Document and Entity Information - USD ($) $ / shares in Units, $ in Billions	12 Months Ended
	Dec. 31, 2018	Jan. 31, 2019	Jun. 30, 2018	Dec. 31, 2017
Document Document And Entity Information [Abstract]
Document Type	10-K
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2018
Document Period End Date	Dec. 31, 2018
Current Fiscal Year End Date	--12-31
Registrant Name	CIGNA Corporation
Central Index Key	0001739940
Common stock, par value per share	$ 0.01			$ 0.25
Trading Symbol	CI
Well Known Seasoned Issuer	Yes
Voluntary Filers	No
Current Reporting Status	Yes
Filer Category	Large Accelerated Filer
Smaller reporting company	false
Emerging growth company	false
Shell company	false
Common Stock outstanding		380,058,967
Public float			$ 41.2
Amendment Flag	false

Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended								12 Months Ended
Consolidated Statements of Income - USD ($) $ in Millions	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenues
Premiums									$ 36,113	$ 32,491	$ 30,824
Net investment income									1,480	1,226	1,147
Total revenues	$ 14,300	$ 11,457	$ 11,480	$ 11,413	$ 10,632	$ 10,372	$ 10,374	$ 10,428	48,650	41,806	39,838
Benefits and Expenses
Medical costs and other benefit expenses									27,528	25,263	24,341
Pharmacy and other service costs									4,793	2,456	2,468
Selling, general and administrative expenses									11,934	10,030	9,790
Amortization of other acquired intangible assets									235	115	151
Total operating expenses									44,490	37,864	36,750
Income from operations									4,160	3,942	3,088
Interest expense and other									(498)	(252)	(278)
Debt extinguishment costs						(321)			0	(321)	0
Net realized investment gains (losses)									(81)	237	169
Income (loss) before income taxes	228	1,033	1,102	1,218	758	824	1,134	890	3,581	3,606	2,979
Total income taxes									935	1,374	1,136
Net Income									2,646	2,232	1,843
Less: net income (loss) attributable to noncontrolling interests									9	(5)	(24)
Shareholders' net income	$ 144	$ 772	$ 806	$ 915	$ 266	$ 560	$ 813	$ 598	$ 2,637	$ 2,237	$ 1,867
Shareholders' net income per share:
Basic	$ 0.56	$ 3.18	$ 3.32	$ 3.78	$ 1.09	$ 2.25	$ 3.2	$ 2.34	$ 10.69	$ 8.92	$ 7.31
Diluted	0.55	3.14	3.29	3.72	1.07	2.21	3.15	2.3	$ 10.54	$ 8.77	$ 7.19
Dividends declared per share	$ 0	$ 0	$ 0	$ 0.04	$ 0	$ 0	$ 0	$ 0.04
Fees and other revenues [Member]
Revenues
Pharmacy revenues, fees and other revenues									$ 5,578	$ 5,110	$ 4,901
Pharmacy revenues [Member]
Revenues
Pharmacy revenues, fees and other revenues									$ 5,479	$ 2,979	$ 2,966

Consolidated Statements of Shareholders' Comprehensive Income - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement Of Comprehensive Income
Shareholders' net income	$ 144	$ 772	$ 806	$ 915	$ 266	$ 560	$ 813	$ 598	$ 2,637	$ 2,237	$ 1,867
Shareholders' other comprehensive income (loss), net of tax:
Net unrealized appreciation (depreciation), securities and derivatives									(365)	(37)	(60)
Net translation (losses) gains on foreign currencies									(152)	304	(95)
Postretirement benefits liability adjustment									127	33	23
Shareholders' other comprehensive income (loss), net of tax									(390)	300	(132)
Shareholders' comprehensive income (loss)									$ 2,247	$ 2,537	$ 1,735

Consolidated Statements of Total Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement Of Comprehensive Income
Shareholders' comprehensive income (loss)	$ 2,247	$ 2,537	$ 1,735
Comprehensive income (loss) attributable to noncontrolling interests:
Net income (loss) attributable to redeemable noncontrolling interests	9	0	(7)
Net income (loss) attributable to other noncontrolling interests	0	(5)	(17)
Other comprehensive income (loss) attributable to redeemable noncontrolling interests	(15)	(3)	(10)
Total comprehensive income (loss) attributable to noncontrolling interests	(6)	(8)	(34)
Total comprehensive income	$ 2,241	$ 2,529	$ 1,701

Consolidated Balance Sheets - USD ($)
$ in Millions

Dec. 31, 2018

Dec. 31, 2017

Assets

Cash and cash equivalents

$ 3,855

$ 2,972

Investments

2,045

2,136

Accounts receivable, net

10,473

3,155

Inventories

2,821

228

Other current assets

1,236

820

Total current assets

20,430

9,311

Long-term investments

26,929

26,483

Reinsurance recoverables

5,507

5,763

Deferred policy acquisition costs

2,821

2,237

Property and equipment

4,562

1,563

Deferred tax assets, net

0

39

Goodwill

44,505

6,164

Other intangible assets

39,003

345

Other assets

1,630

1,431

Separate account assets

7,839

8,423

TOTAL ASSETS

153,226

61,759

Liabilities:

Current insurance and contractholder liabilities

6,801

6,317

Pharmacy and service costs payable

10,702

305

Accounts payable

4,366

184

Accrued expenses and other liabilities

7,071

3,963

Short-term debt

2,955

240

Total current liabilities

31,895

11,009

Non-current insurance and contractholder liabilities

19,974

20,530

Deferred tax liabilities, net

9,453

0

Other non-current liabilities

3,470

2,838

Long-term debt

39,523

5,199

Separate account liabilities

7,839

8,423

TOTAL LIABILITIES

112,154

47,999

Redeemable noncontrolling interests

37

49

Shareholders' Equity

Common stock

^[1]

4

74

Additional paid-in capital

27,751

2,940

Accumulated other comprehensive income (loss)

(1,711)

(1,082)

Retained earnings

15,088

15,800

Less: treasury stock, at cost

(104)

(4,021)

TOTAL SHAREHOLDERS' EQUITY

41,028

13,711

Noncontrolling interests

7

0

Total equity

41,035

13,711

Total liabilities and shareholders' equity

$ 153,226

$ 61,759

Shareholders' Equity Per Share

$ 107.71

$ 56.2

[1]	Par value per share, $0.01 in 2018 and $0.25 in 2017; shares issued, 381 million in 2018 and 296 million in 2017; authorized shares, 600 million in 2018 and 2017.

Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Consolidated Balance Sheets
Common stock, par value per share	$ 0.01	$ 0.25
Common stock shares issued	381,494,000	296,145,000	0
Common stock shares authorized	600,000,000	600,000,000

Consolidated Statements of Changes in Total Equity - USD ($) $ in Millions	Total	Previously Reported [Member]	Restatement Adjustment [Member]	Shareholders' Equity [Member]	Shareholders' Equity [Member] Previously Reported [Member]	Shareholders' Equity [Member] Restatement Adjustment [Member]	Common Stock [Member]	Common Stock [Member] Previously Reported [Member]	Additional Paid In Capital [Member]	Additional Paid In Capital [Member] Previously Reported [Member]	Accumulated Other Comprehensive Income [Member]	Accumulated Other Comprehensive Income [Member] Previously Reported [Member]	Retained Earnings [Member]	Retained Earnings [Member] Previously Reported [Member]	Retained Earnings [Member] Restatement Adjustment [Member]	Treasury Stock [Member]	Treasury Stock [Member] Previously Reported [Member]	Other noncontrolling interests [Member]	Other noncontrolling interests [Member] Previously Reported [Member]
Total Equity, beginning of period at Dec. 31, 2015	$ 12,020	$ 12,044	$ (24)	$ 12,011	$ 12,035	$ (24)	$ 74	$ 74	$ 2,859	$ 2,859	$ (1,250)	$ (1,250)	$ 12,097	$ 12,121	$ (24)	$ (1,769)	$ (1,769)	$ 9	$ 9
Increase (Decrease) In Stockholders Equity [Roll Forward]
Effect of issuing stock for employee benefit plans	91			91					51				(123)			163
Other comprehensive income (loss)	(132)			(132)							(132)							0
Net income (loss)	1,850			1,867									1,867					(17)
Common dividends declared (per share: $0.04)	(10)			(10)									(10)
Repurchase of common stock	(110)			(110)												(110)
Other transactions impacting noncontrolling interest	(6)			(18)					(18)									12
Total Equity, end of period at Dec. 31, 2016	13,703			13,699			74		2,892		(1,382)		13,831			(1,716)		4
Beginning Balance at Dec. 31, 2015	69	$ 69
Redeemable Noncontrolling Interests
Other comprehensive income (loss)	(10)
Net income (loss)	(7)
Other transactions impacting noncontrolling interest	6
Ending Balance at Dec. 31, 2016	58
Increase (Decrease) In Stockholders Equity [Roll Forward]
Effect of issuing stock for employee benefit plans	248			248					51				(258)			455
Other comprehensive income (loss)	300			300							300
Net income (loss)	2,232			2,237									2,237					(5)
Common dividends declared (per share: $0.04)	(10)			(10)									(10)
Repurchase of common stock	(2,760)			(2,760)												(2,760)
Other transactions impacting noncontrolling interest	(2)			(3)					(3)									1
Total Equity, end of period at Dec. 31, 2017	13,711			13,711			74		2,940		(1,082)		15,800			(4,021)		0
Redeemable Noncontrolling Interests
Other comprehensive income (loss)	(3)
Net income (loss)	0
Other transactions impacting noncontrolling interest	(6)
Ending Balance at Dec. 31, 2017	49
Increase (Decrease) In Stockholders Equity [Roll Forward]
Reclassification adjustment related to U.S. tax reform legislation	0			0							(229)		229
Exchange of Old Cigna common stock	0			0			(58)		58
Acquisition of Express Scripts (see Note 3)	25,231			25,224			1		25,223									7
Effect of issuing stock for employee benefit plans	127			127					59				(138)			206
Other comprehensive income (loss)	(390)			(390)							(390)
Net income (loss)	2,637			2,637									2,637					0
Common dividends declared (per share: $0.04)	(10)			(10)									(10)
Repurchase of common stock	(329)			(329)												(329)
Retirement of treasury stock	0			0			(13)		(529)				(3,498)			4,040
Other transactions impacting noncontrolling interest	0			0					0									0
Total Equity, end of period at Dec. 31, 2018	41,035			$ 41,028			$ 4		$ 27,751		$ (1,711)		$ 15,088			$ (104)		$ 7
Redeemable Noncontrolling Interests
Other comprehensive income (loss)	(15)
Net income (loss)	9
Other transactions impacting noncontrolling interest	(6)
Ending Balance at Dec. 31, 2018	$ 37

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash Flows from Operating Activities
Net Income	$ 2,646	$ 2,232	$ 1,843
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	695	566	610
Realized investment (gains) losses	81	(237)	(169)
Deferred income taxes (benefits)	(101)	242	74
Debt extinguishment costs	0	321	0
Net changes in assets and liabilities, net of non-operating effects:
Accounts receivable	705	(233)	663
Inventories	(107)	(72)	30
Deferred policy acquisition costs	(237)	(282)	(213)
Reinsurance recoverables and other assets	(234)	115	246
Insurance liabilities	560	506	683
Pharmacy and service costs payable	(842)	35	(46)
Accounts payable, accrued expenses and other liabilities	332	696	171
Other, net	272	197	134
Net cash provided by (used in) operating activities	3,770	4,086	4,026
Proceeds from investments sold:
Fixed maturities and equity securities	2,655	2,012	1,544
Investment maturities and repayments:
Fixed maturities and equity securities	2,151	2,051	1,755
Commercial mortgage loans	215	335	316
Other sales, maturities and repayments (primarily short-term and other long-term investments)	734	1,702	1,431
Investments purchased or originated:
Fixed maturities and equity securities	(5,637)	(5,628)	(5,191)
Commercial mortgage loans	(312)	(430)	(165)
Other (primarily short-term and other long-term investments)	(1,189)	(1,065)	(1,698)
Property and equipment purchases	(528)	(471)	(461)
Acquisitions, net of cash acquired	(24,455)	(209)	(4)
Other, net	(12)	0	(101)
Net cash provided by (used in) investing activities	(26,378)	(1,703)	(2,574)
Cash Flows from Financing Activities
Deposits and interest credited to contractholder deposit funds	1,040	1,230	1,460
Withdrawals and benefit payments from contractholder deposit funds	(1,151)	(1,363)	(1,362)
Net change in short-term debt	1,487	80	(148)
Payments for debt extinguishment	0	(313)	0
Repayment of long-term debt	(131)	(1,250)	0
Net proceeds on issuance of long-term debt	22,856	1,581	0
Repurchase of common stock	(342)	(2,725)	(139)
Issuance of common stock	68	131	36
Other, net	(312)	(22)	(72)
Net cash provided by (used in) financing activities	23,515	(2,651)	(225)
Effect of foreign currency rate changes on cash and cash equivalents	(24)	55	(10)
Net increase / (decrease) in cash and cash equivalents	883	(213)	1,217
Cash and cash equivalents, January 1,	2,972	3,185	1,968
Cash and cash equivalents, December 31,	3,855	2,972	3,185
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds	1,019	1,036	1,064
Interest paid	$ 267	$ 240	$ 244

Description of Business

12 Months Ended

Dec. 31, 2018

Description Of Business [Abstract]

Description of Business

Note 1 – Description of Business

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

The majority of these products are offered through employers and other groups such as governmental and non-governmental organizations, unions and associations. Cigna also offers commercial health and dental insurance, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the United States and selected international markets. In addition to these ongoing operations, Cigna also has certain run-off operations.

As described more fully in Note 3, on March 8, 2018, the Company entered into a merger agreement with Express Scripts Holding Company (“Express Scripts”). Following entry into the merger agreement and throughout the pendency of the transaction, Cigna and Express Scripts designed integration plans to implement a new management and business reporting structure for the combined company immediately upon closing. On December 20, 2018, Cigna completed the acquisition of Express Scripts. As a result, our segments have changed as described below, effective in the fourth quarter of 2018. Financial data for all prior periods presented was restated to reflect this new segment presentation.

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

The Commercial operating segment serves employers (also referred to as “clients”) and their employees (also referred to as “customers”) and other groups. This segment provides deeply integrated medical and specialty offerings including medical, pharmacy, dental, behavioral health and vision, health advocacy programs and other products and services to insured and self-insured clients.
The Government operating segment offers Medicare Advantage, Medicare Supplement, and Medicare Part D plans to Medicare-eligible beneficiaries as well as Medicaid plans. This operating segment also offers health insurance coverage to individual customers both on and off the public exchanges. This segment includes the acquired Express Scripts’ Medicare Part D business.

Health Services includes pharmacy benefits management (“PBM”), pharmacy home delivery, and certain medical management services. This segment includes Express Scripts’ business from the date of acquisition with the exception of Express Scripts’ Medicare Part D business that is reported in the Government operating segment.

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

The remainder of our business operations are reported in Group Disability and Other, consisting of the following:

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

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

Run-off businesses:

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

Settlement Annuity business in run-off.

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

Certain international run-off businesses

Corporate reflects amounts not allocated to operating segments, including interest expense, net investment income on investments not supporting segment and other operations, interest on uncertain tax positions, certain litigation matters, compensation cost for stock options and related excess tax benefits, expense associated with our frozen pension plans, severance, certain overhead and project costs and intersegment eliminations for products and services sold between segments.

Summary of Signficant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements include the accounts of Cigna Corporation and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company adopted Article 5 of Regulation S-X issued by the Securities and Exchange Commission effective December 31, 2018 in conjunction with the acquisition of Express Scripts. As a result, the Company now presents current assets and liabilities on its balance sheet. The Company reclassified realized investment gains (losses) from revenue and now reports them below income from operations with interest expense in our Consolidated Statements of Income, in conformity with Article 5. Prior years’ information was reclassified to conform to this new presentation.

Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Variable interest entities. See Note 11 for a discussion of variable interest entities.

Recent Accounting Guidance

Accounting Standard and Adoption Date	Requirements and Effects of Adopting New Guidance
GUIDANCE ADOPTED JANUARY 1, 2018
Revenue from Contracts with Customers (Accounting Standards Update (“ASU”) 2014-09 and related amendments)	Requires:
	•	Revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services
	•	Additional revenue-related disclosures
	Effects of adoption:
	•	Applies to the Company’s service and pharmacy contracts with customers
	•	Adopted through full retrospective restatement
	•	Cumulative-effect adjustment of $24 million after-tax was recorded, reducing the December 31, 2015 balance of retained earnings. This adjustment established a contract liability for service fee revenue billed that must be deferred and allocated to services performed after a customer contract terminates. Subsequent changes in the contract liability and the related impact to net income and per share amounts since adoption were immaterial.
	•	Immaterial reclassifications were made to prior periods in the Consolidated Statements of Income to conform to the current presentation. The ASU and related interpretive guidance provide clarification on topics including whether all or a part of a contract is within its scope, and the definition of a customer. Companies are required to identify and evaluate distinct performance obligations within their contracts. These clarifications resulted in reclassifications within the Integrated Medical segment affecting premiums, fees and other revenues, benefit expenses, and selling, general and administrative expenses and had no impact on revenue recognition patterns or net income.
	Expedients and exemptions elected:
	•	Incremental costs of obtaining service and pharmacy contracts for short-term arrangements are expensed as incurred.
	•	The Company does not disclose information about the aggregate amount of transaction price allocated to remaining performance obligations as its contracts are either short-term, or the remaining transaction price consists of variable consideration that relates specifically to wholly unsatisfied future periods of service. See the discussion of the Company’s accounting policies for fees and pharmacy revenues beginning on page 91.

Accounting Standard and Adoption date	Requirements and Effects of Adopting New Guidance
GUIDANCE ADOPTED JANUARY 1, 2018
Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01)	Requires:
	•	Entities to measure equity investments at fair value in net income if they are neither consolidated nor accounted for under the equity method
	Effects of adoption:
	•	Certain limited partnership interests previously carried at cost of approximately $200 million were increased to fair value of approximately $275 million on January 1, 2018. Subsequent changes in fair value are reported in net investment income.
	•	Changes in fair value for equity securities having a readily determinable fair value that were previously reported in accumulated other comprehensive income (“AOCI”) are now reported in net realized investment gains (losses).
	•	Cumulative-effect adjustment of $62 million after-tax was recorded, increasing the opening balance of retained earnings in 2018.
	•	See Notes 9 and 10 for updated disclosures about equity securities.
Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12) Early adopted as of January 1, 2018	Guidance:
	•	Relaxes eligibility requirements for financial and nonfinancial hedging strategies for hedge accounting and changes how companies assess effectiveness
	•	Amends presentation and disclosure requirements to improve transparency about the uses and results of hedging programs
	Effects of adoption:
	•	An immaterial amount of retained earnings was reclassified to AOCI, decreasing the opening balance in 2018, for a portion of the hedging instruments that was previously excluded from the assessment of hedge effectiveness for fair value hedges.
	•	See Note 9 for the Company’s disclosures about derivatives.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02)Early adopted as of January 1, 2018	Guidance:
	•	Allows companies to reclassify the tax effects stranded in AOCI to retained earnings as a result of H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (referred to throughout this Form 10-K as “U.S. tax reform” or “U.S. tax reform legislation”)
	•	Requires additional disclosures of the Company’s accounting policy for releasing income tax effects from AOCI
	•	Allows companies to apply the guidance retrospectively or in the period of adoption
	Effects of adoption: AOCI of $229 million was reclassified to retained earnings, increasing the opening balance in 2018. See Note 12 for additional information including accounting policy disclosures.

In addition to these standards, the Company adopted the following guidance in first quarter 2018 with no material impact to our financial statements: Intra-Entity Transfers of Assets Other than Inventory (ASU 2016-16), Clarifying the Definition of a Business (ASU 2017-01), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), Statement of Cash Flows: Restricted Cash (ASU 2016-18), Gains and Losses from the Derecognition of Nonfinancial Assets (ASU 2017-05), and Stock Compensation Scope of Modification Accounting (ASU 2017-09).

Accounting Guidance Not Yet Adopted

Accounting Standard and Effective Date		Requirements and Expected Effects of New Guidance Not Yet Adopted
Leases (ASU 2016-02 and related amendments) Required as of January 1, 2019	Requires:
	•	Balance sheet recognition of assets and liabilities arising from leases, including leases embedded in other contracts
	•	Additional disclosures of the amount, timing and uncertainty of cash flows from leases
	•	Modified retrospective approach for leases in effect as of and after the date of adoption with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company will adopt this ASU in the first quarter of 2019 on a modified retrospective basis and will not restate comparative periods. While we are still finalizing our adoption procedures, we estimate the primary impact to our Consolidated Balance Sheet will be an increase to assets and liabilities of approximately $700 million for the right-of-use asset and corresponding lease liability related to existing operating leases. We do not expect the impact to retained earnings to be material.
	•	The Company elected the optional practical expedient to retain the current classification of leases, and therefore, we do not expect a material impact to the Consolidated Statements of Income or Cash Flows.
	•	The Company has implemented a new lease system and developed requisite changes to internal controls over financial reporting.
	•	The Company is continuing to work to develop required disclosures.
	•	The Company adopted this new guidance as of the effective date and will not present comparative periods in the financial statements, as recently allowed.
Measurement of Credit Losses on Financial Instruments (ASU 2016-13)Required as of January 1, 2020, with early adoption permitted as of January 1, 2019	Requires:
	•	A new approach using expected credit losses to estimate and recognize credit losses for certain financial instruments such as mortgage loans, reinsurance recoverables and other receivables when such instruments are first originated or acquired.
	•	Changes in the criteria for impairment of available-for-sale debt securities
	•	Adoption using a modified retrospective approach with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company is continuing to evaluate this new standard and its effects on our financial statements and disclosures. We expect to adopt the standard as of January 1, 2020.
	•	An additional allowance for future expected credit losses for certain financial instruments may be required at adoption.
Simplifying the Test for Goodwill Impairment (ASU 2017-04)Required as of January 1, 2020, with early adoption permitted as of January 1, 2017	Guidance:
	•	Simplifies the accounting for goodwill impairment by eliminating the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment
	•	Redefines the amount of goodwill impairment to equal the amount by which a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill of the reporting unit
	•	Requires prospective adoption
	Expected effects:
	•	The Company is evaluating this new standard and its expected timing of adoption.

Accounting Standard and Effective Date		Requirements and Expected Effects of New Guidance Not Yet Adopted
Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12)Required as of January 1, 2021	Requires (for insurance entities that issue long-duration contracts):
	•	Cash flow assumptions used to measure the liability for future policy benefits for traditional and limited-pay contract to be reconsidered at least annually with any changes reflected in net income.
	•	Discount rate assumptions to be reviewed quarterly (based on an upper-medium grade (low credit risk) fixed-income instrument yield that maximizes the use of observable market inputs) with any changes reflected in other comprehensive income.
	•	Deferred policy acquisition costs to be amortized on a constant-level basis over the expected term of the related contract.
	•	Fair value measurement of all market risk benefits.
	•	Additional disclosures, including liability rollforwards and information about significant inputs, judgments, assumptions and methods used in measurement.
	•	Transition methods at adoption vary:
		-	Changes to the liability for future policy benefits will use a modified retrospective approach (applied to all contracts on the basis of their carrying amounts as of the beginning of the earliest period presented), with an option to elect a full retrospective transition under certain criteria.
		-	Deferred policy acquisition costs are to be transitioned consistent with the method applied to the liability for future policyholder benefits.
		-	Market risk benefits are required to transition using retrospective application.
	Expected effects:
	•	The Company is evaluating the impact of this newly-issued guidance, but it is expected to have a significant impact on our processes, controls, systems and financial results. The new guidance will apply to insurance products predominantly sold in the International Markets segment and Group Disability and Other.

Significant Accounting Policies

The Company’s accounting policies are described either in this Note or in the applicable Notes to the Consolidated Financial Statements as indicated in the table below.

Note Number	Footnote and policy	Page
4	Earnings per share	##item8fnepspage
7	Insurance and contractholder liabilities	##item8fninsliabpage
	· Contractholder deposit funds	##item8fninsliabpage
	· Future policy benefits	##item8fninsliabpage
	· Liabilities for unpaid claims and claim expenses - Integrated Medical	##item8fnhcmcppage[2][2]
	· Liabilities for unpaid claims and claim expenses - International Markets and Group Disability and Other	##item8ucpolicy
8	Reinsurance	##item8fnrpage
	· GMDB	##FN9GMDB
	· GMIB	##FN9GMIB
9	Investments, derivatives, investment income and gains and losses	##item8fnipage
	· Fixed maturities	##FN11fixedmaturies
	· Equity securities	##FN11equities
	· Commercial mortgage loans	##FN11CommercialMortgageLoans
	· Other long-term investments	##FN11OLTI
	· Short-term investments and cash equivalents	##FN11ShortTermInvestments
	· Derivative financial instruments	##FN11Derivatives
	· Net investment income	##FN11NII
	· Realized investment gains and losses	##FN11RIGS
10	Fair value measurements	##item8fnfvpage
	· Fixed maturities, equity securities, short-term investments and derivatives	##FN10FVDiscussion
	· Separate accounts	##FN10SeparateAccounts
	· Commercial mortgage loans	##FN10AssetsNotCarriedatFVDiscussion
	· Long-term debt	##FN10AssetsNotCarriedatFVDiscussion
11	Variable interest entities	##item8fnviepage
13	Pension and other postretirement benefit plans	##item8fnpaopbpage
14	Employee incentive plans	##item8fneippage
15	Goodwill, other intangibles and property and equipment	##item8gwpage
18	Income taxes	##item8fnitpage
19	Contingencies and other matters	##item8fncpage

A. Cash and Cash Equivalents

Cash and cash equivalents are carried at cost that approximates fair value. Cash equivalents consist of short-term investments with maturities of three months or less from the time of purchase. The Company reclassifies cash overdraft positions to liabilities when the legal right of offset does not exist.

B. Accounts Receivable, Net

The following amounts are included within accounts receivable, net:

(In millions)	2018		2017
Insurance customer receivables	$	1,888	$	1,818
Noninsurance customer receivables		4,988		441
Pharmaceutical manufacturers receivable⁽¹⁾		3,321		645
Other receivables		276		251
Total accounts receivable, net	$	10,473	$	3,155

⁽¹⁾ Includes $406 million at December 31, 2018 and $336 million at December 31, 2017 of receivables under noninsurance customer contracts.

These accounts receivable balances primarily include amounts due from clients, third-party payors, customers and pharmaceutical manufacturers. Receivables totaling $1.2 billion related to the acquired Express Scripts business are unbilled as of December 31, 2018 and are typically billed to PBM clients within 30 days based on contractual billing schedules. Unbilled receivables for medical benefit management services represent amounts due from clients at contracted rates, and are billed when settlement provisions for capitated risk contracts are met, at least annually.

The receivables balances above are reported net of allowances for doubtful accounts of $217 million as of December 31, 2018 and $210 million as of December 31, 2017. The allowances are based on the current status of each customer’s receivable balance as well as current economic and market conditions and a variety of other factors including the length of time the receivables are past due, the financial health of customers and our past experience. Receivables are written off against allowances only when such amounts are determined to be not recoverable and all collection attempts have failed. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted.

Express Scripts’ receivables were recorded at their estimated fair values at the acquisition date. These fair values considered estimated discounts and claims adjustments issued to customers in the form of client credits, and amounts from third-party payors and pharmaceutical manufacturers that are not considered realizable based on contract terms and historical payment experience.

C. Inventories

Inventories consist of prescription drugs and medical supplies and are stated at the lower of first-in-first-out cost or net realizable value.

D. Reinsurance Recoverables

Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the Company’s insurance businesses. Most reinsurance recoverables are classified as non-current assets. The current portion of reinsurance recoverables is reported in other current assets and consists primarily of recoverables on paid claims expected to be settled within one year. Reinsurance recoverables are presented net of allowances for uncollectible reinsurance that were immaterial as of December 31, 2018 and 2017.

E. Deferred Policy Acquisition Costs

Costs eligible for deferral include incremental, direct costs of acquiring new or renewal insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs include commissions, sales compensation and benefits, policy issuance and underwriting costs and premium taxes. The Company records acquisition costs differently depending on the product line. Acquisition costs for:

Supplemental health, life and accident insurance products (primarily individual products) that comprise the majority of the Company’s deferred policy acquisition costs and group health and accident insurance products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.
Universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.
Other products are expensed as incurred.

Deferred policy acquisition costs also include the value of business acquired (“VOBA”) for certain acquisitions with material long-duration insurance contracts. The Company recorded amortization of deferred policy acquisition costs of $406 million in 2018, $322 million in 2017 and $292 million in 2016 primarily in selling, general and administrative expenses.

Each year, deferred policy acquisition costs are tested for recoverability. For universal life and other individual products, management estimates the present value of future revenues less expected payments. For group health and accident insurance products, management estimates the sum of unearned premiums and anticipated net investment income less future expected claims and related costs. If management’s estimates of these sums are less than the deferred costs, the Company reduces deferred policy acquisition costs and records an additional expense.

F. Other Assets (Current and Non-Current)

Other current assets consist primarily of prepaid expenses, accrued investment income and the current portion of reinsurance recoverables. Other non-current assets consist primarily of GMIB assets and various other insurance-related assets. See Note 8 for the Company’s accounting policy for GMIB assets. Additionally, other non-current assets include the carrying value of our equity-method investments in joint ventures in China, India, the U.S. and other foreign jurisdictions.

G. Redeemable Noncontrolling Interests

Products and services are offered in Turkey and India through joint venture entities. The Company is the principal equity holder and primary beneficiary of the Turkey joint venture and accordingly, this entity is consolidated. In 2017, Cigna modified the agreement governing its joint venture in India due to changes in the local regulatory environment that require control by a local partner. As a result of the changes in the joint venture agreement, the Company determined that it is no longer the primary beneficiary of the joint venture and, effective with the third quarter of 2017, no longer consolidates its results.

Redeemable noncontrolling interests on our Consolidated Balance Sheets represent the Turkey joint venture partner’s preferred and common stock interests in the entity as of December 31, 2018 and 2017. Our joint venture partner may choose to require the Company to purchase their redeemable noncontrolling interests. We also have the right to require our joint venture partner to sell their redeemable noncontrolling interests to us. The redeemable noncontrolling interests were recorded at fair value as of the dates of purchase. When the estimated redemption value for a redeemable noncontrolling interest exceeds its carrying value, an adjustment to increase the redeemable noncontrolling interest is recorded with an offsetting reduction to additional paid-in capital. When an adjustment is made to the carrying value of the redeemable noncontrolling interest, the calculation of shareholders’ net income per share will be adjusted if the redemption value exceeds the greater of the carrying value or fair value.

H. Accrued Expenses and Other Current and Non-Current Liabilities

Accrued expenses (current) includes financial and performance guarantee liabilities under pharmacy contracts (see section L), management compensation, and various insurance-related liabilities, including experience-rated refunds, reinsurance contracts and the risk adjustment and minimum medical loss ratio rebate accruals under The Patient Protection and Affordable Care Act. Other non-current liabilities include obligations for pension, other postretirement and postemployment benefits (see Note 13), GMIB contract liabilities (see Note 8) and self-insured exposures not expected to be settled within one year. Legal costs to defend the Company’s litigation and arbitration matters are expensed when incurred in cases where the Company cannot reasonably estimate the ultimate cost to defend. If the Company can reasonably estimate the cost to defend, a liability for these costs is accrued when the claim is reported.

I. Translation of Foreign Currencies

The Company generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies that are generally their functional currencies. The Company uses exchange rates as of the balance sheet date to translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in accumulated other comprehensive income (loss). The Company uses average monthly exchange rates during the year to translate revenues and expenses into U.S. dollars.

J. Premiums and Related Expenses

Premiums for group life, accident and health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits and expenses are recognized when incurred and, for our Integrated Medical insured business, are presented net of pharmaceutical manufacturer rebates. For experience-rated contracts, premium revenue includes an adjustment for experience-rated refunds based on contract terms and calculated using the customer’s experience (including estimates of incurred but not reported claims).

Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to customers under the commercial minimum medical loss ratio provisions of the ACA. These rebates are settled in the year following the policy year.

Premiums received for the Company’s Medicare Advantage plans and Medicare Part D products from the Centers for Medicare and Medicaid Services (“CMS”) and customers are recognized as revenue ratably over the contract period. CMS provides risk-adjusted premium payments for Medicare Advantage Plans and Medicare Part D products based on the demographics and wellness of customers. The Company recognizes periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured. Additionally, Medicare Part D premiums include payments from CMS for risk sharing adjustments. The risk sharing adjustments are estimated quarterly based on claim experience by comparing actual incurred drug benefit costs to estimated costs submitted in original contracts. These adjustments may result in more or less revenue from CMS. Final revenue adjustments are determined and settled with CMS in the year following the contract year. Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to CMS under the Medicare Advantage and Medicare Part D minimum medical loss ratio provisions of the ACA.

The ACA prescribed three programs to mitigate the risk for participating health insurance companies selling coverage on the public exchanges: risk adjustment, reinsurance and risk corridor. The reinsurance and risk corridor programs expired at the end of 2016, while the permanent risk adjustment program continues.

The risk adjustment program reallocates funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in non-grandfathered plans in the individual and small group markets, both on and off the exchanges. We estimate our receivable or payable based on the risk of our members compared to the risk of other members in the same state and market, considering data obtained from industry studies and the United States Department of Health and Human Services (“HHS”). Receivables or payables are recorded as adjustments to premium revenue based on our year-to-date experience when the amounts are reasonably estimable and collection is reasonably assured. Final revenue adjustments are determined by HHS in the year following the policy year.

Premiums for individual life, accident and supplemental health insurance and annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums.

Revenue for universal life products is recognized as follows:

Investment income on assets supporting universal life products is recognized in net investment income as earned.
Charges for mortality, administration and policy surrender are recognized in premiums as earned. Administrative fees are considered earned when services are provided.

Benefits and expenses for universal life products consist of benefit claims in excess of policyholder account balances and income earned by policyholders. Expenses are recognized when claims are incurred, and income is credited to policyholders in accordance with contract provisions.

The unrecognized portion of premiums received is recorded as unearned premiums included in insurance and contractholder liabilities (see Note 7 for further information).

K. Fees and Related Expenses

The majority of the Company’s service fees are derived from administrative services only (“ASO”) arrangements that allow corporate clients to self-fund claims and assume the risk of medical or other benefit costs. Most of the Company’s ASO arrangements are for medical and specialty services, including pharmacy benefits. Generally, the Company’s ASO arrangements are short-term. Contract modifications typically occur on renewal and are prospective in nature.

In return for fees from these clients, the Company provides or makes available various services supporting benefit management and claims administration. In addition, services offered through our Integrated Medical segment include access to the Company’s participating provider networks, disease management, utilization management, and cost containment services.

In general, the Company considers these services to be a combined performance obligation to provide cost effective administration of plan benefits over the contract period. Fees are billed, due and recognized monthly at contracted rates based on current membership or utilization. This recognition pattern aligns with the benefits from services provided to clients. These revenues are reported in fees and other revenues in the Consolidated Statements of Income.

For most ASO arrangements, the Company is required to perform services for a limited period after a client cancels. If these services will not be separately billed to the client as they are performed, the Company estimates and defers a portion of compensation attributable to this service obligation received in advance. Deferred revenue is recorded as a contract liability and recognized when the related services are performed. The balance was immaterial as of December 31, 2018 and 2017.

The Company may also provide performance guarantees that provide potential refunds to clients if certain service standards, clinical outcomes or financial metrics are not met. If these standards, outcomes and metrics are not met, the Company may be financially at risk up to a stated percentage of the contracted fee or a stated dollar amount. The Company defers revenue by recording a liability for estimated payouts associated with these guarantees within accrued expenses and other liabilities (current). The amount of revenue deferred is estimated for each type of guarantee, using either a most likely amount or expected value method depending upon the nature of the guarantee and the information available to estimate refunds. Estimates are refined each reporting period as additional information on the Company’s performance becomes available, and upon final reconciliation and settlement at the end of the guarantee period. Amounts accrued and paid for performance guarantees during the reporting periods were not material.

Rebates from pharmaceutical manufacturers resulting from ASO client utilization at retail pharmacies, net of amounts payable to ASO clients, are compensation for pharmacy services and recorded in fees and other revenues. Rebates generally represent a per-script amount from the manufacturer and are determined based on scripts filled during the reporting period.

Expenses associated with administrative programs and services are recognized in selling, general and administrative expenses as incurred.

The Company also earns fees by providing integrated medical benefit management solutions that drive cost reductions and improve quality outcomes. These solutions were part of the business acquired from Express Scripts. Clients are primarily sponsors of health benefit plans and fees may be stated as a per-member-per-month fee or as a per-claim fee. The Company considers the services to be a single performance obligation to stand ready to provide utilization management services over the contract period (generally three years). In certain arrangements, the Company assumes the financial obligation for third-party provider costs for medical services provided to the health plan’s members. Fees are recorded gross in revenues because the Company is acting as a principal in arranging for and controlling the services provided by third-party network providers. Contractual fees vary based on enrollment and provider costs and are estimated, billed, due and recognized monthly. Direct costs associated with these programs are included in pharmacy and service costs.

Certain medical benefit management contracts require the Company to share the results of medical cost experience that differs from specified targets. This variable consideration is estimated at contract inception and adjusted through the contract period. The estimated profits and costs are recognized net in revenues.

L. Pharmacy Revenues and Costs

Pharmacy Revenues. Pharmacy revenues include revenue from the acquired Express Scripts business and the Company’s legacy mail order pharmacy business. Pharmacy revenues are recognized when control of the promised goods or services is transferred to clients, in an amount that reflects the consideration the Company expects to receive for those goods or services.

The Express Scripts business provides or makes available various services supporting benefit management and claims administration and is generally obligated to provide prescription drugs to clients’ members through multiple distribution methods including retail networks, home delivery and specialty pharmacies. These goods and services are integrated into a single performance obligation to process claims, dispense prescription drugs, and provide other services over the contract period (generally three years). The Company has elected the practical expedient to account for shipping and handling as a fulfillment activity. This performance obligation is satisfied as the business stands ready to fulfill its obligation.

Fees are billed, due and recognized at contract rates either on a periodic basis or as services are provided (such as, based on volume of claims processed). This recognition pattern aligns with the benefits from services provided.

Revenues for dispensing prescription drugs through retail pharmacies consist of the prescription price (ingredient cost and dispensing fee) contracted with clients, including the member co-payment, and any associated fees for services because we act as principal in these arrangements. When a prescription is presented to a retail network pharmacy, we are solely responsible for member eligibility, drug utilization review, drug-to-drug interaction review, any required clinical intervention, plan provision information, payment to the pharmacy and client billing. These revenues are recognized based on the full prescription price when the pharmacy claim is processed and approved for payment. We also provide benefit design and formulary consultation services to clients, and negotiate separate contractual relationships with clients and network pharmacies. These factors indicate that we have control over these transactions until the prescription is dispensed.

Home delivery and specialty pharmacy revenues are due and recognized as each prescription is shipped, net of reserves for discounts and contractual allowances estimated based on historical experience. Any differences between estimates and actual collections are reflected in operations when payments are received. Historically, adjustments to original estimates and returns have not been material.

We may also provide certain financial and performance guarantees, including a minimum level of discounts a client may receive, generic utilization rates and various service levels. Clients may be entitled to receive performance penalties if we fail to meet guarantees. Actual performance is compared to the guarantee for each measure throughout the period and the Company defers revenue for any estimated payouts within accrued expenses and other liabilities (current). These estimates are adjusted at the end of the guarantee period. Historically, adjustments to original estimates have not been material. The balance was $895 million as of December 31, 2018 and immaterial as of December 31, 2017.

The acquired Express Scripts business and Cigna’s legacy home delivery business administer a program through which we receive rebates and administrative fees from pharmaceutical manufacturers. If these rebates and administrative fees are provided in conjunction with claims processing and home delivery services provided to clients, the amount payable to clients is recorded as a reduction of pharmacy revenues. These amounts are based on expected sharing percentages in contractual arrangements. These estimated payables are adjusted when amounts are collected from pharmaceutical manufacturers. Historically, these adjustments have not been material. If pharmacy rebates and administrative fees are provided in a contract that does not include claims processing, the performance obligation is to arrange for the customer to receive these rebates. In these cases, rebates and administrative fees are recorded as pharmacy revenue, net of contractual amounts payable to the client.

Other pharmacy service revenues are earned by distributing specialty pharmaceuticals and medical supplies to providers, clinics and hospitals and services to specialty pharmacy manufacturers. These revenues are recognized as prescriptions and supplies are shipped and services provided.

Pharmacy costs. Pharmacy costs include the cost of prescriptions sold and for the acquired Express Scripts business, network pharmacy claim costs and co-payments. Also included are direct costs of dispensing prescriptions including supplies, shipping and handling. Home delivery costs are recognized when the drug is shipped and retail network costs are recognized when the drug is dispensed. Pharmacy rebates and administrative fees received for providing claims processing and home delivery services are recorded as a reduction of pharmacy costs. Rebates are recognized as prescriptions are shipped or dispensed. For periods following completion of the merger with Express Scripts, the Company records a pharmacy and service costs payable for certain retail network claims based on our performance throughout the period against the contractual pricing guarantee with each pharmacy network.

Mergers and Acquisitions

12 Months Ended

Dec. 31, 2018

Acquisitions and Dispositions [Abstract]

Acquisitions and Dispositions

Note 3 – Mergers, Acquisitions and Dispositions

Acquisition of Express Scripts

On December 20, 2018, Cigna acquired Express Scripts through a series of mergers (collectively, the “Merger”). Cigna Holding Company (formerly named Cigna Corporation and referred to as “Old Cigna”) and Express Scripts each merged with and into a wholly-owned subsidiary of Cigna. As a result of these transactions, Cigna became the parent of the combined company.

Old Cigna shareholders received one share of Cigna common stock in exchange for each share of Old Cigna common stock held immediately prior to the Merger. Express Scripts shareholders received (1) 0.2434 of a share of Cigna common stock and (2) cash of $48.75, without interest, subject to applicable withholding taxes (the “Merger Consideration”), in exchange for each share of Express Scripts common stock held immediately prior to the Merger. Cash consideration was funded primarily through a combination of cash available and debt financing discussed further in Note 5. After completion of the Merger, shares of Cigna common stock were listed for trading on the New York Stock Exchange.

The acquired Express Scripts business accelerates Cigna’s Go Deeper, Go Local, Go Beyond strategy by greatly increasing the Company’s ability to put medicine within reach of customers and also helping to make it more affordable. We can improve patient outcomes and help control the cost of the drug benefit by: 1) identifying products and offering solutions that improve patient outcomes and assist in controlling costs; 2) evaluating drugs for efficacy, value and price to select a cost-effective formulary; 3) offering cost-effective home delivery pharmacy and specialty services that produce cost savings for plan sponsors and better care for members; 4) leveraging purchasing volume to provide discounts to health benefit providers; and 5) promoting generic and lower-cost brands.

Merger consideration: The estimated merger consideration of $52.8 billion was calculated as follows:


(Dollars and shares in millions, except per share amounts)
Cash consideration
Express Scripts common stock outstanding		564.3
Cash consideration per share	$	48.75
Cash consideration paid to Express Scripts common stockholders	$	27,510
Cash paid in lieu of fractional shares	$	4
Cash consideration paid to Express Scripts performance share holders	$	65
Total cash consideration	$	27,579
Stock consideration
Express Scripts common stock outstanding		564.3
Per share exchange ratio		0.2434
Shares of Cigna issued to Express Scripts common stockholders		137.3
Shares of Cigna issued to Express Scripts performance share holders and other equity holders		0.3
Shares of Cigna issued to Express Scripts shareholders		137.6
Closing price of Cigna common stock on December 20, 2018	$	179.80
Total stock consideration	$	24,745
Noncontrolling interest	$	7
Fair value of other share-based compensation awards	$	479
Total merger consideration	$	52,810

Fair value of share-based compensation award. Express Scripts employees’ awards of options and restricted stock units of Express Scripts stock were rolled over to Cigna stock options and restricted stock units on the date of the acquisition. Each holder of an Express Scripts stock option or restricted stock unit received 0.4802 of a Cigna stock option or restricted stock award. The Cigna stock option exercise price was determined by using this same conversion ratio. Vesting periods and the remaining life of the options remained consistent with the original Express Scripts awards.

The Company valued the restricted stock units at Cigna’s stock price and stock options using a Black-Scholes pricing model as of the acquisition date. The assumptions used were generally consistent with those disclosed in Note 14, except the expected life of these options averaged 4.3 years and the exercise price did not equal the market value at the date of grant.

The fair value of these options and restricted stock unit awards was included in the purchase price to the extent that services had been provided prior to the acquisition based on the grant date of the original Express Scripts award and vesting period. The remaining fair value not included in the purchase price will be recorded as compensation expense in future periods over the remaining vesting periods. Most of the expense is expected to be recognized in 2019 and 2020.

Purchase price allocation: In accordance with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on management’s preliminary estimates of their fair values and may change as additional information becomes available over the next several months. Most of the goodwill ($33.7 billion) is assigned to the Health Services segment, with the remainder to the Integrated Medical segment and is not deductible for federal income tax purposes. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the closing date.


(In millions)
Cash and cash equivalents	$	3,517
Receivables		7,802
Inventory		2,483
Other current assets		600
Property and equipment		2,973
Goodwill		38,361
Other identifiable intangible assets		38,725
Other assets acquired, non-current		314
Total assets acquired		94,775
Other current liabilities		18,616
Long-term debt, including current portion		12,816
Deferred income tax liabilities		9,511
Other liabilities, non-current assumed		1,022
Total liabilities acquired		41,965
Total	$	52,810

A portion of the purchase price has been allocated to intangible assets that are presented and discussed below.

		Estimated	Estimated Useful	Amortization
(In millions)		Fair Value	Life in Years	Method
Customer relationships	$	30,210	14-29	Cash flow trended
Internal-use software⁽¹⁾		2,443	3-7	Straight Line
Trade name - Express Scripts		8,400	N/A	Indefinite
Trade name - Other		115	10	Straight Line
Total	$	41,168

(1) Reported in property and equipment.

The fair value of the customer relationships and the amortization period and method were determined using an income approach that relies heavily on projected future net cash flows including key assumptions for customer attrition, margins, and discount rates. The estimated useful life reflects the time period and pattern that Cigna expects to receive the benefits of the related cash flows.

The results of Express Scripts have been included in the Company’s Consolidated Financial Statements from the date of the acquisition. Revenues of Express Scripts included in the Company’s results for 2018 approximated $2.6 billion and Express Scripts’ results of operations were immaterial to Cigna's net income.

Unaudited pro forma information. The following table presents selected unaudited pro forma information for the Company assuming the acquisition of Express Scripts had occurred on January 1, 2017. The primary adjustments reflected in the pro forma results relate to the interest expense on the debt issued to fund the Merger, the amortization of the acquired intangible assets and the presentation of transaction related costs. Transaction related costs incurred by the Company and Express Scripts in 2018 have been presented as if they had been incurred on January 1, 2017. The pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods.

	Unaudited
	Year Ended December 31,
(In millions, except per share amounts)		2018		2017
Total revenues	$	149,544	$	143,288
Shareholders’ net income	$	5,632	$	4,435

Pro forma shareholders’ net income for the year ended December 31, 2017 includes $1.2 billion in transaction-related costs incurred in connection with the acquisition.

Acquisition of OnePath Life NZ Limited (“OnePath Life”)

On November 30, 2018, the Company acquired OnePath Life for NZ$700 million (approximately $480 million at closing) using internal cash resources. OnePath Life is one of the largest life insurance companies in New Zealand. This acquisition will support diversifying distribution capabilities and product offerings in the New Zealand market. It will also enable better service delivery to clients and customers. The purchase price has been allocated to the tangible and intangible net assets acquired based on management’s preliminary estimates of their fair value and may change as additional information becomes available over the next several months. Goodwill has been assigned to the International Markets segment as of December 31, 2018 and is not tax deductible.

The results of this business have been included in the Company’s Consolidated Financial Statements from the date of acquisition and were not material. In addition, the pro forma effects on total revenues and net income assuming the acquisition had occurred January 1, 2017 were not material to the Company for the years ended December 31, 2018 and 2017.

Transaction-related Costs

The Company has incurred costs detailed in the table below in the acquisition of Express Scripts, the terminated merger with Anthem, Inc. (“Anthem”) and other transactions. These costs consisted primarily of fees for legal, advisory and other professional services, amortization of the Bridge Facility fees in 2018 and interest expense on debt issued to fund the Express Scripts merger through the closing date, net of investment income earned on the debt proceeds. A portion of the costs, primarily legal and advisory fees, related to the completed Express Scripts acquisition are not deductible for federal income tax purposes.

	2018				2017				2016
(In millions)	Before-tax		After-tax		Before-tax		After-tax		Before-tax		After-tax
Interest expense on newly issued debt	$	227	$	179	$	-	$	-	$	-	$	-
Net investment income on debt proceeds		(123)		(97)		-		-		-		-
Charitable contributions		200		158		-		-		-		-
Legal and advisory fees		204		185		36		23		96		95
Bridge facility fees		140		111		-		-		-		-
All other transaction-related costs		204		133		90		69		70		52
Tax (benefit) - previously non-deductible costs		-		-		-		(59)		-		-
Transaction-related costs, net	$	852	$	669	$	126	$	33	$	166	$	147

Earnings Per Share

12 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share

Note 4 – Earnings Per Share (“EPS”)

Accounting policy. The Company computes basic earnings per share using the weighted-average number of unrestricted common and deferred shares outstanding. Diluted earnings per share also includes the dilutive effect of outstanding employee stock options and restricted stock using the treasury stock method and the effect of strategic performance shares.

Basic and diluted earnings per share were computed as follows:

		2018						2017						2016
(Shares in thousands, dollars in millions, except per share amounts)			Effect of						Effect of						Effect of
	Basic		Dilution		Diluted		Basic		Dilution		Diluted		Basic		Dilution		Diluted
Shareholders’ net income	$	2,637	$	-	$	2,637	$	2,237	$	-	$	2,237	$	1,867	$	-	$	1,867
Shares
Weighted average		246,652		-		246,652		250,892		-		250,892		255,360		-		255,360
Common stock equivalents				3,573		3,573				4,180		4,180				4,287		4,287
Total shares		246,652		3,573		250,225		250,892		4,180		255,072		255,360		4,287		259,647
EPS	$	10.69	$	(0.15)	$	10.54	$	8.92	$	(0.15)	$	8.77	$	7.31	$	(0.12)	$	7.19

The following outstanding employee stock options were not included in the computation of diluted earnings per share because their effect was anti-dilutive.

(In millions)	2018	2017	2016
Anti-dilutive options	0.9	0.9	2.3

Debt

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Debt

Note 5 – Debt

The outstanding amounts of debt and capital leases for the years ended December 31 were as follows:

(In millions)	Issuer	2018		2017
Short-term debt
Current maturities: $1,000 million, 2.25% Senior Notes	Express Scripts	$	995	$	-
Current maturities: $337 million, 7.25% Senior Notes	ESI		343		-
Commercial paper	Old Cigna		1,500		100
Current maturities: $131 million, 6.35% Notes	Old Cigna		-		131
Other, including capital leases	various		117		9
Total short-term debt		$	2,955	$	240
Long-term uncollateralized debt
Cigna debt (issued to finance acquisition)
$1,000 million, Floating Rate Notes due 2020	Cigna	$	997	$	-
$1,750 million, 3.2% Notes due 2020	Cigna		1,743		-
$1,000 million, Floating Rate Notes due 2021	Cigna		996		-
$1,250 million, 3.4% Notes due 2021	Cigna		1,245		-
$3,000 million, Floating Rate Term Loan due 2021	Cigna		2,997		-
$700 million, Floating Rate Notes due 2023	Cigna		697		-
$3,100 million, 3.75% Notes due 2023	Cigna		3,085		-
$2,200 million, 4.125% Notes due 2025	Cigna		2,187		-
$3,800 million, 4.375% Notes due 2028	Cigna		3,774		-
$2,200 million, 4.8% Notes due 2038	Cigna		2,178		-
$3,000 million, 4.9% Notes due 2048	Cigna		2,964		-

Express Scripts debt (assumed in acquisition)
$500 million, 4.125% Senior Notes due 2020	Medco		506		-
$500 million, 2.600% Senior Notes due 2020	Express Scripts		493		-
$400 million, Floating Rate Senior Notes due 2020	Express Scripts		399		-
$500 million, 3.300% Senior Notes due 2021	Express Scripts		499		-
$1,250 million, 4.750% Senior Notes due 2021	Express Scripts		1,285		-
$1,000 million, 3.900% Senior Notes due 2022	Express Scripts		998		-
$500 million, 3.050% Senior Notes due 2022	Express Scripts		481		-
$1,000 million, 3.000% Senior Notes due 2023	Express Scripts		959		-
$1,000 million, 3.500% Senior Notes due 2024	Express Scripts		966		-
$1,500 million, 4.500% Senior Notes due 2026	Express Scripts		1,508		-
$1,500 million, 3.400% Senior Notes due 2027	Express Scripts		1,386		-
$449 million, 6.125% Senior Notes due 2041	Express Scripts		493		-
$1,500 million, 4.800% Senior Notes due 2046	Express Scripts		1,465		-

Old Cigna debt (pre-acquisition)
$250 million, 4.375% Notes due 2020	Old Cigna		248		249
$300 million, 5.125% Notes due 2020	Old Cigna		298		299
$78 million, 6.37% Notes due 2021	CGC		78		78
$300 million, 4.5% Notes due 2021	Old Cigna		297		299
$750 million, 4% Notes due 2022	Old Cigna		746		745
$100 million, 7.65% Notes due 2023	Old Cigna		100		100
$17 million, 8.3% Notes due 2023	Old Cigna		17		17
$900 million, 3.25% Notes due 2025	Old Cigna		895		894
$600 million, 3.05% Notes due 2027	Old Cigna		595		594
$259 million, 7.875% Debentures due 2027	Old Cigna		259		258
$45 million, 8.3% Step Down Notes due 2033	Old Cigna		45		45
$191 million, 6.15% Notes due 2036	Old Cigna		190		190
$121 million, 5.875% Notes due 2041	Old Cigna		119		119
$317 million, 5.375% Notes due 2042	Old Cigna		315		315
$1,000 million, 3.875% Notes due 2047	Old Cigna		988		988

Other, including capital leases	Other		32		9
Total long-term debt		$	39,523	$	5,199

Notes issued to fund the Express Scripts acquisition. As presented in the table above, the Company issued private placement Notes with registration rights in the third quarter of 2018 to finance the Express Scripts acquisition. Total proceeds were approximately $20.0 billion. Interest on this debt is generally paid semi-annually except for quarterly interest payments on the floating rate notes.

Term Loan Credit Agreement. Cigna borrowed $3.0 billion under its Term Loan Credit Agreement (the “Term Loan Credit Agreement”) to finance the Merger and to pay fees and expenses of the Merger. The Term Loan Credit Agreement is diversified among 26 banks and contains customary covenants and restrictions, including a financial covenant that Cigna’s leverage ratio may not exceed 60%. There is no remaining amount available for borrowing under this agreement.

Bridge Facility. In March 2018, Cigna entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd and 21 additional banks, to provide a $26.7 billion, 364-day senior unsecured bridge facility (the “Bridge Facility”) in connection with the Merger. The Company incurred approximately $140 million in fees in 2018 for the Bridge Facility that expired upon the close of the Merger.

Revolving Credit Agreement. Cigna has a Revolving Credit and Letter of Credit Agreement (the “Revolving Credit Agreement”) that matures on April 6, 2023 and is diversified among 23 banks.

Cigna can borrow up to $3.25 billion for general corporate purposes, with up to $500 million available for issuance of letters of credit, decreased by $22 million of letters of credit under the Revolving Credit Agreement as of December 31, 2018. The Revolving Credit Agreement also includes an option to increase the facility amount up to $500 million and an option to extend the termination date for additional one year periods, subject to consent of the banks.

The Revolving Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company’s leverage ratio may not exceed 60%.

Cigna is the borrower under the Revolving Credit Agreement and the Term Loan Credit Agreement and certain subsidiaries of Cigna may be required to guarantee these obligations under certain circumstances.

Commercial Paper. Old Cigna issued $1.5 billion under the commercial paper program to finance the Merger.

Assumption of Express Scripts Debt. The Company assumed debt obligations of Express Scripts, ESI and Medco as described in the table above in the acquisition under substantially unchanged terms.

The Company was in compliance with its debt covenants as of December 31, 2018.

Other debt financing transactions. In the third quarter of 2017, Old Cigna entered into the following debt transactions:

On September 14, 2017, Old Cigna issued $1.6 billion long-term debt and the proceeds were used to pay for the cash tender offer described below. Old Cigna also used the proceeds for general corporate purposes, including the repayment of its Notes that matured in 2018.

Old Cigna completed a cash tender offer to purchase $1.0 billion of aggregate principal amount of certain of its outstanding debt securities in the third quarter of 2017 and recorded a pre-tax loss of $321 million ($209 million after-tax), primarily for premiums paid.

Old Cigna repaid $131 million and $250 million of long-term notes that matured during the first quarter of 2018 and 2017 respectively.

Maturities of outstanding long-term debt and capital leases are as follows:

	Scheduled Maturities
(In millions)	Long-term Debt⁽¹⁾		Capital Leases
2019	$	1,337	$	17
2020	$	4,700	$	14
2021	$	7,378	$	4
2022	$	2,250	$	4
2023	$	4,917	$	4
Maturities after 2023	$	20,582	$	7

(1) Long-term debt maturity amounts exclude capital leases.

Interest expense on long-term and short-term debt was $507 million in 2018, $243 million in 2017, and $251 million in 2016, excluding losses on the early extinguishment of debt.

Common and Preferred Stock

12 Months Ended

Dec. 31, 2018

Common And Preferred Stock [Abstract]

Common and preferred stock

Note 6 – Common and Preferred Stock

As more fully described in Note 3, Cigna acquired Express Scripts on December 20, 2018. Old Cigna shareholders exchanged each of their shares for a share of Cigna common stock and shareholders of Express Scripts received 0.2434 of a share of Cigna (and $48.75 in cash) for each share of Express Scripts. Following the Merger, Old Cigna was de-listed and shares of Cigna were listed on the New York Stock Exchange for trading.

Cigna (and, prior to the Merger, Old Cigna) has a total of 25 million shares of $1 par value preferred stock authorized for issuance. No shares of preferred stock were outstanding at December 31, 2018, 2017 or 2016.

The following table presents the share activity of Old Cigna and Cigna for the years ended December 31, 2018, 2017 and 2016.

(Shares in thousands)	2018	2017	2016
Common: Par value $0.25; 600,000 shares authorized - Old Cigna
Outstanding - January 1,	243,967	256,869	256,544
Issued for stock option exercises and other benefit plans	1,118	2,761	1,110
Repurchased common stock	(1,300)	(15,663)	(785)
Balance, December 20, 2018 (Merger Date)	243,785	-	-
Exchange of Old Cigna shares for shares of Cigna	(243,785)	-	-
Outstanding - December 31,	-	243,967	256,869
Retirement of treasury stock on December 20, 2018	(52,358)	-	-
Exchange of Old Cigna certificated treasury stock for new Cigna certificated treasury stock	(2)	-	-
Treasury stock - December 31, 2018	-	52,178	39,276
Issued - December 31,	-	296,145	296,145

Common: Par value $0.01; 600,000 shares authorized - Cigna
Shares issued to Old Cigna shareholders	243,785	-	-
Shares issued to Express Scripts shareholders	137,337	-	-
Issued for stock option exercises and other benefit plans including Express Scripts performance share holders	91	-	-
Repurchased common stock	(289)	-	-
Outstanding - December 31, 2018	380,924	-	-
Treasury stock	570	-	-
Issued - December 31, 2018	381,494	-	-

Insurance and Contractholder Liabilities

12 Months Ended

Dec. 31, 2018

Insurance and Contractholder Liabilities [Abstract]

Insurance and Contractholder Liabilities

Note 7 – Insurance and Contractholder Liabilities

Account Balances – Insurance and Contractholder Liabilities

As of December 31, 2018 and 2017, the Company’s insurance and contractholder liabilities comprised the following:

		December 31, 2018						December 31, 2017

(In millions)		Current		Non-current		Total		Current		Non-current		Total
Contractholder deposit funds	$	641	$	7,365	$	8,006	$	713	$	7,483	$	8,196
Future policy benefits		740		8,981		9,721		706		9,334		10,040
Unpaid claims and claim expenses
Integrated Medical		2,678		19		2,697		2,401		19		2,420
Other segments		2,394		3,230		5,624		2,178		3,289		5,467
Unearned premiums		348		379		727		319		405		724
Total insurance and contractholder liabilities	$	6,801	$	19,974	$	26,775	$	6,317	$	20,530	$	26,847

Insurance and contractholder liabilities expected to be paid within one year are classified as current.

Accounting Policy - Contractholder Deposit Funds: Liabilities for contractholder deposit funds primarily include deposits received from customers for investment-related and universal life products and investment earnings on their fund balances. These liabilities are adjusted to reflect administrative charges and, for universal life fund balances, mortality charges. In addition, this caption includes: 1) premium stabilization reserves under group insurance contracts representing experience refunds left with the Company to pay future premiums; 2) deposit administration funds used to fund non-pension retiree insurance programs; 3) retained asset accounts; and 4) annuities or supplementary contracts without significant life contingencies. Interest credited on these funds is accrued ratably over the contract period.

Accounting Policy - Future Policy Benefits: Future policy benefits represent the present value of estimated future obligations under long-term life and supplemental health insurance policies and annuity products currently in force. These obligations are estimated using actuarial methods and consist primarily of reserves for annuity contracts, life insurance benefits, GMDB contracts (see Note 8 for additional information) and certain health, life and accident insurance products of our International Markets segment.

Obligations for annuities represent specified periodic benefits to be paid to an individual or groups of individuals over their remaining lives. Obligations for life insurance policies and GMDB contracts represent benefits expected to be paid to policyholders, net of future premiums expected to be received. Management estimates these obligations based on assumptions as to premiums, interest rates, mortality or morbidity, future claim adjudication expenses and surrenders, allowing for adverse deviation as appropriate. Mortality, morbidity and surrender assumptions are based on the Company’s own experience and published actuarial tables. Interest rate assumptions are based on management’s judgment considering the Company’s experience and future expectations, and range from 1% to 9%. Obligations for the run-off settlement annuity business include adjustments for realized and unrealized investment returns consistent with GAAP when a premium deficiency exists.

Unpaid Claims and Claim Expenses – Integrated Medical

This liability reflects estimates of the ultimate cost of claims that have been incurred but not reported, including expected development on reported claims, those that have been reported but not yet paid (reported claims in process), and other medical care expenses and services payable that are primarily comprised of accruals for incentives and other amounts payable to health care professionals and facilities. This liability no longer includes amounts from the international health care business now reported in International Markets following our change in segment reporting in 2018. Prior year rollforwards have been updated to reflect this segment change.

Accounting policy. The Company uses actuarial principles and assumptions that are consistently applied each reporting period and recognizes the actuarial best estimate of the ultimate liability along with a margin for adverse deviation. This approach is consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions.

The Company compares key assumptions used to establish the medical costs payable to actual experience for each reporting period. The unpaid claims liability is adjusted through current period shareholders’ net income when actual experience differs from these assumptions. Additionally, the Company evaluates expected future developments and emerging trends that may impact key assumptions. The process used to determine this liability requires the Company to make critical accounting estimates that involve considerable judgment, reflecting the variability inherent in forecasting future claim payments. These estimates are highly sensitive to changes in the Company’s key assumptions, specifically completion factors and medical cost trends.

The liability is primarily calculated using “completion factors” developed by comparing the claim incurral date to the date claims were paid. Completion factors are impacted by several key items including changes in: 1) electronic (auto-adjudication) versus manual claim processing; 2) provider claims submission rates; 3) membership; and 4) the mix of products. The Company uses historical completion factors combined with an analysis of current trends and operational factors to develop current estimates of completion factors. The Company estimates the liability for claims incurred in each month by applying the current estimates of completion factors to the current paid claims data. This approach implicitly assumes that historical completion rates will be a useful indicator for the current period.

The Company relies more heavily on medical cost trend analysis that reflects expected claim payment patterns and other relevant operational considerations for more recent months. Medical cost trend is primarily impacted by medical service utilization and unit costs that are affected by changes in the level and mix of medical benefits offered, including inpatient, outpatient and pharmacy, the impact of copays and deductibles, changes in provider practices and changes in consumer demographics and consumption behavior.

This liability predominately consists of incurred but not reported amounts and reported claims in process including expected development on reported claims. The total of incurred but not reported liabilities plus expected development on reported claims, including reported claims in process, was $2.5 billion at December 31, 2018 and $2.3 billion at December 31, 2017. The remaining balance in both periods reflects amounts due for physician incentives and other medical care expenses and services payable.

Activity in the unpaid claims liability for the Integrated Medical segment for the years ended December 31 was as follows:

(In millions)	2018		2017		2016
Balance at January 1,	$	2,420	$	2,261	$	2,105
Less: Reinsurance and other amounts recoverable		262		273		237
Balance at January 1, net		2,158		1,988		1,868
Acquired, net		40		-		-
Incurred costs related to:
Current year		21,331		19,334		18,085
Prior years		(173)		(227)		(70)
Total incurred		21,158		19,107		18,015
Paid costs related to:
Current year		18,978		17,179		16,142
Prior years		1,945		1,758		1,753
Total paid		20,923		18,937		17,895
Balance at December 31, net		2,433		2,158		1,988
Add: Reinsurance and other amounts recoverable		264		262		273
Balance at December 31,	$	2,697	$	2,420	$	2,261

Reinsurance and other amounts recoverable reflect amounts due from reinsurers and policyholders to cover incurred but not reported and pending claims for certain business where the Company administers the plan benefits but the right of offset does not exist. See Note 8 for additional information on reinsurance.

Variances in incurred costs related to prior years’ unpaid claims and claims expenses that resulted from the differences between actual experience and the Company’s key assumptions were as follows for the years ended December 31:

	2018				2017
($ in millions)		$	%⁽¹⁾			$	%⁽²⁾
Actual completion factors	$	92	0.5	%	$	87	0.6	%
Medical cost trend		72	0.4			131	0.7
Other		9	-			9	-
Total favorable variance	$	173	0.9	%	$	227	1.3	%

(1) Percentage of current year incurred costs as reported for 2017.
(2) Percentage of current year incurred costs as reported for 2016.

Incurred costs related to prior years in the table above, although adjusted through shareholders’ net income, do not directly correspond to an increase or decrease to shareholders’ net income. The primary reason for this difference is that decreases to prior year incurred costs pertaining to the portion of the liability established for moderately adverse conditions are not considered as impacting shareholders’ net income if they are offset by increases in the current year provision for moderately adverse conditions.

Prior year development increased shareholders’ net income by $77 million ($97 million before tax) for the year ended December 31, 2018, compared with $96 million ($148 million before tax) in 2017. Favorable prior year development implies primarily lower than expected utilization of medical services while unfavorable prior year development implies higher than expected utilization of medical services. Prior year development amounts close to zero imply utilization of medical services that are consistent with expectations.

The following table depicts the incurred and paid claims development as of December 31, 2018 (net of reinsurance), claims frequency metrics and incurred but not reported liabilities reported in the Integrated Medical segment. The information about incurred and paid claims development for the year ended December 31, 2017 is presented as supplementary information and is unaudited.

	Incurred Costs
Incurral Year	2017 (Unaudited)		2018		Unpaid Claims & Claim Expenses		Claims Frequency
(in millions)
2017	$	18,692	$	18,528	$	22		2.6 million
2018				20,458	$	2,266		2.9 million
Cumulative incurred costs plus acquired for the periods presented			$	38,986

	Cumulative Costs Paid
Incurral Year	2017 (Unaudited)		2018
2017	$	16,628	$	18,506
2018				18,192
Cumulative paid costs for the periods presented			$	36,698

Outstanding liabilities for the periods presented, net of reinsurance			$	2,288
Other long-duration liabilities not included in development table above				145
Net unpaid claims and claims expenses - Integrated Medical				2,433
Reinsurance and other amounts recoverable				264
Unpaid claims and claim expenses - Integrated Medical			$	2,697

More than 95% of health claims for an accident year are paid within one year of their incurred date.

There is no single or common claim frequency metric used in the health care industry. The Company believes a relevant metric for its health insurance business is the number of customers for whom an insured medical claim was paid. Customers for whom no insured medical claim was paid are excluded from the calculation. Claims that did not result in a liability are not included in the frequency metric.

Unpaid Claims and Claim Expenses – International Markets and Group Disability and Other

This liability now includes amounts from international health care following our change in segment reporting in 2018. Prior year rollforwards have been updated to reflect this segment change.

Accounting policy. Liabilities for unpaid claims and claim expenses are established by book of business within the Company’s International Markets segment and Group Disability and Other. Liabilities for unpaid claims and claim expenses within the group disability and life business consist of the following primary products: long-term and short-term disability, life insurance, and accident coverages. Unpaid claims and claim expenses consist of (1) case or claims reserves for reported claims that are unpaid as of the balance sheet date; (2) incurred but not reported reserves for claims when the insured event has occurred but has not been reported to the Company; and (3) loss adjustment expense reserves for the expected costs of settling these claims. The Company consistently estimates incurred but not yet reported losses using actuarial principles and assumptions based on historical and projected claim incidence patterns, claim size and the expected payment period. The Company recognizes the actuarial best estimate of the ultimate liability within a level of confidence, consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions. The Company immediately records an adjustment in medical costs and other benefit expenses when estimates of these liabilities change.

The majority of the Company’s liability for disability claims consists of the present value of estimated future benefit payments, including expected development, for each reported claim that is currently receiving benefit payments, or pending a decision on eligibility for benefits, over the expected disability period. The Company projects the expected disability period by using historical resolution rates combined with an analysis of current trends and operational factors to develop current estimates of resolution rates. Expected claim resolution rates may vary based upon the Company’s experience for the anticipated disability period, the covered benefit period, the cause of disability, the benefit design and the claimant’s age, gender and income level. The gross monthly benefit is reduced (offset) by disability income received under other benefit programs, most commonly Social Security Disability Income, workers’ compensation, statutory disability or other group benefit plans. The Company estimates the probability and amount of future offset awards and lapses based on the Company’s experience for certain offsets not yet finalized.

The Company also establishes a liability for the expected present value of future benefit payments for known claims that have recently been resolved but may reopen in the future, based on Company experience. Prior to a claim becoming known, the Company establishes a liability for incurred but not reported claims, using standard actuarial techniques and calculations based on completion factors and loss ratio assumptions using the Company’s experience combined with an analysis of current trends and operational factors. Completion factors are impacted by several key items including changes in claim inventory levels, claim payment patterns, changes in business volume and other factors. Loss ratio assumptions are developed using historical Company experience, adjusted prospectively for expected changes in the underlying business including rate actions, persistency and inforce growth.

Liability balance details. The liability details for unpaid claims and claim expenses as of December 31 are as follows:

(In millions)	2018		2017
Group Disability and Other
Group Disability and Life	$	4,674	$	4,491
Other Operations		192		193
Total Group Disability and Other		4,866		4,684
International Markets		758		783
Unpaid claims and claim expenses Group Disability and Other and International Markets	$	5,624	$	5,467

The Company discounts certain liabilities, predominantly long-term disability, because benefits payments are made over extended periods. Discount rate assumptions for these liabilities are based on projected investment returns for the supporting asset portfolios. Details of the Company’s unpaid claim discounted liability balances as of December 31 were as follows:

(In billions)		2018							2017
Discounted liabilities	$				4.2		$				4.0
Aggregate amount of discount	$				1.1		$				1.0
Range of discount rates		4.2	%	-	5.2	%		4.5	%	-	5.2	%

Interest is accreted and recognized in medical costs and other benefit expenses in the Consolidated Statements of Income.

Activity in the Company’s liabilities for unpaid claims and claim expenses, excluding Other Operations, are presented in the following table. Liabilities associated with Other Operations are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.

(In millions)	2018		2017		2016
Balance at January 1,	$	5,274	$	4,997	$	4,609
Less: Reinsurance		140		123		121
Balance at January 1, net		5,134		4,874		4,488
Incurred claims related to:
Current year		5,350		5,097		5,116
Prior years
Interest accretion		156		163		161
All other incurred		(147)		(43)		85
Total incurred		5,359		5,217		5,362
Paid claims related to:
Current year		3,391		3,229		3,221
Prior years		1,808		1,757		1,739
Total paid		5,199		4,986		4,960
Acquisitions		23		-
Foreign currency		(41)		29		(16)
Balance at December 31, net		5,276		5,134		4,874
Add: Reinsurance		156		140		123
Balance at December 31,	$	5,432	$	5,274	$	4,997

Reinsurance in the previous table reflects amounts due from reinsurers related to unpaid claims liabilities. The Company’s insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses. See Note 8 for additional information on reinsurance.

The majority of the liability for unpaid claims and claim expenses is related to disability claims with long-tailed payouts. Interest earned on assets backing these liabilities is an integral part of pricing and reserving. Therefore, interest accreted on prior year balances is shown as a separate component of prior year incurred claims. This interest is calculated by applying the average discount rate used in determining the liability balance to the average liability balance over the period. The remaining prior year incurred claims amount primarily reflects updates to the Company’s liability estimates and variances between actual experience during the period relative to the assumptions and expectations reflected in determining the liability. Assumptions reflect the Company’s expectations over the life of the book of business and will vary from actual experience in any period, both favorably and unfavorably, with variation in resolution rates being the most significant driver for the long-term disability business. Favorable prior year incurred claims reported in 2018 largely reflect favorable loss ratio experience for long-term disability and life relative to expectations. Favorable prior year incurred claims reported in 2017 largely reflect improved resolution rate experience for long-term disability relative to expectations. Prior year incurred claims reported in 2016 included the impact of changes made to our disability claims management process and a period of elevated life claims.

Long-term disability development tables. The table below presents information about incurred and paid claims development as of December 31, 2018 (net of reinsurance), total incurred but not reported liabilities, and cumulative claims frequency for the Company’s long-term disability book of business. The information about incurred and paid claims development for the years ended 2012 through 2017 is presented as supplementary information and is unaudited. As permitted under GAAP, the Company presented development table information beginning in 2012 because obtaining information beyond this period was impracticable as historical data was not maintained in such detail.

(In millions, except for claims frequency)
															Incurred
	Incurred Claims (undiscounted)														But Not
	Unaudited														Reported		Claims
Accident Year	2012		2013		2014		2015		2016		2017		2018		Liabilities ⁽¹⁾		Frequency
2012	$	995	$	951	$	889	$	876	$	883	$	880	$	861	$	-		21,183
2013				1,063		1,037		1,062		1,072		1,057		1,032		-		23,526
2014						1,158		1,129		1,167		1,146		1,094		-		25,314
2015								1,184		1,154		1,185		1,160		-		25,737
2016										1,246		1,184		1,199		3		25,349
2017												1,226		1,193		10		23,382
2018														1,348		515		12,025
Cumulative incurred claims for the periods presented													$	7,887
⁽¹⁾ Incurred but not reported amounts are included in 2018 incurred claims.

	Cumulative Paid Claims
	Unaudited
Accident Year	2012		2013		2014		2015		2016		2017		2018
2012	$	81	$	288	$	429	$	504	$	571	$	621	$	661
2013				92		342		503		600		670		732
2014						111		379		575		667		743
2015								114		417		603		702
2016										122		411		598
2017												110		396
2018														116
Cumulative paid claims for the periods presented													$	3,948

All outstanding liabilities for the periods presented, net of reinsurance													$	3,939
All outstanding liabilities prior to 2012, net of reinsurance														921
Impact of discounting														(885)
Liability for long-term disability unpaid claims and claim expenses, net of reinsurance													$	3,975

The claims frequency metric used for the Company’s long-term disability line of business represents the number of unique claim events for which benefits have been approved and payments made. Claim events are identified using a unique claimant identifier and incurral date. Thus, if an individual has multiple claims for different disabling events (and therefore different incurral dates), each will be determined to be a unique claim event. However, if an individual receives multiple benefits under more than one policy (for example for supplemental disability benefits such as pension contribution benefits or survivor benefits), the Company treats this as a single claim occurrence because they related to the same claim event. Claims frequency metrics for the most recent year are expected to be low reflecting the long-term disability product features including waiting and elimination periods that result in delayed eligibility for contract benefits. Claims that did not result in a liability are not included in the frequency metric.

The following is supplementary and unaudited information about average historical claims payout patterns for the long-term disability business for the years presented in the development table as of December 31, 2018. The average annual percentage payout of incurred claims, net of reinsurance, is approximately 9% in year one, 24% in year two, 16% in year three, 9% in year four, 7% in year five, 6% in year six and 5% in year seven.

The following table reconciles the long-term disability net incurred and paid claims development table to the liability for unpaid claims and claim expenses in the Company’s Consolidated Balance Sheets as of December 31, 2018.

(In millions)
Net outstanding liabilities – Group Disability and Life businesses
Long-term disability liabilities, net of reinsurance	$	3,975
Other short-duration insurance books of business, net of reinsurance		594
Liabilities for unpaid claims and claim expenses, net of reinsurance		4,569
Reinsurance recoverable on unpaid claims – Group Disability and Life businesses
Long-term disability		94
Other short-duration insurance books of business		11
Total reinsurance recoverable on unpaid claims		105
Total liability for unpaid claims and claim expenses – Group Disability and Life businesses		4,674
International Markets segment		758
Other Operations		192
Unpaid claims and claim expenses - Group Disability and Other and International Markets	$	5,624

The other short-duration insurance books of business, net of reinsurance, primarily include liabilities for life, accident and short-term disability insurance products. Liabilities for these products are typically complete within one year. Claim development on these liabilities is largely driven by completion factors and loss ratio assumptions.

Reinsurance

12 Months Ended

Dec. 31, 2018

Reinsurance Disclosures [Abstract]

Reinsurance

Note 8 – Reinsurance

The Company’s insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance is also used to limit losses from large exposures and to permit recovery of a portion of direct or assumed losses. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.

Reinsurance Recoverables

The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Components of the Company’s reinsurance recoverables are presented in the following table. Included in the table below is $297 million as of December 31, 2018 and $282 million as of December 31, 2017 of current reinsurance recoverables that are reported in other current assets.


(Dollars in millions)
	Line of Business	Reinsurer(s)	December 31, 2018		December 31, 2017		Collateral and Other Termsat December 31, 2018
Ongoing Operations
	Integrated Medical, International Markets, Group Disability, COLI	Various	$	464	$	454	Balances range from less than $1 million up to $70 million. Over 70% of the balance is from companies rated as investment grade by Standard & Poor’s.
	Total recoverables related to ongoing operations			464		454
Acquisition, disposition or runoff activities
	Individual Life and Annuity (sold in 1998)	Lincoln National Life and Lincoln Life & Annuity of New York		3,312		3,436	Both companies’ ratings were well above the level that would trigger a contractual obligation to fully secure the outstanding balance.
	GMDB (effectively exited in 2013)	Berkshire		893		928	100% secured by assets in a trust.
	Retirement Benefits Business (sold in 2004)	Prudential Retirement Insurance and Annuity		787		850	100% secured by assets in a trust.
	Supplemental Benefits Business (2012 acquisition)	Great American Life		261		283	100% secured by assets in a trust.
	Other	Various		87		95	100% secured by assets in a trust or other deposits.
	Total recoverables related to acquisition, disposition or runoff activities			5,340		5,592
Total reinsurance recoverables			$	5,804	$	6,046

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables if recovery is not considered probable.

Effects of Reinsurance

The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It also presents reinsurance recoveries that have been netted against benefit expenses in the Company’s Consolidated Statements of Income.

(In millions)	2018		2017		2016
Premiums
Short-duration contracts
Direct	$	32,148	$	28,838	$	27,694
Assumed		77		199		247
Ceded		(182)		(150)		(229)
Total short-duration contract premiums		32,043		28,887		27,712
Long-duration contracts
Direct		4,268		3,748		3,259
Assumed		116		130		137
Ceded
Individual life insurance and annuity business sold		(133)		(143)		(153)
Other		(181)		(131)		(131)
Total long-duration contract premiums		4,070		3,604		3,112
Total premiums	$	36,113	$	32,491	$	30,824
Reinsurance recoveries
Individual life insurance and annuity business sold	$	249	$	259	$	279
Other		203		66		261
Total reinsurance recoveries	$	452	$	325	$	540

The effects of reinsurance on written premiums for short-duration contracts were not materially different from the recognized premium amounts shown in the table above.

Effective Exit of GMDB and GMIB Business

The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction in 2013. Berkshire reinsured 100% of the Company's future claim payments in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.4 billion remaining at December 31, 2018.

GMDB is accounted for as reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below. GMIB assets are reported in other current assets and other assets, and GMIB liabilities are reported in accrued expenses and other liabilities and other non-current liabilities.

GMDB

The GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death. The Company’s exposure arises when the guaranteed minimum death benefit exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death.

Accounting policy. The Company estimates the gross liability and reinsurance recoverable with an internal model based on the Company’s experience and future expectations over an extended period, consistent with the long-term nature of this product. As a result of the reinsurance transaction, reserve increases have a corresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit (including the GMIB asset presented below).

The following table presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees assumed by the Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. Unless the Berkshire reinsurance limit is exceeded, the Company should be reimbursed in full for these payments.

(Dollars in millions, excludes impact of reinsurance ceded)	2018		2017
Account value	$	8,402	$	10,109
Net amount at risk	$	2,466	$	2,112
Average attained age of contractholders (weighted by exposure)		74		75
Number of contractholders		220,000		245,000

GMIB

The Company reinsured contracts with issuers of GMIB products. The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that must occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”), including retrocessional coverage from Berkshire, for these contracts.

Accounting policy. The Company reports GMIB liabilities and assets as derivatives at fair value because cash flows of these liabilities and assets are affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum payments. The Company receives and pays fees periodically based on either contractholders’ account values or deposits increased at a contractual rate. The Company will also pay and receive cash depending on changes in account values and interest rates when contractholders first elect to receive minimum income payments. Cash flows on these contracts are reported in operating activities.

Assumptions used in fair value measurement. GMIB assets and liabilities are established using capital market assumptions and assumptions related to future annuitant behavior (including mortality, lapse, and annuity election rates). The Company classifies GMIB assets and liabilities in Level 3 in the fair value hierarchy described in Note 10 because assumptions related to future annuitant behavior are largely unobservable.

The only assumption expected to impact future shareholders’ net income is non-performance risk. The non-performance risk adjustment reflects a market participant’s view of nonpayment risk by adding an additional spread to the discount rate in the calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral.

The Company regularly evaluates each of the assumptions used in establishing these assets and liabilities. Significant decreases in assumed lapse rates or spreads used to calculate non-performance risk of the Company, or significant increases in assumed annuity election rates or spreads used to calculate the non-performance risk of the reinsurers, would result in higher fair value measurements. A change in one of these assumptions is not necessarily accompanied by a change in another assumption.

GMIB liabilities totaling $706 million as of December 31, 2018 and $762 million as of December 31, 2017 were reported in accrued expenses and other liabilities and other non-current liabilities. There were three reinsurers covering 100% of the GMIB exposures as of December 31, 2018 and 2017 as follows:

(In millions)
Line of Business	Reinsurer	December 31, 2018		December 31, 2017		Collateral and Other Termsat December 31, 2018
GMIB	Berkshire	$	341	$	359	100% were secured by assets in a trust.
	Sun Life Assurance Company of Canada		208		221
	Liberty Re (Bermuda) Ltd.		184		197	86% were secured by assets in a trust.
Total GMIB recoverables reported in other current assets and other assets		$	733	$	777

Amounts included in shareholders net income for GMIB assets and liabilities were not material in 2018, 2017 and 2016.

Investments

12 Months Ended

Dec. 31, 2018

Investments:

Investments

Note 9 – Investments, Investment Income and Gains and Losses

Cigna’s investment portfolio consists of a broad range of investments including fixed maturities, equity securities, commercial mortgage loans, policy loans, other long-term investments, short-term investments, and derivative financial instruments. The sections below provide more detail regarding our accounting policies, investment balances, net investment income and realized investment gains and losses. See Note 10 for information about valuation of the Company’s investment portfolio. Fixed maturities, commercial mortgage loans, derivative financial instruments, and short-term investments with contractual maturities during the next 12 months are classified on the balance sheet as current investments, unless they are held as statutory deposits or restricted for other purposes, where they are classified in long-term investments. Equity securities classified as current include exchange traded funds that are used in our cash management process. All other investments are classified in long-term investments. The following table summarizes the Company’s investments by category and current or long-term classification.


		December 31, 2018						December 31, 2017

(In millions)		Current		Long-term		Total		Current		Long-term		Total
Fixed Maturities	$	1,320	$	21,608	$	22,928	$	1,516	$	21,622	$	23,138
Equity securities		377		171		548		406		182		588
Commercial mortgage loans		32		1,826		1,858		15		1,746		1,761
Policy loans		-		1,423		1,423		-		1,415		1,415
Other long-term investments		-		1,901		1,901		-		1,518		1,518
Short-term investments		316		-		316		199		-		199
Total	$	2,045	$	26,929	$	28,974	$	2,136	$	26,483	$	28,619

Investment Portfolio

Fixed Maturities

Accounting policy. Fixed maturities (including bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor) are classified as available for sale and are carried at fair value with changes in fair value recorded in accumulated other comprehensive income (loss) within shareholders’ equity. Net unrealized appreciation on investments supporting the Company’s run-off settlement annuity business is reported in future policy benefit liabilities rather than accumulated other comprehensive income (loss).

The Company records impairment losses in net income for fixed maturities with fair value below amortized cost that meet either of the following conditions:

If the Company intends to sell or determines that it is more likely than not to be required to sell these fixed maturities before their fair values recover, an impairment loss is recognized for the excess of the amortized cost over fair value.
If the net present value of projected future cash flows of a fixed maturity (based on qualitative and quantitative factors, including the probability of default, and the estimated timing and amount of recovery) is below the amortized cost basis, that difference is recognized as an impairment loss. For mortgage and asset-backed securities, estimated future cash flows are also based on assumptions about the collateral attributes including prepayment speeds, default rates and changes in value.

Debt securities are classified as either current or long-term investments based on their contractual maturities. The amortized cost and fair value by contractual maturity periods for fixed maturities were as follows at December 31, 2018:

	Amortized		Fair
(In millions)	Cost		Value
Due in one year or less	$	1,323	$	1,327
Due after one year through five years		6,452		6,522
Due after five years through ten years		10,205		9,992
Due after ten years		4,064		4,577
Mortgage and other asset-backed securities		506		510
Total	$	22,550	$	22,928

Actual maturities of these securities could differ from their contractual maturities used in the table above. This could occur because issuers may have the right to call or prepay obligations, with or without penalties.

Gross unrealized appreciation (depreciation) on fixed maturities by type of issuer is shown below.

	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Appreciation		Depreciation		Value
December 31, 2018
Federal government and agency	$	507	$	204	$	(1)	$	710
State and local government		920		66		(1)		985
Foreign government		2,214		155		(7)		2,362
Corporate		18,403		411		(453)		18,361
Mortgage and other asset-backed		506		16		(12)		510
Total	$	22,550	$	852	$	(474)	$	22,928
Investments supporting liabilities of the Company‘s run-off settlement annuity business (included in total above)⁽¹⁾	$	2,264	$	479	$	(40)	$	2,703
December 31, 2017
Federal government and agency	$	541	$	239	$	(1)	$	779
State and local government		1,196		93		(2)		1,287
Foreign government		2,360		142		(15)		2,487
Corporate		17,301		868		(81)		18,088
Mortgage and other asset-backed		469		29		(1)		497
Total	$	21,867	$	1,371	$	(100)	$	23,138
Investments supporting liabilities of the Company‘s run-off settlement annuity business (included in total above)⁽¹⁾	$	2,200	$	681	$	(2)	$	2,879

(1) Net unrealized appreciation for these investments is excluded from accumulated other comprehensive income.

The Company had commitments to purchase $106 million of fixed maturities as of December 31, 2018, all of which bear interest at a fixed market rate.

Review of declines in fair value. Management reviews fixed maturities with a decline in fair value from cost for impairment based on criteria that include:

length of time and severity of decline;
financial health and specific near term prospects of the issuer;
changes in the regulatory, economic or general market environment of the issuer’s industry or geographic region; and
the Company’s intent to sell or the likelihood of a required sale prior to recovery.

Management believes the unrealized depreciation below to be temporary based on this review, and therefore has not impaired these amounts. The table below summarizes fixed maturities with a decline in fair value from amortized cost by the length of time these securities have been in an unrealized loss position.

	December 31, 2018							December 31, 2017
	Fair		Amortized		Unrealized		Number	Fair		Amortized		Unrealized		Number
(Dollars in millions)	Value		Cost		Depreciation		of Issues	Value		Cost		Depreciation		of Issues
One year or less
Investment grade	$	7,127	$	7,367	$	(240)	1,324	$	3,272	$	3,309	$	(37)	797
Below investment grade	$	1,185	$	1,240	$	(55)	1,190	$	543	$	553	$	(10)	643
More than one year
Investment grade	$	3,023	$	3,181	$	(158)	784	$	1,503	$	1,549	$	(46)	373
Below investment grade	$	249	$	270	$	(21)	245	$	155	$	162	$	(7)	42

Equity Securities

Accounting policy. Upon adopting ASU 2016-01 beginning in 2018, changes in the fair values of equity securities that have a readily determinable fair value (primarily exchange-traded funds) are reported in net realized investment gains (losses). As of December 31, 2018, the fair values of these securities were $415 million and cost was $433 million. Also beginning in 2018, private equity securities of $89 million as of December 31, 2018 without a readily determinable fair value are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes. The amount of impairments or value changes resulting from observable price changes was not material.

Equity securities also include hybrid investments consisting of preferred stock with call features that are carried at fair value with changes in fair value reported in net realized investment gains (losses) and dividends reported in net investment income. As of December 31, 2018, fair values of these securities were $44 million and cost was $58 million, compared with fair value of $49 million and cost of $61 million as of December 31, 2017.

Commercial Mortgage Loans

Mortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are generally issued at a fixed rate of interest and are secured by high quality, primarily completed and substantially leased operating properties.

Accounting policy. Commercial mortgage loans are carried at unpaid principal balances or, if impaired, the lower of unpaid principal or fair value of the underlying real estate. See the “Impaired commercial mortgage loans” section below for the Company’s accounting policy for impaired commercial mortgage loans. Commercial mortgage loans are classified as either current or long-term investments based on their contractual maturities.

As of December 31, 2018, approximately 93% of the Company’s commercial mortgage loan portfolio is scheduled to mature in 2022 or thereafter.

Actual maturities could differ from contractual maturities for several reasons: borrowers may have the right to prepay obligations with or without prepayment penalties; the maturity date may be extended; and loans may be refinanced.

Credit quality. The Company regularly evaluates and monitors credit risk, beginning with the initial underwriting of a mortgage loan and continuing throughout the investment holding period. Mortgage origination professionals employ an internal credit quality rating system designed to evaluate the relative risk of the transaction at origination that is then updated each year as part of the annual portfolio loan review. The Company evaluates and monitors credit quality on a consistent and ongoing basis, classifying each loan as a loan in good standing, potential problem loan or problem loan.

Quality ratings are based on our evaluation of a number of key inputs related to the loan, including real estate market-related factors such as rental rates and vacancies, and property-specific inputs such as growth rate assumptions and lease rollover statistics. However, the two most significant contributors to the credit quality rating are the debt service coverage and loan-to-value ratios. The debt service coverage ratio measures the amount of property cash flow available to meet annual interest and principal payments on debt, with a ratio below 1.0 indicating that there is not enough cash flow to cover the required loan payments. The loan-to-value ratio, commonly expressed as a percentage, compares the amount of the loan to the fair value of the underlying property collateralizing the loan.

The following table summarizes the credit risk profile of the Company’s commercial mortgage loan portfolio based on loan-to-value and debt service coverage ratios as of December 31, 2018 and 2017:

(Dollars in millions)	2018				2017
Loan-to-Value Ratio		Carrying Value	Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Carrying Value	Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio
Below 60%	$	1,132	2.14		$	1,109	2.03
60% to 79%		650	1.93			652	2.24
80% to 100%		76	1.49			-	-
Total	$	1,858	2.04	58%	$	1,761	2.11	57%

The Company’s annual in-depth review of its commercial mortgage loan investments is the primary mechanism for identifying emerging risks in the portfolio. The most recent review was completed by the Company’s investment professionals in the second quarter of 2018 and included an analysis of each underlying property’s most recent annual financial statements, rent rolls, operating plans, budgets, a physical inspection of the property and other pertinent factors. Based on historical results, current leases, lease expirations and rental conditions in each market, the Company estimated the current year and future stabilized property income and fair value for each loan.

The Company re-evaluates a loan’s credit quality between annual reviews if new property information is received or an event such as delinquency or a borrower’s request for restructure causes management to believe that the Company’s estimate of financial performance, fair value or the risk profile of the underlying property has been impacted.

Impaired commercial mortgage loans. A commercial mortgage loan is considered impaired when it is probable that the Company will not collect all amounts due per the terms of the promissory note. Impaired loans are carried at the lower of the unpaid principal balance or fair value of the underlying collateral. Interest income on impaired mortgage loans is only recognized when a payment is received.

There were no impaired commercial mortgage loans as of December 31, 2018 and 2017.

Policy Loans

Accounting policy. Policy loans, primarily associated with our corporate owned life insurance business, are carried at unpaid principal balances plus accumulated interest, the total of which approximates fair value. These loans are collateralized by life insurance policy cash values and therefore have minimal exposure to credit loss. Interest rates are reset annually based on a rolling average of benchmark interest rates.

Other Long-Term Investments

Accounting policy. Other long-term investments include investments in unconsolidated entities. These entities include certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company’s ownership percentage of reported income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.

Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicate that the carrying value may not be recoverable. Depreciation is generally recorded using the straight-line method based on the estimated useful life of each asset. Investment real estate as of December 31, 2018 and 2017 is expected to be held longer than one year and includes real estate acquired through the foreclosure of commercial mortgage loans.

Additionally, other long-term investments includes foreign currency swaps carried at fair value. See discussion below for information on the Company’s accounting policies for these derivative financial instruments.

Other long-term investments and related commitments are diversified by issuer, property type and geographic regions. The following table provides unfunded commitment and carrying value information for these investments. The Company expects to disburse approximately 26% of the committed amounts in 2019.

					Unfunded
		Carrying value as of December 31,			Commitments as of
(In millions)	2018		2017		December 31, 2018
Real estate investments	$	679	$	591	$	376
Securities partnerships		1,045		863		1,063
Other		177		64		33
Total	$	1,901	$	1,518	$	1,472

Short-Term Investments and Cash Equivalents

Accounting policy. Security investments with maturities of greater than three months to one year from time of purchase are classified as short-term, available for sale and carried at fair value that approximates cost. Cash equivalents consist of short-term investments with maturities of three months or less from the time of purchase and are carried at cost that approximates fair value.

Short-term investments and cash equivalents included the following types of issuers:

		December 31,		December 31,
(In millions)		2018		2017
Corporate securities	$	581	$	1,143
Federal government securities	$	82	$	604
Foreign government securities	$	238	$	159
Money market funds	$	1,174	$	12

Derivative Financial Instruments

The Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contract holder liabilities. The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates. The Company has written and purchased GMIB reinsurance contracts in its run-off reinsurance business that are accounted for as freestanding derivatives and discussed further in Note 8. Derivatives in the Company’s separate accounts are excluded from the following discussion because associated gains and losses generally accrue directly to separate account policyholders.

Derivative instruments used by the Company typically include foreign currency swap contracts and foreign currency forward contracts. Foreign currency swap contracts periodically exchange cash flows between two currencies for principal and interest. Foreign currency forward contracts require the Company to purchase a foreign currency in exchange for the functional currency of its operating unit at a future date, generally within three months from the contracts’ trade dates.

The Company manages the credit risk of these derivative instruments by diversifying its portfolio among approved dealers of high credit quality, and through routine monitoring of credit risk exposures. Certain of the Company’s over-the-counter derivative instruments require either the Company or the counterparty to post collateral or demand immediate payment depending on the amount of the net liability position of the derivative instrument and predefined financial strength or credit rating thresholds. These collateral posting requirements vary by counterparty and amounts posted were not significant as of December 31, 2018 or 2017.

Accounting policy. Derivatives are recorded on our balance sheet at fair value and are classified as current or non-current according to their contractual maturities. Further information on our policies for determining fair value are discussed in Note 10. Derivative cash flows are generally reported in operating activities. The Company applies hedge accounting when derivatives are designated, qualified and highly effective as hedges. Under hedge accounting, the changes in fair value of the derivative and the hedged risk are generally recognized together and offset each other when reported in shareholders’ net income. Various qualitative or quantitative methods appropriate for each hedge are used to formally assess and document hedge effectiveness at inception and each period throughout the life of a hedge.

Fair value hedges of the foreign exchange-related changes in fair values of certain fixed maturity foreign-denominated bonds: Swap fair values are reported in long-term investments or other non-current liabilities. Changes in fair values attributable to foreign exchange risk of the swap contracts and the hedged bonds are reported in other realized investment gains and losses. The portion of the swap contracts’ changes in fair value excluded from the assessment of hedge effectiveness is recorded in accumulated other comprehensive income and recognized in net investment income as swap coupon payments are accrued, offsetting the foreign denominated coupons received on the designated bonds.
Net investment hedges of certain foreign subsidiaries that conduct their business principally in Euros: The fair values of the swap contracts are reported in other assets or other non-current liabilities. The changes in fair values of these instruments are reported in other comprehensive income, specifically in translation of foreign currencies. The portion of the change in swap fair values relating to foreign exchange spot rates will be recognized in earnings upon deconsolidation of the hedged foreign subsidiaries. The remaining changes in swap fair value are excluded from the effectiveness assessment and recognized in selling, general and administrative expenses as swap coupon payments are accrued. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.
Economic hedges for derivatives not designated as accounting hedges: Fair values of derivative instruments are reported in current investments or accrued expenses and other liabilities. The changes in fair values are reported in net realized investment gains and losses.

Gross fair values of our derivative financial instruments are presented in Note 10. As of December 31, 2018 and 2017, the effects of derivative instruments on the Consolidated Financial Statements were not material, including gains or losses reclassified from accumulated other comprehensive income into shareholders’ net income, as well as amounts excluded from the assessment of hedge effectiveness. The following table summarizes the types and notional quantity of derivative instruments held by the Company.


(In millions)		Notional Value as of December 31,
Type of Instrument	Purpose	2018		2017
Foreign currency swap contracts	Fair value hedge: To hedge the foreign exchange-related changes in fair values of certain fixed maturity foreign-denominated bonds. The notional value of these derivatives matches the amortized cost of the hedged bonds.	$	525	$	318
Foreign currency swap contracts	Net investment hedge: To reduce the risk of changes in net assets due to changes in foreign currency spot exchange rates for certain foreign subsidiaries that conduct their business principally in Euros. The notional value of hedging instruments matches the hedged amount of subsidiary net assets.	$	439	$	-
Foreign currency forward contracts	Economic hedge: To hedge the foreign exchange related changes in fair values of a U.S. dollar-denominated fixed maturity bond portfolio to reflect the local currency for the Company‘s foreign subsidiary in South Korea. The notional value of hedging instruments generally aligns with the fair value of the hedged bond portfolio.	$	309	$	255

Concentration of Risk

The Company did not have a concentration of investments in a single issuer or borrower exceeding 10% of shareholders’ equity as of December 31, 2018 and 2017.

Net Investment Income

Accounting policy. When interest and principal payments on investments are current, the Company recognizes interest income when it is earned. The Company recognizes interest income on a cash basis when interest payments are delinquent based on contractual terms or when certain terms (interest rate or maturity date) of the investment have been restructured. For unconsolidated entities that are included in Other long-term investments, investment income is generally recognized according to the Company’s share of the reported income or loss on the underlying investments. Investment income attributed to the Company’s separate accounts is excluded from our earnings because associated gains and losses generally accrue directly to separate account policyholders.

The components of pre-tax net investment income for the years ended December 31 were as follows:

(In millions)	2018		2017		2016
Fixed maturities	$	1,009	$	946	$	899
Equity securities		28		14		4
Commercial mortgage loans		78		81		91
Policy loans		70		69		72
Other long-term investments		156		124		98
Short-term investments and cash		194		42		26
Total investment income		1,535		1,276		1,190
Less investment expenses		55		50		43
Net investment income	$	1,480	$	1,226	$	1,147

Real estate investments and securities partnerships with a carrying value of $150 million at December 31, 2018 and $191 million at December 31, 2017 were non-income producing during the preceding twelve months.

Realized Investment Gains And Losses

Accounting policy. Realized investment gains and losses are based on specifically identified assets and results from sales, investment asset write-downs, changes in the fair values of certain derivatives and equity securities and changes in valuation reserves on commercial mortgage loans.

The following realized gains and losses on investments for the years ended December 31 exclude amounts required to adjust future policy benefits for the run-off settlement annuity business, as well as realized gains and losses attributed to the Company’s separate accounts because those gains and losses generally accrue directly to separate account policyholders.

(In millions)	2018		2017		2016
Net realized investment (losses) gains, excluding investment asset write-downs	$	(34)	$	268	$	227
Write-downs on debt securities		(43)		(26)		(35)
Write-downs on other invested assets		(4)		(5)		(23)
Net realized investment (losses) gains, before income taxes	$	(81)	$	237	$	169

Net realized investment losses, excluding investment asset write-downs in 2018 represent primarily mark to market losses on equity securities and derivatives and net losses on sales of fixed maturities, partially offset by net gains on sales of real estate properties held in joint ventures. Net realized investment gains, excluding asset write-downs in 2017 and 2016 represented primarily gains on sales of real estate properties held in joint ventures and gains on sales of fixed maturities and equity securities. Realized losses on equity securities still held at December 31, 2018 were $33 million in 2018.

The following table presents sales information for available-for-sale securities (fixed maturities for the year ended in 2018, and fixed maturities and equity securities for the years ended in 2017 and 2016). Gross gains on sales and gross losses on sales exclude amounts required to adjust future policy benefits for the run-off settlement annuity business.

(In millions)	2018		2017		2016
Proceeds from sales	$	2,625	$	2,012	$	1,544
Gross gains on sales	$	28	$	103	$	83
Gross losses on sales	$	(47)	$	(18)	$	(7)

Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair value measurements

Note 10 – Fair Value Measurements

The Company carries certain financial instruments at fair value in the financial statements including fixed maturities, certain equity securities, short-term investments and derivatives. Other financial instruments are measured at fair value only under certain conditions, such as when impaired.

Fair value is defined as the price at which an asset could be exchanged in an orderly transaction between market participants at the balance sheet date. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a market participant, not the amount that would be paid to settle the liability with the creditor.

The Company’s financial assets and liabilities carried at fair value have been classified based upon a hierarchy defined by GAAP. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or a liability’s classification is based on the lowest level of input that is significant to its measurement. For example, a financial asset or liability carried at fair value would be classified in Level 3 if unobservable inputs were significant to the instrument’s fair value, even though the measurement may be derived using inputs that are both observable (Levels 1 and 2) and unobservable (Level 3).

The Company estimates fair values using prices from third parties or internal pricing methods. Fair value estimates received from third-party pricing services are based on reported trade activity and quoted market prices when available, and other market information that a market participant may use to estimate fair value. The internal pricing methods are performed by the Company’s investment professionals and generally involve using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality, as well as other qualitative factors. In instances where there is little or no market activity for the same or similar instruments, fair value is estimated using methods, models and assumptions that the Company believes a hypothetical market participant would use to determine a current transaction price. These valuation techniques involve some level of estimation and judgment that becomes significant with increasingly complex instruments or pricing models.

The Company is responsible for determining fair value, as well as for assigning the appropriate level within the fair value hierarchy, based on the significance of unobservable inputs. The Company reviews methodologies, processes and controls of third-party pricing services and compares prices on a test basis to those obtained from other external pricing sources or internal estimates. The Company performs ongoing analyses of both prices received from third-party pricing services and those developed internally to determine that they represent appropriate estimates of fair value. The controls executed by the Company include evaluating changes in prices and monitoring for potentially stale valuations. The Company also performs sample testing of sales values to confirm the accuracy of prior fair value estimates. The minimal exceptions identified during these processes indicate that adjustments to prices are infrequent and do not significantly impact valuations. Annually, we conduct an on-site visit of the most significant pricing service to review their processes, methodologies and controls. This on-site review includes a walk-through of inputs for a sample of securities held across various asset types to validate the documented pricing process.

Financial Assets and Financial Liabilities Carried at Fair Value

The following table provides information as of December 31, 2018 and 2017 about the Company’s financial assets and liabilities carried at fair value. Separate account assets that are also recorded at fair value on the Company’s Consolidated Balance Sheets are reported separately in the Separate Accounts section as gains and losses related to these assets generally accrue directly to policyholders.

As of December 31,
(In millions)	Quoted Prices in Active Markets for Identical Assets(Level 1)				Significant Other Observable Inputs(Level 2)				Significant Unobservable Inputs(Level 3)				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Financial assets at fair value
Fixed maturities
Federal government and agency	$	209	$	253	$	501	$	526	$	-	$	-	$	710	$	779
State and local government		-		-		985		1,287		-		-		985		1,287
Foreign government		-		-		2,356		2,442		6		45		2,362		2,487
Corporate		-		-		18,127		17,658		234		430		18,361		18,088
Mortgage and other asset-backed		-		-		372		343		138		154		510		497
Total fixed maturities		209		253		22,341		22,256		378		629		22,928		23,138
Equity securities⁽¹⁾		384		412		43		73		32		103		459		588
Short-term investments		-		-		316		199		-		-		316		199
Derivative assets		-		-		53		2		-		-		53		2
Real estate funds priced at NAV as a practical expedient⁽²⁾														239		N/A
Financial liabilities at fair value
Derivative liabilities	$	-	$	-	$	10	$	25	$	-	$	-	$	10	$	25
(1) Certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities) beginning in 2018. Such private equity securities of $70 million were included in the Level 3 amount as of December 31, 2017. See Note 9 for additional information on this accounting policy change.
(2) Certain real estate funds are carried at fair value (previously carried at cost) based on the Company's ownership share of the equity of the investee (Net Asset Value (“NAV“)) as a practical expedient including changes in the fair value of its underlying investments upon adopting ASU 2016-01 beginning in 2018. The funds have a quarterly redemption frequency, 45-90 day redemption notice period and $57 million in unfunded commitments as of December 31, 2018. See Note 9 for additional information on this accounting change. Prior years are designated as not applicable (“N/A“) in this table.

Level 1 Financial Assets

Inputs for instruments classified in Level 1 include unadjusted quoted prices for identical assets in active markets accessible at the measurement date. Active markets provide pricing data for trades occurring at least weekly and include exchanges and dealer markets.

Assets in Level 1 include actively-traded U.S. government bonds and exchange-listed equity securities. A relatively small portion of the Company’s investment assets are classified in this category given the narrow definition of Level 1 and the Company's investment asset strategy to maximize investment returns.

Level 2 Financial Assets and Financial Liabilities

Inputs for instruments classified in Level 2 include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are market observable or can be corroborated by market data for the term of the instrument. Such other inputs include market interest rates and volatilities, spreads and yield curves. An instrument is classified in Level 2 if the Company determines that unobservable inputs are insignificant.

Fixed maturities and equity securities. Approximately 96% of the Company’s investments in fixed maturities and equity securities are classified in Level 2 including most public and private corporate debt and hybrid equity securities, federal agency and municipal bonds, non-government mortgage-backed securities and preferred stocks. Third-party pricing services and internal methods often use recent trades of securities with similar features and characteristics because many fixed maturities do not trade daily. Pricing models are used to determine these prices when recent trades are not available. These models calculate fair values by discounting future cash flows at estimated market interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data, and industry and economic events. For mortgage-backed securities, inputs and assumptions may also include characteristics of the issuer, collateral attributes, prepayment speeds and credit rating.

Nearly all of these instruments are valued using recent trades or pricing models. Less than 1% of the fair value of investments classified in Level 2 represents foreign bonds that are valued using a single unadjusted market-observable input derived by averaging multiple broker-dealer quotes, consistent with local market practice.

Short-term investments are carried at fair value which approximates cost. The Company compares market prices for these securities to recorded amounts on a regular basis to validate that current carrying amounts approximate exit prices. The short-term nature of the investments and corroboration of the reported amounts over the holding period support their classification in Level 2.

Derivative assets and liabilities classified in Level 2 represent over-the-counter instruments such as foreign currency forward and swap contracts. Fair values for these instruments are determined using market observable inputs including forward currency and interest rate curves and widely published market observable indices. Credit risk related to the counterparty and the Company is considered when estimating the fair values of these derivatives. However, the Company is largely protected by collateral arrangements with counterparties and determined that no adjustment for credit risk was required as of December 31, 2018 or 2017. The nature and use of these derivative financial instruments are described in Note 9.

Level 3 Financial Assets and Financial Liabilities

Certain inputs for instruments classified in Level 3 are unobservable (supported by little or no market activity) and significant to their resulting fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.

The Company classifies certain newly issued, privately-placed, complex or illiquid securities in Level 3. Approximately 2% of fixed maturities and equity securities are priced using significant unobservable inputs and classified in this category.

Fair values of mortgage and other asset-backed securities as well as corporate and government fixed maturities are primarily determined using pricing models that incorporate the specific characteristics of each asset and related assumptions including the investment type and structure, credit quality, industry and maturity date in comparison to current market indices, spreads and liquidity of assets with similar characteristics. Inputs and assumptions for pricing may also include collateral attributes and prepayment speeds for mortgage and other asset-backed securities. Recent trades in the subject security or similar securities are assessed when available, and the Company may also review published research in its evaluation, as well as the issuer’s financial statements.

Quantitative Information about Unobservable Inputs

The following table summarizes the fair value and significant unobservable inputs used in pricing the following fixed maturities that were developed directly by the Company as of December 31, 2018 and 2017. The range and weighted average basis point amounts (“bps”) for liquidity and credit spreads (adjustment to discount rates) reflect the Company’s best estimates of the unobservable adjustments a market participant would make to calculate these fair values.

Mortgage and other asset-backed securities. The significant unobservable inputs used to value the following mortgage and other asset-backed securities are liquidity and weighting of credit spreads. An adjustment for liquidity is made as of the measurement date that considers current market conditions, issuer circumstances and complexity of the security structure when there is limited trading activity for the security. An adjustment to weight credit spreads is needed to value a more complex bond structure with multiple underlying collateral and no standard market valuation technique. The weighting of credit spreads is primarily based on the underlying collateral’s characteristics and their proportional cash flows supporting the bond obligations.

Corporate and government fixed maturities. The significant unobservable input used to value the following corporate and government fixed maturities is an adjustment for liquidity. An adjustment is needed to reflect current market conditions and issuer circumstances when there is limited trading activity for the security.

As of December 31,
	Fair Value				Unobservable Input	Unobservable Adjustment Range (Weighted Average)
(Fair value in millions )	2018		2017		Unobservable Input	2018	2017
Fixed maturities
Mortgage and other asset-backed securities	$	138	$	154	Liquidity	60- 340 (70) bps	60 - 370 (90) bps
					Weighting of credit spreads	190 - 340 (260) bps	180 - 290 (230) bps
Corporate and government fixed maturities		229		446	Liquidity	50 - 930 (230) bps	70 - 1,650 (300) bps
Securities not priced by the Company ⁽¹⁾		11		29
Total Level 3 fixed maturities	$	378	$	629

(1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.

Significant increases in liquidity or credit spreads would result in lower fair value measurements while decreases in these inputs would result in higher fair value measurements. The unobservable inputs are generally not interrelated and a change in the assumption used for one unobservable input is not accompanied by a change in the other unobservable input.

Changes in Level 3 Financial Assets and Financial Liabilities Carried at Fair Value

The following table summarizes the changes in financial assets and financial liabilities classified in Level 3 for the years ended December 31, 2018 and 2017. Gains and losses reported in this table may include net changes in fair value that are attributable to both observable and unobservable inputs.

(In millions)	Fixed Maturities & Equity Securities
	2018		2017
Balance at January 1,	$	732	$	776
Total gains (losses) included in shareholders‘ net income		(22)		25
Losses included in other comprehensive income		(8)		(11)
Gains (losses) required to adjust future policy benefits for settlement annuities⁽¹⁾		(8)		7
Purchases, sales, settlements
Purchases		22		133
Sales		(11)		(95)
Settlements		(70)		(74)
Total purchases, sales and settlements		(59)		(36)
Transfers into/(out of) Level 3
Transfers into Level 3		44		275
Transfers out of Level 3 ⁽²⁾		(269)		(304)
Total transfers into/(out of) Level 3		(225)		(29)
Balance at December 31,	$	410	$	732
Total gains (losses) included in shareholders' net income attributable to instruments held at the reporting date	$	(9)	$	(9)

(1) Amounts do not accrue to shareholders.
(2) Beginning in 2018, certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities). Private equity securities of $70 million as of December 31, 2017 are included in the 2018 Transfers out of Level 3 amount.

Total gains and losses included in shareholders’ net income in the table above are reflected in the Consolidated Statements of Income as realized investment gains (losses) and net investment income.

Gains and losses included in other comprehensive income in the tables above are reflected in net unrealized appreciation (depreciation) on securities in the Consolidated Statements of Comprehensive Income.

Transfers into or out of the Level 3 category occur when unobservable inputs, such as the Company’s best estimate of what a market participant would use to determine a current transaction price, become more or less significant to the fair value measurement. Transfers between Level 2 and Level 3 during 2018 and 2017 primarily reflected changes in liquidity and credit risk estimates for certain private placement issuers across several sectors. As noted above, transfers out of Level 3 during 2018 also include $70 million of private equity securities that are no longer carried at fair value.

Separate Accounts

Accounting policy. Separate account assets and liabilities are contractholder funds maintained in accounts with specific investment objectives. The assets of these accounts are legally segregated and are not subject to claims that arise out of any of the Company’s other businesses. These separate account assets are carried at fair value with equal amounts recorded for related separate account liabilities. The investment income and fair value gains and losses of these accounts generally accrue directly to the contractholders and, together with their deposits and withdrawals, are excluded from the Company’s Consolidated Statements of Income and Cash Flows. Fees and charges earned for mortality risks, asset management or administrative services are reported in either premiums or fees and other revenues. Investments that are measured using the practical expedient of NAV are excluded from the fair value hierarchy.

Fair values of separate account assets at December 31 were as follows:

(In millions)	Quoted Prices in Active Markets for Identical Assets(Level 1)				Significant Other Observable Inputs(Level 2)				Significant Unobservable Inputs(Level 3)				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Guaranteed separate accounts (See Note 19)	$	187	$	215	$	267	$	308	$	-	$	-	$	454	$	523
Non-guaranteed separate accounts ⁽¹⁾		1,204		1,536		5,216		5,298		233		292		6,653		7,126
Subtotal	$	1,391	$	1,751	$	5,483	$	5,606	$	233	$	292		7,107		7,649
Non-guaranteed separate accounts priced at NAV as a practical expedient⁽¹⁾														732		774
Total separate account assets													$	7,839	$	8,423

(1) Non-guaranteed separate accounts included $3.8 billion as of December 31, 2018 and $3.9 billion as of December 31, 2017 in assets supporting the Company‘s pension plans, including $0.2 billion classified in Level 3 as of December 31, 2018 and $0.3 billion classified in Level 3 as of December 31, 2017.

Separate account assets in Level 1 primarily include exchange-listed equity securities. Level 2 assets primarily include:

corporate and structured bonds valued using recent trades of similar securities or pricing models that discount future cash flows at estimated market interest rates as described above; and
actively-traded institutional and retail mutual fund investments.

Separate account assets classified in Level 3 primarily support Cigna’s pension plans, and include commercial mortgage loans as well as certain newly issued, privately-placed, complex, or illiquid securities that are priced using methods discussed above. Activity, including transfers into and out of Level 3, was not material for 2018 or 2017.

Separate account investments in securities partnerships, real estate, and hedge funds are generally valued based on the separate account’s ownership share of the equity of the investee (NAV as a practical expedient), including changes in the fair values of its underlying investments. Substantially all of these assets support the Cigna Pension Plans. The following table provides additional information on these investments.

						Unfunded
						Commitments	Redemption Frequency
	Fair Value as of					as of	(if currently	Redemption Notice
(In millions)	December 31, 2018		December 31, 2017		December 31, 2018		eligible)	Period
Securities partnerships	$	477	$	458	$	308	Not applicable	Not applicable
Real estate funds		237		239		-	Quarterly	30-90 days
Hedge funds		18		77		-	Up to annually, varying by fund	30-90 days
Total	$	732	$	774	$	308

Assets and Liabilities Measured at Fair Value under Certain Conditions

Some financial assets and liabilities are not carried at fair value each reporting period, but may be measured using fair value only under certain conditions, such as investments when they become impaired including investment real estate and commercial mortgage loans, and certain equity securities with no readily determinable fair value. Recorded values for these asset types representing less than 1% of total investments, were written down to their fair values, resulting in immaterial realized investment losses in 2018 and 2017.

Fair Value Disclosures for Financial Instruments Not Carried at Fair Value

The following table includes the Company’s financial instruments not recorded at fair value that are subject to fair value disclosure requirements at December 31, 2018 and 2017. In addition to universal life products and capital leases, financial instruments that are carried in the Company’s Consolidated Financial Statements at amounts that approximate fair value are excluded from the following table.

(In millions)			December 31, 2018				December 31, 2017
	Classification in Fair Value Hierarchy		Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,832	$	1,858	$	1,766	$	1,761
Long-term debt, including current maturities, excluding capital leases	Level 2	$	40,819	$	40,829	$	5,730	$	5,321

Fair values of off-balance sheet financial instruments were not material as of December 31, 2018 and 2017.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Variable Interest Entities	12 Months Ended
Variable Interest Entities	Dec. 31, 2018
Variable Interest Entities [Abstract]
Variable interest entities	Note 11 – Variable Interest Entities When the Company becomes involved with a variable interest entity, as well as when there is a change in the Company’s involvement with an entity, the Company must determine if it is the primary beneficiary and must consolidate the entity. The Company would be considered the primary beneficiary if it has the power to direct the entity’s most significant economic activities or has the right to receive benefits or obligation to absorb losses that could be significant to the entity. The Company evaluates the following criteria: the structure and purpose of the entity; the risks and rewards created by and shared through the entity; and the Company’s ability to direct its activities, receive its benefits and absorb its losses relative to the other parties involved with the entity including its sponsors, equity holders, guarantors, creditors and servicers. The Company determined it was not a primary beneficiary in any material variable interest entities as of December 31, 2018 and 2017. The Company’s involvement in variable interest entities where it is not the primary beneficiary is described below. Securities limited partnerships and real estate limited partnerships. The Company owns interests in securities limited partnerships and real estate limited partnerships that are defined as variable interest entities. These partnerships invest in the equity or mezzanine debt of privately held companies and real estate properties. General partners unaffiliated with the Company control decisions that most significantly impact the partnership’s operations and the limited partners do not have substantive kick-out or participating rights. The Company’s maximum exposure to these entities of $2.9 billion across approximately 130 limited partnerships as of December 31, 2018 includes $1.5 billion reported in long-term investments and commitments to contribute an additional $1.4 billion. The Company’s non-controlling interest in each of these limited partnerships is generally less than 10% of the partnership ownership interests. Other asset-backed and corporate securities. In the normal course of its investing activities, the Company also makes passive investments in certain asset-backed and corporate securities that are issued by variable interest entities whose sponsors or issuers are unaffiliated with the Company. The Company receives fixed-rate cash flows from these investments and the maximum potential exposure to loss is limited to the carrying amount of $0.6 billion as of December 31, 2018 that is reported in fixed maturities. The Company’s combined ownership interests are insignificant relative to the total principal amounts issued by these entities. The Company is also involved in real estate joint ventures, independent physician associations (“IPAs”) and a joint venture in India that are variable interest entities. The carrying values and maximum exposures associated with these arrangements are immaterial. The Company has not provided, and does not intend to provide, financial support to any of the above entities that it is not contractually required to provide. The Company performs ongoing qualitative analyses of its involvement with these variable interest entities to determine if consolidation is required.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details

Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2018

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Other Comprehensive Income (Loss)

Note 12 – Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI includes the Company’s share from entities accounted for using the equity method. AOCI excludes amounts required to adjust future policy benefits for the run-off settlement annuity business and a portion of deferred acquisition costs associated with the corporate-owned life insurance business. Generally, tax effects in AOCI are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCI reclassifications are recognized. As discussed in Note 2, the Company early adopted ASU 2018-02 effective January 1, 2018 and $229 million of stranded tax effects resulting from U.S. tax reform legislation enacted in 2017 were reclassified from AOCI to retained earnings. Changes in the components of accumulated other comprehensive income (loss) were as follows:

(In millions)		2018		2017		2016
Securities and Derivatives
Beginning balance	$	328	$	365	$	425
Reclassification adjustment to retained earnings related to U.S. tax reform legislation⁽¹⁾		65		-		-
Reclassification adjustment to retained earnings related to new financial instruments guidance⁽¹⁾		(4)		-		-
Reclassification adjustment from retained earnings related to new hedging guidance⁽¹⁾		(6)		-		-
Adjusted beginning balance		383		365		425
(Depreciation) appreciation on securities and derivatives		(512)		34		(48)
Tax benefit (expense)		100		(19)		6
Net (depreciation) appreciation on securities and derivatives		(412)		15		(42)
Reclassification adjustment for losses (gains) included in shareholders‘ net income (net realized investment losses (gains))		60		(81)		(29)
Reclassification adjustment for losses included in shareholders‘ net income (selling, general and administrative expenses)		-		1		1
Tax (expense) benefit		(13)		28		10
Net losses (gains) reclassified from AOCI to net income		47		(52)		(18)
Other comprehensive (loss), net of tax		(365)		(37)		(60)
Ending balance	$	18	$	328	$	365

Translation of foreign currencies
Beginning balance	$	(65)	$	(369)	$	(274)
Reclassification adjustment to retained earnings related to U.S. tax reform legislation⁽¹⁾		(4)		-		-
Adjusted beginning balance		(69)		(369)		(274)
Translation of foreign currencies		(152)		309		(95)
Tax (expense)		-		(5)		-
Net translation of foreign currencies		(152)		304		(95)
Ending balance	$	(221)	$	(65)	$	(369)



















(In millions)		2018		2017		2016
Postretirement benefits liability
Beginning balance	$	(1,345)	$	(1,378)	$	(1,401)
Reclassification adjustment to retained earnings related to U.S. tax reform legislation⁽¹⁾		(290)		-		-
Adjusted beginning balance		(1,635)		(1,378)		(1,401)
Reclassification adjustment for amortization of net losses from past experience and prior service costs (selling, general and administrative expenses)		69		64		64
Reclassification adjustment for settlement (selling, general and administrative expenses)		-		7		-
Tax (expense)		(15)		(24)		(22)
Net adjustments reclassified from AOCI to net income		54		47		42
Valuation update		93		(22)		(29)
Tax (expense) benefit		(20)		8		10
Net change due to valuation update		73		(14)		(19)
Other comprehensive income, net of tax		127		33		23
Ending balance	$	(1,508)	$	(1,345)	$	(1,378)

(1) See Note 2 for further information about adjustments resulting from the Company's adoption of new accounting standards in 2018.

Pension and Other Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2018

Pension and Other Postretirement Benefit Plans [Abstract]

Pension and Other Postretirement Benefit Plans

Note 13 – Pension and Other Postretirement Benefit Plans

About our Plans

Pension plans. We froze future benefit accruals for the Company’s principal domestic defined benefit pension plans in 2009. The Company also has foreign pension and other postretirement benefit plans that are immaterial to our results of operations, liquidity and financial position. Additionally, in connection with the acquisition of Express Scripts on December 20, 2018, the Company assumed a frozen cash balance retirement plan, the results of which are immaterial to our results of operations, liquidity and financial position.

Other postretirement benefit plans. The Company’s postretirement medical plan was frozen in 2013. The Company also offers certain postretirement life insurance benefits through various plans.

Accounting policy. The Company measures the assets and liabilities of its domestic pension and other postretirement benefit plans as of December 31. Benefit obligations are measured at the present value of estimated future payments based on actuarial assumptions. Changes in these assumptions are called net unrecognized actuarial gains (losses) because the Company uses the “corridor” method to account for changes in the benefit obligation when actual results differ from those assumed, or when assumptions change. Under the corridor method, net unrecognized actuarial gains (losses) are initially recorded in accumulated other comprehensive income. When the unrecognized gain (loss) exceeds 10% of the benefit obligation, that excess is amortized to expense over the expected remaining lives of plan participants. The net plan expense is reported in interest expense and other in the Consolidated Statements of Income.

For balance sheet purposes, we measure plan assets at fair value. When the actual return differs from the expected return, those differences are reflected in the net unrealized actuarial gain (loss) discussed above. However, to measure pension benefit costs, we use a “market-related” asset valuation that differs from the actual fair value for domestic pension plan assets invested in non-fixed income investments. The “market-related” value recognizes the difference between actual and expected long-term returns in the portfolio over five years, a method that reduces the short-term impact of market fluctuations on pension costs. The market-related asset value was approximately $4.0 billion, compared with a fair value of approximately $4.2 billion at December 31, 2018.

Funded Status and Amounts Included in Accumulated Other Comprehensive Income

The following table summarizes the projected benefit obligations and assets related to our domestic and international pension and other postretirement benefit plans as of, and for the years ended, December 31:

		Pension				Other Postretirement
		Benefits				Benefits
(In millions)	2018		2017		2018		2017
Change in benefit obligation
Benefit obligation, January 1	$	4,969	$	4,888	$	258	$	277
Service cost		3		3		-		-
Interest cost		169		186		8		9
Assumed in acquisition		137		-		-		-
Partial litigation settlement-attorneys' fees		32		-		-		-
(Gain) loss from past experience		(235)	⁽¹⁾	181	⁽²⁾	(31)		1
Benefits paid from plan assets		(314)		(277)		-		(3)
Benefits paid — other		(20)		(12)		(25)		(26)
Benefit obligation, December 31		4,741		4,969		210		258
Change in plan assets
Fair value of plan assets, January 1		4,281		3,977		2		5
Assumed in acquisition		96		-		-		-
Actual return on plan assets		85		418		-		-
Benefits paid		(314)		(277)		(2)		(3)
Contributions		3		163		-		-
Fair value of plan assets, December 31		4,151		4,281		-		2
Funded status	$	(590)	$	(688)	$	(210)	$	(256)

Liability in Consolidated Balance Sheets
Accrued expenses and other liabilities	$	(30)	$	(25)	$	(23)	$	(27)
Other non-current liabilities	$	(560)	$	(663)	$	(187)	$	(229)
(1) Gain reflects an increase in the discount rate and a favorable change in the mortality assumption.
(2) Loss reflects a decrease in the discount rate, partially offset by a favorable change in the mortality assumption.

We fund our qualified pension plans at least at the minimum amount required by the Employee Retirement Income Security Act of 1974 and the Pension Protection Act of 2006. For 2019, contributions to the qualified pension plans are expected to be immaterial. Future years’ contributions will ultimately be based on a wide range of factors including but not limited to asset returns, discount rates and funding targets. Non-qualified pension and other postretirement benefit plans are generally funded on a pay-as-you-go basis as there are no plan assets for these plans.

Benefit payments. The following benefit payments are expected to be paid in:


	Pension		Other Postretirement
(In millions)	Benefits		Benefits
2019	$	324	$	25
2020	$	311	$	23
2021	$	313	$	22
2022	$	316	$	20
2023	$	318	$	19
2024-2028	$	1,549	$	72

Amounts reflected in the pension and other postretirement benefit liabilities shown above that have not yet been reported in net income and therefore are included in accumulated other comprehensive loss consisted of the following as of December 31:

	Pension				Other
	Benefits				Postretirement Benefits
(In millions)	2018		2017		2018		2017
Unrecognized net gains (losses)	$	(1,980)	$	(2,113)	$	32	$	-
Unrecognized prior service cost		(6)		(6)		44		46
Postretirement benefits liability adjustment	$	(1,986)	$	(2,119)	$	76	$	46

Cost of Our Plans

Net pension and other postretirement benefits cost was as follows for the years ended December 31:

	Pension Benefits						Other Postretirement Benefits
(In millions)	2018		2017		2016		2018		2017		2016
Service cost	$	3	$	3	$	2	$	-	$	-	$	-
Interest cost		169		186		199		8		9		11
Expected long-term return on plan assets		(257)		(260)		(249)		-		-		-
Partial litigation settlement - attorneys' fees		32		-		-		-		-		-
Amortization of:
Net loss from past experience		70		66		65		1		1		1
Prior service cost		-		-		1		(2)		(3)		(3)
Settlement loss		-		7		-		-		-		-
Net plan cost	$	17	$	2	$	18	$	7	$	7	$	9

As further discussed in Note 19, Old Cigna and the Cigna Pension Plan are defendants in a class action lawsuit related to the Plan’s conversion of certain employees from an annuity to a cash balance benefit in 1997. In the fourth quarter of 2018, the Court ordered the Plan to pay $32 million representing the attorney fee portion of the settlement. This payment was recognized as an expense in 2018. An offsetting expense credit of $32 million was also recorded to reduce the litigation reserve held, resulting in no impact to net income in 2018 related to this matter. In 2019, barring any new order from the Court, it is expected that: 1) class participants will be notified of their increased benefits; 2) the plan will be amended; and 3) benefits will begin to be paid. However, the exact timing and amount of these actions remain uncertain. The Company’s remaining litigation reserve is adequate to cover the expected benefits due to class participants.

Assumptions Used for Pension and Other Postretirement Benefit Plans

Management determined the present value of the projected benefit obligation and the accumulated other postretirement benefit obligation and related benefit costs based on the following weighted average assumptions as of and for the years ended December 31:

	2018	2017
Discount rate:
Pension benefit obligation	4.23%	3.51%
Other postretirement benefit obligation	4.09%	3.37%
Pension benefit cost	3.51%	3.95%
Other postretirement benefit cost	3.37%	3.70%
Expected long-term return on plan assets:
Pension benefit cost	7.00%	7.25%
Other postretirement benefit cost	5.00%	5.00%
Mortality table for pension and postretirement benefit obligations	RP 2014 with MP 2018 projection scale	RP 2014 with MP 2017 projection scale

The Company used the Society of Actuaries mortality table RP2014 and the updated improvement scales published in 2017 and 2018 to value its benefit obligations because the Company’s mortality experience closely matched these tables based on internal studies. The updated improvement scales published in 2017 and 2018 both indicated that mortality improvement is expected to be lower than was originally projected when the study was first published in 2014, resulting in decreases to the benefit obligations in both years.

The Company sets discount rates by applying actual annualized yields for high quality bonds at various durations to the expected cash flows of the pension and other postretirement benefits liabilities. A discount rate curve is constructed using an array of bonds in various industries throughout the domestic market, but only selects those for the curve that have an above average return at each duration. Management believes that this curve is representative of the yields that the Company is able to achieve through its plan asset investment strategy.

Expected long-term rates of return on plan assets were developed considering actual long-term historical returns, expected long-term market conditions, plan asset mix and management’s investment strategy that continues a significant allocation to domestic and foreign equity securities as well as securities partnerships, real estate and hedge funds. Expected long-term market conditions take into consideration certain key macroeconomic trends including expected domestic and foreign GDP growth, employment levels and inflation.

Pension Plan Assets

As of December 31, 2018, pension assets included $3.8 billion invested in the separate accounts of Connecticut General Life Insurance Company and Life Insurance Company of North America, subsidiaries of the Company, as well as an additional $265 million invested directly in funds offered by the buyer of the retirement benefits business, and $116 million invested by others.

The fair values of pension assets by category are as follows as of December 31, 2018 and 2017.

(In millions)		2018		2017
Fixed maturities:
Federal government and agency	$	-	$	1
Corporate		1,446		1,124
Asset-backed		32		22
Fund investments		768		884
Total fixed maturities		2,246		2,031
Equity securities:
Domestic		506		689
International, including funds and pooled separate accounts⁽¹⁾		360		476
Total equity securities		866		1,165
Securities partnerships		477		457
Real estate funds, including pooled separate accounts⁽¹⁾		250		300
Commercial mortgage loans		110		140
Hedge funds		36		73
Guaranteed deposit account contract		107		63
Cash equivalents and other current assets, net		59		52
Total pension assets at fair value	$	4,151	$	4,281

(1) A pooled separate account has several participating benefit plans and each owns a share of the total pool of investments.

The Company’s current target investment allocation percentages (55% fixed income, 25% public equity securities and 20% in other investments, including private equity (securities partnerships) and real estate, are developed by management as guidelines, although the fair values of each asset category are expected to vary as a result of changes in market conditions. The Company would expect to further reduce the allocation to equity securities and other investments and increase the allocation to fixed income investments as funding levels improve.

See Note 10 for further details regarding how fair value is determined, including the level within the fair value hierarchy and the procedures we use to validate fair value measurements. The Company classifies substantially all fixed maturities in Level 2 for pension plan assets. These assets are valued using recent trades of similar securities or are fund investments priced using their daily net asset value that is the exit price. A substantial portion of domestic equity securities within pension assets are classified as Level 1, while international equity funds within pension assets are predominantly classified in Level 2 using daily net asset value.

Securities partnerships, real estate and hedge funds are valued using NAV as a practical expedient and are excluded from the fair value hierarchy. See Note 10 for additional disclosures related to these assets invested in the separate accounts of the Company’s subsidiaries. Certain securities as described in Note 10, as well as commercial mortgage loans and guaranteed deposit account contracts, are classified in Level 3 because unobservable inputs used in their valuation are significant.

401(k) Plans

The Company sponsors a 401(k) plan in which the Company matches a portion of employees’ pre-tax contributions. Participants in the plan may invest in various funds that invest in the Company’s common stock, several diversified stock funds, a bond fund or a fixed-income fund.

The Company may elect to increase its matching contributions if the Company’s annual performance meets certain targets. The Company’s annual expense for these plans was as follows:

(In millions)	2018		2017		2016
Expense	$	196	$	122	$	113

Employee Incentive Plans

12 Months Ended

Dec. 31, 2018

Employee Incentive Plans [Abstract]

Employee Incentive Plans

Note 14 – Employee Incentive Plans

A. About Our Plans

The People Resources Committee (the “Committee”) of the Board of Directors awards stock options, restricted stock, restricted stock units, deferred stock and strategic performance shares (“SPS”) to certain employees. The Committee has issued common stock instead of cash compensation. Prior to the acquisition of Express Scripts, the Company issued shares from Treasury stock for these awards. Following the acquisition, original issues shares were used.

Awards of Express Scripts options and restricted stock units were rolled over to Cigna stock options and restricted stock units in connection with the Express Scripts acquisition on December 20, 2018 as explained further in Note 3. Information in this footnote includes the effect of the Express Scripts rollover awards unless otherwise indicated.

The Company records compensation expense for stock and option awards over their vesting periods primarily based on the estimated fair value at the grant date. Fair value is determined differently for each type of award as discussed below.

Shares of common stock available for award at December 31 were as follows:

(In millions)	2018		2017		2016
Common shares available for award		25.7		14.0		6.8

B. Stock Options

Accounting policy. The Company awards options to purchase Cigna common stock at the market price of the stock on the grant date except for rollover option awards issued to Express Scripts employees in connection with the acquisition (see Note 3). Options vest over periods ranging from one to three years and expire no later than 10 years from grant date. Fair value is estimated using the Black-Scholes option-pricing model by applying the assumptions presented below. That fair value is reduced by options expected to be forfeited during the vesting period. The Company estimates forfeitures at the grant date based on our experience and adjusts the expense to reflect actual forfeitures over the vesting period. The fair value of options, net of forfeitures, is recognized in selling, general and administrative expenses on a straight line basis over the vesting period.

Black-Scholes option-pricing model assumptions and the resulting fair value of options are presented in the following table. The average fair value of options, and the expected option life exclude the rollover options granted to Express Scripts employees in connection with the acquisition. See Note 3 for further information.

		2018		2017		2016
Dividend yield		0.0%		0.0%		0.0%
Expected volatility		35.0%		35.0%		35.0%
Risk-free interest rate		2.5%		1.8%		1.2%
Expected option life		4.4 years		4.3 years		4.3 years
Weighted average fair value of options	$	64.18	$	46.38	$	42.01

The expected volatility reflects the past daily stock price volatility of Cigna stock. The Company does not consider volatility implied in the market prices of traded options to be a good indicator of future volatility because remaining traded options will expire within one year. The risk-free interest rate is derived using the four-year U.S. Treasury bond yield rate as of the award date for the primary annual grant. Expected option life reflects the Company’s historical experience.

The following table shows the status of, and changes in, common stock options during the last three years.

(Options in thousands)	2018				2017				2016
			Weighted				Weighted				Weighted
			Average				Average				Average
	Options		Exercise Price		Options		Exercise Price		Options		Exercise Price
Outstanding - January 1		6,156	$	100.79		7,097	$	82.01		6,433	$	68.86
Granted		7,080	$	143.62		1,230	$	149.17		1,336	$	139.20
Exercised		(771)	$	88.35		(2,072)	$	63.41		(577)	$	62.09
Expired or canceled		(95)	$	165.04		(99)	$	138.41		(95)	$	117.18
Outstanding - December 31		12,370	$	125.46		6,156	$	100.79		7,097	$	82.01
Options exercisable at year-end		9,446	$	114.22		3,894	$	77.36		4,409	$	58.36

Compensation expense of $61 million related to unvested stock options at December 31, 2018 will be recognized over the next two years (weighted average period).

The table below summarizes information for stock options exercised during the last three years:

(In millions)	2018		2017		2016
Intrinsic value of options exercised	$	86	$	218	$	41
Cash received for options exercised	$	68	$	131	$	36
Tax benefit from options exercised	$	8	$	41	$	11

The following table summarizes information for outstanding common stock options at December 31, 2018:

		Options		Options
		Outstanding		Exercisable
Number (in thousands)		12,370		9,446
Total intrinsic value (in millions)	$	804	$	715
Weighted average exercise price	$	125.46	$	114.22
Weighted average remaining contractual life		5.4 years		4.5 years

C. Restricted Stock

The Company awards restricted stock to the Company’s employees with vesting periods ranging from three to five years. Recipients of restricted stock awards accumulate dividends during the vesting period, but forfeit their awards and accumulated dividends if their employment terminates before the vesting date.

Accounting policy. Fair value of restricted stock awards is equal to the market price of Cigna’s common stock on the date of grant. This fair value is reduced by awards that are expected to forfeit. At the grant date, the Company estimates forfeitures based on experience and adjusts the expense to reflect actual forfeitures over the vesting period. This fair value, net of forfeitures, is recognized in selling, general and administrative expenses over the vesting period on a straight-line basis.

The following table shows the status of, and changes in, restricted stock awards during the last three years.

(Awards in thousands)	2018			2017			2016
		Weighted Average Fair Value at Award Date			Weighted Average Fair Value at Award Date			Weighted Average Fair Value at Award Date

	Grants/Units			Grants/Units			Grants/Units
Outstanding - January 1	1,295	$	126.44	1,309	$	97.78	1,642	$	72.58
Awarded	1,451	$	183.29	451	$	155.21	315	$	138.61
Vested	(560)	$	112.53	(409)	$	67.09	(591)	$	50.01
Forfeited	(48)	$	150.84	(56)	$	121.74	(57)	$	92.51
Outstanding - December 31	2,138	$	168.12	1,295	$	126.44	1,309	$	97.78

The fair value of vested restricted stock at the vesting date for the years ended December 31 was as follows:

(In millions)	2018		2017		2016
Fair value of vested restricted stock	$	107	$	62	$	82

Approximately 10,400 employees held 2.1 million restricted stock awards at the end of 2018 with $174 million of related compensation expense to be recognized over the next two years (weighted average period).

D. Strategic Performance Shares (“SPS”)

The Company awards SPSs to executives and certain other key employees generally with a performance period of three years. Half of these shares are subject to a market condition (total shareholder return relative to industry peer companies) and half are subject to a performance condition (cumulative adjusted net income). These targets are set by the Committee. Holders of these awards receive shares of Cigna common stock at the end of the performance period ranging anywhere from 0 to 200% of the original awards.

Accounting policy. Compensation expense for SPSs is recorded over the performance period. Fair value is determined at the grant date for “market condition” SPSs using a Monte Carlo simulation model and not subsequently adjusted regardless of the final outcome. Expense is initially accrued for “performance condition” SPSs based on the most likely outcome, but evaluated for adjustment each period for updates in the expected outcome. Expense is adjusted to the actual outcome (number of shares awarded times the share price at the grant date) at the end of the performance period. The Company estimates forfeitures at the grant date based on experience and adjusts the expense to reflect actual forfeitures over the vesting period.

The following table shows the status of, and changes in, SPSs during the last three years:

	2018			2017			2016
		Weighted			Weighted			Weighted
		Average Fair Value			Average Fair Value			Average Fair Value
(Awards in thousands)	Shares	at Award Date		Shares	at Award Date		Shares	at Award Date
Outstanding - January 1	778	$	136.57	942	$	109.14	1,188	$	81.68
Awarded	221	$	197.51	275	$	150.06	286	$	139.05
Vested	(269)	$	121.57	(386)	$	78.91	(494)	$	60.15
Forfeited	(23)	$	158.16	(53)	$	138.19	(38)	$	112.70
Outstanding - December 31	707	$	160.74	778	$	136.57	942	$	109.14

The fair value of vested SPSs at the vesting date for the years ended December 31 was as follows:

	2018				2017				2016
(Shares in thousands; $ in millions)	Shares		Fair Value		Shares		Fair Value		Shares		Fair Value
Shares of Cigna common stock distributed upon SPS vesting		380	$	73		476	$	70		768	$	109

Approximately 1,500 employees held 707,000 SPSs at the end of 2018 and $51 million of related compensation expense is expected to be recognized over the next two years. The amount of expense for “performance condition” SPSs may vary based on actual performance in 2019 and 2020.

E. One-Time Employee Stock Award

The Company granted most employees a one-time stock award in 2017 of five shares that immediately vested. Approximately 205,000 shares were issued in connection with this program at a price of $162.96, resulting in a pre-tax cost of $33 million.

F. Compensation Cost and Tax Effects of Share-based Compensation

The Company records tax benefits in shareholders’ net income during the vesting period based on the amount of expense being recognized. The difference between tax benefits based on the expense and the actual tax benefit realized are also recorded in net income when stock options are exercised, or when restricted stock and SPSs vest.

(In millions)	2018		2017		2016
Total compensation cost for shared-based awards	$	180	$	178	$	128
Tax benefits recognized	$	36	$	79	$	57

Goodwill, Other Intangibles, and Property and Equipment

12 Months Ended

Dec. 31, 2018

Goodwill Other Intangibles And Property And Equipment [Abstract]

Goodwill, Other Intangibles, and Property and Equipment

Note 15 – Goodwill, Other Intangibles and Property and Equipment

Goodwill

Accounting policy. Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets. The resulting goodwill is assigned to those reporting units expected to realize cash flows from the acquisition, allocated to reporting units based on relative fair values, primarily reported in the Health Services segment ($33.7 billion), the Integrated Medical segment ($10.5 billion) and, to a lesser extent, the International Markets segment ($0.3 billion).

The Company evaluates goodwill for impairment at least annually during the third quarter at the reporting unit level and writes it down through shareholders’ net income if impaired. Fair value of a reporting unit is generally estimated based on either market data or a discounted cash flow analysis using assumptions that the Company believes a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value include the discount rate and future cash flows. A discount rate is selected to correspond with each reporting unit’s weighted average cost of capital, consistent with that used for investment decisions considering the specific and detailed operating plans and strategies within that reporting unit. Projections of future cash flows for each reporting unit are consistent with our annual planning process for revenues, claims, operating expenses, taxes, capital levels and long-term growth rates.

Goodwill activity. Goodwill activity during 2018 and 2017 was as follows:

(In millions)		2018		2017
Balance at January 1,	$	6,164	$	5,980
Goodwill acquired, net		38,371		154
Impact of foreign currency translation		(30)		30
Balance at December 31,	$	44,505	$	6,164

The significant increase in goodwill during 2018 reflects the Company’s acquisition of Express Scripts as further discussed in Note 3.

Other Intangibles

Accounting policy. The Company’s other intangible assets include purchased customer and producer relationships, provider networks and trademarks. The fair value of purchased customer relationships and the amortization method were determined as of the dates of purchase using an income approach that relies on projected future net cash flows including key assumptions for customer attrition and discount rates. The Company amortizes other intangibles on an accelerated or straight-line basis over periods from 0.3 to 39 years. Management revises amortization periods if it believes there has been a change in the length of time that an intangible asset will continue to have value. Costs incurred to renew or extend the terms of these intangible assets are generally expensed as incurred.

Components of other assets, including other intangibles. Other intangible assets were comprised of the following at December 31:

			Accumulated	Net Carrying
(In millions)		Cost	Amortization	Value
2018
Customer relationships	$	31,451	1,213	30,238
Trade Name - Express Scripts		8,400	-	8,400
Other		560	195	365
Other intangible assets		40,411	1,408	39,003
Value of business acquired (reported in deferred policy acquisition costs)		665	102	563
Total	$	41,076	1,510	39,566
2017
Customer relationships	$	1,280	1,056	224
Other		291	170	121
Other intangible assets		1,571	1,226	345
Value of business acquired (reported in deferred policy acquisition costs)		232	86	146
Total	$	1,803	1,312	491

The significant increase reflects the intangible assets acquired from Express Scripts as discussed further in Note 3.

Property and Equipment

Accounting policy. Property and equipment is carried at cost less accumulated depreciation. Cost includes interest, real estate taxes and other costs incurred during construction when applicable. Internal-use software that is acquired, developed or modified solely to meet the Company’s internal needs, with no plan to market externally, is also included in this category. Costs directly related to acquiring, developing or modifying internal-use software are capitalized.

The Company calculates depreciation and amortization principally using the straight-line method generally based on the estimated useful life of each asset as follows: buildings and improvements, 10 to 40 years; purchased software, three to five years; internally developed software, three to seven years; and furniture and equipment (including computer equipment), three to 10 years. Improvements to leased facilities are depreciated over the lesser of the remaining lease term or the estimated life of the improvement. The Company considers events and circumstances that would indicate the carrying value of property, equipment or capitalized software might not be recoverable. An impairment charge is recorded if the Company determines the carrying value of any of these assets is not recoverable. The Company also reviews and shortens the estimated useful lives of these assets, if necessary.

Components of property and equipment. Property and equipment was comprised of the following as of December 31:

				Accumulated		Net Carrying
(In millions)		Cost		Amortization		Value
2018
Internal-use software	$	5,694	$	2,415	$	3,279
Other property and equipment
Assets recorded under capital leases⁽¹⁾		56		4		52
Other property and equipment not recorded under capital leases		2,208		977		1,231
Total other property and equipment		2,264		981		1,283
Total property and equipment	$	7,958	$	3,396	$	4,562
2017
Internal-use software	$	2,991	$	2,184	$	807
Other property and equipment
Assets recorded under capital leases⁽¹⁾		49		31		18
Other property and equipment not recorded under capital leases		1,573		835		738
Total other property and equipment		1,622		866		756
Total property and equipment	$	4,613	$	3,050	$	1,563

(1) Current capital lease agreements are for equipment and generally have a term of 48 months with the equipment expected to be returned to the lessor at termination.

Components of depreciation and amortization. Depreciation and amortization was comprised of the following for the years ended December 31:

(In millions)	2018		2017		2016
Internal-use software	$	323	$	298	$	303
Other property and equipment⁽¹⁾		146		153		158
Value of business acquired (reported in deferred policy acquisition costs)		16		18		20
Other intangibles		210		97		129
Total depreciation and amortization	$	695	$	566	$	610

(1) Other property and equipment includes amortization on assets recorded under capital leases of $9 million in 2018, $14 million in 2017 and $20 million in 2016.

The Company estimates annual pre-tax amortization for intangible assets, including internal-use software, over the next five calendar years to be as follows:

(In millions)	Pre-tax Amortization
2019	$	3,169
2020	$	2,164
2021	$	2,062
2022	$	1,844
2023	$	1,777

- Definition

Discloses the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain or loss on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables. Disclosure of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, building and production equipment. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures. This element may be used as a single block of text to include the entire PPE disclosure, including data and tables.

+ References + Details

Leases and Rentals

12 Months Ended

Dec. 31, 2018

Leases and Rentals [Abstract]

Leases and Rentals

Note 16 – Leases and Rentals

Description of operating leases. The Company’s operating leases are primarily for office space and certain computer and other equipment. Some of these leases include renewal options and other incentives that are amortized over the life of the lease. Leases active in 2018 had terms ranging from one month to 18 years.

Rental expense and payments. For the years ended December 31, net rental expenses for operating leases were approximately:

(In millions)	2018		2017		2016
Net rental expense for operating leases	$	162	$	162	$	151

Future net minimum rental payments under non-cancelable operating leases were approximately $860 million as of December 31, 2018, payable as follows:

(In millions)	Operating Lease Payments
2019	$	199
2020	$	182
2021	$	148
2022	$	116
2023	$	84
2024 and thereafter	$	132

The Company also has capital lease arrangements. See Note 15 and Note 5 for further information on assets recorded under capital leases and our related obligations.

Shareholders Equity and Dividend Restrictions

12 Months Ended

Dec. 31, 2018

Shareholders Equity And Dividend Restrictions [Abstract]

Stockholders' Equity And Dividend Restrictions

Note 17 – Shareholders’ Equity and Dividend Restrictions

State insurance departments and foreign jurisdictions that regulate certain of the Company’s subsidiaries prescribe accounting practices (differing in some respects from GAAP) to determine statutory net income and surplus. The Company’s life, accident and health insurance and Health Maintenance Organization (“HMO”) subsidiaries are regulated by such statutory requirements. Regulatory changes in the jurisdiction of one of our foreign insurance affiliates caused a significant increase in surplus in 2017, primarily from beginning to include deferred policy acquisition costs as an admitted asset. The statutory net income of the Company’s life, accident and health insurance and HMO subsidiaries for the years ended, and their statutory surplus as of December 31, were as follows:

(In billions)	2018		2017		2016
Net income	$	3.4	$	2.5	$	2.0
Surplus	$	12.2	$	10.4	$	8.5

The Company’s HMO and life, accident and health insurance subsidiaries are also subject to minimum statutory surplus requirements and may be required to maintain investments on deposit with state departments of insurance or other regulatory bodies. Additionally, these subsidiaries may be subject to regulatory restrictions on the amount of annual dividends or other distributions (such as loans or cash advances) that insurance companies may extend to their parent companies without prior approval. As of December 31, 2018, these amounts, including restricted GAAP net assets of the Company’s subsidiaries, were as follows:

(In billions)	2018
Minimum statutory surplus required by regulators	$	3.9
Investments on deposit with regulatory bodies	$	0.6
Maximum dividend distributions permitted in 2019 without regulatory approval	$	2.1
Maximum loans to the parent company permitted without regulatory approval	$	1.3
Restricted GAAP net assets of Cigna Corporation's subsidiaries	$	15.5

Permitted practices used by the Company’s insurance subsidiaries in 2018 that differed from prescribed regulatory accounting had an immaterial impact on statutory net income and surplus.

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes [Abstract]

Income Taxes

Note 18 – Income Taxes

Accounting policy. Deferred income taxes are reflected in the balance sheet for differences between the financial and income tax reporting bases of the underlying assets and liabilities, and established based upon enacted tax rates and laws. Deferred income tax assets are recognized when available evidence indicates that realization is more likely than not, and to the extent this standard is not met a valuation allowance is established. The deferred income tax provision generally represents the net change in deferred income tax assets and liabilities during the reporting period excluding adjustments to accumulated other comprehensive income or amounts recorded in connection with a business combination. The current income tax provision generally represents estimated amounts due on income tax returns for the year reported to various jurisdictions plus the effect of any uncertain tax positions. The Company recognizes a liability for uncertain tax positions if management believes the probability that the positions will be sustained is less than 50 percent.

Income taxes attributable to the Company’s foreign operations are generally provided using the respective foreign jurisdictions’ tax rate.

The Company’s foreign operations continue to retain a significant portion of their earnings overseas. These undistributed earnings are deployed outside of the United States in support of the liquidity and capital needs of our foreign operations as well as to support growth initiatives overseas. The Company generally does not intend to repatriate these earnings.

Income Tax Expense

The federal corporate income tax rate declined to 21% effective January 1, 2018 because of U.S. tax reform legislation enacted in late 2017. As a result, the Company’s U.S. income tax expense and effective tax rate were notably lower in 2018. Prior year consolidated tax expense included a $232 million charge due to U.S. tax reform, driven by revaluation of deferred tax balances and the deemed repatriation tax on accumulated foreign earnings. The Company has continued to evaluate the provisional tax reform adjustments first recorded in 2017. The one-year measurement period under SEC requirements has expired with only minor adjustments to the initial amounts recorded.

The components of income taxes for the years ended December 31 were as follows:

(In millions)	2018		2017		2016
Current taxes
U.S. income taxes	$	804	$	974	$	935
Foreign income taxes		185		122		95
State income taxes		47		36		32
Total current taxes		1,036		1,132		1,062
Deferred taxes (benefits)
U.S. income taxes (benefits)		(75)		204		69
Foreign income taxes		8		39		9
State income tax (benefits)		(34)		(1)		(4)
Total deferred taxes (benefits)		(101)		242		74
Total income taxes	$	935	$	1,374	$	1,136

Total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate for the following reasons:

		2018			2017				2016
(In millions)		$	%			$	%			$	%
Tax expense at nominal rate	$	752	21.0	%	$	1,262	35.0	%	$	1,043	35.0	%
Effect of U.S. tax reform legislation		(4)	(0.1)			232	6.4			-	-
Effect of foreign earnings		74	2.1			(70)	(1.9)			(57)	(1.9)
Health insurance industry tax		78	2.2			-	-			108	3.6
State income tax (net of federal income tax benefit)		10	0.3			23	0.6			18	0.6
Other		25	0.6			(73)	(2.0)			24	0.8
Total income taxes	$	935	26.1	%	$	1,374	38.1	%	$	1,136	38.1	%

Consolidated pre-tax income from the Company’s foreign operations was approximately 15% of the Company’s pre-tax income in 2018. The comparable amount in prior years was 14% in 2017 and 11% in 2016. South Korean operations produced a majority of the Company’s foreign pre-tax earnings.

The effective tax rate for 2018 of 26.1% was considerably lower than the 38.1% rate for 2017. The decline was due to the reduction in the U.S. tax rate, and was partially offset by reinstatement of the non-deductible health insurance industry tax. The health insurance industry tax will again be suspended for 2019.

The Company continues to retain a significant portion of its foreign earnings overseas, where they are generally subject to a higher tax rate than that imposed in the U.S. Additional deferred tax liabilities of approximately $135 million for foreign withholding taxes would have been recorded if these earnings were intended to be remitted. A portion of these withholding taxes may be eligible for credit against the Company’s U.S. tax liability.

Deferred Income Taxes

Deferred income tax assets and liabilities as of December 31 were as follows:

(In millions)	2018		2017
Deferred tax assets
Employee and retiree benefit plans	$	411	$	279
Other insurance and contractholder liabilities		402		358
Loss carryforwards		255		105
Other accrued liabilities		340		101
Other		205		91
Deferred tax assets before valuation allowance		1,613		934
Valuation allowance for deferred tax assets		(199)		(72)
Deferred tax assets, net of valuation allowance		1,414		862
Deferred tax liabilities
Depreciation and amortization		838		176
Acquisition-related basis differences		9,792		320
Policy acquisition expenses		211		190
Unrealized appreciation on investments and foreign currency translation		(29)		102
Other		55		35
Total deferred tax liabilities		10,867		823
Net deferred income tax (liabilities) assets	$	(9,453)	$	39

The net deferred tax balance changed significantly due to the Company’s acquisition of Express Scripts, primarily representing deferred tax liabilities on the intangible assets recognized in purchase accounting. No deferred tax liability has been recognized for goodwill that is nondeductible for tax purposes. Also certain prior year balances have been reclassified to align with our presentation as of December 31, 2018.

Management believes that future results will generally be sufficient to realize the Company’s gross deferred tax assets. The Company establishes a valuation allowance when it determines that it is not at least more likely than not the asset will be recognized. The Company has recognized deferred tax assets related to federal, state and foreign losses, a portion of which have been offset by a valuation allowance. There are multiple expiration dates associated with these losses, though a significant portion expires in 2021.

C. Uncertain Tax Positions

A reconciliation of unrecognized tax benefits for the years ended December 31 was as follows:

(In millions)	2018		2017		2016
Balance at January 1,	$	35	$	31	$	31
Increase due to prior year positions		40		-		-
Increase due to business combinations		860		-		-
Increase due to current year positions		6		7		10
Reduction related to settlements with taxing authorities		(1)		(1)		(2)
Reduction related to lapse of applicable statute of limitations		(12)		(2)		(8)
Balance at December 31,	$	928	$	35	$	31

The liability for uncertain tax positions has increased significantly due to the Company’s acquisition of Express Scripts, the majority of which would impact shareholder’s net income, if recognized. It is reasonably possible that the liability for uncertain tax positions could decline over the intervening twelve months.

The Company classifies net interest expense on uncertain tax positions as a component of income tax expense, but excludes this amount from the disclosed liability for uncertain tax positions. The liability for net interest expense was not material as of December 31, 2018 or 2017.

Other Tax Matters

The statute of limitations for Cigna’s consolidated income tax returns through 2014 has closed, and there are no pending examinations. The Company has filed an amended 2014 consolidated tax return and the claim is subject to Internal Revenue Service (“IRS”) review. The IRS has examined Express Scripts’ tax returns for 2010 through 2012, for which there is a significant disputed tax matter, and is currently examining returns for 2013 through 2015. The Company conducts business in a number of state and foreign jurisdictions, and may be engaged in multiple audit proceedings at any given time. Generally, no further state or foreign audit activity is expected for tax years prior to 2011 for Cigna’s entities and 2006 for Express Scripts’ entities.

Contingencies and Other Matters

12 Months Ended

Dec. 31, 2018

Contingencies And Other Matters [Abstract]

Contingencies and Other Matters

Note 19 – Contingencies and Other Matters

The Company, through its subsidiaries, is contingently liable for various guarantees provided in the ordinary course of business.

Financial Guarantees: Retiree and Life Insurance Benefits

The Company guarantees that separate account assets will be sufficient to pay certain life insurance or retiree benefits. For the majority of these benefits, the sponsoring employers are primarily responsible for ensuring that assets are sufficient to pay these benefits and are required to maintain assets that exceed a certain percentage of benefit obligations. If employers fail to do so, the Company or an affiliate of the buyer of the retirement benefits business (Prudential Retirement Insurance and Annuity Company or “Prudential”) has the right to redirect the management of the related assets to provide for benefit payments. As of December 31, 2018, employers maintained assets that exceeded the benefit obligations under these arrangements of approximately $455 million. Approximately 11% of these are reinsured by Prudential. The remaining guarantees are provided by the Company with minimal reinsurance from third parties. The Company establishes an additional liability if management believes that the Company will be required to make payment under the guarantees; there were no additional liabilities required for these guarantees, net of reinsurance, as of December 31, 2018. Separate account assets supporting these guarantees are classified in Levels 1 and 2 of the GAAP fair value hierarchy (see Note 10).

The Company does not expect that these financial guarantees will have a material effect on the Company’s consolidated results of operations, liquidity or financial condition.

B. Certain Other Guarantees

The Company had indemnification obligations as of December 31, 2018 in connection with acquisition and disposition transactions. These indemnification obligations are triggered by the breach of representations or covenants provided by the Company, such as representations for the presentation of financial statements, the filing of tax returns, compliance with law or the identification of outstanding litigation. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential amount due is subject to contractual limitations based on a percentage of the transaction purchase price, while in other cases limitations are not specified or applicable. The Company does not believe that it is possible to determine the maximum potential amount due under these obligations because not all amounts due under these indemnification obligations are subject to limitation. There were no liabilities for these indemnification obligations as of December 31, 2018.

C. Guaranty Fund Assessments

The Company operates in a regulatory environment that may require its participation in assessments under state insurance guaranty association laws. The Company’s exposure to assessments for certain obligations of insolvent insurance companies to policyholders and claimants is based on its share of business written in the relevant jurisdictions.

In first quarter 2017, the Commonwealth Court of Pennsylvania entered an order of liquidation of Penn Treaty Network America Insurance Company, together with its subsidiary American Network Insurance Company (collectively “Penn Treaty,” a long-term care insurance carrier), triggering guaranty fund coverage and a charge of approximately $130 million before-tax ($85 million after-tax). As of December 31, 2018, the recorded liability for this assessment was approximately $42 million. Updates to the amount of the Penn Treaty assessment were not material in 2018. A portion of this assessment is expected to be offset in the future by premium tax credits that will be recognized in the period received.

D. Legal and Regulatory Matters

The Company is routinely involved in numerous claims, lawsuits, regulatory inquiries and audits, government investigations, including under the federal False Claims Act and state false claims acts initiated by a government investigating body or by a qui tam relator’s filing of a complaint under court seal, and other legal matters arising, for the most part, in the ordinary course of managing a global health services business. Additionally, the Company has received and is cooperating with subpoenas or similar processes from various governmental agencies requesting information, all arising in the normal course of its business. Except for the specific matters noted below, the Company believes that the legal actions, regulatory matters, proceedings and investigations currently pending against it should not have a material adverse effect on the Company’s results of operations, financial condition or liquidity based upon our current knowledge and taking into consideration current accruals. This includes certain matters previously discussed in Express Scripts’ annual and quarterly reports that are no longer disclosed because they are not considered material legal proceedings for the combined company. Disputed tax matters arising from audits by the IRS or other state and foreign jurisdictions, including those resulting in litigation, are accounted for under GAAP guidance for uncertain tax positions. Further information on income tax matters can be found in Note 18.

Pending litigation and legal or regulatory matters that the Company has identified with a reasonably possible material loss are described below. When litigation and regulatory matters present loss contingencies that are both probable and estimable, the Company accrues the estimated loss by a charge to shareholders’ net income. The estimated loss is the Company’s best estimate of the probable loss at the time or an amount within a range of estimated losses reflecting the most likely outcome or the minimum amount of the range (if no amount is better than any other estimated amount in the range.) For material pending litigation and legal or regulatory matters discussed below, the Company provides disclosure in the aggregate of accruals and range of loss, or a statement that such information cannot be estimated. In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company. The Company has accrued approximately $190 million ($150 million after-tax) as of December 31, 2018 for the matters discussed below under “Litigation Matters” as well as litigation related to certain of the Company’s claim operating practices and disputes around reimbursement rates to providers. Due to numerous uncertain factors presented in these cases, it is not possible to estimate an aggregate range of loss (if any) for these matters at this time. In light of the uncertainties involved in these matters, there is no assurance that their ultimate resolution will not exceed the amounts currently accrued by the Company. An adverse outcome in one or more of these matters could be material to the Company’s results of operations, financial condition or liquidity for any particular period.

Litigation Matters

Amara cash balance pension plan litigation. In December 2001, Janice Amara filed a class action lawsuit in the U.S. District Court for the District of Connecticut against Cigna Corporation and the Cigna Pension Plan (the “Plan”) on behalf of herself and other similarly situated Plan participants affected by the 1998 conversion to a cash balance formula. The plaintiffs allege various violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), including that the Plan’s cash balance formula discriminates against older employees; that the conversion resulted in a wear-away period (when the pre-conversion accrued benefit exceeded the post-conversion benefit); and that the Plan communications contained inaccurate or inadequate disclosures about these conditions.

In 2008, the District Court (1) affirmed the Company’s right to convert to a cash balance plan prospectively beginning in 1998; (2) found for plaintiffs on the disclosure claim only; and (3) required the Company to pay pre-1998 benefits under the pre-conversion traditional annuity formula and post-1997 benefits under the post-conversion cash balance formula. From 2008 through 2015, this case has undergone a series of court proceedings that resulted in the original District Court order being largely upheld. In 2015, the Company submitted to the District Court its proposed method for calculating the additional pension benefits due to class members and plaintiffs responded in August 2015.

Since then, there has been continued litigation regarding the calculation of benefits, attorneys’ fees, and the administration of the remedy payments. On November 29, 2018, the Court ordered the Pension Plan to pay attorneys’ and incentive fees of $32 million, and that the Plan must pay any past due lump sums and back benefits within 90 days of the Order. These payments were made as ordered in December 2018. Barring any new Order by the Court impacting the timing, the Company expects to amend the Plan and commence remedy benefit payments in 2019. Once these events occur, the Plan will reflect the additional remedy benefits ordered by the Court as an increase to the pension liability (see Note 13) and the Company will reduce the remaining litigation reserve accordingly. Management believes that the Company’s remaining reserve is adequate as of December 31, 2018.

Litigation related to the Merger. Following announcement of the Company’s Merger Agreement with Express Scripts as discussed in Note 3, putative class action complaints (collectively the “complaints”) have been filed against Express Scripts and the Express Scripts board of directors. Certain of these complaints also include Cigna, Old Cigna, Cigna Merger Sub and Express Scripts Merger Sub as defendants. The complaints alleged that the registration statement filed in connection with the Merger (and certain amendments thereto) omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act, rendering the registration statement false and misleading. The parties entered into a settlement agreement in November 2018 and notices of voluntary dismissal have been filed.

Cigna Litigation with Anthem. In February 2017, the Company delivered a notice to Anthem terminating the 2015 merger agreement, and notifying Anthem that it must pay the Company the $1.85 billion reverse termination fee pursuant to the terms of the merger agreement. Also in February 2017, the Company filed suit against Anthem in the Delaware Court of Chancery (the “Chancery Court”) seeking declaratory judgments that the Company’s termination of the merger agreement was valid and that Anthem was not permitted to extend the termination date. The complaint also sought payment of the reverse termination fee and additional damages in an amount exceeding $13 billion, including the lost premium value to the Company’s shareholders caused by Anthem’s willful breaches of the merger agreement.

On February 15, 2017, the Chancery Court granted Anthem’s motion for a temporary restraining order and temporarily enjoined the Company from terminating the merger agreement. In May 2017, the Chancery Court denied Anthem’s motion for a preliminary injunction to enjoin Cigna from terminating the merger agreement but stayed its ruling pending Anthem’s determination as to whether to seek an appeal. Anthem subsequently notified Cigna and the Chancery Court that it did not intend to appeal the Chancery Court’s decision. As a result, the merger agreement was terminated.

The litigation between the parties remains pending. Trial commenced on February 25, 2019 and we await the outcome. We believe in the merits of our claims and dispute Anthem’s claims, and we intend to vigorously defend ourselves and pursue our claims. The outcomes of lawsuits are inherently unpredictable, and we may be unsuccessful in the ongoing litigation or any future claims or litigation.

Express Scripts Litigation with Anthem. In March 2016, Anthem filed a lawsuit in the United States District Court for the Southern District of New York alleging various breach of contract claims against Express Scripts relating to the parties’ rights and obligations under the periodic pricing review section of the pharmacy benefit management agreement between the parties, including allegations that Express Scripts failed to negotiate new pricing concessions in good faith, as well as various alleged service issues. Anthem requests the court enter declaratory judgment that Express Scripts is required to provide Anthem competitive benchmark pricing, that Anthem can terminate the agreement, and that Express Scripts is required to provide Anthem with post-termination services at competitive benchmark pricing for one year following any termination by Anthem. Anthem claims it is entitled to $13.0 billion in additional pricing concessions over the remaining term of the agreement as well as $1.8 billion for one year following any contract termination by Anthem, and $150 million in damages for service issues (“Anthem’s Allegations”). On April 19, 2016, in response to Anthem’s complaint, Express Scripts filed its answer denying Anthem’s Allegations in their entirety and asserting affirmative defenses and counterclaims against Anthem. The court subsequently granted Anthem’s motion to dismiss two of six counts of Express Scripts’ amended counterclaims. The current scheduling order runs through the completion of summary judgment briefing in December 2019. There is no tentative trial date.

Regulatory Matters

Civil Investigative Demand. The U.S. Department of Justice (“DOJ”) is conducting an industry review of Medicare Advantage organizations’ risk adjustment practices under Medicare Parts C and D, including medical chart reviews and health exams. The Company is currently responding to information requests (civil investigative demands) received from the DOJ (U.S. Attorney’s Offices for the Eastern District of Pennsylvania and the Southern District of New York). We will continue to cooperate with the DOJ’s investigation.

Disability claims regulatory matter. During the second quarter of 2013, the Company finalized an agreement with the Departments of Insurance for Maine, Massachusetts, Pennsylvania, Connecticut and California (together, the “monitoring states”) related to the Company’s long-term disability claims handling practices. The agreement requires primarily: (1) enhanced procedures related to documentation and disposition and (2) a two-year monitoring period followed by a re-examination that began in the second quarter of 2016. Management believes the Company has addressed the requirements of the agreement. If the monitoring states find material non-compliance with the agreement upon re-examination, the Company may be subject to additional costs and penalties or requests to change its business practices that could negatively impact future earnings for this business.

Condensed Consolidating Financial Information

12 Months Ended

Dec. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Condensed Consolidating Financial Information

Note 20 – Condensed Consolidating Financial Information

Effective with the Merger that closed on December 20, 2018 (see Note 3 for further information) the senior notes issued by Cigna, Old Cigna, Express Scripts, Inc. (“ESI”), Medco Health Solutions, Inc. (“Medco”), and Express Scripts became jointly and severally and fully and unconditionally (subject to certain customary release provisions, including sale, exchange, transfer or liquidation of the guarantor subsidiary) guaranteed by Cigna, Old Cigna, ESI, Medco and Express Scripts, as applicable. Details of these debt obligations are presented in Note 5. The following condensed consolidating financial information has been prepared in accordance with the requirements as prescribed by the SEC in Regulation S-X. The condensed consolidating financial information presented below is not indicative of what the financial position, results of operations or cash flows would have been had each of the entities operated as an independent company during the periods for various reasons, including, but not limited to, intercompany transactions and integration of systems.

The condensed consolidating financial information is presented separately for:

(i)

Cigna (the Parent Company), guarantor, the issuer of additional guaranteed obligations;

(ii)

Old Cigna (former Parent Company for the fiscal years ended 2017 and 2016), guarantor, the issuer of additional guaranteed obligations;

(iii)

Express Scripts, guarantor, the issuer of additional guaranteed obligations;

(iv)

ESI, guarantor, the issuer of additional guaranteed obligations;

(v)

Medco, guarantor, the issuer of additional guaranteed obligations;

(vi)

Non-guarantor subsidiaries, on a combined basis;

(vii)

Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among Cigna, Old Cigna, Express Scripts, ESI, Medco and the non-guarantor subsidiaries, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries; and

(viii)

Cigna and subsidiaries on a consolidated basis.

Condensed Consolidating Statements of Income
(In millions)
For the year ended December 31, 2018	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Revenues
Premiums	$	-	$	-	$	-	$	-	$	-	$	36,113	$	-	$	36,113
Fees and other revenues		-		-		-		23		7		5,596		(48)		5,578
Pharmacy revenues		-		-		-		1,866		418		4,165		(970)		5,479
Net investment income		123		1		2		-		-		1,354		-		1,480
Total revenues		123		1		2		1,889		425		47,228		(1,018)		48,650
Benefits and expenses
Medical costs and other benefit expenses		-		-		-		-		-		27,528		-		27,528
Pharmacy and other service costs		-		-		-		1,763		417		3,583		(970)		4,793
Selling, general and administrative expenses		200		535		-		44		8		11,195		(48)		11,934
Amortization of acquired intangible assets		-		-		-		94		13		128		-		235
Total benefits and expenses		200		535		-		1,901		438		42,434		(1,018)		44,490
Income (loss) from operations		(77)		(534)		2		(12)		(13)		4,794		-		4,160
Interest and other income (expense)		(244)		(264)		15		(17)		(10)		22		-		(498)
Intercompany interest income (expense)		(5)		(58)		(15)		7		5		66		-		-
Net realized investment (losses)		(1)		-		-		-		-		(80)		-		(81)
Income (loss) before income taxes		(327)		(856)		2		(22)		(18)		4,802		-		3,581
Total income tax (benefit) expense		(74)		(163)		-		(4)		(4)		1,180		-		935
Income (loss) before equity in earnings of subsidiaries		(253)		(693)		2		(18)		(14)		3,622		-		2,646
Equity in earnings (loss) of subsidiaries		2,890		3,613		(32)		(33)		29		-		(6,467)		-
Net income (loss)		2,637		2,920		(30)		(51)		15		3,622		(6,467)		2,646
Less: Net income attributable to noncontrolling interests		-		-		-		-		-		9		-		9
Shareholders' net income (loss)	$	2,637	$	2,920	$	(30)	$	(51)	$	15	$	3,613	$	(6,467)	$	2,637
Other comprehensive (loss), net of tax		(390)		(390)		-		-		-		(536)		926		(390)
Shareholders' comprehensive income (loss)	$	2,247	$	2,530	$	(30)	$	(51)	$	15	$	3,077	$	(5,541)	$	2,247

Condensed Consolidating Statements of Income
(In millions)
For the year ended December 31, 2017	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Revenues
Premiums	$	-	$	-	$	-	$	-	$	-	$	32,491	$	-	$	32,491
Fees and other revenues		-		-		-		-		-		5,110		-		5,110
Pharmacy revenues		-		-		-		-		-		2,979		-		2,979
Net investment income		-		-		-		-		-		1,226		-		1,226
Total revenues		-		-		-		-		-		41,806		-		41,806
Benefits and expenses
Medical costs and other benefit expenses		-		-		-		-		-		25,263		-		25,263
Pharmacy and other service costs		-		-		-		-		-		2,456		-		2,456
Selling, general and administrative expenses		-		195		-		-		-		9,835		-		10,030
Amortization of acquired intangible assets		-		-		-		-		-		115		-		115
Total benefits and expenses		-		195		-		-		-		37,669		-		37,864
Income (loss) from operations		-		(195)		-		-		-		4,137		-		3,942
Interest and other (expense)		-		(246)		-		-		-		(6)		-		(252)
Intercompany interest income (expense)		-		(18)		-		-		-		18		-		-
Debt extinguishment (costs)		-		(321)		-		-		-		-		-		(321)
Net realized investment gains		-		-		-		-		-		237		-		237
Income (loss) before income taxes		-		(780)		-		-		-		4,386		-		3,606
Total income tax (benefit) expense		-		(194)		-		-		-		1,568		-		1,374
Income (loss) before equity in earnings of subsidiaries		-		(586)		-		-		-		2,818		-		2,232
Equity in earnings of subsidiaries		-		2,823		-		-		-		-		(2,823)		-
Net income		-		2,237		-		-		-		2,818		(2,823)		2,232
Less: Net (loss) attributable to noncontrolling interests		-		-		-		-		-		(5)		-		(5)
Shareholders' net income	$	-	$	2,237	$	-	$	-	$	-	$	2,823	$	(2,823)	$	2,237
Other comprehensive income, net of tax		-		300		-		-		-		269		(269)		300
Shareholders' comprehensive income	$	-	$	2,537	$	-	$	-	$	-	$	3,092	$	(3,092)	$	2,537

Condensed Consolidating Statements of Income
(In millions)
For the year ended December 31, 2016	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Revenues
Premiums	$	-	$	-	$	-	$	-	$	-	$	30,824	$	-	$	30,824
Fees and other revenues		-		-		-		-		-		4,901		-		4,901
Pharmacy revenues		-		-		-		-		-		2,966		-		2,966
Net investment income		-		-		-		-		-		1,147		-		1,147
Total revenues		-		-		-		-		-		39,838		-		39,838
Benefits and expenses
Medical costs and other benefit expenses		-		-		-		-		-		24,341		-		24,341
Pharmacy and other service costs		-		-		-		-		-		2,468		-		2,468
Selling, general and administrative expenses		-		281		-		-		-		9,509		-		9,790
Amortization of acquired intangible assets		-		-		-		-		-		151		-		151
Total benefits and expenses		-		281		-		-		-		36,469		-		36,750
Income (loss) from operations		-		(281)		-		-		-		3,369		-		3,088
Interest and other (expense)		-		(244)		-		-		-		(34)		-		(278)
Intercompany interest income (expense)		-		(3)		-		-		-		3		-		-
Net realized investment gains		-		-		-		-		-		169		-		169
Income (loss) before income taxes		-		(528)		-		-		-		3,507		-		2,979
Total income tax (benefit) expense		-		(146)		-		-		-		1,282		-		1,136
Income (loss) before equity in earnings of subsidiaries		-		(382)		-		-		-		2,225		-		1,843
Equity in earnings of subsidiaries		-		2,249		-		-		-		-		(2,249)		-
Net income		-		1,867		-		-		-		2,225		(2,249)		1,843
Less: Net (loss) attributable to noncontrolling interests		-		-		-		-		-		(24)		-		(24)
Shareholders' net income	$	-	$	1,867	$	-	$	-	$	-	$	2,249	$	(2,249)	$	1,867
Other comprehensive (loss), net of tax		-		(132)		-		-		-		(154)		154		(132)
Shareholders' comprehensive income	$	-	$	1,735	$	-	$	-	$	-	$	2,095	$	(2,095)	$	1,735

Condensed Consolidating Balance Sheets
(In millions)
As of December 31, 2018	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Assets
Cash and cash equivalents	$	243	$	-	$	633	$	43	$	-	$	2,936	$	-	$	3,855
Investments		-		-		-		-		-		2,045		-		2,045
Accounts receivable, net		-		-		-		4,206		748		5,519		-		10,473
Inventories		-		-		-		-		-		2,821		-		2,821
Other current assets		14		59		-		310		-		1,063		(210)		1,236
Total current assets		257		59		633		4,559		748		14,384		(210)		20,430
Long-term investments		-		10		-		-		-		26,919		-		26,929
Reinsurance recoverables		-		-		-		-		-		5,507		-		5,507
Deferred policy acquisition costs		-		-		-		-		-		2,821		-		2,821
Property and equipment		-		-		-		2,432		-		2,130		-		4,562
Investments in subsidiaries		68,969		27,544		52,035		17,115		8,117		-		(173,780)		-
Intercompany receivables		-		4,505		-		7,425		2,335		24,882		(39,147)		-
Goodwill		-		-		31,049		-		-		13,456		-		44,505
Other intangible assets		-		-		8,400		18,962		7,040		4,601		-		39,003
Other assets		48		198		-		68		74		1,488		(246)		1,630
Separate account assets		-		-		-		-		-		7,839		-		7,839
TOTAL ASSETS	$	69,274	$	32,316	$	92,117	$	50,561	$	18,314	$	104,027	$	(213,383)	$	153,226
Liabilities
Current insurance and contractholder liabilities	$	-	$	-	$	-	$	-	$	-	$	6,801	$	-	$	6,801
Pharmacy and service costs payable		-		-		-		8,422		1,579		701		-		10,702
Accounts payable		22		-		-		834		4		3,506		-		4,366
Accrued expenses and other liabilities		396		182		129		1,387		189		4,998		(210)		7,071
Short-term debt		-		1,500		995		353		-		107		-		2,955
Total current liabilities		418		1,682		1,124		10,996		1,772		16,113		(210)		31,895
Non-current insurance and contractholder liabilities		-		-		-		-		-		19,974		-		19,974
Deferred tax liabilities, net		-		-		2,001		5,012		1,685		1,001		(246)		9,453
Other non-current liabilities		-		685		-		497		290		1,998		-		3,470
Intercompany payables		4,965		4,361		29,569		-		-		252		(39,147)		-
Long-term debt		22,863		5,110		10,932		24		506		88		-		39,523
Separate account liabilities		-		-		-		-		-		7,839		-		7,839
TOTAL LIABILITIES		28,246		11,838		43,626		16,529		4,253		47,265		(39,603)		112,154
Redeemable noncontrolling interests		-		-		-		-		-		37		-		37
TOTAL SHAREHOLDERS’ EQUITY		41,028		20,478		48,491		34,032		14,061		56,718		(173,780)		41,028
Noncontrolling interests		-		-		-		-		-		7		-		7
TOTAL EQUITY		41,028		20,478		48,491		34,032		14,061		56,725		(173,780)		41,035
TOTAL LIABILITIES AND EQUITY	$	69,274	$	32,316	$	92,117	$	50,561	$	18,314	$	104,027	$	(213,383)	$	153,226

Condensed Consolidating Balance Sheets
(In millions)
As of December 31, 2017	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Assets
Cash and cash equivalents	$	-	$	9	$	-	$	-	$	-	$	2,963	$	-	$	2,972
Investments		-		63		-		-		-		2,073		-		2,136
Accounts receivable, net		-		-		-		-		-		3,155		-		3,155
Inventories		-		-		-		-		-		228		-		228
Other current assets		-		31		-		-		-		789		-		820
Total current assets		-		103		-		-		-		9,208		-		9,311
Long-term investments		-		-		-		-		-		26,483		-		26,483
Reinsurance recoverables		-		-		-		-		-		5,763		-		5,763
Deferred policy acquisition costs		-		-		-		-		-		2,237		-		2,237
Property and equipment		-		-		-		-		-		1,563		-		1,563
Investments in subsidiaries		-		22,631		-		-		-		-		(22,631)		-
Intercompany receivables		-		200		-		-		-		2,980		(3,180)		-
Deferred tax assets, net		-		221		-		-		-		(182)		-		39
Goodwill		-		-		-		-		-		6,164		-		6,164
Other intangible assets		-		-		-		-		-		345		-		345
Other assets		-		-		-		-		-		1,431		-		1,431
Separate account assets		-		-		-		-		-		8,423		-		8,423
TOTAL ASSETS	$	-	$	23,155	$	-	$	-	$	-	$	64,415	$	(25,811)	$	61,759
Liabilities
Current insurance and contractholder liabilities		-		-		-		-		-		6,317		-		6,317
Pharmacy and service costs payable		-		-		-		-		-		305		-		305
Accounts payable, accrued expenses and other liabilities		-		270		-		-		-		3,877		-		4,147
Short-term debt		-		231		-		-		-		9		-		240
Total current liabilities		-		501		-		-		-		10,508		-		11,009
Non-current insurance and contractholder liabilities		-		-		-		-		-		20,530		-		20,530
Intercompany payables		-		2,980		-		-		-		200		(3,180)		-
Other non-current liabilities		-		851		-		-		-		1,987		-		2,838
Long-term debt		-		5,112		-		-		-		87		-		5,199
Separate account liabilities		-		-		-		-		-		8,423		-		8,423
TOTAL LIABILITIES		-		9,444		-		-		-		41,735		(3,180)		47,999
Redeemable noncontrolling interests		-		-		-		-		-		49		-		49
SHAREHOLDERS’ EQUITY		-		13,711		-		-		-		22,631		(22,631)		13,711
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	-	$	23,155	$	-	$	-	$	-	$	64,415	$	(25,811)	$	61,759

Condensed Consolidating Cash Flow Statements
(In millions)
For the year ended December 31, 2018	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Net cash provided by (used in) operating activities	$	145	$	2,416	$	(36)	$	80	$	(304)	$	3,987	$	(2,518)	$	3,770
Cash Flows from Investing Activities
Net change in loans due (from) affiliates		-		(4,412)		(200)		-		-		(1,121)		5,733		-
Proceeds from investments sold:
Fixed maturities and equity securities		-		-		-		-		-		2,655		-		2,655
Investment maturities and repayments:
Fixed maturities and equity securities		-		-		-		-		-		2,151		-		2,151
Commercial mortgage loans		-		-		-		-		-		215		-		215
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		63		-		-		-		671		-		734
Investments purchased or originated:
Fixed maturities and equity securities		-		(10)		-		-		-		(5,627)		-		(5,637)
Commercial mortgage loans		-		-		-		-		-		(312)		-		(312)
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		-		-		-		-		(1,189)		-		(1,189)
Property and equipment purchases, net		-		-		-		(6)		-		(522)		-		(528)
Acquisitions, net of cash acquired		(27,115)		-		1,676		23		-		961		-		(24,455)
Other, net		-		-		-		-		-		(12)		-		(12)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(27,115)		(4,359)		1,476		17		-		(2,130)		5,733		(26,378)
Cash Flows from Financing Activities
Net change in amounts due to (from) affiliates		4,437		1,121		(807)		(54)		304		732		(5,733)		-
Intercompany dividends paid		-		-		-		-		-		(2,518)		2,518		-
Deposits and interest credited to contractholder deposit funds		-		-		-		-		-		1,040		-		1,040
Withdrawals and benefit payments from contractholder deposit funds		-		-		-		-		-		(1,151)		-		(1,151)
Net change in short-term debt		-		1,400		-		-		-		87		-		1,487
Payments for debt extinguishment		-		-		-		-		-		-		-		-
Repayment of long-term debt		-		(131)		-		-		-		-		-		(131)
Net proceeds on issuance of long-term debt		22,856		-		-		-		-		-		-		22,856
Repurchase of common stock		(32)		(310)		-		-		-		-		-		(342)
Issuance of common stock		1		67		-		-		-		-		-		68
Other, net		(49)		(213)		-		-		-		(50)		-		(312)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		27,213		1,934		(807)		(54)		304		(1,860)		(3,215)		23,515
Effect of foreign currency rate changes on cash and cash equivalents		-		-		-		-		-		(24)		-		(24)
Net increase (decrease) in cash and cash equivalents		243		(9)		633		43		-		(27)		-		883
Cash and cash equivalents, January 1,		-		9		-		-		-		2,963		-		2,972
Cash and cash equivalents, December 31,	$	243	$	-	$	633	$	43	$	-	$	2,936	$	-	$	3,855

Condensed Consolidating Cash Flow Statements
(In millions)
For the year ended December 31, 2017	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Net cash provided by operating activities	$	-	$	602	$	-	$	-	$	-	$	4,242	$	(758)	$	4,086
Cash Flows from Investing Activities
Net change in loans due (from) affiliates		-		-		-		-		-		(1,955)		1,955		-
Proceeds from investments sold:
Fixed maturities and equity securities		-		-		-		-		-		2,012		-		2,012
Investment maturities and repayments:
Fixed maturities and equity securities		-		-		-		-		-		2,051		-		2,051
Commercial mortgage loans		-		-		-		-		-		335		-		335
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		-		-		-		-		1,702		-		1,702
Investments purchased or originated:
Fixed maturities and equity securities		-		-		-		-		-		(5,628)		-		(5,628)
Commercial mortgage loans		-		-		-		-		-		(430)		-		(430)
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		(6)		-		-		-		(1,059)		-		(1,065)
Property and equipment purchases, net		-		-		-		-		-		(471)		-		(471)
Acquisitions, net of cash acquired		-		-		-		-		-		(209)		-		(209)
Other, net		-		(11)		-		-		-		11		-		-
NET CASH (USED IN) INVESTING ACTIVITIES		-		(17)		-		-		-		(3,641)		1,955		(1,703)
Cash Flows from Financing Activities
Net change in amounts due to affiliates		-		1,955		-		-		-		-		(1,955)		-
Intercompany dividends paid		-		-		-		-		-		(758)		758		-
Deposits and interest credited to contractholder deposit funds		-		-		-		-		-		1,230		-		1,230
Withdrawals and benefit payments from contractholder deposit funds		-		-		-		-		-		(1,363)		-		(1,363)
Net change in short-term debt		-		100		-		-		-		(20)		-		80
Payments for debt extinguishment		-		(313)		-		-		-		-		-		(313)
Repayment of long-term debt		-		(1,250)		-		-		-		-		-		(1,250)
Net proceeds on issuance of long-term debt		-		1,581		-		-		-		-		-		1,581
Repurchase of common stock		-		(2,725)		-		-		-		-		-		(2,725)
Issuance of common stock		-		131		-		-		-		-		-		131
Other, net		-		(73)		-		-		-		51		-		(22)
NET CASH (USED IN) FINANCING ACTIVITIES		-		(594)		-		-		-		(860)		(1,197)		(2,651)
Effect of foreign currency rate changes on cash and cash equivalents		-		-		-		-		-		55		-		55
Net decrease in cash and cash equivalents		-		(9)		-		-		-		(204)		-		(213)
Cash and cash equivalents, January 1,		-		18		-		-		-		3,167		-		3,185
Cash and cash equivalents, December 31,	$	-	$	9	$	-	$	-	$	-	$	2,963	$	-	$	2,972

Condensed Consolidating Cash Flow Statements
(In millions)
For the year ended December 31, 2016	Cigna		Old Cigna		Express Scripts Holding Company		Express Scripts, Inc.		Medco Health Solutions, Inc.		Non-Guarantors		Eliminations and Consolidation Adjustments		Consolidated
Net cash provided by operating activities	$	-	$	376	$	-	$	-	$	-	$	4,230	$	(580)	$	4,026
Cash Flows from Investing Activities
Net change in loans due to affiliates		-		-		-		-		-		78		(78)		-
Proceeds from investments sold:
Fixed maturities and equity securities		-		-		-		-		-		1,544		-		1,544
Investment maturities and repayments:
Fixed maturities and equity securities		-		-		-		-		-		1,755		-		1,755
Commercial mortgage loans		-		-		-		-		-		316		-		316
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		-		-		-		-		1,431		-		1,431
Investments purchased or originated:
Fixed maturities and equity securities		-		-		-		-		-		(5,191)		-		(5,191)
Commercial mortgage loans		-		-		-		-		-		(165)		-		(165)
Other sales, maturities and repayments (primarily short-term and other long-term investments)		-		(3)		-		-		-		(1,695)		-		(1,698)
Property and equipment purchases, net		-		-		-		-		-		(461)		-		(461)
Acquisitions, net of cash acquired		-		-		-		-		-		(4)		-		(4)
Other, net		-		(8)		-		-		-		(93)		-		(101)
NET CASH (USED IN) INVESTING ACTIVITIES		-		(11)		-		-		-		(2,485)		(78)		(2,574)
Cash Flows from Financing Activities
Net change in amounts due (from) affiliates		-		(78)		-		-		-		-		78		-
Intercompany dividends paid		-		-		-		-		-		(580)		580		-
Deposits and interest credited to contractholder deposit funds		-		-		-		-		-		1,460		-		1,460
Withdrawals and benefit payments from contractholder deposit funds		-		-		-		-		-		(1,362)		-		(1,362)
Net change in short-term debt		-		(100)		-		-		-		(48)		-		(148)
Payments for debt extinguishment		-		-		-		-		-		-		-		-
Repayment of long-term debt		-		-		-		-		-		-		-		-
Net proceeds on issuance of long-term debt		-		-		-		-		-		-		-		-
Repurchase of common stock		-		(139)		-		-		-		-		-		(139)
Issuance of common stock		-		36		-		-		-		-		-		36
Other, net		-		(82)		-		-		-		10		-		(72)
NET CASH (USED IN) FINANCING ACTIVITIES		-		(363)		-		-		-		(520)		658		(225)
Effect of foreign currency rate changes on cash and cash equivalents		-		-		-		-		-		(10)		-		(10)
Net increase in cash and cash equivalents		-		2		-		-		-		1,215		-		1,217
Cash and cash equivalents, January 1,		-		16		-		-		-		1,952		-		1,968
Cash and cash equivalents, December 31,	$	-	$	18	$	-	$	-	$	-	$	3,167	$	-	$	3,185

Segment Information

12 Months Ended

Dec. 31, 2018

Segment Information [Abstract]

Segment Information [Text Block]

Note 21 – Segment Information

See Note 1 for a description of our segments. Effective with the fourth quarter of 2018, the Company uses adjusted income from operations on a before-tax basis as its principal financial measure of segment operating performance. Prior year segment information has been adjusted to reflect this change and a description of our basis for reporting segment operating results is outlined below. Intersegment transactions primarily reflect home delivery pharmacy sales to insured customers of the Integrated Medical segment. These transactions are eliminated in consolidation.

The Company uses “pre-tax adjusted income from operations” as its principal financial measure of segment operating performance because management believes it best reflects the underlying results of business operations and permits analysis of trends in underlying revenue, expenses and profitability. Pre-tax adjusted income from operations is defined as income before taxes excluding realized investment results, amortization of acquired intangible assets, results of transitioning clients and special items. Income or expense amounts that are excluded from adjusted income from operations because they are not indicative of underlying performance or the responsibility of operating segment management include:

Realized investment gains (losses), including changes in market values of certain financial instruments between balance sheet dates, as well as gains and losses associated with invested asset sales
Amortization of acquired intangible assets, because these relate to costs incurred for acquisitions
Results of transitioning clients, because those results are not indicative of ongoing results
Special items, if any, that management believes are not representative of the underlying results of operations due to the nature or size of these matters. Further context about these items is provided in the footnotes listed in the table below.

The following table presents the special items recorded by the Company for the years ended December 31, 2018, 2017 and 2016.

(In millions)
Description of Special Item Charges (Benefits) and Financial Statement Line Item(s)			After-tax		Before-tax
Year ended December 31, 2018
	Transaction-related costs
	- Selling, general and administrative expenses (see Note 3)	$	587	$	748
	- Interest expense and other (see Note 3)		179		227
	- Net investment income (see Note 3)		(97)		(123)
	Total transaction-related costs	$	669	$	852
	Charges associated with litigation matters (Selling, general and administrative expenses, see Note 19D.)	$	19	$	25
	Total charges associated with U.S. tax reform
	- Selling, general and administrative expenses	$	1	$	2
	- Tax expense		(3)		-
	Total charges associated with U.S. tax reform	$	(2)	$	2
Year ended December 31, 2017
	Transaction-related costs (see Note 3)	$	33	$	126
	Charges associated with U.S. tax reform
	- Selling, general and administrative expenses	$	(36)	$	(56)
	- Tax expense (see Note 18)		232		-
	Total charges associated with U.S. tax reform	$	196	$	(56)
	Debt extinguishment costs (see Note 5)	$	209	$	321
	Long-term care guaranty fund assessment (Selling, general and administrative expenses, see Note 19D. for details)	$	83	$	129
Year ended December 31, 2016
	Transaction-related costs (see Note 3)	$	147	$	166
	Charges associated with litigation matters (Selling, general and administrative expenses, see Note 19D. for details)	$	25	$	40
	Risk corridor allowance (Selling, general and administrative expenses)	$	80	$	124

Summarized segment financial information for the years ended December 31, was as follows:

(In millions)	Integrated Medical		Health Services		International Markets		Group Disability and Other		Corporate and Eliminations		Total
2018
Revenues from external customers⁽¹⁾	$	31,759	$	5,902	$	5,174	$	4,335	$	-	$	47,170
Inter-segment revenues		573		1,154		-		14		(1,741)		-
Net investment income		459		9		149		712		151		1,480
Total revenues		32,791		7,065		5,323		5,061		(1,590)		48,650
Revenue contributions from transitioning clients		-		(459)		-		-		-		(459)
Net realized investment results from equity method subsidiaries⁽²⁾		-		-		43		-		-		43
Special items reported in transaction-related costs		-		-		-		-		(123)		(123)
Adjusted revenues	$	32,791	$	6,606	$	5,366	$	5,061	$	(1,713)	$	48,111
Depreciation and amortization	$	466	$	120	$	55	$	53	$	1	$	695
Income (loss) before taxes	$	3,342	$	329	$	670	$	497	$	(1,257)	$	3,581
Pre-tax adjustments to reconcile to adjusted income from operations
Adjustment for transitioning clients		-		(62)		-		-		-		(62)
(Income) loss attributable to noncontrolling interests		-		-		(14)		-		-		(14)
Net realized investment (gains) losses⁽²⁾		36		-		61		25		2		124
Amortization of acquired intangible assets		99		113		18		5		-		235
Special items
Transaction-related costs		-		-		-		-		852		852
Charges associated with litigation matters		25		-		-		-		-		25
U.S. tax reform		-		-		-		2		-		2
Pre-tax adjusted income (loss) from operations	$	3,502	$	380	$	735	$	529	$	(403)	$	4,743



(In millions)	Integrated Medical		Health Services		International Markets		Group Disability and Other		Corporate and Eliminations		Total
2017
Revenues from external customers⁽¹⁾	$	28,193	$	3,250	$	4,774	$	4,363	$	-	$	40,580
Inter-segment revenues		476		988		-		12		(1,476)		-
Net investment income		366		3		127		700		30		1,226
Total revenues	$	29,035	$	4,241	$	4,901	$	5,075	$	(1,446)	$	41,806
Adjusted revenues	$	29,035	$	4,241	$	4,901	$	5,075	$	(1,446)	$	41,806
Depreciation and amortization	$	470	$	-	$	61	$	31	$	4	$	566
Income (loss) before taxes	$	2,859	$	288	$	667	$	614	$	(822)	$	3,606
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) loss attributable to noncontrolling interests		1		-		1		-		-		2
Net realized investment (gains) losses		(137)		-		(31)		(69)		-		(237)
Amortization of acquired intangible assets		93		-		17		5		-		115
Special items
Transaction-related costs		-		-		-		-		126		126
U.S. tax reform		-		-		-		(56)		-		(56)
Debt extinguishment costs		-		-		-		-		321		321
Long-term care guaranty fund assessment		106		-		-		23		-		129
Pre-tax adjusted income (loss) from operations	$	2,922	$	288	$	654	$	517	$	(375)	$	4,006

(1) Includes the Company’s share of the earnings of its joint ventures reported in the International Markets segment using the equity method of accounting.
(2) Beginning in 2018, includes the Company's share of the realized investment gains (losses) of its joint ventures reported using the equity method of accounting.















(In millions)	Integrated Medical		Health Services		International Markets		Group Disability and Other		Corporate and Eliminations		Total
2016
Revenues from external customers⁽¹⁾	$	26,695	$	3,169	$	4,424	$	4,403	$	-	$	38,691
Inter-segment revenues		395		894		-		-		(1,289)		-
Net investment income		305		3		113		705		21		1,147
Total revenues	$	27,395	$	4,066	$	4,537	$	5,108	$	(1,268)	$	39,838
Adjusted revenues	$	27,395	$	4,066	$	4,537	$	5,108	$	(1,268)	$	39,838
Depreciation and amortization	$	519	$	-	$	61	$	29	$	1	$	610
Income (loss) before taxes	$	2,417	$	268	$	497	$	324	$	(527)	$	2,979
Pre-tax adjustments to reconcile to adjusted income from operations
(Income) loss attributable to noncontrolling interests		2		-		18		-		-		20
Net realized investment (gains) losses		(116)		-		2		(54)		(1)		(169)
Amortization of acquired intangible assets		125		-		21		5		-		151
Special items
Transaction-related costs		-		-		-		-		166		166
Risk corridor allowance		124		-		-		-		-		124
Charges associated with litigation matters		40		-		-		-		-		40
Pre-tax adjusted income (loss) from operations	$	2,592	$	268	$	538	$	275	$	(362)	$	3,311

(1) Includes the Company’s share of the earnings of its joint ventures reported in the International Markets segment using the equity method of accounting.

Revenue from external customers includes premiums, pharmacy revenues, and fees and other revenues. The following table presents these revenues by premium, service and product type for the years ended December 31:

(In millions)	2018		2017		2016
Insurance premiums
Integrated Medical premiums (ASC 944)
Commercial Premiums
Risk	$	10,710	$	9,439	$	7,911
Stop loss		4,008		3,483		3,082
Other		1,038		917		886
Government
Medicare Advantage		5,832		5,534		6,621
Medicare Part D		764		764		1,122
Other		4,496		3,494		2,640
Total Integrated Medical premiums		26,848		23,631		22,262
International Markets premiums		5,043		4,619		4,273
Domestic disability, life and accident premiums		4,000		3,973		4,002
Other premiums		222		268		287
Total premiums		36,113		32,491		30,824
Services (ASC 606)
Fees		5,558		5,053		4,844
Other external revenues		20		57		57
2016-2017 other revenues adjustment				57		57

Total services		5,578		5,110		4,901
Products (Pharmacy revenues) (ASC 606)
Home delivery and specialty revenues		3,997		2,979		2,966
Network revenues		1,415		-		-
Other		67		-		-
Total pharmacy revenues		5,479		2,979		2,966
Total revenues from external customers	$	47,170	$	40,580	$	38,691

Foreign and U.S. revenues from external customers for the three years ended December 31 are shown below. The Company’s foreign revenues are generated by its foreign operating entities. In the periods shown, no foreign country contributed more than 5% of consolidated revenues from external customers.

(In millions)	2018		2017		2016
United States	$	42,773	$	36,555	$	35,011
South Korea		2,093		1,892		1,666
All other foreign countries		2,304		2,133		2,014
Total	$	47,170	$	40,580	$	38,691

Revenues from CMS were 16% of consolidated revenues in 2018 and 2017, compared with 19% in 2016. These amounts were reported in the Integrated Medical segment.

Quarterly Financial Data

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

Quarterly Financial Data (unaudited)

The following unaudited quarterly financial data is presented on a consolidated basis for each of the years ended December 31, 2018 and December 31, 2017. Quarterly financial results necessarily rely heavily on estimates. This and certain other factors, such as the seasonal nature of portions of the insurance business, suggest the need to exercise caution in drawing specific conclusions from quarterly consolidated results.

(In millions, except per share amounts)					Three Months Ended
	March 31,			June 30,			September 30,			December 31,
Consolidated Results
2018
Total revenues	$	11,413		$	11,480		$	11,457		$	14,300
Income before income taxes		1,218			1,102			1,033			228
Shareholders’ net income		915	⁽¹⁾		806	⁽¹⁾		772	⁽¹⁾		144	⁽¹⁾
Shareholders’ net income per share	1
Basic		3.78			3.32			3.18			0.56
Diluted		3.72			3.29			3.14			0.55
2017
Total revenues	$	10,428		$	10,374		$	10,372		$	10,632
Income before income taxes		890			1,134			824			758
Shareholders’ net income		598	⁽¹⁾		813	⁽¹⁾		560	⁽¹⁾		266	⁽¹⁾
Shareholders’ net income per share	1
Basic		2.34			3.20			2.25			1.09
Diluted		2.30			3.15			2.21			1.07
Stock and dividend data
2018
Price range of common stock — high	$	227.13		$	182.10		$	208.73		$	226.61
— low	$	163.02		$	163.80		$	166.88		$	176.52
Dividends declared per common share	$	0.04		$	-		$	-		$	-
2017
Price range of common stock — high	$	154.83		$	173.21		$	188.36		$	212.46
— low	$	133.52		$	146.70		$	166.81		$	183.08
Dividends declared per common share	$	0.04		$	-		$	-		$	-

(1) Shareholders’ net income includes the following after-tax charges (benefits), described in Note 21 to the Consolidated Financial Statements:
	March 31,			June 30,			September 30,			December 31,
2018 Transaction-related costs	$	50		$	109		$	108		$	402
2018 Charges associated with litigation matters		-			-			35			(16)
2018 U.S. tax reform		-			-			(5)			3

Total 2018 charges	$	50		$	109		$	138		$	389

	March 31,			June 30,			September 30,			December 31,
2017 U.S. tax reform	$	-		$	-		$	-		$	196
2017 Debt extinguishment costs		-			-			209			-
2017 Long-term care guaranty fund assessment		83			-			-			-
2017 Transaction-related costs		49			(47)			6			25
Total 2017 charges (benefits)	$	132		$	(47)		$	215		$	221

Schedule I - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2018

Condensed Financial Information of Cigna Corporation (Registrant) [Abstract]

Condensed Financial Information of Cigna Corporation (Registrant)

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF INCOME

	For the years ended
	December 31,
	Cigna*		Old Cigna*		Old Cigna*
(in millions)	2018		2017		2016
Revenues
Net investment income	$	123	$	-	$	-
Total revenues		123		-		-
Operating expenses
Selling, general and administrative expenses		200		195		281
Total operating expenses		200		195		281
Income (loss) from operations		(77)		(195)		(281)
Interest and other (expense)		(244)		(246)		(244)
Intercompany interest (expense)		(5)		(18)		(3)
Debt extinguishment costs		-		(321)		-
Realized investment (loss)		(1)		-		-
Loss before taxes		(327)		(780)		(528)
Income tax (benefit)		(74)		(194)		(146)
Loss of Parent Company		(253)		(586)		(382)
Equity in income of subsidiaries		2,890		2,823		2,249
Shareholders' net income		2,637		2,237		1,867
Shareholders’ other comprehensive income (loss)
Net unrealized (depreciation) on securities and derivatives		(365)		(37)		(60)
Net translation gains (losses) of foreign currencies		(152)		304		(95)
Postretirement benefits liability adjustment		127		33		23
Shareholders’ other comprehensive income (loss):		(390)		300		(132)
Shareholders' comprehensive income	$	2,247	$	2,537	$	1,735
* As described in Note 3, on December 20, 2018, through the "Merger," Old Cigna merged into a wholly-owned subsidiary of Cigna, and Cigna became the Registrant. Refer to Note 20 for Condensed Consolidated Financial Statements of Cigna and Old Cigna.

See Notes to Financial Statements on the following pages.

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

BALANCE SHEETS

	As of December 31,
	Cigna*		Old Cigna*
(in millions)	2018		2017
Assets
Cash and cash equivalents	$	243	$	9
Short-term investments		-		63
Other current assets		14		31
Total current assets		257		103
Intercompany receivable		-		200
Investments in subsidiaries		68,969		22,631
Other noncurrent assets		48		221
TOTAL ASSETS	$	69,274	$	23,155
Liabilities
Short-term debt	$	-	$	231
Other current liabilities		418		270
Total current liabilities		418		501
Intercompany payable		4,965		2,980
Long-term debt		22,863		5,112
Other noncurrent liabilities		-		851
TOTAL LIABILITIES		28,246		9,444
Shareholders’ Equity
Common stock (shares issued, 381 and 296; authorized, 600)		4		74
Additional paid-in capital		27,751		2,940
Accumulated other comprehensive loss		(1,711)		(1,082)
Retained earnings		15,088		15,800
Less treasury stock, at cost		(104)		(4,021)
TOTAL SHAREHOLDERS’ EQUITY		41,028		13,711
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	69,274	$	23,155
* As described in Note 3, on December 20, 2018, through the "Merger," Old Cigna merged into a wholly-owned subsidiary of Cigna, and Cigna became the Registrant. Refer to Note 20 for Condensed Consolidated Financial Statements of Cigna and Old Cigna.

See Notes to Financial Statements on the following pages.

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

STATEMENTS OF CASH FLOWS

	For the years ended
	December 31,
	Cigna*		Old Cigna*		Old Cigna*
(in millions)	2018		2017		2016
Cash Flows from Operating Activities
Shareholders’ net income	$	2,637	$	2,237	$	1,867
Adjustments to reconcile shareholders’ net income
to net cash provided by operating activities
Equity in income of subsidiaries		(2,890)		(2,823)		(2,249)
Dividends received from subsidiaries		-		758		580
Other liabilities		412		(224)		(9)
Debt extinguishment costs		-		321		-
Other, net		(14)		333		187
NET CASH PROVIDED BY OPERATING ACTIVITIES		145		602		376
Cash Flows from Investing Activities
Short-term investment purchased, net		-		(6)		(3)
Other, net		(27,115)		(11)		(8)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(27,115)		(17)		(11)
Cash Flows from Financing Activities
Net change in amounts due to (from) affiliates		4,437		1,955		(78)
Net change in short-term debt		-		100		(100)
Payments for debt extinguishment		-		(313)		-
Repayment of long-term debt		-		(1,250)		-
Net proceeds on issuance of long-term debt		22,856		1,581		-
Issuance of common stock		1		131		36
Common dividends paid		-		(10)		(10)
Repurchase of common stock		(32)		(2,725)		(139)
Tax withholding on stock compensation and other		(49)		(63)		(72)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		27,213		(594)		(363)
Net increase (decrease) in cash and cash equivalents		243		(9)		2
Cash and cash equivalents, beginning of year		-		18		16
Cash and cash equivalents, end of year	$	243	$	9	$	18
* As described in Note 3, on December 20, 2018, through the "Merger," Old Cigna merged into a wholly-owned subsidiary of Cigna, and Cigna became the Registrant. Refer to Note 20 for Condensed Consolidated Financial Statements of Cigna and Old Cigna.
(1) As required in adopting ASU 2016-09, the Company retrospectively reclassified $79 million cash payments from operating to financing activities in 2015. These payments were related to employee tax obligations associated with stock compensation. The comparable amounts reported in financing activities were $61 million in 2017 and $72 million in 2016.

See Notes to Financial Statements on the following pages.

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF CIGNA CORPORATION

(REGISTRANT)

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

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

Note 2 — See Note 5 – Debt included in Part II, Item 8 of this Form 10-K for a description of the short-term and long-term debt obligations of Cigna Corporation and its subsidiaries. Maturity of the Company’s long-term debt is as follows:

Note 3 — Intercompany liabilities of the Company consist primarily of payables to Old Cigna of $4.3 billion as of December 31, 2018. Intercompany liabilities of Old Cigna consisted primarily of payables to Cigna Holdings, Inc. of $2.8 billion as of December 31, 2017. Interest was accrued at an average monthly rate of 2.33% for 2018 and 1.47% for 2017.

Note 4 — The Company had guarantees of approximately $19.6 billion as of December 31, 2018. These guarantees are related to outstanding debt of certain wholly-owned subsidiaries as described in Note 5 and Note 20. In 2018, no payments have been made on these guarantees.

Schedule II - Valuation and Qualifying Accounts and Reserves

12 Months Ended

Dec. 31, 2018

Valuation and Qualifying Accounts and Reserves [Abstract]

Valuation and Qualifying Accounts and Reserves

CIGNA CORPORATION AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


			Charged		Charged
	Balance at		(Credited) to		(Credited)				Balance at
(in millions)	beginning		costs and		to other		Other		end
Description	of year		expenses		accounts		deductions		of year
2018
Allowance for doubtful accounts
Premiums, accounts and notes receivable	$	207	$	18	$	(3)	$	(5)	$	217
Deferred tax asset valuation allowance	$	72	$	(5)	$	132	$	-	$	199
Reinsurance recoverables	$	3	$	(1)	$	-	$	-	$	2
2017
Investment asset valuation reserves
Commercial mortgage loans	$	5	$	1	$	-	$	(6)	$	-
Allowance for doubtful accounts
Premiums, accounts and notes receivable	$	200	$	19	$	(11)	$	(1)	$	207
Deferred tax asset valuation allowance ⁽¹⁾	$	87	$	11	$	(26)	$	-	$	72
Reinsurance recoverables	$	3	$	-	$	-	$	-	$	3
2016
Investment asset valuation reserves
Commercial mortgage loans	$	15	$	-	$	-	$	(10)	$	5
Allowance for doubtful accounts
Premiums, accounts and notes receivable	$	75	$	134	$	(8)	$	(1)	$	200
Deferred tax asset valuation allowance	$	71	$	21	$	(5)	$	-	$	87
Reinsurance recoverables	$	3	$	-	$	-	$	-	$	3

(1) Deferred tax valuation allowance amount includes amount assumed from Express Scripts in 2018.

Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Basis of Presentation

The Consolidated Financial Statements include the accounts of Cigna Corporation and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These Consolidated Financial Statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company adopted Article 5 of Regulation S-X issued by the Securities and Exchange Commission effective December 31, 2018 in conjunction with the acquisition of Express Scripts. As a result, the Company now presents current assets and liabilities on its balance sheet. The Company reclassified realized investment gains (losses) from revenue and now reports them below income from operations with interest expense in our Consolidated Statements of Income, in conformity with Article 5. Prior years’ information was reclassified to conform to this new presentation.

Amounts recorded in the Consolidated Financial Statements necessarily reflect management’s estimates and assumptions about medical costs, investment valuation, interest rates and other factors. Significant estimates are discussed throughout these Notes; however, actual results could differ from those estimates. The impact of a change in estimate is generally included in earnings in the period of adjustment. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Recent Accounting Changes

Accounting Standard and Adoption Date	Requirements and Effects of Adopting New Guidance
GUIDANCE ADOPTED JANUARY 1, 2018
Revenue from Contracts with Customers (Accounting Standards Update (“ASU”) 2014-09 and related amendments)	Requires:
	•	Revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services
	•	Additional revenue-related disclosures
	Effects of adoption:
	•	Applies to the Company’s service and pharmacy contracts with customers
	•	Adopted through full retrospective restatement
	•	Cumulative-effect adjustment of $24 million after-tax was recorded, reducing the December 31, 2015 balance of retained earnings. This adjustment established a contract liability for service fee revenue billed that must be deferred and allocated to services performed after a customer contract terminates. Subsequent changes in the contract liability and the related impact to net income and per share amounts since adoption were immaterial.
	•	Immaterial reclassifications were made to prior periods in the Consolidated Statements of Income to conform to the current presentation. The ASU and related interpretive guidance provide clarification on topics including whether all or a part of a contract is within its scope, and the definition of a customer. Companies are required to identify and evaluate distinct performance obligations within their contracts. These clarifications resulted in reclassifications within the Integrated Medical segment affecting premiums, fees and other revenues, benefit expenses, and selling, general and administrative expenses and had no impact on revenue recognition patterns or net income.
	Expedients and exemptions elected:
	•	Incremental costs of obtaining service and pharmacy contracts for short-term arrangements are expensed as incurred.
	•	The Company does not disclose information about the aggregate amount of transaction price allocated to remaining performance obligations as its contracts are either short-term, or the remaining transaction price consists of variable consideration that relates specifically to wholly unsatisfied future periods of service. See the discussion of the Company’s accounting policies for fees and pharmacy revenues beginning on page 91.

Accounting Standard and Adoption date	Requirements and Effects of Adopting New Guidance
GUIDANCE ADOPTED JANUARY 1, 2018
Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01)	Requires:
	•	Entities to measure equity investments at fair value in net income if they are neither consolidated nor accounted for under the equity method
	Effects of adoption:
	•	Certain limited partnership interests previously carried at cost of approximately $200 million were increased to fair value of approximately $275 million on January 1, 2018. Subsequent changes in fair value are reported in net investment income.
	•	Changes in fair value for equity securities having a readily determinable fair value that were previously reported in accumulated other comprehensive income (“AOCI”) are now reported in net realized investment gains (losses).
	•	Cumulative-effect adjustment of $62 million after-tax was recorded, increasing the opening balance of retained earnings in 2018.
	•	See Notes 9 and 10 for updated disclosures about equity securities.
Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12) Early adopted as of January 1, 2018	Guidance:
	•	Relaxes eligibility requirements for financial and nonfinancial hedging strategies for hedge accounting and changes how companies assess effectiveness
	•	Amends presentation and disclosure requirements to improve transparency about the uses and results of hedging programs
	Effects of adoption:
	•	An immaterial amount of retained earnings was reclassified to AOCI, decreasing the opening balance in 2018, for a portion of the hedging instruments that was previously excluded from the assessment of hedge effectiveness for fair value hedges.
	•	See Note 9 for the Company’s disclosures about derivatives.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02)Early adopted as of January 1, 2018	Guidance:
	•	Allows companies to reclassify the tax effects stranded in AOCI to retained earnings as a result of H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (referred to throughout this Form 10-K as “U.S. tax reform” or “U.S. tax reform legislation”)
	•	Requires additional disclosures of the Company’s accounting policy for releasing income tax effects from AOCI
	•	Allows companies to apply the guidance retrospectively or in the period of adoption
	Effects of adoption: AOCI of $229 million was reclassified to retained earnings, increasing the opening balance in 2018. See Note 12 for additional information including accounting policy disclosures.

Accounting Standard and Effective Date		Requirements and Expected Effects of New Guidance Not Yet Adopted
Leases (ASU 2016-02 and related amendments) Required as of January 1, 2019	Requires:
	•	Balance sheet recognition of assets and liabilities arising from leases, including leases embedded in other contracts
	•	Additional disclosures of the amount, timing and uncertainty of cash flows from leases
	•	Modified retrospective approach for leases in effect as of and after the date of adoption with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company will adopt this ASU in the first quarter of 2019 on a modified retrospective basis and will not restate comparative periods. While we are still finalizing our adoption procedures, we estimate the primary impact to our Consolidated Balance Sheet will be an increase to assets and liabilities of approximately $700 million for the right-of-use asset and corresponding lease liability related to existing operating leases. We do not expect the impact to retained earnings to be material.
	•	The Company elected the optional practical expedient to retain the current classification of leases, and therefore, we do not expect a material impact to the Consolidated Statements of Income or Cash Flows.
	•	The Company has implemented a new lease system and developed requisite changes to internal controls over financial reporting.
	•	The Company is continuing to work to develop required disclosures.
	•	The Company adopted this new guidance as of the effective date and will not present comparative periods in the financial statements, as recently allowed.
Measurement of Credit Losses on Financial Instruments (ASU 2016-13)Required as of January 1, 2020, with early adoption permitted as of January 1, 2019	Requires:
	•	A new approach using expected credit losses to estimate and recognize credit losses for certain financial instruments such as mortgage loans, reinsurance recoverables and other receivables when such instruments are first originated or acquired.
	•	Changes in the criteria for impairment of available-for-sale debt securities
	•	Adoption using a modified retrospective approach with a cumulative-effect adjustment recorded in retained earnings
	Expected effects:
	•	The Company is continuing to evaluate this new standard and its effects on our financial statements and disclosures. We expect to adopt the standard as of January 1, 2020.
	•	An additional allowance for future expected credit losses for certain financial instruments may be required at adoption.
Simplifying the Test for Goodwill Impairment (ASU 2017-04)Required as of January 1, 2020, with early adoption permitted as of January 1, 2017	Guidance:
	•	Simplifies the accounting for goodwill impairment by eliminating the need to determine the fair value of individual assets and liabilities of a reporting unit to measure a goodwill impairment
	•	Redefines the amount of goodwill impairment to equal the amount by which a reporting unit’s carrying value exceeds its fair value, limited to the total amount of goodwill of the reporting unit
	•	Requires prospective adoption
	Expected effects:
	•	The Company is evaluating this new standard and its expected timing of adoption.

Accounting Standard and Effective Date		Requirements and Expected Effects of New Guidance Not Yet Adopted
Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12)Required as of January 1, 2021	Requires (for insurance entities that issue long-duration contracts):
	•	Cash flow assumptions used to measure the liability for future policy benefits for traditional and limited-pay contract to be reconsidered at least annually with any changes reflected in net income.
	•	Discount rate assumptions to be reviewed quarterly (based on an upper-medium grade (low credit risk) fixed-income instrument yield that maximizes the use of observable market inputs) with any changes reflected in other comprehensive income.
	•	Deferred policy acquisition costs to be amortized on a constant-level basis over the expected term of the related contract.
	•	Fair value measurement of all market risk benefits.
	•	Additional disclosures, including liability rollforwards and information about significant inputs, judgments, assumptions and methods used in measurement.
	•	Transition methods at adoption vary:
		-	Changes to the liability for future policy benefits will use a modified retrospective approach (applied to all contracts on the basis of their carrying amounts as of the beginning of the earliest period presented), with an option to elect a full retrospective transition under certain criteria.
		-	Deferred policy acquisition costs are to be transitioned consistent with the method applied to the liability for future policyholder benefits.
		-	Market risk benefits are required to transition using retrospective application.
	Expected effects:
	•	The Company is evaluating the impact of this newly-issued guidance, but it is expected to have a significant impact on our processes, controls, systems and financial results. The new guidance will apply to insurance products predominantly sold in the International Markets segment and Group Disability and Other.

These accounts receivable balances primarily include amounts due from clients, third-party payors, customers and pharmaceutical manufacturers. Receivables totaling $1.2 billion related to the acquired Express Scripts business are unbilled as of December 31, 2018 and are typically billed to PBM clients within 30 days based on contractual billing schedules. Unbilled receivables for medical benefit management services represent amounts due from clients at contracted rates, and are billed when settlement provisions for capitated risk contracts are met, at least annually.

The receivables balances above are reported net of allowances for doubtful accounts of $217 million as of December 31, 2018 and $210 million as of December 31, 2017. The allowances are based on the current status of each customer’s receivable balance as well as current economic and market conditions and a variety of other factors including the length of time the receivables are past due, the financial health of customers and our past experience. Receivables are written off against allowances only when such amounts are determined to be not recoverable and all collection attempts have failed. We regularly review the adequacy of these allowances based on a variety of factors, including age of the outstanding receivable and collection history. When circumstances related to specific collection patterns change, estimates of the recoverability of receivables are adjusted.

Express Scripts’ receivables were recorded at their estimated fair values at the acquisition date. These fair values considered estimated discounts and claims adjustments issued to customers in the form of client credits, and amounts from third-party payors and pharmaceutical manufacturers that are not considered realizable based on contract terms and historical payment experience.

C. Inventories

Inventories consist of prescription drugs and medical supplies and are stated at the lower of first-in-first-out cost or net realizable value.

D. Reinsurance Recoverables

Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the Company’s insurance businesses. Most reinsurance recoverables are classified as non-current assets. The current portion of reinsurance recoverables is reported in other current assets and consists primarily of recoverables on paid claims expected to be settled within one year. Reinsurance recoverables are presented net of allowances for uncollectible reinsurance that were immaterial as of December 31, 2018 and 2017.

E. Deferred Policy Acquisition Costs

Costs eligible for deferral include incremental, direct costs of acquiring new or renewal insurance and investment contracts and other costs directly related to successful contract acquisition. Examples of deferrable costs include commissions, sales compensation and benefits, policy issuance and underwriting costs and premium taxes. The Company records acquisition costs differently depending on the product line. Acquisition costs for:

Supplemental health, life and accident insurance products (primarily individual products) that comprise the majority of the Company’s deferred policy acquisition costs and group health and accident insurance products are deferred and amortized, generally in proportion to the ratio of periodic revenue to the estimated total revenues over the contract periods.
Universal life products are deferred and amortized in proportion to the present value of total estimated gross profits over the expected lives of the contracts.
Other products are expensed as incurred.

Deferred policy acquisition costs also include the value of business acquired (“VOBA”) for certain acquisitions with material long-duration insurance contracts. The Company recorded amortization of deferred policy acquisition costs of $406 million in 2018, $322 million in 2017 and $292 million in 2016 primarily in selling, general and administrative expenses.

Each year, deferred policy acquisition costs are tested for recoverability. For universal life and other individual products, management estimates the present value of future revenues less expected payments. For group health and accident insurance products, management estimates the sum of unearned premiums and anticipated net investment income less future expected claims and related costs. If management’s estimates of these sums are less than the deferred costs, the Company reduces deferred policy acquisition costs and records an additional expense.

F. Other Assets (Current and Non-Current)

Other current assets consist primarily of prepaid expenses, accrued investment income and the current portion of reinsurance recoverables. Other non-current assets consist primarily of GMIB assets and various other insurance-related assets. See Note 8 for the Company’s accounting policy for GMIB assets. Additionally, other non-current assets include the carrying value of our equity-method investments in joint ventures in China, India, the U.S. and other foreign jurisdictions.

G. Redeemable Noncontrolling Interests

Products and services are offered in Turkey and India through joint venture entities. The Company is the principal equity holder and primary beneficiary of the Turkey joint venture and accordingly, this entity is consolidated. In 2017, Cigna modified the agreement governing its joint venture in India due to changes in the local regulatory environment that require control by a local partner. As a result of the changes in the joint venture agreement, the Company determined that it is no longer the primary beneficiary of the joint venture and, effective with the third quarter of 2017, no longer consolidates its results.

Redeemable noncontrolling interests on our Consolidated Balance Sheets represent the Turkey joint venture partner’s preferred and common stock interests in the entity as of December 31, 2018 and 2017. Our joint venture partner may choose to require the Company to purchase their redeemable noncontrolling interests. We also have the right to require our joint venture partner to sell their redeemable noncontrolling interests to us. The redeemable noncontrolling interests were recorded at fair value as of the dates of purchase. When the estimated redemption value for a redeemable noncontrolling interest exceeds its carrying value, an adjustment to increase the redeemable noncontrolling interest is recorded with an offsetting reduction to additional paid-in capital. When an adjustment is made to the carrying value of the redeemable noncontrolling interest, the calculation of shareholders’ net income per share will be adjusted if the redemption value exceeds the greater of the carrying value or fair value.

H. Accrued Expenses and Other Current and Non-Current Liabilities

Accrued expenses (current) includes financial and performance guarantee liabilities under pharmacy contracts (see section L), management compensation, and various insurance-related liabilities, including experience-rated refunds, reinsurance contracts and the risk adjustment and minimum medical loss ratio rebate accruals under The Patient Protection and Affordable Care Act. Other non-current liabilities include obligations for pension, other postretirement and postemployment benefits (see Note 13), GMIB contract liabilities (see Note 8) and self-insured exposures not expected to be settled within one year. Legal costs to defend the Company’s litigation and arbitration matters are expensed when incurred in cases where the Company cannot reasonably estimate the ultimate cost to defend. If the Company can reasonably estimate the cost to defend, a liability for these costs is accrued when the claim is reported.

I. Translation of Foreign Currencies

The Company generally conducts its international business through foreign operating entities that maintain assets and liabilities in local currencies that are generally their functional currencies. The Company uses exchange rates as of the balance sheet date to translate assets and liabilities into U.S. dollars. Translation gains or losses on functional currencies, net of applicable taxes, are recorded in accumulated other comprehensive income (loss). The Company uses average monthly exchange rates during the year to translate revenues and expenses into U.S. dollars.

J. Premiums and Related Expenses

Premiums for group life, accident and health insurance and managed care coverages are recognized as revenue on a pro rata basis over the contract period. Benefits and expenses are recognized when incurred and, for our Integrated Medical insured business, are presented net of pharmaceutical manufacturer rebates. For experience-rated contracts, premium revenue includes an adjustment for experience-rated refunds based on contract terms and calculated using the customer’s experience (including estimates of incurred but not reported claims).

Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to customers under the commercial minimum medical loss ratio provisions of the ACA. These rebates are settled in the year following the policy year.

Premiums received for the Company’s Medicare Advantage plans and Medicare Part D products from the Centers for Medicare and Medicaid Services (“CMS”) and customers are recognized as revenue ratably over the contract period. CMS provides risk-adjusted premium payments for Medicare Advantage Plans and Medicare Part D products based on the demographics and wellness of customers. The Company recognizes periodic changes to risk-adjusted premiums as revenue when the amounts are determinable and collection is reasonably assured. Additionally, Medicare Part D premiums include payments from CMS for risk sharing adjustments. The risk sharing adjustments are estimated quarterly based on claim experience by comparing actual incurred drug benefit costs to estimated costs submitted in original contracts. These adjustments may result in more or less revenue from CMS. Final revenue adjustments are determined and settled with CMS in the year following the contract year. Premium revenue also includes an adjustment to reflect the estimated effect of rebates due to CMS under the Medicare Advantage and Medicare Part D minimum medical loss ratio provisions of the ACA.

The ACA prescribed three programs to mitigate the risk for participating health insurance companies selling coverage on the public exchanges: risk adjustment, reinsurance and risk corridor. The reinsurance and risk corridor programs expired at the end of 2016, while the permanent risk adjustment program continues.

The risk adjustment program reallocates funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in non-grandfathered plans in the individual and small group markets, both on and off the exchanges. We estimate our receivable or payable based on the risk of our members compared to the risk of other members in the same state and market, considering data obtained from industry studies and the United States Department of Health and Human Services (“HHS”). Receivables or payables are recorded as adjustments to premium revenue based on our year-to-date experience when the amounts are reasonably estimable and collection is reasonably assured. Final revenue adjustments are determined by HHS in the year following the policy year.

Premiums for individual life, accident and supplemental health insurance and annuity products, excluding universal life and investment-related products, are recognized as revenue when due. Benefits and expenses are matched with premiums.

Revenue for universal life products is recognized as follows:

Investment income on assets supporting universal life products is recognized in net investment income as earned.
Charges for mortality, administration and policy surrender are recognized in premiums as earned. Administrative fees are considered earned when services are provided.