The CIGNA Corporation

02/26/2026 | Press release | Distributed by Public on 02/26/2026 11:09

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide information to assist you in better understanding and evaluating the financial condition of The Cigna Group as of December 31, 2025 compared with December 31, 2024 and our results of operations for 2025 compared with 2024 and 2023 and is intended to help you understand the ongoing trends in our business. For comparisons of our results of operations for 2024 compared with 2023, please refer to the previously filed MD&A included in Part II, Item 7 of our Form 10-K for the year ended December 31, 2024. We encourage you to read this MD&A in conjunction with our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K ("Form 10-K") and the "Risk Factors" contained in Part I, Item 1A of this Form 10-K.
Unless otherwise indicated, financial information in this MD&A is presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Note 2 to the Consolidated Financial Statements in this Form 10-K for additional information regarding the Company's significant accounting policies. In some of our financial tables in this MD&A, we present either percentage changes or "N/M" when those changes are so large as to become not meaningful. Changes in percentages are expressed in basis points ("bps").
In this MD&A, our consolidated measures "adjusted income from operations," earnings per share on that same basis and "adjusted revenues" are not determined in accordance with GAAP and should not be viewed as substitutes for the most directly comparable GAAP measures of "shareholders' net income," "earnings per share" and "total revenues." We also use pre-tax adjusted income (loss) from operations and adjusted revenues to measure the results of our segments.
The Company uses "pre-tax adjusted income (loss) from operations" and "adjusted revenues" as its principal financial measures of segment operating performance because management believes these metrics reflect the underlying results of business operations and facilitate analysis of trends in underlying revenue, expenses and profitability. We define adjusted income (loss) from operations as shareholders' net income (or income (loss) before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net investment gains/losses, amortization of acquired intangible assets and special items. The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders' net income. See the below Financial Highlights section for a reconciliation of consolidated adjusted income from operations to shareholders' net income.
The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future
underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, total revenues. See the below Financial Highlights section for a reconciliation of consolidated adjusted revenues to total revenues.
See Note 23 to the Consolidated Financial Statements for additional discussion of these metrics and a reconciliation of income (loss) before income taxes to pre-tax adjusted income (loss) from operations, as well as a reconciliation of Total revenues to adjusted revenues. Note 23 to the Consolidated Financial Statements also explains that segment revenues include both external revenues and sales between segments that are eliminated in Corporate. Ratios presented in the segment discussion exclude the same items as adjusted revenues and pre-tax adjusted income (loss) from operations.
EXECUTIVE OVERVIEW
The Cigna Group, together with its subsidiaries (either individually or collectively referred to as the "Company," "we," "us" or "our"), is a global health company committed to creating a better future for every individual and every community. Our subsidiaries offer a differentiated set of pharmacy, medical, behavioral, dental, and related products and services. For further information on our business and strategy, see Part I, Item 1 - "Business" of this Form 10-K.
Financial Highlights
Consolidated Results of Operations (GAAP basis)
For the Years Ended December 31, Change Change
(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Pharmacy revenues $ 216,672 $ 185,362 $ 137,243 $ 31,310 17 % $ 48,119 35 %
Premiums 40,261 45,996 44,237 (5,735) (12) 1,759 4
Fees and other revenues 16,921 14,790 12,619 2,131 14 2,171 17
Net investment income 1,046 973 1,166 73 8 (193) (17)
Total revenues 274,900 247,121 195,265 27,779 11 51,856 27
Pharmacy and other service costs 214,991 182,509 133,801 32,482 18 48,708 36
Medical costs and other benefit expenses 34,349 38,648 36,287 (4,299) (11) 2,361 7
Selling, general and administrative expenses 14,617 14,844 14,822 (227) (2) 22 -
Amortization of acquired intangible assets 1,743 1,703 1,819 40 2 (116) (6)
Total benefits and expenses 265,700 237,704 186,729 27,996 12 50,975 27
Income from operations
9,200 9,417 8,536 (217) (2) 881 10
Interest expense and other (1,408) (1,435) (1,446) 27 (2) 11 (1)
Net gain (loss) on sale of businesses
13 24 (1,499) (11) (46) 1,523 N/M
Net investment losses
(24) (2,737) (78) 2,713 (99) (2,659) N/M
Income before income taxes
7,781 5,269 5,513 2,512 48 (244) (4)
Total income taxes 1,493 1,491 141 2 - 1,350 N/M
Net income
6,288 3,778 5,372 2,510 66 (1,594) (30)
Less: Net income attributable to noncontrolling interests
331 344 208 (13) (4) 136 65
Shareholders' net income
$ 5,957 $ 3,434 $ 5,164 $ 2,523 73 % $ (1,730) (34) %
Consolidated effective tax rate 19.2 % 28.3 % 2.6 % (910) bps 2,570 bps
Medical customers (in thousands) 18,118 19,147 19,780 (1,029) (5) % (633) (3) %
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
For the Years Ended December 31,
2025 2024 2023
(In millions) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax
Shareholders' net income
$ 5,957 $ 3,434 $ 5,164
Adjustments to reconcile to adjusted income from operations
Net investment (gains) losses (1)
$ (225) (90) $ 2,533 2,529 $ 135 114
Amortization of acquired intangible assets 1,743 1,325 1,703 1,347 1,819 1,413
Special items
Strategic optimization program
749 565 - - - -
Deferred tax expenses (benefits), net
- 427 - 84 - (1,071)
Integration and transaction-related costs
327 247 275 211 45 35
(Benefits) charges associated with litigation matters
(17) (13) - - 201 171
Net (gain) loss on sale of businesses
(13) (404) (24) (2) 1,499 1,429
Impairment of dividend receivable
- - 182 138 - -
Charge for organizational efficiency plan
- - - - 252 193
Total special items $ 1,046 822 $ 433 431 $ 1,997 757
Adjusted income from operations
$ 8,014 $ 7,741 $ 7,448
(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
Reconciliation of Shareholders' Net Income (GAAP) to Adjusted Income from Operations
For the Years Ended December 31,
2025 2024 2023
(Diluted earnings per share) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax
Shareholders' net income
$ 22.18 $ 12.12 $ 17.39
Adjustments to reconcile to adjusted income from operations
Net investment (gains) losses (1)
$ (0.84) (0.34) $ 8.95 8.93 $ 0.45 0.38
Amortization of acquired intangible assets 6.50 4.94 6.01 4.76 6.13 4.77
Special items
Strategic optimization program
2.78 2.10 - - - -
Deferred tax expenses (benefits), net
- 1.59 - 0.30 - (3.61)
Integration and transaction-related costs
1.22 0.92 0.97 0.75 0.15 0.12
(Benefits) charges associated with litigation matters
(0.06) (0.05) - - 0.68 0.58
Net (gain) loss on sale of businesses
(0.05) (1.50) (0.08) (0.02) 5.05 4.81
Impairment of dividend receivable
- - 0.64 0.49 - -
Charge for organizational efficiency plan
- - - - 0.85 0.65
Total special items $ 3.89 3.06 $ 1.53 1.52 $ 6.73 2.55
Adjusted income from operations
$ 29.84 $ 27.33 $ 25.09
(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
Financial highlights by segment
For the Years Ended December 31, Change Change
(Dollars in millions, except per share amounts) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Revenues
Adjusted revenues by segment
Evernorth Health Services $ 234,953 $ 202,155 $ 153,499 16 % 32 %
Cigna Healthcare 47,163 52,914 51,205 (11) 3
Other Operations 674 828 596 (19) 39
Corporate, net of eliminations (8,139) (8,798) (9,978) (7) (12)
Adjusted revenues 274,651 247,099 195,322 11 27
Net investment results from certain equity method investments 249 204 (57) 22 N/M
Special item related to impairment of dividend receivable - (182) - N/M N/M
Total revenues $ 274,900 $ 247,121 $ 195,265 11 % 27 %
Shareholders' net income
$ 5,957 $ 3,434 $ 5,164 73 % (34) %
Adjusted income from operations
$ 8,014 $ 7,741 $ 7,448 4 % 4 %
Earnings per share (diluted)
Shareholders' net income
$ 22.18 $ 12.12 $ 17.39 83 % (30) %
Adjusted income from operations
$ 29.84 $ 27.33 $ 25.09 9 % 9 %
Pre-tax adjusted income (loss) from operations by segment
Evernorth Health Services $ 7,221 $ 7,001 $ 6,442 3 % 9 %
Cigna Healthcare 4,153 4,229 4,478 (2) (6)
Other Operations 89 (9) 96 N/M N/M
Corporate, net of eliminations (1,593) (1,688) (1,698) (6) (1)
Consolidated pre-tax adjusted income from operations
9,870 9,533 9,318 4 2
Income attributable to noncontrolling interests
475 405 146 17 177
Net investment gains (losses) (1)
225 (2,533) (135) N/M N/M
Amortization of acquired intangible assets (1,743) (1,703) (1,819) 2 (6)
Special items (1,046) (433) (1,997) 142 (78)
Income before income taxes
$ 7,781 $ 5,269 $ 5,513 48 % (4) %
(1)Includes Net investment gains/losses as presented in our Consolidated Statements of Income, as well as the Company's share of certain investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting, which are presented within Fees and other revenues in our Consolidated Statements of Income.
Key Transactions and Business Developments
Divestiture of Medicare Advantage and Related Businesses
On March 19, 2025, the Company completed the sale of our Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies®businesses to Health Care Service Corporation ("HCSC," and such transaction, the "HCSC transaction"). The final purchase price and total cash proceeds collected in 2025 were $4.9 billion. See Note 5 to the Consolidated Financial Statements for further information.
Strategic Optimization Program
In the first quarter of 2025, the Company commenced an enterprise-wide initiative to evolve our business and deliver a more efficient and improved experience for our patients, providers and customers. In 2025, we reported total costs of $749 million, pre-tax ($565 million, after-tax) associated with this initiative. As we continue to evaluate additional opportunities to improve the overall efficiency and effectiveness of our operations, we anticipate future charges. See Note 16 to the Consolidated Financial Statements for further information.
We expect this initiative to generate annualized after-tax savings of at least $500 million, a portion of which was realized in 2025.
Commentary: 2025 versus 2024
The commentary presented below, and the segment commentaries that follow, compare results for the year ended December 31, 2025 with results for the year ended December 31, 2024. Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.
Shareholders' net income increased 73%, primarily reflecting the absence of the impairment of VillageMD equity securities that was recorded in 2024.
Adjusted income from operations. See discussion of segment results in the "Segment Reporting" section.
Medical customersdecreased 5%, primarily reflecting the closing of the HCSC transaction.
Pharmacy revenues increased 17%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.
Premiumsdecreased 12%, primarily driven by the impact of the HCSC transaction (-18%), partially offset by higher premium rates within our ongoing U.S. Healthcare businesses (+4%).
Fees and other revenues increased 14%, primarily reflecting growth in affordability services (defined in the "Segment Reporting" section) within our Pharmacy Benefit Services operating segment.
Net investment incomeincreased 8%, primarily due to an increase in partnership income (17%) as well as the absence of the impairment of the dividend receivable in 2024 related to VillageMD accrued dividends (19%). These impacts were offset by lower average assets (23%), due in part to the impact of the HCSC transaction.
Pharmacy and other service costs increased 18%, primarily reflecting higher utilization of prescription drugs from customer growth in Evernorth Health Services.
Medical costs and other benefit expenses decreased 11%, primarily driven by the impact of the HCSC transaction (-18%), partially offset by higher medical costs within our ongoing U.S. Healthcare businesses (+7%).
Selling, general and administrative ("SG&A") expensesdecreased 2%, primarily impacted by the HCSC transaction (-10%), partially offset by supporting business growth (+5%) and the strategic optimization program (+3%). See Note 16 to the Consolidated Financial Statements for further discussion of the strategic optimization program.
Net gain (loss) on sale of businessesdecreased in 2025. The gain recorded in 2025 primarily reflects the HCSC transaction. The net gain reported in 2024 reflects the sale of a portion of an equity method investment, partially offset by an estimated loss on sale (primarily goodwill impairments) related to the HCSC transaction. See the "Divestiture of Medicare Advantage and Related Businesses" section above and Note 5 to the Consolidated Financial Statements for further discussion of the HCSC transaction.
Investment resultsimproved in 2025, primarily reflecting the absence of the impairment of VillageMD equity securities that was recorded in 2024.
The effective tax ratedecreased, primarily driven by the absence of a valuation allowance related to the impairment of equity securities recorded in 2024 (-1100 bps) and benefits related to the HCSC transaction (-400 bps), partially offset by an increased valuation allowance against foreign tax attributes (+500 bps). See Note 21 to the Consolidated Financial Statements for further discussion of these matters.
SEGMENT REPORTING
Evernorth Health Services Segment
Evernorth Health Services includes our Pharmacy Benefit Services and Specialty and Care Services operating segments, which provide independent and coordinated health solutions and capabilities to enable the health care system to work better and help people live healthier lives. As described in the introduction to Segment Reporting, the performance of Evernorth Health Services is measured using adjusted revenues and pre-tax adjusted income (loss) from operations.
The Company has renewed or extended contracts with the business's three largest clients through the end of the decade. Additionally, to further deliver value for the benefit of those we serve and to build a more sustainable model for health care, the Company will incur investment and transition costs to support its recently announced rebate-free model for pharmacy benefits, designed to lower
medication costs, improve transparency and support local pharmacies. As a result, we expect these efforts to impact pre-tax adjusted income from operations for Evernorth Health Services over the short term.
Key Factors Affecting Segment Performance
The key factors that impact the segment's revenues and income from operations are claims utilization, claims composition and contract affordability services. Specialty and Care Services revenues are also impacted by customer and client growth. These key factors are discussed further below. See Note 2 to the Consolidated Financial Statements in this Form 10-K for additional information on revenue and cost recognition policies for this segment.
Key factors that impact both Pharmacy Benefit Services and Specialty and Care Services:
•Pharmacy claim volume (also referred to as utilization) relates to processing prescription claims filled by retail pharmacies in our network and dispensing prescription claims from our home delivery and specialty pharmacies, along with other claims. Pharmacy claim volume is impacted by new clients or organic customer growth through the expansion of existing clients or through the loss of customers and business.
•The composition of claims generally considers the types of drugs, including the mix of claims among branded and higher priced specialty drugs compared to generic or biosimilar alternatives. We manage pharmaceutical manufacturer increases in prices through programs designed to reduce drug spend, providing positive impacts on our clients, our customers and us. Changes to claims mix, including types of drugs, distribution methods, pharmaceutical manufacturer prices, and alternative uses of drugs within our formularies continue to be a significant driver of our revenues and income from operations in the current environment.
•Our client contract pricing is impacted by our ongoing ability to negotiate favorable contracts for pharmacy network, pharmaceutical and wholesaler purchasing, and manufacturer rebates (also referred to as affordability improvements or affordability services). Through these affordability improvements, we seek to improve the effectiveness of our combined and standalone solutions for our clients by continuously innovating, improving affordability and implementing drug purchasing contract initiatives. Our continued affordability improvements further reduce drug costs for our customers and clients, and we share in the value delivered, which generally results in a favorable impact on our income from operations.
Key factors that impact Specialty and Care Services:
•Customer and client growth, both organic and new business, and key relationships in our Specialty and Care Services business generally results in increased revenues and income from operations. This includes client movement in our specialty pharmacy, specialty distribution services, virtual care, benefits management and behavioral health services as we expand our businesses.
Results of Operations
Financial Summary
For the Years Ended December 31, Change Change
(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Adjusted revenues (1)
$ 234,953 $ 202,155 $ 153,499 $ 32,798 16 % $ 48,656 32 %
Pre-tax adjusted income from operations (1)
$ 7,221 $ 7,001 $ 6,442 $ 220 3 % $ 559 9 %
Pre-tax margin (1)(2)
3.1 % 3.5 % 4.2 % (40) bps (70) bps
SG&A expense ratio (3)
1.8 % 1.9 % 2.2 % (10) bps (30) bps
(1)See Note 23 to the Consolidated Financial Statements for reconciliation of adjusted revenues and pre-tax adjusted income from operations to Total revenues and Income before income taxes, respectively.
(2)Pre-tax margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues.
(3)SG&A expense ratio is calculated as segment selling, general and administrative expenses divided by adjusted revenues. See Note 23 to the Consolidated Financial Statements for further details.
In this selected financial information, we present adjusted revenues and pre-tax income from operations by our two operating segments, Pharmacy Benefit Services and Specialty and Care Services.
Selected Financial Information
For the Years Ended December 31, Change Change
(Dollars and adjusted scripts in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Total adjusted revenues
Pharmacy Benefit Services $ 132,126 $ 111,822 $ 76,792 18 % 46 %
Specialty and Care Services 102,827 90,333 76,707 14 18
Total adjusted revenues $ 234,953 $ 202,155 $ 153,499 16 % 32 %
Pre-tax adjusted income from operations
Pharmacy Benefit Services $ 3,506 $ 3,577 $ 3,469 (2) % 3 %
Specialty and Care Services 3,715 3,424 2,973 8 15
Total pre-tax adjusted income from operations $ 7,221 $ 7,001 $ 6,442 3 % 9 %
Pharmacy claim volume (1)
2,222 2,120 1,585 5 % 34 %
(1)Non-specialty network prescriptions filled through 90-day programs and home delivery prescriptions are counted as three claims. All other network and specialty prescriptions are counted as one claim.
2025 versus 2024
Commentary in parentheses regarding percentage changes (or bps) represents the driver's impact on the overall category.
Adjusted revenuesincreased 16%, primarily reflecting higher utilization of prescription drugs from customer growth in Pharmacy Benefit Services (+6%) and Specialty and Care Services (+6%) and an increase due to claims composition in Pharmacy Benefit Services (+4%).
Pre-tax adjusted income from operations increased 3%, primarily reflecting specialty pharmacy growth in Specialty and Care Services (+6%), and contract affordability improvements and customer growth in Pharmacy Benefit Services (+1%), partially offset by strategic investments and initiatives to support business growth and improve the patient experience in Pharmacy Benefit Services (-3%) and Specialty and Care Services (-1%).
The SG&A expense ratio decreased 10 bps, primarily reflecting higher adjusted revenues as discussed above, offset by strategic investments and initiatives to support business growth.
Cigna Healthcare Segment
Cigna Healthcare includes our U.S. Healthcare and International Health operating segments, which provide comprehensive medical and coordinated solutions to clients and customers. As described in the introduction to Segment Reporting, performance of the Cigna Healthcare segment is measured using adjusted revenues and pre-tax adjusted income from operations.
On March 19, 2025, the Company completed the sale of our Medicare Advantage, Medicare Individual Stand-Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S. Healthcare operating segment. See "Key Transactions and Business Developments" for further discussion.
Key Factors Affecting Segment Performance
The key factors that impact the segment's revenues and income from operations include revenue growth, customer growth, medical cost trend, the medical care ratio ("MCR") and the SG&A expense ratio. These key factors are discussed further below. See Note 2 to the Consolidated Financial Statements included in this Form 10-K for additional information on revenue and cost recognition policies for this segment.
•Revenue growth includes increases to premium rates in consideration of anticipated medical cost increases, customer growth driven by new clients and customers, and increased fee revenue from the expansion of products and services to existing clients and customers, including solutions provided by Evernorth Health Services.
•Higher medical costs (also referred to as higher medical cost trend) are impacted by utilization (the quantity of medical services consumed by our customers), unit costs (the cost per medical service) and mix of services.
•MCR represents medical costs as a percentage of premiums for our segment's insured businesses, and it is impacted by medical cost trend and premium rates. Affordability initiatives that serve to mitigate medical cost inflation also impact the MCR.
•The SG&A expense ratio represents the segment's selling, general and administrative expenses divided by adjusted revenues.
Results of Operations
Financial Summary
For the Years Ended December 31, Change Change
(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Adjusted revenues (1)
$ 47,163 $ 52,914 $ 51,205 $ (5,751) (11) % $ 1,709 3 %
Pre-tax adjusted income from operations (1)
$ 4,153 $ 4,229 $ 4,478 $ (76) (2) % $ (249) (6) %
Pre-tax margin(1)(2)
8.8 % 8.0 % 8.7 % 80 bps (70) bps
Medical care ratio 84.4 % 83.2 % 81.3 % 120 bps 190 bps
SG&A expense ratio (3)
20.2 % 20.4 % 21.6 % (20) bps (120) bps
(1)See Note 23 to the Consolidated Financial Statements for reconciliation of adjusted revenues and pre-tax adjusted income from operations to Total revenues and Income before income taxes, respectively.
(2)Pre-tax margin is calculated as pre-tax adjusted income from operations divided by adjusted revenues.
(3)SG&A expense ratio is calculated as segment selling, general and administrative expenses divided by adjusted revenues. See Note 23 to the Consolidated Financial Statements for further details.
2025 versus 2024
Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.
Adjusted revenues decreased 11%, or $5,751 million, primarily due to the impact of the HCSC transaction (-$8,498 million), partially offset by higher premiums within employer insured (+$1,276 million) and stop loss (+$855 million), primarily reflecting premium rate increases.
Pre-tax adjusted income from operations decreased 2%, or $76 million, primarily due to lower contributions from the Individual and Family Plans business.
The medical care ratio increased 120 bps, primarily due to higher medical costs, driven by the Individual and Family Plans business.
The SG&A expense ratio decreased 20 bps, primarily due to revenue growth outpacing volume-related expenses within the ongoing businesses (-70 bps), partially offset by higher technology spend (+30 bps) and the impact of the HCSC transaction (+20 bps).
Medical Customers
Medical customers include individuals who meet any of the following criteria: (i) are covered under a medical insurance policy, managed care arrangement or administrative services agreement issued by Cigna Healthcare; (ii) have access to the Cigna Healthcare provider network for covered services under their medical plan; or (iii) have medical claims that are administered by Cigna Healthcare.
Cigna Healthcare Medical Customers
As of December 31, Change Change
(In thousands) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
U.S. Healthcare
2,548 3,853 4,280 (1,305) (34) % (427) (10) %
International Health (1)
1,260 1,211 1,184 49 4 27 2
Insured 3,808 5,064 5,464 (1,256) (25) % (400) (7) %
U.S. Healthcare
13,875 13,649 13,890 226 2 % (241) (2) %
International Health (1)
435 434 426 1 - 8 2
Administrative services only 14,310 14,083 14,316 227 2 % (233) (2) %
Total 18,118 19,147 19,780 (1,029) (5) % (633) (3) %
(1)International Health excludes medical customers served by less than 100%-owned subsidiaries, as well as certain customers served by our third-party administrator.
Total medical customers decreased 5%, primarily due to the HCSC transaction.
Unpaid Claims and Claim Expenses
As of December 31, Change Change
(In millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Unpaid claims and claim expenses $ 4,241 $ 5,018 $ 5,092 $ (777) (15) % $ (74) (1) %
Our unpaid claims and claim expenses liability decreased 15%, primarily due to the HCSC transaction.
Other Operations
Other Operations includes corporate-owned life insurance ("COLI"), the Company's run-off operations and other non-strategic businesses. As described in the introduction of Segment Reporting, performance of Other Operations is measured using adjusted revenues and pre-tax adjusted income from operations.
Results of Operations
Financial Summary
For the Years Ended December 31, Change Change
(Dollars in millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Adjusted revenues $ 674 $ 828 $ 596 $ (154) (19) % $ 232 39 %
Pre-tax adjusted income (loss) from operations
$ 89 $ (9) $ 96 $ 98 N/M % $ (105) N/M %
Pre-tax margin 13.2 % (1.1) % 16.1 % 1,430 bps (1,720) bps
2025 versus 2024
Adjusted revenues primarily reflect premiums and net investment income associated with COLI and our run-off operations, as well as revenues from other non-strategic businesses.
Pre-tax adjusted income (loss) from operations increased, primarily driven by the decision to discontinue certain small non-strategic businesses.
Corporate
Corporate reflects amounts not allocated to operating segments, including net interest expense (defined as interest on corporate financing less net investment income on investments not supporting segment and other operations), certain litigation matters, expense associated with our frozen pension plans, charitable contributions, operating severance, certain overhead and enterprise-wide project costs, and eliminations for products and services sold between segments.
Financial Summary
For the Years Ended December 31, Change Change
(In millions) 2025 2024 2023 2025 vs. 2024 2024 vs. 2023
Pre-tax adjusted loss from operations
$ (1,593) $ (1,688) $ (1,698) $ 95 (6) % $ 10 (1) %
2025 versus 2024
Commentary regarding percentage changes (or bps) and dollar variances represents the driver's impact on the overall category.
Pre-tax adjusted loss from operationsdecreased, primarily due to lower interest expense (-3%) and lower operating costs (-2%).
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
We maintain liquidity at two levels: the subsidiary level and the parent company level.
Subsidiary Level. Cash requirements at the subsidiary level generally consist of pharmacy, medical costs and other benefit payments; expense requirements, primarily for employee compensation and benefits, information technology, and facilities costs; income taxes; and debt service.
Our subsidiaries normally meet their liquidity requirements by maintaining appropriate levels of cash, cash equivalents and short-term investments; using cash flows from operating activities; matching durations of investments to estimated durations for the related insurance and contractholder liabilities; selling investments; and borrowing from affiliates, subject to applicable regulatory limits.
Parent Company Level. Cash requirements at the parent company level generally consist of debt service, payment of declared dividends to shareholders, lending to subsidiaries as needed and pension plan funding.
The parent company normally meets its liquidity requirements by maintaining appropriate levels of cash and various types of marketable investments, collecting dividends from its subsidiaries, using proceeds from issuing debt and common stock, and borrowing from its subsidiaries, subject to applicable regulatory limits.
Regulatory Restrictions. Dividends from our insurance, Health Maintenance Organization ("HMO") and certain foreign subsidiaries are subject to regulatory restrictions. See Note 20 to the Consolidated Financial Statements in this Form 10-K for additional information regarding these restrictions. Most of the Evernorth Health Services segment operations are not subject to regulatory restrictions regarding dividends and therefore provide significant financial flexibility to The Cigna Group.
Investment Portfolio. We support the liquidity needs of our businesses by managing the duration of invested assets to be consistent with the duration of liabilities. We manage the portfolio to both optimize returns in the current economic environment and meet our liquidity needs.
Cash flows for the years ended December 31 were as follows:
For the Years Ended December 31,
(In millions) 2025 2024 2023
Operating activities $ 9,601 $ 10,363 $ 11,813
Investing activities $ (4,407) $ (2,102) $ (5,174)
Financing activities $ (6,421) $ (7,647) $ (4,294)
The following discussion explains variances in the various categories of cash flows for the year ended December 31, 2025 compared with the same period in 2024.
Operating Activities. Cash flows from operating activities consist principally of cash receipts and disbursements for pharmacy revenues and costs, premiums and medical costs, fees, investment income, taxes, and other expenses.
Operating cash flows decreased for the year ended December 31, 2025, primarily due to the unfavorable net impact related to clients that onboarded in 2024, as well as timing of settlements related to the accounts receivable factoring facility. These decreases are partially offset by the favorable impact of accrued liabilities and higher insurance liabilities.
Investing Activities. The increase in cash used in investing activities reflects higher investment purchases, partially offset by the net proceeds from the HCSC transaction.
Financing Activities. The decrease in net cash used in financing activities in 2025 is primarily driven by lower share repurchases, partially offset by higher debt repayments.
Capital Resources
Our capital resources consist primarily of cash, cash equivalents and investments maintained at regulated subsidiaries required to underwrite insurance risks, cash flows from operating activities, our commercial paper program, revolving credit facility, and the issuance of long-term debt and equity securities. Our businesses generate significant cash flows from operations, some of which is subject to regulatory restrictions relative to the amount and timing of dividend payments to the parent company. Dividends received from U.S.-regulated subsidiaries were $0.9 billion for the year ended December 31, 2025 and $2.4 billion for the year ended December 31, 2024. Non-regulated subsidiaries also generate significant cash flows from operating activities, which are typically available immediately to the parent company for general corporate purposes.
We prioritize our use of capital resources to (i) invest in capital expenditures (primarily related to technology to support innovative solutions for our clients and customers), provide the capital necessary to maintain or improve the financial strength ratings of subsidiaries, and to repay debt and fund pension obligations if necessary; (ii) pay dividends to shareholders; (iii) consider acquisitions
and investments that are strategically and economically advantageous; and (iv) return capital to shareholders through share repurchases.
Funds Available
Commercial Paper Program.There was no commercial paper outstanding balance as of December 31, 2025.
Revolving Credit Agreement. Our revolving credit agreement provides us with the ability to borrow amounts for general corporate purposes, including for the purpose of providing liquidity support if necessary under our commercial paper program discussed above. In April 2025, the Company replaced its previous revolving credit agreements and entered into a $6.5 billion, five-year revolving credit and letter of credit agreement that will mature in April 2030. See Note 7 to the Consolidated Financial Statements for further information on our credit agreement and commercial paper program.
As of December 31, 2025, we had $6.5 billion of undrawn committed capacity under our revolving credit agreement (these amounts are available for general corporate purposes, including providing liquidity support for our commercial paper program), $6.5 billion of remaining capacity under our commercial paper program, and $7.9 billion in cash and short-term investments, approximately $0.9 billion of which was held by the parent company or certain non-regulated subsidiaries.
Our debt-to-capitalization ratio (calculated as Short-term debt and Long-term debt ("Total debt") as a percentage of Total shareholders' equity and Total debt ("Total capitalization")) was 43.0% and 43.8% as of December 31, 2025 and 2024, respectively.
We actively monitor our debt obligations and engage in issuance and repayment activities as needed in accordance with our capital management strategy.
Debt Issuance and Term Loan.In September 2025, we issued $4.5 billion of new senior notes. The proceeds from this debt issuance were used to repay the $2.0 billion of loans outstanding under the Term Loan Facility, dated August 2025, the proceeds of which were used to partially fund an investment in Shields Health Solutions, a leading specialty pharmacy management company. We used the remainder for general corporate purposes, including investments and repayment of indebtedness. See Note 7 to the Consolidated Financial Statements for further information regarding our debt issuance and the Term Loan Facility.
Subsidiary Borrowings. In addition to the sources of liquidity discussed above, the parent company can borrow an additional $1.2 billion from its subsidiaries without further approvals as of December 31, 2025.
Use of Capital Resources
Short-Term and Long-Term Debt. See Note 7 to the Consolidated Financial Statements for further information regarding changes to our short-term and long-term debt. The Company may, from time to time, repay or repurchase debt in advance of maturities when it deems appropriate.
Capital Expenditures.Capital expenditures for property, equipment and computer software were $1.2 billion in the year ended December 31, 2025 compared with $1.4 billion in the year ended December 31, 2024. We expect to deploy approximately $1.3 billion in capital expenditures in 2026, which will be funded primarily from operating cash flows.
Dividends.The Company currently intends to pay regular quarterly dividends, with future declarations subject to approval by our Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of The Cigna Group and its shareholders. See Note 8 to the Consolidated Financial Statements for further information regarding dividend payments and declarations.
Share Repurchases.The Company maintains a share repurchase program authorized by the Board of Directors, under which it may repurchase shares of its common stock from time to time. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternate uses of capital. The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including through Rule 10b5-1 trading plans or privately negotiated transactions. The program may be suspended or discontinued at any time.
We repurchased 11.9 million shares for approximately $3.6 billion during the year ended December 31, 2025, compared with 20.9 million shares for approximately $7.0 billion during the year ended December 31, 2024.
Other Sources of Funds and Uses of Capital Resources
Divestiture. As discussed in the "Key Transactions and Business Developments" section above, the HCSC transaction was completed on March 19, 2025. We used the proceeds in alignment with our capital deployment priorities, with the majority allocated to share repurchases.
Risks to Liquidity and Capital Resources
Risks to our liquidity and capital resources outlook include cash projections that may not be realized, and the demand for funds could exceed available cash if our ongoing businesses experience unexpected shortfalls in earnings or we experience material adverse effects from one or more risks or uncertainties described more fully in the "Risk Factors" section in this Form 10-K.
Guarantees and Contractual Obligations
We are contingently liable for various contractual obligations and financial and other guarantees entered into in the ordinary course of business. See Note 22 to the Consolidated Financial Statements for discussion of various guarantees.
On Balance Sheet:
Long-Term Debt. Total scheduled payments on long-term debt are $49.9 billion through January 2056 (of which $2.0 billion relate to the fiscal year ending December 31, 2026), which include scheduled interest payments and maturities of long-term debt. See Note 7 to the Consolidated Financial Statements for information regarding principal maturities of long-term debt.
Other Non-Current Liabilities. These include other long-term liabilities reflected in our Consolidated Balance Sheets as of December 31, 2025, including obligations associated with other postretirement and postemployment benefit obligations, reinsurance liabilities, supplemental and deferred compensation plans, and derivative financial instruments.
Uncertain Tax Positions. In the event we are unable to sustain all of our $1.5 billion of uncertain tax positions, it could result in future tax payments of approximately $1.2 billion. We are adequately reserved for such positions. As a result, there is minimal direct risk to earnings should we fail to sustain our positions. We cannot reasonably estimate the timing of such future payments. See Note 21 to the Consolidated Financial Statements for additional information on uncertain tax positions.
Off-Balance Sheet:
Purchase Obligations. These include agreements to purchase goods or services that are enforceable and legally binding. Purchase obligations exclude contracts that are cancellable without penalty and those that do not contractually require minimum levels of goods or services to be purchased. As of December 31, 2025, purchase obligations consisted of a total of $6.3 billion of estimated payments required under contractual arrangements (of which we expect $2.1 billion of purchase obligations to be paid within the next 12 months beginning January 1, 2026). This includes the following:
•$3.2 billion of investment commitments (of which we expect $1.0 billion of the committed amounts to be disbursed in 2026). See Note 11 of the Consolidated Financial Statements for additional information on investment commitments.
•$3.1 billion of future service commitments (of which we expect $1.1 billion of the committed amounts to be disbursed in 2026), primarily comprised of contracts for information technology maintenance and support and certain outsourced business processes.
CRITICAL ACCOUNTING ESTIMATES
The preparation of Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures in the Consolidated Financial Statements. Management considers an accounting estimate to be critical if:
•it requires assumptions to be made that were uncertain at the time the estimate was made; and
•changes in the estimate or different estimates that could have been selected could have a material effect on our consolidated results of operations or financial condition.
Management has discussed how critical accounting estimates are developed and selected with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed the disclosures presented in this Form 10-K. We regularly evaluate items that may impact critical accounting estimates.
In addition to the estimates described below, the Notes to the Consolidated Financial Statements describe other estimates that management has made in preparation of the financial statements. Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience significantly differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on liquidity and our financial condition. The information below presents the adverse impacts of certain possible changes in assumptions. The effect of assumption changes in the opposite direction would be a positive impact to our consolidated results of operations, liquidity or financial condition, except for assessing impairment of goodwill.
Goodwill and Other Intangible Assets
Nature of Critical Accounting Estimate. Goodwill represents the excess of the cost of businesses acquired over the fair value of their net assets at the acquisition date. Intangible assets primarily reflect the value of customer relationships and other intangibles acquired in business combinations.
Fair values of reporting units are estimated based on discounted cash flow analysis and market approach models using assumptions that we believe a hypothetical market participant would use to determine a current transaction price. The significant assumptions and estimates used in determining fair value primarily 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 each reporting unit. Projections of future cash flows differ by reporting unit and are consistent with our ongoing strategic projections. Future cash flows for the Evernorth Health Services reporting units are primarily driven by the forecasted gross margins of the business, as well as operating expenses and long-term growth rates. Future cash flows for our other reporting units are primarily driven by forecasted revenues, benefit expenses, operating expenses and long-term growth rates.
The fair value of intangibles and the amortization method were determined using an income approach that relies on projected future cash flows, including key assumptions for customer attrition and discount rates. 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.
The Company conducts its quantitative evaluation for goodwill impairment at least annually during the third quarter at the reporting unit level and performs qualitative impairment assessments on a quarterly basis to determine if events or changes in circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value.
Goodwill and Other intangible assets as of December 31, 2025 were $44,924 million and $28,560 million, respectively, and as of December 31, 2024, were $44,370 million and $29,417 million, respectively, excluding amounts classified as held for sale. See Note 19 to the Consolidated Financial Statements for additional discussion of our goodwill and other intangibles.
Effect if Different Assumptions Used. We completed our normal annual evaluations for impairment of goodwill and intangible assets during the third quarter of 2025. The evaluations support that as of December 31, 2025, the fair value estimates of our reporting units exceed their carrying values by substantial margins. Changes in assumptions concerning future financial results or other underlying assumptions, including macroeconomic factors, government legislation, changes in the competitive landscape or other market conditions (including business models), could impact our ability to achieve profitability projections. If we consistently do not achieve our earnings and cash flow projections or our cost of capital rises significantly, the assumptions and estimates underlying the goodwill and intangible asset impairment evaluations could be adversely affected and result in future impairment charges that would negatively impact our operating results and financial position.
Income Taxes - Uncertain Tax Positions
Nature of Critical Accounting Estimate. We evaluate tax positions to determine whether the benefits are more likely than not to be sustained on audit based on their technical merits. The Company establishes a liability if the probability that the position will be sustained is 50% or less. For uncertain positions that management believes are more likely than not to be sustained, the Company recognizes a liability based upon management's estimate of the most likely settlement outcome with the taxing authority. These amounts primarily relate to federal and state uncertain positions of the value and timing of deductions and uncertain positions of attributing taxable income to states.
Balances that are included in the Consolidated Balance Sheets within Accrued expenses and other liabilities were $1,538 million and $1,477 million as of December 31, 2025 and 2024, respectively. See Note 21 to the Consolidated Financial Statements for additional discussion around uncertain tax positions and the Liquidity and Capital Resources section of this MD&A for a discussion of their potential impact on liquidity.
Effect if Different Assumptions Used. The factors that could impact our estimates of uncertain tax positions include the likelihood of
sustaining our tax position (and related assumed interest and penalties) under audit. If our positions are upheld upon audit, our net income would increase.
Income Taxes - Valuation Allowance
Nature of Critical Accounting Estimate. Deferred income taxes in the Consolidated Balance Sheets reflect differences between the financial and income tax reporting bases of the Company's underlying assets and liabilities, and are 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 a valuation allowance is established to the extent this standard is not met. It is possible that the realization of deferred tax assets may be impacted by changes in forecasted future earnings in various foreign jurisdictions or the Company's ability to generate future capital gains.
Valuation allowances that are included in the Consolidated Balance Sheets within Deferred tax liabilities, net were $2,374 million and $2,332 million as of December 31, 2025 and 2024, respectively. See Note 21 to the Consolidated Financial Statements for additional discussion around valuation allowances.
Effect if Different Assumptions Used. The factors that could impact our estimates of valuation allowances include changes in forecasted future earnings in foreign jurisdictions, potential international tax reform, and the Company's future ability to generate capital gains. Decreases in our valuation allowance would increase net income, while increases in our valuation allowance would decrease net income.
Unpaid Claims and Claims Expenses - Cigna Healthcare
Nature of Critical Accounting Estimate. Unpaid claims and claim expenses reflect estimates of the ultimate cost of claims that have been incurred but not reported, expected development on reported claims, claims 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.
Unpaid claims and claim expenses in Cigna Healthcare are primarily impacted by assumptions related to completion factors and medical cost trend. Variation of actual results from either assumption could impact the unpaid claims balance as noted below. A large number of factors may cause the medical cost trend to vary from the Company's estimates, including changes in health management practices, changes in the level and mix of benefits offered and services utilized, and changes in medical practices. Completion factors may be affected if actual claims submission rates from providers differ from estimates (that can be influenced by a number of factors, including provider mix and electronic versus manual submissions), or if changes to the Company's internal claims processing patterns occur.
Unpaid claims and claim expenses for the Cigna Healthcare segment, both gross and net of reinsurance and other recoverables, as of December 31, 2025 were $4,241 million gross and $4,094 million net and as of December 31, 2024 were $5,018 million gross and $4,859 million net. See Note 9 to the Consolidated Financial Statements for additional information regarding assumptions and methods used to estimate this liability.
Effect if Different Assumptions Used. Based on studies of our claim experience, it is reasonably possible that a 100 basis point change in the medical cost trend and a 50 basis point change in completion factors could occur in the near term. A 100 basis point increase in the medical cost trend rate would increase this liability by approximately $115 million, resulting in a decrease in net income of approximately $90 million after-tax, and a 50 basis point decrease in completion factors would increase this liability by approximately $180 million, resulting in a decrease in net income of approximately $140 million after-tax.
Valuation of Debt Security Investments
Nature of Critical Accounting Estimate. Most debt securities are classified as available for sale and are carried at fair value with changes in fair value recorded in Accumulated other comprehensive loss within Shareholders' equity. 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.
Determining fair value for a financial instrument requires management judgment. The degree of judgment involved generally correlates to the level of pricing readily observable in the markets. Financial instruments with quoted prices in active markets or with market-observable inputs to determine fair value, such as public securities, generally require less judgment. Conversely, private placements including more complex securities that are traded infrequently are typically measured using pricing models that require more judgment as to the inputs and assumptions used to estimate fair value. There may be a number of alternative inputs to select based on an understanding of the issuer, the structure of the security and overall market conditions. In addition, these factors are inherently variable in nature as they change frequently in response to market conditions. Approximately 60% of our debt securities are public securities and approximately 40% are private placement securities.
Typically, the most significant input in the measurement of fair value is the market interest rate used to discount the estimated future cash flows of the instrument. 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.
Balances that are included in the Consolidated Balance Sheets within Investments and Long-term investments were $8,362 million and $9,423 million as of December 31, 2025 and 2024, respectively (inclusive of amounts held for sale as of December 31, 2024). See Notes 11A and 12 to the Consolidated Financial Statements for a discussion of our fair value measurements, the procedures performed by management to determine that the amounts represent appropriate estimates and our accounting policy regarding unrealized appreciation on debt securities.
Effect if Different Assumptions Used. If the derived market rates used to calculate fair value increased by 100 basis points, the fair value of the total debt security portfolio of $8.4 billion would decrease by approximately $0.4 billion, resulting in an after-tax decrease to shareholders' equity of approximately $0.3 billion as of December 31, 2025.
INVESTMENT ASSETS
Information regarding our investment assets is included in Notes 11, 12, 13 and 15 to the Consolidated Financial Statements.
Investment Outlook
Future realized and unrealized investment results will be driven largely by market conditions, and these future conditions are not reasonably predictable. We believe that the vast majority of our investments will continue to perform under their contractual terms. We manage the portfolio for long-term economics; therefore, we expect to hold a significant portion of these assets for the long term. Although future declines in investment fair values remain possible due to interest rate movements and credit deterioration due to both investment-specific uncertainties and global economic uncertainties as discussed below, we do not expect these losses to have a material unfavorable effect on our financial condition or liquidity. The below discussion addresses the strategies and risks associated with our various classes of investment assets. See Part I, Item 1A - "Risk Factors" of this Form 10-K for additional information regarding risks associated with our investment portfolio.
Debt Securities
The carrying value of our debt securities portfolio decreased from $9.4 billion as of December 31, 2024 to $8.4 billion as of December 31, 2025, primarily reflecting the HCSC transaction. See Note 5 to the Consolidated Financial Statements for further information. Our portfolio remains in a net unrealized depreciation position due to generally increasing interest rates over the past few years.
As of December 31, 2025, $7.3 billion, or 87%, of the debt securities in our investment portfolio were investment grade (Baa and above, or equivalent) and the remaining $1.1 billion were below investment grade. The majority of the bonds that are below investment grade were rated at the higher end of the non-investment-grade spectrum. These quality characteristics have not materially changed since the prior year and remain consistent with our investment strategy.
Investments in debt securities are diversified by issuer, geography and industry. On an aggregate basis, the debt securities portfolio continues to perform according to original expectations, which includes a long-term economic investment strategy. Primary risks facing many of the issuers in our portfolio include ongoing geopolitical events and economic conditions. To date, most issuers have been successful in managing these issues without a meaningful change in credit quality. We continue to monitor the economic environment and its effect on our portfolio; we also continue to consider the impact of various factors in determining the allowance for credit losses on debt securities, which is discussed in Note 11 to the Consolidated Financial Statements.
Commercial Mortgage Loans
As of December 31, 2025, our $1.2 billion commercial mortgage loan portfolio consisted of approximately 40 fixed-rate loans, diversified by property type, location and borrower. These loans are carried in our Consolidated Balance Sheets at their unpaid principal balance, net of an allowance for expected credit losses. As a result of increasing market interest rates since the majority of these loans were made, the carrying value exceeds the market value of these loans as of December 31, 2025. Given the quality and diversity of the underlying real estate, positive debt service coverage, and significant borrower cash invested in the property generally ranging between 30% and 40%, we remain confident that the vast majority of borrowers will continue to perform as expected under their contract terms. For further discussion of the results and changes in key credit quality indicators, see Note 11 to the Consolidated Financial Statements.
Office sector fundamentals are weak but have begun to stabilize for higher-quality assets. Lower-quality assets will likely continue to experience value erosion due to weak tenant demand and low investor interest. Additionally, the current macroeconomic headwinds
are impacting capital markets and reducing investor appetite for capital-intensive assets (e.g., offices and regional shopping malls). Our commercial mortgage loan portfolio has no exposure to regional shopping malls and less than 25% exposure to office properties. Although future losses remain possible due to further credit deterioration, we do not expect these losses to have a material unfavorable effect on our results of operations, financial condition or liquidity.
Other Long-Term Investments
Other long-term investments of $5.0 billion as of December 31, 2025 included investments in securities limited partnerships and real estate limited partnerships, direct investments in real estate joint ventures, and other deposit activity that is required to support various insurance and health services businesses. These limited partnership entities typically invest in mezzanine debt or equity of privately held companies and equity real estate. Given our subordinate position in the capital structure of these underlying entities, we assume a higher level of risk for higher expected returns. To mitigate risk, these investments are diversified by industry sector or property type and geographic region. No single partnership investment exceeded 3% of our securities and real estate limited partnership portfolio.
We expect continued volatility in private equity and real estate fund performance going forward as fair market valuations are adjusted to reflect market and portfolio transactions. Less than 4% of our other long-term investments are exposed to real estate in the office sector.
Unconsolidated Subsidiary Investments Portfolio
We participate in an insurance joint venture in China with a 50% ownership interest. We account for this joint venture under the equity method of accounting. Our 50% share of the investment portfolio supporting the joint venture's liabilities was approximately $18.2 billion as of December 31, 2025. These investments were comprised of approximately 70% debt securities, including government and corporate debt diversified by issuer, industry and geography; 20% equities, including mutual funds, equity securities and private equity partnerships; and 10% long-term deposits and policy loans. We continuously review the joint venture's investment strategy and its execution. There were no investments with a material unrealized loss as of December 31, 2025. See Note 14 to the Consolidated Financial Statements in this Form 10-K for additional information regarding unconsolidated subsidiaries.
MARKET RISK
Our assets and liabilities include financial instruments subject to the risk of potential losses from adverse changes in market rates and prices. Our primary market risk exposure from financial instruments is our interest-rate risk exposure to fixed-rate, medium-term instruments. Changes in market interest rates affect the value of instruments that promise a fixed return.
Consistent with disclosure requirements, the following items have been excluded from this consideration of market risk for financial instruments: changes in the fair values of insurance-related assets and liabilities as disclosed in Note 9 to the Consolidated Financial Statements (because their primary risks are insurance rather than market risk); changes in the fair values of investments recorded using the equity method of accounting and liabilities for pension and other postretirement and postemployment benefit plans (and related assets); and changes in the fair values of other significant assets and liabilities, such as goodwill, taxes and various accrued liabilities (because they are not financial instruments, their primary risks are other than market risks).
Our Management of Market Risks
We predominantly rely on two techniques to manage our exposure to market risk:
•Investment/liability matching.We generally select investment assets with characteristics (such as duration, yield, currency and liquidity) that correspond to the underlying characteristics of our related insurance and contractholder liabilities so that we can match the investments to our obligations. Shorter-term investments generally support shorter-term life and health liabilities. Medium-term, fixed-rate investments support interest-sensitive and medium-term health liabilities. Longer-term investments generally support products with longer payout periods such as annuities.
•Use of derivatives.We use derivative financial instruments to reduce our primary market risks. See Note 11 to the Consolidated Financial Statements for additional information about derivative financial instruments.
Effect of Market Fluctuations
We determine the sensitivity of market risk for our fixed income financial instruments, including debt securities and commercial mortgage loans, by estimating the present value of future cash flows using duration modeling and applying a 100 basis point increase in interest rates. The effect of these hypothetical changes in market rates or prices on the fair value of certain noninsurance financial instruments would have been as follows:
Market scenario for certain noninsurance financial instruments
Loss in Fair Value
(in billions) December 31, 2025 December 31, 2024
100 basis point increase in interest rates (excluding the Company's long-term debt) $ 0.5 $ 0.6
In the event of a hypothetical 100 basis point increase in interest rates, the fair value of the Company's long-term debt would decrease approximately $2.1 billion at December 31, 2025 and $1.8 billion at December 31, 2024. Changes in the fair value of our long-term debt do not impact our financial position or operating results since long-term debt is not required to be recorded at fair value. See Note 7 to the Consolidated Financial Statements for additional information about the Company's debt.
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