Goodwill, Other Intangibles and Property and Equipment

12 Months Ended

Dec. 31, 2020

Goodwill Other Intangibles And Property And Equipment [Abstract]

Goodwill, Other Intangibles, and Property and Equipment

Goodwill, Other Intangibles and Property and Equipment

A.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, based on those reporting units’ relative fair values. As a result, goodwill is primarily reported in the Evernorth segment ($33.8 billion), the U.S. Medical segment ($10.4 billion) and, to a lesser extent, the International Markets segment ($0.4 billion).

The Company conducts its annual quantitative evaluation for goodwill impairment during the third quarter at the reporting unit level and writes it down through shareholders’ net income if impaired. On a quarterly basis, the Company performs a qualitative impairment assessment 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. Fair value of a reporting unit is generally estimated based on either a market approach 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, pharmacy costs, benefits expenses, operating expenses, taxes, capital levels and long-term growth rates.

Goodwill activity. Goodwill activity during 2020 and 2019 was as follows:


(In millions)	2020		2019
Balance at January 1,	$	44,602	$	44,505
Goodwill acquired, net	29		103
Impact of foreign currency translation	17		(6)
Balance at December 31,	$	44,648	$	44,602

B.Other Intangibles

Accounting policy. The Company’s other intangible assets primarily 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’s definite-lived intangible assets are amortized on an accelerated or straight-line basis, reflecting their pattern of economic benefits, over periods from three 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.

The Company’s amortized intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the total of the expected future undiscounted cash flows generated by the underlying asset group is less than the carrying amount of the asset group, the Company recognizes an impairment charge equal to the difference between the carrying value of the asset group and its estimated fair value. The Company’s indefinite-lived intangible assets are each reviewed for impairment at least annually by comparing their fair value with their carrying value. If the carrying value exceeds fair value, that excess is recognized as an impairment loss.

There were no material impairments in the years ended December 31, 2020, 2019 or 2018.

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


(In millions)	Cost		Accumulated Amortization	Net Carrying Value
2020
Customer relationships	$	29,432	3,024	26,408
Trade Name - Express Scripts	8,400			8,400
Other	475		104	371
Other intangible assets	38,307		3,128	35,179
Value of business acquired (reported in Deferred policy acquisition costs)	670		152	518
Total	$	38,977	3,280	35,697
2019
Customer relationships	$	31,184	3,319	27,865
Trade Name - Express Scripts	8,400			8,400
Other	383		86	297
Other intangible assets	39,967		3,405	36,562
Value of business acquired (reported in Deferred policy acquisition costs)	643		122	521
Total	$	40,610	3,527	37,083

The Company has indefinite-lived intangible assets totaling $8.5 billion at December 31, 2020 and $8.4 billion at December 31, 2019, largely consisting of trade names and licenses.

C.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:


(In millions)	Cost		Accumulated Amortization		Net Carrying Value
2020
Internal-use software	$	7,061	$	4,048	$	3,013
Other property and equipment	2,719		1,527		1,192
Total property and equipment	$	9,780	$	5,575	$	4,205
2019
Internal-use software	$	6,578	$	3,282	$	3,296
Other property and equipment	2,569		1,353		1,216
Total property and equipment	9,147		4,635		4,512
Property and equipment classified as Assets held for sale	(226)		(131)		(95)
Total property and equipment per Consolidated Balance Sheet	$	8,921	$	4,504	$	4,417

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


(In millions)	2020		2019		2018
Internal-use software	$	971	$	850	$	323
Other property and equipment	276		284		146
Value of business acquired (reported in deferred policy acquisition costs)	28		34		16
Other intangibles	1,527		2,483		210
Total depreciation and amortization	$	2,802	$	3,651	$	695

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
2021	$	2,719
2022	$	2,236
2023	$	2,014
2024	$	1,821
2025	$	1,760

- 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.

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