The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's first quarter 2019 results review. At this time, all callers are in a listen-only mode. We will conduct a question and answer session later during the conference and review procedures on how to enter queue to ask questions at that time. If you should require assistance during the call, please press star zero on your touchtone phone. As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We'll begin by turning the conference over to Mr. Will McDowell Please go ahead, Mr. McDowell.

Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. With me this morning are David Cordani, our President and Chief Executive Officer, and Eric Palmer, Cigna's Chief Financial Officer. In our remarks today, David and Eric will cover a number of topics, including Cigna's first quarter 2019 financial results, as well as an update on our financial outlook for 2019. As noted in our earnings release, when describing our financial results, Cigna uses certain financial measures, adjusted income from operations and adjusted revenues, which are not determined in accordance with accounting principles generally accepted in the United States, otherwise known as GAAP. A reconciliation of these measures to the most directly comparable GAAP measures, shareholders net income and total revenues respectively, is contained in today's earnings release, which is posted in the investor relations section of Cigna.com. We use the term labeled adjusted income from operations and earnings per share on this same basis as our principal measures of financial performance. I would remind you that, as previously disclosed, we exclude contributions from transitioning clients from adjusted income from operations and adjusted revenue. In our remarks today, we will be making some forward-looking statements, including statements regarding our outlook for 2019 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. A description of these risks and uncertainties is contained in the cautionary note to today's earnings release and in our most recent reports filed with the SEC. Before turning the call over to David, I will cover a few items pertaining to our financial results and disclosures regarding our results. In the first quarter, we recorded special items totaling to a charge of $108 million, or 28 cents per share, primarily to reflect the impact of integration and transaction-related costs. As described in today's earnings release, special items are excluded from adjusted income from operations and adjusted revenues in our discussion of financial results. Please note that, consistent with past practice, when we make prospective comments regarding financial performance, including our full year 2019 outlook, we will do so on a basis that excludes the impact of any future share repurchases or additional prior year development of medical costs. Finally, I remind you that Cigna will be hosting our upcoming Investor Day on May 31st in New York City. And with that, I'll turn the call over to David. Thanks, Will.

Good morning, everyone, and thanks for joining our call today. Today, I'm going to highlight Cigna's strong financial results in our first quarter as a combined company with Express Scripts, driven by growth, innovation, and focused execution across our businesses. I'll then address how Cigna is creating differentiated value in an ever-changing landscape. as we remain on a path to deliver attractive growth in 2019 and beyond. I'll also update you on how our team is advancing our integration priorities before turning the call over to Eric for a more detailed overview of our financial results. I'll begin with our strong first quarter performance, which included exceptional service delivery to our customers, patients, and clients, strong retention levels, expansion and deepening of our customer, patient, and client relationships, and innovation and growth across our portfolio of businesses. I'll provide just a few examples of our momentum. In health services, we added 1.7 million new pharmacy customers since the start of the year. We drove 9% organic medical customer growth in the select segment year over year, reflecting the value of the differentiated, fully integrated solutions we bring to that marketplace. Within our integrated medical business, we further deepened our customer relationships by adding approximately 800,000 behavioral and approximately 600,000 in dental. In addition, Cigna continues to deliver outstanding medical and pharmacy cost trend across our commercial, government, and health service businesses. This momentum has helped to fuel a great start to 2019. Cigna's consolidated adjusted revenue was $33.4 billion and we grew after-tax earnings by 48% to $1.5 billion. Within our business segments, Integrated Medical delivered a 13% increase in revenue with very strong earnings growth of 16%, and Health Services delivered significant growth in both revenue and earnings. Our other business segments also made solid contributions as we generated very strong cash flows in the first quarter while deploying significant capital to both debt repayment and CHERI purchase. Collectively, our first quarter results demonstrate Cigna's strong performance and momentum and give us confidence we will achieve our increased outlook for revenue, earnings, and EPS in 2019. Looking beyond our strong first quarter results, we recognize that our company operates in a dynamic environment and that customers and patients need even greater value from the healthcare system. As more stakeholders seek to improve sustainability, we continue engaging with our regulatory, client, provider, and community partners. Our goal in doing this is to better identify and implement proven solutions that improve affordability, choice, and predictability, all while accelerating innovation. This path to sustainability is strengthened by our combination with Express Scripts, leveraging our broad services, depth of informatics, and healthcare partnerships all to accelerate innovation and the value for those we serve. Let me provide two recent examples of how Cigna has already leveraged our combination to deliver additional innovations for our customers, patients, and clients. The first relates to diabetes. Approximately 24 million Americans are diagnosed with diabetes, and about 6 million of them are insulin dependent. Too many of these individuals struggle to afford their insulin. In fact, a recent Yale study found that one in four insulin-dependent individuals with diabetes cut back on the use of insulin because of cost. We view that as unacceptable, and given the importance of the issue, it was one we decided to tackle immediately. We launched our patient assurance program last month, which addresses the need for greater affordability and increases access to insulin for people with diabetes by ensuring our eligible customers pay no more than $25 for a 30-day supply of insulin. This is a major innovation for people with diabetes, some of whom have to pay hundreds of dollars they can't afford for the 30-day supply. Together, we harnessed our combined strength and accelerated the introduction of this new solution for our customers and patients. Our combination created the opportunity for us to deliver this solution to the marketplace faster than either Cigna or Express Scripts could have achieved independently. A second example of how we're innovating revolves around improving today's fragmented healthcare system, which is too frequently marked by episodic, uncoordinated care. To help address this, Express Scripts recently launched HealthConnect 360, an outcome-based approach to delivering highly personalized clinical support for clients and patients. The capability comprehensively connects health plans, providers, pharmacists, and other clinical partners to ensure each person gets the clinical care support they need when and how they want it. With HealthConnect 360, we're able to dramatically expand value-based care programs as well, benefiting customers, patients, clients, and those healthcare professionals who are creating the most value today. The platform works by integrating otherwise unconnected data through our Care Insights Hub, which provides more comprehensive care programs that lead to better health and greater affordability for our patients and clients. The result is personalized and effective coordination without duplication or confusion. We've already rolled out HealthConnect 360 in successful pilot programs covering approximately 500,000 customers and patients. We are receiving significant client interest for implementation later this year and into 2020. These examples highlight how Cigna is using the full breadth of our capabilities to address the most pressing challenges in healthcare, fueled by our clear strategic direction to maximize the value we create for our customers, patients, and clients, our highly engaged 74,000 coworkers, our four well-positioned growth platforms, the breadth and depth of our actionable data and analytics, which give us the tools to holistically understand and address our customer and patient needs, and our strong cash flow, which gives us meaningful financial flexibility and strategic optionality. Relative to Express Script's integration activities, we are making very good progress. Specifically, we're executing well against each of our five integration priorities, which include, first and foremost, delivering on our commitments to provide outstanding service to our customers, patients, and clients in 2019 and as we look to 2020. In the first quarter, our customer net promoter score across our commercial business saw significant improvements year over year. In our health service business specifically, we continue to earn the trust of our clients as validated by the outlook introduced this morning for 96 to 98% retention for 2020. Our second priority is maintaining high level of talent engagement and retention. We are encouraged by our early progress with engagement retention levels which are above our already strong pre-combination levels. Third is realizing shareholder synergies from administrative costs and other efficiencies. We are on track with our targets. Fourth, delivering medical and pharmacy cost savings. We are well into our program and we are on track to deliver meaningful savings. And fifth is keeping our vision top of mind as we collaborate to drive accelerated innovation. All in, we are pleased with our progress to date and we look forward to providing you with additional insights on our integration progress at our upcoming Investor Day. Now to conclude, Cigna delivered strong first quarter financial results, which reflect momentum across our businesses, in our first full quarter as a combined company, including continued customer growth and deepening of relationships in health services, as well as integrated medical business, and strong medical and pharmacy cost results. In the quarter, we generated strong cash flows and deployed significant capital to both debt repayment and share repurchase. Our first quarter results reflect Cigna's strong performance momentum and give us confidence we will achieve our increased outlook for revenue, earnings, and EPS in 2019. Looking ahead, I am very confident and excited about our path forward, and we remain on track to achieve our 2021 EPS target of $20 to $21 per share. With that, I'll turn the call over to Eric.