Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 22 – Income Taxes

Accounting policy. Deferred income taxes are reflected in the Consolidated Balance Sheets for 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. 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 (loss) 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 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. The liabilities for uncertain tax positions are classified as current when the position is expected to be settled within 12 months or the statute of limitation expires within 12 months.

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

A.Income Tax Expense

The components of income taxes were as follows:

	For the Years Ended December 31,
(In millions)	2022		2021		2020
Current taxes
U.S. income taxes	$	1,679	$	1,268	$	2,128
Foreign income taxes	219		207		334
State income taxes	189		112		303
Total current taxes	2,087		1,587		2,765
Deferred taxes (benefits)
U.S. income tax benefits	(283)		(167)		(217)
Foreign income (tax benefits) taxes	(28)		69		11
State income tax benefits	(169)		(122)		(180)
Total deferred tax benefits	(480)		(220)		(386)
Total income taxes	$	1,607	$	1,367	$	2,379

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

	For the Years Ended December 31,
	2022				2021				2020
(In millions)	$		%		$		%		$		%
Tax expense at nominal rate	$	1,754	21.0	%	$	1,424	21.0	%	$	2,282	21.0	%
Impact of sale of businesses	(37)		(0.4)		—		—		104		1.0
Effect of foreign earnings	(96)		(1.2)		(33)		(0.5)		(61)		(0.6)
Health insurance industry tax	—		—		—		—		93		0.9
State income tax (benefit), net of federal income tax benefit	16		0.2		(9)		(0.1)		24		0.2
Other	(30)		(0.4)		(15)		(0.2)		(63)		(0.6)
Total income taxes	$	1,607	19.2	%	$	1,367	20.2	%	$	2,379	21.9	%

Consolidated pre-tax income from the Company's foreign operations was approximately 46% of the Company's pre-tax income in 2022, 26% in 2021 and 14% in 2020. The increase over 2021 is primarily driven by the gain from the Chubb transaction, an increase to the Company's international pharmaceutical operations, partially offset by a reduction in earnings from the sold entities.

B.Deferred Income Taxes

Deferred income tax assets and liabilities were as follows:

(In millions)	December 31, 2022		December 31, 2021
Deferred tax assets
Employee and retiree benefit plans	$	189	$	304
Other insurance and contractholder liabilities	311		263
Loss carryforwards	205		278
Other accrued liabilities	265		412
Policy acquisition expenses	41		—
Unrealized depreciation on investments and foreign currency translation	156		—
Other	190		246
Deferred tax assets before valuation allowance	1,357		1,503
Valuation allowance for deferred tax assets	(208)		(246)
Deferred tax assets, net of valuation allowance	1,149		1,257
Deferred tax liabilities
Depreciation and amortization	512		698
Acquisition-related basis differences	8,347		8,726
Policy acquisition expenses	—		312
Unrealized appreciation on investments and foreign currency translation	—		104
Other	41		212
Total deferred tax liabilities	8,900		10,052
Net deferred income tax liabilities			(8,795)
Net deferred income tax liabilities classified as Liabilities of businesses held for sale			(449)
Net deferred income tax liabilities per Consolidated Balance Sheets	$	(7,751)	$	(8,346)

Management believes that future results will be sufficient to realize a majority of the Company's gross deferred tax assets. As of December 31, 2022, we had approximately $270 million in deferred tax assets ("DTAs") associated with unrealized investment losses that are primarily recorded in Accumulated other comprehensive loss. We have determined that a valuation allowance against the DTAs is not currently required based on the Company's ability to carryback losses and other known investment strategies. We will monitor and evaluate the need for any valuation allowance in the future. Valuation allowances are established against deferred tax assets when it is determined that it is more likely than not that the asset will not be recognized. Valuation allowances have been established against certain federal, state and foreign tax attributes. There are multiple expiration dates associated with these tax attributes.

C.Uncertain Tax Positions

Reconciliations of unrecognized tax benefits were as follows:

	For the Years Ended December 31,
(In millions)	2022		2021		2020
Balance at January 1,	$	1,230	$	1,210	$	1,018
Increase due to prior year positions	8		21		128
Increase due to current year positions	137		31		88
Reduction related to settlements with taxing authorities	(4)		(15)		—
Reduction related to lapse of applicable statute of limitations	(28)		(17)		(24)
Balance at December 31,	$	1,343	$	1,230	$	1,210

Substantially all unrecognized tax benefits would impact Shareholders' net income if recognized.

The Company classifies net interest expense on uncertain tax positions as a component of income tax expense and in Other non-current liabilities in the Consolidated Balance Sheets. In addition to the amounts in the table above, the liability for net interest expense on uncertain tax positions was approximately $176 million as of December 31, 2022, $148 million as of December 31, 2021 and $127 million as of December 31, 2020.

D.Other Tax Matters

The statutes of limitations for The Cigna Group's consolidated federal income tax returns through 2016 have closed. However, The Cigna Group filed amended returns for both the 2015 and 2016 tax years, which are under review by the Internal Revenue Service ("IRS"). Additionally, the IRS is examining The Cigna Group's returns for 2017 and 2018. The statutes of limitations for Express Scripts' consolidated federal income tax returns through 2012 has closed. However, for 2010 through 2012 tax years, there remains a significant disputed matter. The IRS is also examining Express Scripts' consolidated federal income tax returns for 2013 through 2018. The Company has established adequate reserves for these matters.

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 2013 for The Cigna Group's entities and 2010 for Express Scripts' entities.