COVID-19 and Related Economic Impact

9 Months Ended

Sep. 30, 2020

Unusual or Infrequent Items, or Both [Abstract]

COVID-19 and Related Economic Impact

COVID-19 and Related Economic Impact

Cigna continues to actively monitor all aspects of our business in light of the ongoing coronavirus ("COVID-19") pandemic. The Company also initiated several actions to assist our customers, clients, health care providers, and employees in this time of crisis. As described below, management has taken a number of steps to assess the impact on our business, including the financial reporting implications associated with this pandemic.

The COVID-19 pandemic has pervasively impacted the economy, financial markets and the global health care delivery systems. The effects of the COVID-19 pandemic on the Company began to emerge in the U.S. at the end of the first quarter and were not material to the Company's results of operations or financial condition for that period. Beginning in April, we experienced a significant deferral of care by our customers. The deferral of care moderated over the course of the second quarter with utilization levels eventually returning to nearly normal levels by the end of June. As expected, in the third quarter we experienced medical utilization at more typical levels as we observed a reduction to the level of deferred care and our customers sought care for COVID-19 testing and treatment. These impacts were most prevalent in the U.S. Medical segment where quarterly earnings reflect the impacts of COVID-19 including the return of medical utilization to more typical levels, costs of COVID-19 care as well as the costs of actions we have taken to support customers and providers, decreased contributions from our specialty products, and lower net investment income. Higher year to date U.S. Medical results reflect deferral of care by our customers in April and May that exceeded the cost of COVID-19 testing and treatment, the cost of COVID-19 related actions including premium relief programs for employer clients as well as cost share waivers for customers, and lower net investment income. Our Group Disability and Other results reflect significantly elevated life insurance claims related to the COVID-19 pandemic and its effects in the third quarter. Quarterly and year to date earnings in our Evernorth segment also reflected effects of the pandemic, specifically, a favorable mix of claims as a result of both the type of drugs dispensed as well as the distribution method used for dispensing and fulfilling, partially offset by lower non-specialty, 30-day retail script volume.

The Company conducted its annual quantitative evaluation of goodwill impairment during the third quarter of 2020. These evaluations were performed at the reporting unit level, based on discounted cash flow analyses and market data. The estimated fair value of each of our reporting units exceeded their carrying values by significant margins.

For all other long-lived assets, including intangible assets, the Company conducted its normal quarterly qualitative impairment assessment and concluded that the current economic and business conditions did not result in a triggering event requiring a quantitative impairment analysis. There were no material impairments recorded for the nine months ended September 30, 2020.

The Company reviewed all classes of financial instruments including investments, accounts receivable and reinsurance recoverables. The additional allowance for expected credit losses recorded was not material for the nine months ended September 30, 2020.