CVS Health CVS · USD

Segment ReportingThe Company has four reportable segments: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. The Company’s segments maintain separate financial information, and the CODM, the Company’s Chief Executive Officer, evaluates the segments’ operating results on a regular basis in deciding how to allocate resources among the segments and in assessing segment performance. The CODM evaluates the performance of the Company’s segments based on adjusted operating income. Total assets by segment are not used by the CODM to assess the performance of, or allocate resources to, the Company’s segments, therefore total assets by segment are not disclosed.Adjusted operating income (loss) is defined as operating income (loss) (GAAP measure) excluding the impact of amortization of intangible assets, net realized capital gains or losses, and other items, if any, that neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance. The CODM uses adjusted operating income as its principal measure of segment performance as it enhances the CODM’s ability to compare past financial performance with current performance and analyze underlying business performance and trends. Non-GAAP financial measures the Company discloses, such as consolidated adjusted operating income, should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.In 2025, 2024 and 2023, revenues from the federal government accounted for 25%, 24% and 19%, respectively, of the Company’s consolidated total revenues, primarily related to contracts with CMS for coverage of Medicare-eligible individuals within the Health Care Benefits segment.

Commitments and ContingenciesGuaranteesThe Company had the following significant guarantee arrangements at December 31, 2025:•ASC Claim Funding Accounts - The Company has arrangements with certain banks for the processing of claim payments for its ASC customers. The banks maintain accounts to fund claims of the Company’s ASC customers. The customer is responsible for funding the amount paid by the bank each day. In these arrangements, the Company guarantees that the banks will not sustain losses if the responsible ASC customer does not properly fund its account. The Company can limit its exposure to these guarantees by suspending the payment of claims for ASC customers that have not adequately funded the amount paid by the bank. •Separate Accounts Assets - Certain Separate Accounts assets associated with the large case pensions business in the Corporate/Other segment represent funds maintained as a contractual requirement to fund specific pension annuities that the Company has guaranteed. Minimum contractual obligations underlying the guaranteed benefits in these Separate Accounts were approximately $807 million and $857 million at December 31, 2025 and 2024, respectively. See Note 1 ‘‘Significant Accounting Policies’’ for additional information on Separate Accounts. Contract holders assume all investment and mortality risk and are required to maintain Separate Accounts balances at or above a specified level. The level of required funds is a function of the risk underlying the Separate Account’s investment strategy. If contract holders do not maintain the required level of Separate Accounts assets to meet the annuity guarantees, the Company would establish an additional liability. Contract holders’ balances in the Separate Accounts at December 31, 2025 exceeded the value of the guaranteed benefit obligation. As a result, the Company was not required to maintain any additional liability for its related guarantees at December 31, 2025. Lease GuaranteesBetween 1995 and 1997, the Company sold or spun off a number of subsidiaries, including Linens ‘n Things and Marshalls. In many cases, when a former subsidiary leased a store, the Company provided a guarantee of the former subsidiary’s lease obligations for the initial lease term and any extension thereof pursuant to a renewal option provided for in the lease prior to the time of the disposition.

Income TaxesThe components of income before income tax provision, based on tax jurisdiction, consisted of the following for the years ended December 31, 2025, 2024 and 2023:In millions202520242023Income before income tax provision:United States$1,335 $5,964 $11,107 Foreign801 184 66 Total$2,136 $6,148 $11,173 The income tax provision (benefit) consisted of the following for the years ended December 31, 2025, 2024 and 2023:In millions202520242023Current:Federal$(217)$1,622 $2,814 State409 476 662 Foreign114 36 5 Total current306 2,134 3,481 Deferred:Federal92 (456)(543)State10 (119)(139)Foreign— 3 6 Total deferred102 (572)(676)Total income tax provision (benefit):Federal(125)1,166 2,271 State419 357 523 Foreign114 39 11 Total$408 $1,562 $2,805 The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2025, 2024 and 2023:202520242023In millions, except percentages$%$%$%Federal statutory tax rate$449 21.0 %$1,291 21.0 %$2,346 21.0 %State and local income taxes, net of federal income tax effect340 15.9 3024.9 4353.9 Foreign tax effects:IrelandStatutory tax rate difference between Ireland and United States(66)(3.1)— — *— — Other19 0.9 — — *— — Total foreign tax effects(47)(2.2)(15)(0.2)7 0.1 Effect of changes in tax laws or rates enacted in the current period— — — — — — Effect of cross-border tax laws:Global intangible low-taxed income38 1.7 — — *— — Foreign base company income27 1.3 — — *— — Total effect of cross-border tax laws65 3.0 20 0.3 — — Tax credits:Research and development tax credits(50)(2.3)— — *— — *Energy related tax credits(76)(3.6)— — *— — Low-income housing tax credits(25)(1.2)— — *— — *Other(16)(0.7)— — *— — *Total tax credits(167)(7.8)(92)(1.5)(62)(0.6)Changes in valuation allowances(7)(0.3)570.9 280.2 Nontaxable or nondeductible items:Recognition of basis difference in subsidiaries(1,793)(83.9)(71)(1.2)—— Gain on deconsolidation(101)(4.7)—— —— Goodwill impairment1,202 56.3 —— —— Nondeductible litigation324 15.2 —— *—— *Compensation72 3.3 —— *—— *Other7 0.3 991.7 650.6 Total nontaxable or nondeductible items(289)(13.5)280.5 650.6 Changes in unrecognized tax benefits64 3.0 (29)(0.5)(14)(0.1)Effective income tax rate$408 19.1 %$1,562 25.4 %$2,805 25.1 %_____________________________________________*The impact to the income tax rate is immaterial for separate disclosure in the respective period.

LeasesThe Company leases most of its retail stores, mail order facilities and primary care centers, as well as certain distribution centers and corporate offices under operating or finance leases, typically with initial terms of 15 to 25 years. The Company also leases certain equipment and other assets under operating or finance leases, typically with initial terms of 3 to 10 years. In addition, the Company leases pharmacy space at the stores of another retail chain for which the noncancelable contractual term of the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings. For these pharmacy lease arrangements, the Company concluded that for accounting purposes the lease term was the remaining estimated economic life of the buildings. Consequently, most of these individual pharmacy leases are finance leases.

Acquisition and DivestitureRite Aid Asset AcquisitionIn May 2025, the Company reached an agreement to acquire the prescription files of certain Rite Aid pharmacies, as well as acquire and operate certain Rite Aid stores in Idaho, Oregon and Washington for total consideration of $465 million. The closings were completed during the third quarter of 2025. The Company recorded $285 million of customer relationships intangible assets related to the prescription file acquisitions, which will be amortized over a weighted average period of 10 years.ACO REACH and MSSP ExitPrior to the first quarter of 2025, the Company’s Health Services segment provided enablement services to health systems primarily through two programs administered by CMS: the Accountable Care Organization Realizing Equity, Access and Community Health (“ACO REACH”) program and the Medicare Shared Savings Program (“MSSP”). During the first quarter of 2025, the Company determined that it would substantially exit both the ACO REACH program and the MSSP as further described below. In connection with these actions, during the year ended December 31, 2025, the Company recorded expenses of $288 million, which were included in the loss on Accountable Care assets and are reflected in operating expenses within the Health Services segment.ACO REACHIn February 2025, the Company informed CMS of its plans to voluntarily terminate substantially all of its participation in the ACO REACH program effective March 31, 2025. In connection with the process of winding down its ACO REACH operations, the Company incurred costs of $52 million during the year ended December 31, 2025.MSSPIn March 2025, the Company also divested its MSSP operations to Wellvana Health, LLC. The Company recorded a pre-tax loss on the divestiture of $236 million in the year ended December 31, 2025, which includes the removal of intangible assets and goodwill totaling $342 million. The consideration received related to this agreement was not material.

Cybersecurity is an important and integrated part of the Company’s enterprise risk management strategy. Safeguarding the Company’s business information, intellectual property, customer, patient and employee data and technology systems is essential for the continuity of its businesses, meeting applicable regulatory requirements and maintaining the trust of its stakeholders.To help protect the Company from a major cybersecurity incident that could have a material impact on operations or the Company’s financial results, the Company has implemented a robust information security program and has made technology investments that focus on cybersecurity incident prevention, detection and mitigation. The steps the Company takes to reduce its vulnerability and to mitigate the impacts from cybersecurity incidents include, but are not limited to: comprehensive information security policies and standards, implementing logical and technical controls through processes and technologies, monitoring its information technology systems for cybersecurity threats, assessing cybersecurity risk profiles of key third parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices. The Company is currently in material compliance with applicable information privacy and cybersecurity standards.The Company has implemented a Cybersecurity Incident Response Plan (the “Plan”), which is integrated into its overall crisis management program. The Plan provides a framework for responding to cybersecurity incidents. The Plan identifies applicable requirements for incident disclosure and reporting as well as provides protocols for incident evaluation, including the use of third-party service providers and partners, processes for notification and internal escalation of information to the Company’s senior management, the disclosure committee, the Board and appropriate Board committees. The Plan also addresses requirements for the Company’s external reporting obligations. The Plan is reviewed and updated, as necessary, under the leadership of the Company’s Chief Information Security Officer (“CISO”) and Chief Privacy Officer (“CPO”).

Fair ValueThe preparation of the Company’s consolidated financial statements requires certain assets and liabilities to be reflected at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the fair value of financial assets and liabilities and how it determines those fair values. The Company presents this information for those financial instruments that are measured at fair value for which the change in fair value impacts net income attributable to CVS Health or other comprehensive income separately from other financial assets and liabilities.Financial Instruments Measured at Fair Value on the Consolidated Balance SheetsCertain of the Company’s financial instruments are measured at fair value on the consolidated balance sheets. The fair values of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP. The following are the levels of the hierarchy and a brief description of the type of valuation information (“valuation inputs”) that qualifies a financial asset or liability for each level:•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets.•Level 2 – Valuation inputs other than Level 1 that are based on observable market data. These include: quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, valuation inputs that are observable that are not prices (such as interest rates and credit risks) and valuation inputs that are derived from or corroborated by observable markets.•Level 3 – Developed from unobservable data, reflecting the Company’s assumptions.Financial assets and liabilities are classified based upon the lowest level of input that is significant to the valuation. When quoted prices in active markets for identical assets and liabilities are available, the Company uses these quoted market prices to determine the fair value of financial assets and liabilities and classifies these assets and liabilities in Level 1. In other cases where a quoted market price for identical assets and liabilities in an active market is either not available or not observable, the Company estimates fair value using valuation methodologies based on available and observable market information or by using a matrix pricing model. These financial assets and liabilities are classified in Level 2.

InvestmentsTotal investments at December 31, 2025 and 2024 were as follows:20252024In millionsCurrentLong-termTotalCurrentLong-termTotalDebt securities available for sale$1,997 $26,721 $28,718 $2,256 $23,777 $26,033 Mortgage loans148 1,376 1,524 151 1,354 1,505 Other investments— 4,572 4,572 — 3,803 3,803 Total investments$2,145 $32,669 $34,814 $2,407 $28,934 $31,341 Debt SecuritiesDebt securities available for sale at December 31, 2025 and 2024 were as follows:In millionsAmortized Cost (1)GrossUnrealizedGainsGrossUnrealizedLossesFairValueDecember 31, 2025 Debt securities: U.S. government securities$2,691 $39 $(8)$2,722 States, municipalities and political subdivisions296 3 (7)292 U.S. corporate securities14,657 262 (231)14,688 Foreign securities2,981 78 (31)3,028 Residential mortgage-backed securities1,065 14 (29)1,050 Commercial mortgage-backed securities1,974 28 (23)1,979 Other asset-backed securities4,921 25 (2)4,944 Redeemable preferred securities15 — — 15 Total debt securities (2)$28,600 $449 $(331)$28,718 December 31, 2024Debt securities:U.S. government securities$2,826 $7 $(38)$2,795 States, municipalities and political subdivisions712 4 (18)698 U.S. corporate securities13,043 94 (412)12,725 Foreign securities2,608 27 (111)2,524 Residential mortgage-backed securities792 2 (54)740 Commercial mortgage-backed securities1,731 9 (67)1,673 Other asset-backed securities4,834 35 (7)4,862 Redeemable preferred securities16 — — 16 Total debt securities (2)$26,562 $178 $(707)$26,033 _____________________________________________(1)There was no allowance for expected credit losses recorded on available-for-sale debt securities at December 31, 2025 or December 31, 2024.(2)Investment risks associated with the Company’s experience-rated products generally do not impact the Company’s consolidated operating results. At December 31, 2025, debt securities with a fair value of $475 million, gross unrealized capital gains of $10 million and gross unrealized capital losses of $16 million, and at December 31, 2024, debt securities with a fair value of $543 million, gross unrealized capital gains of $5 million and gross unrealized capital losses of $30 million were included in total debt securities, but support experience-rated products. Changes in net unrealized capital gains (losses) on these securities are not reflected in accumulated other comprehensive income (loss).