Anthem, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Anthem's third quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session where participants are encouraged to present a single question. If you wish to ask a question, please press star then one on your telephone keypad. You will hear a prompt that you have been cued. You may withdraw your question at any time by pressing star then two. These instructions will be repeated prior to the question and answer portion of this call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to the company's management. Please go ahead.

Good morning, and welcome to Anthem's third quarter 2021 earnings call. This is Steve DeMau, Vice President of Investor Relations, and with us this morning on the earnings call are Gail Boudreau, President and CEO, John Galena, our CFO, Peter Haitayan, President of our Diversified Business Group and IngenioRx, Morgan Kendrick, President of our Commercial and Specialty Business Division, and Felicia Norwood. President of our Government Business Division. Gail will begin the call with a brief discussion of the quarter, recent progress against our strategic initiatives, and close on Anthem's commitment to its mission. John will then discuss our financial results and outlook in greater detail. After our prepared remarks, the team will be available for Q&A. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, antheminc.com. We will also be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Anthem. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail.

Thanks, Steve, and good morning, everyone. We're pleased to talk with you about another strong quarter. This morning, we reported third quarter GAAP earnings per share of $6.13 and adjusted earnings per share of $6.79, ahead of expectations despite another surge in COVID that created challenges throughout the country. Once again, Anthem continues to deliver on stakeholder commitment. accelerate growth in every core benefits business, and make considerable progress towards our long-term strategy to transform from a health benefits company to a lifetime trusted partner in health. Addressing the whole person is essential to becoming a trusted lifetime partner in health. Responding to the pandemic has allowed us to instill new agility and innovation into the business. particularly around solutions for physical health, pharmacy, behavioral and social needs, with an emphasis on maternal health, access to nutritious foods, and health disparities. Ultimately, we believe we're only as healthy as the communities we live in and recognize our important role in ensuring everyone has an opportunity to be and stay healthy. As the healthcare paradigm shifts, we're accelerating work to simplify members' and clients' everyday experiences and meet their evolving needs through a personalized experience. Moreover, there's abundant opportunity to modernize further and reinforce our position, leveraging our technology, predictive analytics, and innovative products and services to bring an enhanced experience only Anthem can offer. We expect whole person healthcare, powered by digital technologies, to help us achieve our goal of driving commercial medical cost trend down toward the rate of CPI by 2025. Currently, we're exploring more ways to drive differentiated value across medical and pharmacy. Our insight-driven approach is fueling new programs that drive better cost and quality outcomes for our members, including in the areas of behavioral health and autoimmune disease. Additionally, we recently launched a new offering to test the full suite of our capabilities in the form of a virtual primary care first product, which we expect to demonstrate meaningful reductions in overall cost of care and greater member satisfaction. We are already selling virtual-first risk-based commercial plans in certain markets across each of Anthem's 14 blue states for the 2022 plan year, featuring simplified plan designs, 24-by-7 service, and leveraging our high-performing networks that enable affordable price points. We've also seen strong interest in these capabilities from our fee-based clients, and will be embedding virtual primary care with several large fee-based clients throughout 2022. At the same time, innovative product offerings like Sydney Preferred, which allows employers to customize a digital-first healthcare experience for their employees, are gaining considerable momentum. To date, more than 50 national accounts have signed up for Sydney Preferred, representing nearly 900,000 commercial members. To help accelerate our digital platform, we've elevated Rajiv Rananki to President of Digital Platform. Rajiv will drive the commercialization of our digital capabilities for consumers and care providers as we reimagine the health ecosystem. Now I'll share notable third-quarter highlights and business-driving initiatives for the balance of fiscal 2021, starting with our Medicaid business, which is performing well. Our Healthy Blue Plan, in partnership with Blue Cross Blue Shield of North Carolina, has quickly become the largest Medicaid managed care plan by membership in North Carolina and the leading choice for consumers. Its success, coupled with the ongoing suspension of eligibility redeterminations drove Anthem's total Medicaid membership above 10 million at quarter end, exceeding our internal expectations. Our commitment to members and their communities has never been stronger, and we continue to develop innovative solutions to meet their unique holistic health needs. As a result, our focus on reducing health disparities and inequities remains vital to the value Anthem offers state partners. This is reflected in our momentum, along with our 100% RFP win rate year to date. Looking further ahead, Anthem will launch another new statewide Medicaid managed care contract in Ohio in the summer of 2022. After earning the City of New York's Group Medicare Advantage contract last quarter, We added several new group MA customers in the third quarter for January 1st, 2020 to start days and have a growing pipeline of new prospects. As part of our strategy to deepen our Medicare Advantage market penetration, we remain focused on converting commercial age-outs to MA relationships and preparing for a flawless January launch of our group Medicare Advantage plan for New York City's retirees Customized solutions at scale underpin our approach to individual Medicare Advantage benefits for 2022. Many of our MA plans will allow customers to choose what's best for them from a menu of innovative whole health benefits. For example, in some areas, the program will include a Kroger grocery cart, generous over-the-counter benefits, and up to 60 hours of in-home support to assist with light housekeeping, errands, and companionship. We expect these and other benefit enhancements to help drive another year of double-digit growth in our individual Medicare Advantage membership next year. Medicare Star Ratings continue to be a focused area across Anthem, and the ratings released two weeks ago show we've made solid progress. We're particularly proud HealthSUN received a five-star rating for the fifth consecutive year, the only Medicare Advantage health plan in Florida to accomplish such an achievement. For the 2023 payment year, we anticipate approximately 73% of members in plans that CMS rated as four-plus stars, up from 58% on a comparable basis a year ago. That figure will move even higher with the City of New York's Group Medicare Advantage contract launch next year. At the same time, investments in provider partnerships are accelerating Anthem's evolution toward high-quality, value-based care. This is necessary to drive improved outcomes and cost of care across all of our benefits businesses and is critical in Medicare Advantage where it impacts reimbursement through star ratings. This year, more than 60% of our Medicare Advantage spending will be in risk-sharing arrangements. Based on our current contract, we expect that to increase to more than 70% in 2022, with approximately 30% of Medicare Advantage spending in fully capitated risk arrangements. Investments in our primary care partnerships In particular, we'll support members and drive growth through the expansion of value-based care, leading to an even larger proportion of our members in 4-plus-star contracts over time. We recognize there's still more work to do and we'll continue our efforts to raise customer satisfaction by aligning incentives with care providers to improve quality and medication adherence. while simultaneously enhancing our member experience, accelerating our use of data and analytics, and leveraging IngenioRx as our pharmacy benefit manager. Lastly, a few highlights of the strong growth we see in our commercial business. We're nearing the end of the most robust national account selling season in Anthem's history. Volume of RFPs was down, but average size was up considerably. and we won a disproportionate share of new business and expanded services with our existing clients. IngenioRx is also showing exciting growth with a more than five-fold increase in new sales at this point in the selling season compared to the relatively depressed base a year ago when that pandemic weighed heavily on employer decision-making. The consistent theme across all of our businesses is that each continues to produce strong organic growth. This drove medical enrollment to more than 45 million U.S. consumers, strengthening Anthem's position as the largest health insurer in America by membership. I'm pleased with the progress we're making towards delivering our strategy and want to share two recent leadership changes to accelerate our efforts. Pete Hightine will lead our diversified business group and IngenioRx, both of which are critical components of our growth strategy. Pete has an impressive track record of growth and innovation in his previous roles leading Anthem's commercial and government businesses. With Pete's transition, we're confident our commercial and specialty business division will maintain its strong momentum under the leadership of Morgan Kendrick, who's driven market-leading growth across critical lines of our commercial business, including national accounts and most recently as president of Anthem's commercial West Market, our largest region. The breadth and depth of our collective leadership ensures we stand ready to deliver on our promises to stakeholders across all areas of our business and will guide Anthem to long-term sustainable growth. It's a privilege to work alongside such a strong group of leaders committed to advancing our purpose and mission. In summary, our actions and the focus and discipline we've brought to the business have positioned Anthem for the next several years of growth. Our strategy to extend our role from a partner in health benefits to a lifetime trusted partner in health is resonating in the marketplace as evidenced by our growth. Our response to COVID brings a new level of agility and speed to the business, along with more opportunities to reach consumers and care providers than ever before. And we continue to simplify and personalize our member relationships with relevant benefits and enhance innovative experiences where and when they want. With that, I'll turn the call over to John to discuss our financial results in more detail.