Leases

12 Months Ended

Dec. 31, 2022

The Company records ROU assets and lease liabilities for non-cancelable operating leases primarily for real estate and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Expense related to leases is recorded on a straight-line basis over the lease term, including rent holidays. The Company recognized operating lease expense of $429 million and $390 million during the years ended December 31, 2022 and 2021, respectively.

The Company considers the existence of options to extend or terminate leases in its analysis of the lease term for the purposes of measuring its ROU assets and lease liabilities. The renewal options are not included in the measurement of the ROU assets and lease liabilities unless the Company is reasonably certain to exercise the optional renewal periods.

The following table sets forth the ROU assets and lease liabilities ($ in millions):


	December 31, 2022		December 31, 2021
Assets

ROU assets (recorded within other long-term assets)	$	2,554	$	3,566

Liabilities
Short-term (recorded within accounts payable and accrued expenses)	$	180	$	204
Long-term (recorded within other long-term liabilities)	3,133		3,619
Total lease liabilities	$	3,313	$	3,823

Cash paid for amounts included in the measurement of lease liabilities, recorded as operating cash flows in the Consolidated Statements of Cash Flows, was $440 million and $385 million during the years ended December 31, 2022 and 2021, respectively. New operating leases commenced resulting in the recognition of ROU assets and lease liabilities of $60 million and $177 million during the years ended December 31, 2022 and 2021, respectively. In connection with the acquisition of Magellan in January 2022, the Company acquired $30 million of ROU assets and lease liabilities. As of December 31, 2022, the Company had additional operating leases that have not yet commenced of $8 million. These operating leases will commence in 2023 with lease terms ranging from one to eight years.

As part of the real estate optimization initiative as described in Note 6. Property, Software and Equipment, the Company vacated and abandoned various domestic leased properties. As a result, the Company assessed the ROU assets for impairment. The Company engaged a third-party real estate specialist to determine the recoverability of the leased properties. The valuation primarily considered comparable leased properties in each market and the assessment of potential future rental income that could be generated by the ROU assets.

As a result of the optimization, the Company recognized $577 million of ROU asset impairments in the year ended December 31, 2022, primarily related to the Managed Care segment. The remainder of the $1,627 million charge was recorded within Property, Software and Equipment, refer to Note 6. Property, Software and Equipment.

The weighted average remaining lease term of the Company's operating leases was 20.5 and 21.1 years as of December 31, 2022 and 2021, respectively. The lease liabilities reflect a weighted average discount rate of 5.7% and 5.7% as of December 31, 2022 and 2021, respectively.

Lease payments over the next five years and thereafter are as follows ($ in millions):


	Lease Payments
2023	$	343
2024	350
2025	325
2026	302
2027	287
Thereafter	4,633
Total lease payments	6,240
Less: imputed interest	(2,927)
Total lease liabilities	$	3,313