistical modeling, citing a 2016 Governmental Accountability Office report that recommended selection of contract-level RADV audits with a focus on contracts likely to have high rates of improper payment, the highest coding intensity scores, and contracts with high levels of unsupported diagnoses from prior RADV audits.

The Company is currently unable to predict which of its Medicare Advantage contracts will be selected for audit, the amounts of any retroactive refunds for years prior to 2018 or prospective adjustments to Medicare Advantage premium payments made to the Company, the effect of any such refunds or adjustments on the actuarial soundness of the Company’s Medicare Advantage bids, or whether any RADV audit findings would require the Company to change its method of estimating future premium revenue in future bid submissions to CMS or compromise premium assumptions made in the Company’s bids for prior contract years, the current contract year or future contract years. Any premium or fee refunds or adjustments resulting

from regulatory audits, whether as a result of RADV, Public Exchange-related or other audits by CMS, the OIG or otherwise, including audits of the Company’s minimum loss ratio rebates, methodology and/or reports, could be material and could adversely affect the Company’s operating results, cash flows and/or financial condition.

The RADV Audit Rule does not apply to the CMS Part C Improper Payment Measures audits nor the HHS RADV programs.

Medicare and Medicaid Litigation and Investigations

The Company has received CIDs from the Civil Division of the DOJ in connection with investigations of the Company’s identification and/or submission of diagnosis codes related to risk adjustment payments, including patient chart review processes, under Parts C and D of the Medicare program. The Company is cooperating with the government and providing documents and information in response to these CIDs.

In May 2017, the Company received a CID from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information concerning possible false claims submitted to Medicare in connection with reimbursements for prescription drugs under the Medicare Part D program. The Company has been cooperating with the government and providing documents and information in response to this CID.

Since January 2022, the U.S. Attorney’s Office for the District of Massachusetts has issued subpoenas to Aetna Life Insurance Company seeking, among other things, information in connection with its relationship and compensation arrangements with certain brokers, and the Company may receive similar inquiries in the future. The Company is cooperating with the investigation.

Stockholder Matters

Beginning in February 2019, multiple class action complaints, as well as a derivative complaint, were filed by putative plaintiffs against the Company and certain current and former officers and directors. The plaintiffs in these cases assert a variety of causes of action under federal securities laws that are premised on allegations that the defendants made certain omissions and misrepresentations relating to the performance of the Company’s LTC business unit. Since filing, several of the cases have been consolidated, and two have resolved. In February 2025, the District of Rhode Island granted the Company’s motion to dismiss In re CVS Health Corp. Securities Act Litigation (formerly known as Waterford). A derivative case in the District of Rhode Island, Lovoi v. Aguirre, had been stayed pending the outcome of the Waterford case, and the court has scheduled a status conference. In In re CVS Health Corp. Securities Litigation (formerly known as City of Warren and Freundlich), the Rhode Island Supreme Court affirmed the superior court’s order granting the Company’s motion to dismiss in January 2025. The Company and its current and former officers and directors are defending themselves against remaining claims.

Beginning in December 2021, the Company has received three demands for inspection of books and records pursuant to Delaware General Corporation Law Section 220 (“Section 220 demands”), as well as a derivative complaint (Vladimir Gusinsky Revocable Trust v. Lynch, et al.) that was filed in January 2023, which the defendants moved to dismiss. The Section 220 demands and the complaint purport to be related to potential breaches of fiduciary duties by the Board in relation to certain matters concerning opioids. Following the Company’s response to the Section 220 demands, two of the three stockholders sent demand letters to the Board containing allegations substantially similar to those made in the earlier Section 220 demands and the derivative matter, and requested that it take certain actions, including consideration of its governance and policies with respect to controlled substances. The Board deferred consideration of these two demands until after the motion to dismiss the Gusinsky case was decided. In July 2024, the court granted the defendants’ motion to dismiss the Gusinsky case. In September 2024, the Board received a third demand letter containing similar allegations and requesting the Board take action. The Board has formed a demand review committee to evaluate the demands.

In January 2022, a shareholder class action complaint was filed in the Northern District of Illinois, Allison v. Oak Street Health, Inc., et al. Defendants include Oak Street Health and certain of its pre-acquisition officers and directors. The putative plaintiffs assert causes of action under various securities laws premised on allegations that defendants made omissions and misrepresentations to investors relating to marketing conduct they allege may violate the False Claims Act. In May 2024, the parties reached agreement in principle to settle this action for an amount immaterial to the Company. The court granted approval of the settlement in December 2024.

Beginning in July 2024, two purported class action complaints, as well as multiple derivative complaints, were filed by putative plaintiffs against the Company and certain current and former officers and directors. The plaintiffs in these cases assert a variety of causes of action under federal securities laws and state law that are premised on allegations that the defendants made certain

omissions and misrepresentations relating to the profitability of the Health Care Benefits segment. Two purported class actions were filed and have been consolidated in U.S. District Court for the Southern District of New York under Nixon v. CVS Health Corporation, et al. Two derivative cases were also filed in the Southern District of New York and have been consolidated as In re CVS Health Corporation Derivative Litigation. Two derivative cases filed in the District of Rhode Island have been consolidated as In re CVS Health Corporation Stockholder Derivative Litigation. The consolidated derivative actions have been stayed pending the outcome of any motion to dismiss in the consolidated Nixon securities class action. Three additional derivative cases were filed in Rhode Island Superior Court: Goff v. Lynch, et al., Brodin v. Lynch, et al., and Davidow v. Lynch, et al. The Company and the individual defendants are defending themselves against these claims. In January 2025, the Board received a stockholder demand containing allegations substantially similar to those made in the class action and derivative matters, and requesting that it take certain actions, including investigating whether any Board members or officers breached their fiduciary duties related to those allegations, and bringing litigation to recover the Company’s damages if any such misconduct is found. The Board is evaluating the demand.

Other Legal and Regulatory Proceedings

The Company is also a party to other legal proceedings and is subject to government investigations, inquiries and audits, and has received and is cooperating with the government in response to CIDs, subpoenas, or similar process from various governmental agencies requesting information. These other legal proceedings and government actions include claims of or relating to bad faith, medical or professional malpractice, breach of fiduciary duty, claims processing, dispensing of medications, the use of medical testing devices in the in-home evaluation setting, non-compliance with state and federal regulatory regimes, marketing misconduct, denial of or failure to timely or appropriately pay or administer claims and benefits, provider network structure (including the use of performance-based networks and termination of provider contracts), rescission of insurance coverage, improper disclosure or use of personal information, anticompetitive practices, the Company’s participation in the 340B program, general contractual matters, product liability, intellectual property litigation, discrimination and employment litigation. Some of these other legal proceedings are or are purported to be class actions or derivative claims. The Company is defending itself against the claims brought in these matters.

Awards to the Company and others of certain government contracts, particularly Medicaid contracts and other contracts with government customers in the Company’s Health Care Benefits segment, frequently are subject to protests by unsuccessful bidders. These protests may result in awards to the Company being reversed, delayed, or modified. The loss or delay in implementation of any government contract could adversely affect the Company’s operating results. The Company will continue to defend contract awards it receives.

There also continues to be a heightened level of review and/or audit by regulatory authorities and legislators of, and increased litigation regarding, the Company’s and the rest of the health care and related benefits industry’s business and reporting practices, including premium rate increases, utilization management, development and application of medical policies, complaint, grievance and appeal processing, information privacy, provider network structure (including provider network adequacy, the use of performance-based networks and termination of provider contracts), provider directory accuracy, calculation of minimum MLRs and/or payment of related rebates, delegated arrangements, rescission of insurance coverage, limited benefit health products, student health products, PBM practices (including manufacturers’ rebates, pricing, the use of narrow networks and the placement of drugs in formulary tiers), sales practices, customer service practices, vendor oversight, and claim payment practices (including payments to out-of-network providers).

As a leading national health solutions company, the Company regularly is the subject of government actions of the types described above. These government actions may prevent or delay the Company from implementing planned premium rate increases and may result, and have resulted, in restrictions on the Company’s businesses, changes to or clarifications of the Company’s business practices, retroactive adjustments to premiums, refunds or other payments to members, beneficiaries, states or the federal government, withholding of premium payments to the Company by government agencies, assessments of damages, civil or criminal fines or penalties, or other sanctions, including the possible suspension or loss of licensure and/or suspension or exclusion from participation in government programs.

The Company can give no assurance that its businesses, financial condition, operating results and/or cash flows will not be materially adversely affected, or that the Company will not be required to materially change its business practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of existing laws or regulations as they may relate to one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iii) pending or future federal or state government investigations of one or more of the Company’s businesses, one or more of the industries in which the Company competes and/or the health care industry generally; (iv) pending or future government audits, investigations or enforcement actions against the Company; (v)

adverse developments in any pending qui tam lawsuit against the Company, whether sealed or unsealed, or in any future qui tam lawsuit that may be filed against the Company; or (vi) adverse developments in pending or future legal proceedings against the Company or affecting one or more of the industries in which the Company competes and/or the health care industry generally.

**19.**Segment Reporting

The Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. The Company’s segments maintain separate financial information, and the CODM, the Company’s Chief Executive Officer, evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income. Total assets by segment are not used by the CODM to assess the performance of, or allocate resources to, the Company’s segments, therefore total assets by segment are not disclosed.

Adjusted operating income (loss) is defined as operating income (loss) (GAAP measure) excluding the impact of amortization of intangible assets, net realized capital gains or losses, and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. The CODM uses adjusted operating income as its principal measure of segment performance as it enhances the Company’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

In 2024, 2023 and 2022, revenues from the federal government accounted for 24%, 19% and 18%, respectively, of the Company’s consolidated total revenues, primarily related to contracts with CMS for coverage of Medicare-eligible individuals within the Health Care Benefits segment.

The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:


	Year Ended December 31, 2024
In millions	Health Care Benefits		Health Services (1)		Pharmacy & Consumer Wellness		Corporate/ Other		Consolidated Totals
Revenues from external customers	$	129,120	$	158,016	$	83,464	$	56	$	370,656
Intersegment revenues	72		15,304		41,036		—		56,412
Net investment income	1,473		285		—		395		2,153
Total revenues	130,665		173,605		124,500		451		429,221
Intersegment eliminations (2)									(56,412)
Total consolidated revenues									$	372,809
Less: Net realized capital gains (losses)	(97)		289		—		(75)
Cost of products sold	—		160,036		99,337		—
Health care costs	113,659		3,407		—		187
Other segment items (3)	16,796		2,630		19,389		1,687
Adjusted operating income (loss)	$	307	$	7,243	$	5,774	$	(1,348)	$	11,976

Reconciliation of principal measure of segment performance to consolidated operating income:
Amortization of intangible assets (4)									2,025
Net realized capital gains (5)									(117)
Acquisition-related integration costs (6)									243
Restructuring charges (7)									1,179
Office real estate optimization charges (8)									30
Opioid litigation charge (9)									100
Operating income (GAAP measure)									8,516
Interest expense									2,958
Gain on early extinguishment of debt (12)									(491)
Other income									(99)
Income before income tax provision									$	6,148

Depreciation and amortization	$	1,599	$	1,059	$	1,543	$	396	$	4,597


	Year Ended December 31, 2023
In millions	Health Care Benefits		Health Services (1)		Pharmacy & Consumer Wellness		Corporate/ Other		Consolidated Totals
Revenues from external customers	$	104,800	$	174,018	$	77,748	$	57	$	356,623
Intersegment revenues	81		12,826		39,020		—		51,927
Net investment income (loss)	765		(1)		(5)		394		1,153
Total revenues	105,646		186,843		116,763		451		409,703
Intersegment eliminations (2)									(51,927)
Total consolidated revenues									$	357,776
Less: Net realized capital losses	(402)		—		(5)		(90)
Cost of products sold	—		175,424		91,447		1
Health care costs	85,504		1,607		—		210
Other segment items (3)	14,967		2,500		19,358		1,648
Adjusted operating income (loss)	$	5,577	$	7,312	$	5,963	$	(1,318)	$	17,534

Reconciliation of principal measure of segment performance to consolidated operating income:
Amortization of intangible assets (4)									1,905
Net realized capital losses (5)									497
Acquisition-related transaction and integration costs (6)									487
Restructuring charges (7)									507
Office real estate optimization charges (8)									46
Loss on assets held for sale (10)									349
Operating income (GAAP measure)									13,743
Interest expense									2,658
Other income									(88)
Income before income tax provision									$	11,173

Depreciation and amortization	$	1,572	$	880	$	1,549	$	365	$	4,366


	Year Ended December 31, 2022
In millions	Health Care Benefits		Health Services (1)		Pharmacy & Consumer Wellness		Corporate/ Other		Consolidated Totals
Revenues from external customers	$	90,798	$	157,968	$	72,739	$	124	$	321,629
Intersegment revenues	76		11,608		35,901		—		47,585
Net investment income (loss)	476		—		(44)		406		838
Total revenues	91,350		169,576		108,596		530		370,052
Intersegment eliminations (2)									(47,585)
Total consolidated revenues									$	322,467
Less: Net realized capital losses	(225)		—		(44)		(51)
Cost of products sold	—		160,738		82,063		42
Health care costs	71,473		—		—		249
Other segment items (3)	13,764		2,057		20,046		1,903
Adjusted operating income (loss)	$	6,338	$	6,781	$	6,531	$	(1,613)	$	18,037

Reconciliation of principal measure of segment performance to consolidated operating income:
Amortization of intangible assets (4)									1,785
Net realized capital losses (5)									320


Office real estate optimization charges (8)									117
Opioid litigation charge (9)									5,803
Loss on assets held for sale (10)									2,533
Gain on divestiture of subsidiaries (11)									(475)
Operating income (GAAP measure)									7,954
Interest expense									2,287
Other income									(169)
Income before income tax provision									$	5,836

Depreciation and amortization	$	1,579	$	519	$	1,889	$	237	$	4,224

(1)Total revenues of the Health Services segment include approximately $11.4 billion, $13.7 billion and $12.6 billion of retail co-payments for 2024, 2023 and 2022, respectively. See Note 1 ‘‘Significant Accounting Policies’’ for additional information about retail co-payments.

(2)Intersegment revenue eliminations relate to intersegment revenue generating activities that occur between the Health Care Benefits segment, the Health Services segment, and/or the Pharmacy & Consumer Wellness segment.

(3)Other segment items for each reportable segment includes operating expenses, which primarily consists of selling, general and administrative expenses. Other segment items excludes the impact of amortization of intangible assets and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance.

(4)The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

(5)The Company’s net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of insurance liabilities. Net realized capital gains and losses are reflected in net investment income (loss) within each segment. These capital gains and losses are the result of investment decisions, market conditions and other economic developments that are unrelated to the performance of the Company’s business, and the amount and timing of these capital gains and losses do not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Accordingly, the Company believes excluding net realized capital gains and losses enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends.

(6)In 2024, the acquisition-related integration costs relate to the acquisitions of Signify Health and Oak Street Health. In 2023, the acquisition-related transaction and integration costs relate to the acquisitions of Signify Health and Oak Street Health. The acquisition-related transaction and integration costs are reflected in operating expenses within the Corporate/Other segment.

(7)In 2024, the restructuring charges are primarily comprised of a store impairment charge, corporate workforce optimization costs, including severance and employee-related costs, other asset impairment and related charges associated with the discontinuation of certain non-core assets and a stock-based compensation charge. During the third quarter of 2024, the Company finalized an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs. In connection with this restructuring plan, the Company completed a strategic review of its retail business and determined that it plans to close 271 retail stores in 2025, and, accordingly, it recorded a store impairment charge to write down the associated operating or financing lease right-of-use assets and property and equipment. In addition, during the third quarter of 2024, the Company also conducted a review of its various strategic assets and determined that it would discontinue the use of certain non-core assets, at which time impairment losses were recorded to write down the carrying value of these assets to the Company’s best estimate of their fair value. In 2023, the restructuring charges are primarily comprised of severance and employee-related costs, asset impairment charges and a stock-based compensation charge. The restructuring charges associated with the store impairments are reflected within the Pharmacy & Consumer Wellness segment, other asset impairments and related charges are reflected within the Corporate/Other and Pharmacy & Consumer Wellness segments and corporate workforce optimization costs, including severance and employee-related costs, as well as stock-based compensation charges, are reflected within the Corporate/Other segment.

(8)In 2024, 2023 and 2022, the office real estate optimization charges primarily relate to the abandonment of leased real estate and the related right-of-use assets and property and equipment in connection with the Company’s evaluation of corporate office real estate space in response to its ongoing flexible work arrangement. The office real estate optimization charges are reflected in operating expenses within each segment.

(9)In 2024, the opioid litigation charge relates to a change in the Company’s accrual related to ongoing opioid litigation matters. In 2022, the opioid litigation charges relate to agreements to resolve substantially all opioid claims against the Company by certain states and governmental entities. The opioid litigation charges are reflected within the Corporate/Other segment.

(10)In 2023 and 2022, the loss on assets held for sale relates to the LTC business within the Pharmacy & Consumer Wellness segment. During 2022, the Company determined that its LTC business was no longer a strategic asset and committed to a plan to sell it, at which time the LTC business met the criteria for held-for-sale accounting and its net assets were accounted for as assets held for sale. The carrying value of the LTC business was determined to be greater than its estimated fair value less costs to sell and, accordingly, the Company recorded a loss on assets held for sale during 2022. During the first quarter of 2023, a loss on assets held for sale was recorded to write down the carrying value of the LTC business to the Company’s best estimate of the ultimate selling price which reflected its estimated fair value less costs to sell. As of the third quarter of 2023, the Company determined the LTC business no longer met the criteria for held-for-sale accounting and, accordingly, the net assets associated with the LTC business were reclassified to held and used at their respective fair values. During 2022, the loss on assets held for sale also relates to the Company’s Thailand business, which was included in the Commercial Business reporting unit in the Health Care Benefits segment. The sale of the Thailand business closed in the second quarter of 2022, and the ultimate loss on the sale was not material.

(11)In 2022, the gain on divestiture of subsidiaries represents the pre-tax gain on the sale of bswift, which the Company sold in November 2022, and the pre-tax gain on the sale of PayFlex, which the Company sold in June 2022. The gains on divestitures are reflected as a reduction of operating expenses within the Health Care Benefits segment.

(12)In 2024, the gain on early extinguishment of debt relates to the Company’s repayment of approximately $2.6 billion of its outstanding senior notes in December 2024, pursuant to its tender offer for such senior notes.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of CVS Health Corporation

Opinion on Internal Control Over Financial Reporting

We have audited CVS Health Corporation’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CVS Health Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 12, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.

/s/ Ernst & Young LLP

Boston, Massachusetts

February 12, 2025

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of CVS Health Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CVS Health Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 12, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) 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 a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.


						Valuation of goodwill for the Government reporting unit
Description of the Matter						At December 31, 2024, the Company’s consolidated goodwill was $91.3 billion. As discussed in Note 1 to the consolidated financial statements, goodwill is not amortized, but rather is subject to an annual impairment review, or more frequent reviews, if events and circumstances indicate an impairment may exist. Auditing the Company’s estimate of fair value related to the Government reporting unit was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting unit. In particular, the fair value estimate was sensitive to significant assumptions, such as the discount rate and projected health care costs, that are forward-looking and affected by future economic and market conditions.


How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above. To test the estimated fair value of the Government reporting unit, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions to the reporting unit’s historical results and third-party industry data. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the significant assumptions. We involved valuation specialists to assist in our assessment of the methodology and evaluation of the discount rate used by the Company.
						Valuation of health care costs payable
Description of the Matter						At December 31, 2024, the incurred but not reported liabilities within the Health Care Benefits segment represented a significant portion of the health care costs payable. As discussed in Note 1 to the consolidated financial statements, the Company’s liability for health care costs payable includes estimated payments for (1) services rendered to members but not yet reported and (2) claims that have been reported but not yet paid, each as of the financial statement date (collectively, “IBNR”). The estimated IBNR liability is developed utilizing actuarial principles and assumptions that include historical and projected claim submission and processing patterns, historical and assumed medical cost trends, historical utilization of medical services, claim inventory levels, changes in membership and product mix, seasonality and other relevant factors to record the actuarial best estimate of health care costs payable. There is significant uncertainty inherent in determining management’s actuarial best estimate of health care costs payable. In particular, the estimate is sensitive to the assumed completion factors and the assumed health care cost trend rates. Auditing management’s actuarial best estimate of IBNR reserves for health care costs payable within the Health Care Benefits segment involved a high degree of subjectivity in evaluating management’s assumptions used in the valuation process.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the process for estimating IBNR reserves. This included, among others, controls over the completeness and accuracy of data used in the actuarial projections, the transfer of data between underlying source systems, and the review and approval processes that management has in place for the actuarial principles and assumptions used in estimating the health care costs payable. To test IBNR reserves, our audit procedures included, among others, testing the completeness and accuracy of the underlying claim and membership data used in the calculation of IBNR reserves. We involved actuarial specialists to assist with our audit procedures, which included, among others, evaluating the methodologies applied by the Company in determining the actuarially determined liability, evaluating management’s actuarial principles and assumptions used in their analysis based on historical claim experience, and independently calculating a range of reserve estimates for comparison to management’s actuarial best estimate of the liability for health care costs payable. Additionally, we performed a review of the prior period liabilities for incurred but not paid claims to subsequent claims development.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2007.

Boston, Massachusetts

February 12, 2025

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