Cigna(CI) - 2020 Q3 - Quarterly Report

Financial Performance - Cigna's adjusted income from operations is used as the principal financial measure, reflecting underlying business performance and excluding realized investment gains and losses, amortization of acquired intangible assets, and special items [248]. - Year-to-date U.S. Medical results showed higher earnings due to the deferral of care in April and May, which exceeded the costs associated with COVID-19 testing and treatment [260]. - Total revenues for the three months ended September 30, 2020, were $40,955 million, a 6% increase from $38,556 million in 2019 [268]. - Adjusted revenues rose by 14% to $40,801 million for the three months ended September 30, 2020, compared to $35,833 million in 2019 [266]. - Shareholders' net income for the three months ended September 30, 2020, was $1,388 million, reflecting a 3% increase from $1,351 million in 2019 [268]. - Pharmacy revenues grew by 7% to $27,802 million for the three months ended September 30, 2020, compared to $25,987 million in 2019 [268]. - Medical costs and other benefit expenses increased by 9% to $8,429 million for the three months ended September 30, 2020, compared to $7,734 million in 2019 [268]. - Total benefits and expenses for the three months ended September 30, 2020, were $38,847 million, a 7% increase from $36,433 million in 2019 [268]. - Adjusted income from operations for the three months ended September 30, 2020, decreased to $1,618 million from $1,718 million in 2019, reflecting impacts of COVID-19 [273]. - Cash flows from operating activities for the nine months ended September 30, 2020, were $6,056 million, a decrease from $6,692 million in the same period of 2019 [309]. - Total revenues for the third quarter of 2020 were $29,944 million, an increase of 9% from $27,598 million in the same period of 2019 [352]. - Adjusted revenues for the third quarter of 2020 were $29,827 million, up 20% from $24,880 million in the third quarter of 2019 [352]. COVID-19 Impact - The COVID-19 pandemic led to a significant deferral of care by customers, with medical utilization returning to nearly normal levels by the end of June 2020 [260]. - The Group Disability and Other segment experienced significantly elevated life insurance claims related to the COVID-19 pandemic in the third quarter [260]. - Cigna has enhanced liquidity measures to support operations and meet obligations amid the ongoing pandemic [262]. - The company anticipates potential impacts on future results due to rising unemployment, higher medical costs, and lower investment returns [261]. - The company has implemented COVID-19 related cost share waivers and expanded access to virtual care for customers [256]. - Cigna's operational response to the pandemic included enabling remote work and enhancing safety protocols for employees [258]. - The company continues to assess the financial impacts of COVID-19 on its operations and financial position [263]. - Medical customer base decreased as of September 30, 2020, compared to the same period in 2019, primarily due to economic impacts of COVID-19 [368]. Segment Performance - Cigna's Evernorth segment results reflected a favorable mix of claims, partially offset by lower non-specialty, 30-day retail script volume [260]. - Evernorth segment revenues increased by 20% to $29,827 million for the three months ended September 30, 2020, compared to $24,880 million in 2019 [266]. - The U.S. Medical segment reported adjusted revenues of $9,629 million for the third quarter of 2020, a 5% increase from $9,148 million in the same period of 2019 [361]. - Adjusted revenues for Group Disability and Other increased to $1,314 million for the three months ended September 30, 2020, a 2% increase from $1,284 million in the same period in 2019 [380]. Investment and Financial Position - Net realized investment results from certain equity method investments increased significantly to $37 million for the three months ended September 30, 2020, from $5 million in 2019 [266]. - The debt-to-capitalization ratio was 42.8%, down from 45.2% at December 31, 2019, with a focus on reducing it below 40% [323]. - The company had $4.25 billion of undrawn committed capacity under revolving credit agreements and approximately $5.8 billion in cash and short-term investments as of September 30, 2020 [328]. - Total investment assets increased to $24,673 million as of September 30, 2020, compared to $23,755 million as of December 31, 2019 [388]. - The low interest rate environment pressures income from investments, with U.S. treasury rates near all-time lows and historically low yields for investment-grade assets [402]. Regulatory and Legal Matters - The company is subject to ongoing RADV audits by CMS and OIG, which may impact future operations [294]. - The federal government stopped funding cost-sharing reduction subsidies in 2017, leading to ongoing litigation regarding these payments [296]. - The company filed a lawsuit in May 2020 against the federal government seeking payment of cost-sharing reduction subsidies, currently stayed pending appeals [296]. - The Transparency in Coverage rule requires health plans to disclose price and cost-sharing information, effective January 1, 2023 [292]. - COVID-19 regulatory actions have provided premium relief and mandated coverage for testing and treatment, impacting operational flexibility [292]. - The company continues to monitor regulatory actions related to drug pricing and expects no material impact on its business [292].