Global health company The Cigna Group (NYSE: CI) today announced that it has entered into a definitive agreement whereby Health Care Service Corporation (HCSC) will acquire The Cigna Group's Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D and CareAllies businesses, for a total transaction value of approximately $3.7 billion. As part of the transaction, The Cigna Group and HCSC have agreed to enter into a four-year services agreement under which Evernorth Health Services, a subsidiary of The Cigna Group, will continue to provide pharmacy benefit services to the Medicare businesses, effective on closing of the transaction.

The transaction is expected to close in the first quarter of 2025, subject to receipt of applicable regulatory approvals and other customary closing conditions. There is no financing condition.

"The agreement will enable The Cigna Group to drive meaningful value for all our stakeholders, providing an enhanced ability to accelerate investment and growth in our services platform, while further deepening our commitment to our existing health benefits platform. In tandem, the transaction will position our Medicare businesses and CareAllies for additional growth as they continue to serve the needs of their customers as part of HCSC," said David M. Cordani, Chairman and Chief Executive Officer of The Cigna Group. "This decision is aligned with our highly disciplined approach to managing our portfolio and allocating resources toward growth opportunities in our Evernorth Health Services and Cigna Healthcare portfolios. While we continue to believe the overall Medicare space is an attractive segment of the healthcare market, our Medicare businesses require sustained investment, focus, and dedicated resources disproportionate to their size within The Cigna Group's portfolio. We continue to see significant, meaningful growth opportunities for government services, including Medicare, in our Evernorth Health Services portfolio of businesses."

The transaction is expected to be accretive to The Cigna Group's adjusted earnings per share¹ in 2025. The Cigna Group today also reaffirmed its 2024 outlook targeting consolidated adjusted income from operations on a per share basis¹ of at least $28 for full-year 2024, and its long-term annual adjusted earnings per share¹ growth target of 10 to 13 percent, while maintaining an attractive dividend, and will provide updated guidance with its fourth quarter earnings release on February 2, 2024. Following the completion of the sale, The Cigna Group will strategically use proceeds from the transaction in alignment with its capital deployment priorities, with the majority of the proceeds allocated to share repurchases.

"HCSC is building on its commitment to lead and expand access to quality affordable care for people in all phases of their lives," said Maurice Smith, HCSC's CEO, President and Vice Chair. "This acquisition supplements our growth strategy in the large and growing Medicare marketplace and will bring many opportunities to HCSC and its members – including a wider range of product offerings, robust clinical programs, and a larger geographic reach. We look forward to offering our proven member and provider engagement model to even more people, and we are excited to welcome Cigna's Medicare and CareAllies teams with their demonstrated talent and expertise."

Advisors

Centerview Partners LLC is acting as financial advisor to The Cigna Group. Morgan Stanley & Co. LLC provided additional financial advice. Wachtell, Lipton, Rosen & Katz is serving as corporate legal counsel, and Rule Garza Howley LLP, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., and Sidley Austin LLP are serving as regulatory counsel.

Notes

^1. Adjusted income (loss) from operations is a principal financial measure of profitability used by The Cigna Group's management because it presents the underlying results of operations of The Cigna Group's businesses and permits analysis of trends in underlying revenue, expenses and shareholders' net income. Adjusted income from operations is defined as shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net realized investment results, amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized 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 Exhibit 1 for a reconciliation of consolidated adjusted income from operations to shareholders' net income.

Management is not able to provide a reconciliation of adjusted income from operations to shareholders' net income (loss) or adjusted revenues to total revenues on a forward-looking basis because it is unable to predict, without unreasonable effort, certain components thereof including (i) future net realized investment results (from equity method investments with respect to adjusted revenues) and (ii) future special items. These items are inherently uncertain and depend on various factors, many of which are beyond The Cigna Group's control. As such, any associated estimate and its impact on shareholders' net income could vary materially.