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Investments

3 Months Ended

Mar. 31, 2023

Note 11 – InvestmentsThe Cigna Group's investment portfolio consists of a broad range of investments including debt securities, equity securities, commercial mortgage loans, policy loans, other long-term investments, short-term investments and derivative financial instruments. The sections below provide more detail regarding our investment balances and realized investment gains and losses. See Note 12 to the Consolidated Financial Statements for information about the valuation of the Company's investment portfolio. Further information about our accounting policies for investment assets can be found in Note 11 in the Company's 2022 Form 10-K.

The following table summarizes the Company's investments by category and current or long-term classification:


	March 31, 2023						December 31, 2022
(In millions)	Current		Long-term		Total		Current		Long-term		Total
Debt securities	$	616	$	9,293	$	9,909	$	654	$	9,218	$	9,872
Equity securities	51		3,069		3,120		45		577		622
Commercial mortgage loans	106		1,501		1,607		67		1,547		1,614
Policy loans	—		1,211		1,211		—		1,218		1,218
Other long-term investments	—		3,936		3,936		—		3,728		3,728
Short-term investments	141		—		141		139		—		139
Total	$	914	$	19,010	$	19,924	$	905	$	16,288	$	17,193

Investment PortfolioDebt SecuritiesAccounting policy. Our accounting policy for debt securities (including bonds, mortgage and other asset-backed securities and preferred stocks redeemable by the investor) remains materially consistent with the policy disclosed in the Company's 2022 Form 10-K. However, with the adoption of amended accounting guidance for long-duration insurance contracts on January 1, 2023 (discussed in Note 2 to the Consolidated Financial Statements), net unrealized appreciation on debt securities supporting the Company's run-off settlement annuity business is no longer reported in Non-current insurance and contractholder liabilities but rather is reported in Accumulated other comprehensive loss. See Note 14 to the Consolidated Financial Statements for the impact to Accumulated other comprehensive loss.

The amortized cost and fair value by contractual maturity periods for debt securities were as follows as of March 31, 2023:



(In millions)	Amortized Cost		Fair Value
Due in one year or less	$	638	$	630
Due after one year through five years	3,972		3,752
Due after five years through ten years	3,227		2,915
Due after ten years	2,450		2,268
Mortgage and other asset-backed securities	381		344
Total	$	10,668	$	9,909

Actual maturities of these securities could differ from their contractual maturities used in the table above because issuers may have the right to call or prepay obligations, with or without penalties.

Gross unrealized appreciation (depreciation) on debt securities by type of issuer is shown below:


(In millions)	Amortized Cost		Allowance for Credit Loss		Unrealized Appreciation		Unrealized Depreciation		Fair Value
March 31, 2023
Federal government and agency	$	276	$	—	$	29	$	(8)	$	297
State and local government	42		—		—		(1)		41
Foreign government	373		—		16		(18)		371
Corporate	9,596		(41)		124		(823)		8,856
Mortgage and other asset-backed	381		—		1		(38)		344
Total	$	10,668	$	(41)	$	170	$	(888)	$	9,909


December 31, 2022
Federal government and agency	$	292	$	—	$	32	$	(12)	$	312
State and local government	43		—		—		(2)		41
Foreign government	375		—		11		(21)		365
Corporate	9,742		(44)		89		(981)		8,806
Mortgage and other asset-backed	390		—		1		(43)		348
Total	$	10,842	$	(44)	$	133	$	(1,059)	$	9,872

Review of declines in fair value. Management reviews impaired debt securities to determine whether a credit loss allowance is needed based on criteria that include:

•severity of decline;

•financial health and specific prospects of the issuer; and

•changes in the regulatory, economic or general market environment of the issuer's industry or geographic region.

The table below summarizes debt securities with a decline in fair value from amortized cost for which an allowance for credit losses has not been recorded, by investment grade and the length of time these securities have been in an unrealized loss position. Unrealized depreciation on these debt securities is primarily due to declines in fair value resulting from increasing interest rates since these securities were purchased.


	March 31, 2023							December 31, 2022
(Dollars in millions)	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues	Fair Value		Amortized Cost		Unrealized Depreciation		Number of Issues
One year or less
Investment grade	$	3,176	$	3,362	$	(186)	1,019	$	5,533	$	6,127	$	(594)	1,659
Below investment grade	353		371		(18)		936	887		964		(77)		1,287
More than one year
Investment grade	3,222		3,808		(586)		1,035	1,151		1,487		(336)		462
Below investment grade	682		780		(98)		770	330		382		(52)		369
Total	$	7,433	$	8,321	$	(888)	3,760	$	7,901	$	8,960	$	(1,059)	3,777

Equity Securities

The following table provides the values of the Company's equity security investments as of March 31, 2023 and December 31, 2022:


	March 31, 2023				December 31, 2022
(In millions)	Cost		Carrying Value		Cost		Carrying Value
Equity securities with readily determinable fair values	$	680	$	91	$	673	$	138
Equity securities with no readily determinable fair value	2,926		3,029		380		484
Total	$	3,606	$	3,120	$	1,053	$	622

Consistent with our strategy to invest in targeted startup and growth-stage companies in the health care industry, approximately 95% of our investments in equity securities are in the health care sector.

Commercial Mortgage LoansMortgage loans held by the Company are made exclusively to commercial borrowers and are diversified by property type, location and borrower. Loans are generally issued at fixed rates of interest and are secured by high quality, primarily completed and substantially leased operating properties.The Company regularly evaluates and monitors credit risk from the initial mortgage loan underwriting and throughout the investment holding period. For more information on the Company's accounting policies and methodologies regarding these investments, see Note 11 in the Company's 2022 Form 10-K.

The following table summarizes the credit risk profile of the Company's commercial mortgage loan portfolio:


(Dollars in millions)	March 31, 2023					December 31, 2022
Loan-to-Value Ratio	Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio		Carrying Value		Average Debt Service Coverage Ratio	Average Loan-to-Value Ratio
Below 60%	$	912	2.11			$	901	2.12
60% to 79%	504		1.73			564		1.73
80% to 100%	191		1.32			149		1.17



Total	$	1,607	1.89	60	%	$	1,614	1.89	60	%

Other Long-Term Investments

Other long-term investments include investments in unconsolidated entities, including certain limited partnerships and limited liability companies holding real estate, securities or loans. These investments are carried at cost plus the Company's ownership percentage of reporting income or loss, based on the financial statements of the underlying investments that are generally reported at fair value. Income or loss from these investments is reported on a one quarter lag due to the timing of when financial information is received from the general partner or manager of the investments.

Other long-term investments also include investment real estate carried at depreciated cost less any impairment write-downs to fair value when cash flows indicate that the carrying value may not be recoverable. Additionally, statutory and other restricted deposits and foreign currency swaps carried at fair value are reported in the table below as Other. The following table provides the carrying value information for these investments:


	Carrying Value as of
(In millions)	March 31, 2023		December 31, 2022
Real estate investments	$	1,434	$	1,319
Securities partnerships	2,259		2,166
Other	243		243
Total	$	3,936	$	3,728

Derivative Financial InstrumentsThe Company uses derivative financial instruments to manage the characteristics of investment assets (such as duration, yield, currency and liquidity) to meet the varying demands of the related insurance and contractholder liabilities. The Company also uses derivative financial instruments to hedge the risk of changes in the net assets of certain of its foreign subsidiaries due to changes in foreign currency exchange rates and to hedge the interest rate risk of certain long-term debt.As of March 31, 2023, there have been no material changes to the Company's derivative financial instruments. The effects of derivative financial instruments used in our individual hedging strategies were not material to the Consolidated Financial Statements as of March 31, 2023 and December 31, 2022. The gross fair values of our derivative financial instruments are presented in Note 12 to the Consolidated Financial Statements. Please refer to the Company's 2022 Form 10-K for further discussion of the types of derivative financial instruments and associated accounting policies. Realized Investment Gains and LossesAccounting policy. Realized investment gains and losses are based on specifically identified assets and result from sales, investment asset write-downs, change in the fair value of certain derivatives and equity securities and changes in allowances for credit losses on debt securities and commercial mortgage loan investments. With the adoption of amended accounting guidance for long-duration insurance contracts on January 1, 2023 (discussed in Note 2 to the Consolidated Financial Statements), realized investment gains and losses no longer exclude amounts that were previously required to adjust future policy benefits for the run-off settlement annuity business. Prior period net realized investment losses have been updated to reflect the impact of adopting LDTI.

The following realized gains and losses on investments exclude realized gains and losses attributed to the Company's separate accounts because those gains and losses generally accrue directly to separate account policyholders:


	Three Months Ended March 31,

(In millions)		2023		2022
Net realized investment (losses), excluding credit loss expense and asset write-downs		$	(51)	$	(322)
Credit loss recoveries		3		—
Other investment asset write-downs		(8)		—
Net realized investment (losses), before income taxes		$	(56)	$	(322)

Net realized investment losses for the three months ended March 31, 2023 and March 31, 2022 were primarily due to mark-to-market losses on a strategic health care equity securities investment.