The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's second 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 question and answer 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 second 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 the 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 second quarter, we recorded an after-tax special item charge of $115 million dollars or 30 cents per share for integration and transaction-related costs. We also recorded a special item charge of $64 million, or 17 cents per share, for a litigation matter. As described in today's earnings release, special items are excluded from adjusted income from operations 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 or purchases or additional prior year development of medical costs. And with that, I'll turn the call over to David.

Thanks, Will. Good morning, everyone, and thank you for joining our call. Today I'll highlight Cigna's strong second quarter financial results, which reflect continued momentum across our businesses. I'll also discuss how our differentiated health service model fuels our ability to drive innovation and accelerate growth and build a more sustainable health care system. I begin with our second quarter performance, which included continued innovation, which drove strong revenue and earnings growth, exceptional service delivery, and deepening of our customer and client relationships. Cigna's consolidated adjusted revenue for the quarter was $34.4 billion, and we grew our earnings to $1.6 billion, a result of that by our health services and integrated medical segments. With health services delivering strong revenues and earnings, that were modestly above our expectations and our integrated medical segment delivering a 10% increase in revenues with earnings growth of 8%. In addition, Cigna continued to deliver solid performance across our international markets and other businesses. Overall, we are pleased with our second quarter results which continue to demonstrate momentum across our portfolio of businesses. We're also making very good progress on our integration priorities as we continue to provide excellent services across our portfolio of businesses retain and meaningfully grow our client relationships, deliver a leading medical and pharmacy cost trend, drive medical and pharmacy synergies for the direct benefit of our customers and clients, and deliver on our synergy capture for the benefit of our shareholders. All in, we're on track to achieve our integration goals. Collectively, our second quarter performance gives us confidence to, again, raise our revenue and earnings outlook for 2019, representing 17% to 19% EPS growth, over Cigna's strong 2018 performance. Our strong results and confidence in continued long-term sustainable growth are fueled by the same thing, a portfolio of leading assets that we connect to provide better care, greater choice, and improved affordability for those we serve. We are led by a clear mission and more than 74,000 talented colleagues focused on improving health, well-being, and peace of mind for those we serve. Our four growth businesses give us a path for attractive growth in a dynamic marketplace and regulatory environment. In commercial, we are executing on our plans to expand our go-deep markets by 25% over the next three to five years, building on the success of our proven strategy. In Medicare Advantage, we expect 10 to 15% average annual customer growth, driven by both product and geographic market expansion beginning in 2020. In our health services business, we see meaningful opportunities for sustained growth through innovative new products, cross-selling opportunities, and further geographic expansion given the modest overlap between our health services and integrated medical businesses. We also continue to serve commercial clients while we further expand and deepen health plan and governmental agency client relationships. And in international markets, we continue our product and distribution channel expansion to drive sustained attractive growth. By leveraging these distinctive assets and guided by our clear strategic direction, Cigna is accelerating the future of healthcare. We began this journey almost a decade ago when we moved from the transactional phase of healthcare to leading the transitional phase, where we demonstrated that improving health, engaging individuals, and supporting and incentivizing healthcare professionals does work and yields real value. That value includes delivering lower medical cost trend, fueled in part by our leading portfolio of specialty capabilities, which includes behavioral health and coaching programs that serve as the cornerstone of our coordinated care approach. Our approach has earned us the privilege to serve more than 165 million customer relationships around the globe. Now, our transformative model of healthcare is building on the progress we have made to position us to lead the industry in creating a better, more sustainable healthcare system. Our focus is in three critical areas, treating the whole person, body and mind, targeted rapid innovation to meet customers' needs for more affordable, personalized solutions, and leveraging data and technology to serve as the connective tissue between our customers and their healthcare professional partners of choice. Let me briefly touch on these components, beginning with the first two, treating the whole person and investing in targeted innovation. to meet the needs for more affordable personalized solutions. We see extraordinary opportunities to achieve better whole person health by building personalized solutions at scale in a way no one else does, as we offer a holistic, connected approach to addressing emerging threats to health. For example, it is clear to us that conditions such as stress, loneliness, and depression each impact overall health and vitality, as well as overall cost of care. Often we see people having one or more of these conditions. Further, data demonstrates that behavioral and medical conditions are highly interrelated. Having both behavioral and medical conditions can increase cost of care by up to two to three times compared with the cost of treating a patient without a behavioral condition. For example, chronic stress has become a major concern around the world. It is linked to reduced workplace productivity and cost employers hundreds of billions of dollars a year in the United States alone. Yet in most cases in the United States and the world for that matter, behavioral and medical services remain uncoordinated. At Cigna, we are addressing these costly conditions in a better, more coordinated way. We have more than 1,000 coaches and specialists helping individuals set goals and improve their behavioral and mental health conditions. We have 600 nurses who visit our customers' homes every day. We have more than 650 aligned collaborative accountable care relationships who are now rapidly expanding services to include behavioral health programs. And we have game-changing connected data thanks to the combination of Cigna and Express Scripts. I'll provide two examples of the benefit of our integrated approach. The first relates to our work to address the mental health needs of first responders. Eighty-five percent of firefighters, police officers, and paramedics and other first responders have experienced symptoms related to mental health issues. However, many have trouble accessing coordinated local care. In a first of its kind initiative, we work closely with the city of San Diego and local healthcare professionals to give first responders easy, coordinated access to behavioral wellness treatment. We are bringing together our capabilities with data and technology to help first responders cope with traumatic and high stress situations while on the job. thereby improving their overall health and well-being. A second example is our partnership with a large global client to help employees avoid work-related stress. In this example, our client's employees are tasked with sorting through social media content, some of which can cause symptoms and health challenges similar to PTSD. Collaborating with our client, we developed the first end-to-end stress management application that incorporates artificial intelligence, virtual reality capabilities, and personalized behavioral coaching. Through this approach, we've created a solution that measures individual stress levels real time, identifies social media content most likely to trigger that stress, and alerts dedicated wellness coaches to engage with individuals who may be exhibiting high levels of stress, helping them through their greatest time of need. A third way we're working to transform healthcare is by leveraging data and technology to serve as the connective tissue between our customers and their healthcare professional partners of choice. To be clear, our strategy guides us to work with, partner, and enable healthcare professional partners as they provide care to their patients, not compete with or disintermediate them. More than ever, people expect coordinated, personalized experiences that are similar to those they receive from other industries. This means understanding each person's engagement preferences, health needs, and treatment protocols to help us to deliver better, more affordable care one person at a time. Let's take a simple yet critically important example. We know that 50 to 60% of people with chronic illness miss taking their medication or take the wrong dose or discontinue treatment prematurely. The cost of inconsistent and incomplete care is staggering. $300 billion in the U.S. alone, approaching almost 10% of what our country spends on annual health care costs. One way we're addressing this challenge is by turning it into an opportunity, one individual at a time, leveraging technology to empower patients and providers to address condition-specific challenges like diabetes, which impacts more than 30 million people in the United States. Our glucose monitoring technology enables targeted clinical intervention for people with diabetes by generating personalized real-time analytics and alerts to inform targeted outreach and coaching from our diabetes specialist pharmacists and clinical teams. Through our Diabetes Care Value Program, we provide physicians with the data they need to help people better manage their diabetes. In addition to improving the adherence and clinical outcomes, it also improves quality of life. And within our commercial plans, for example, those enrolled in this program saw a 4.3% decline in spending in 2018 versus a 4.1% increase for these conditions overall. So as you can see at Cigna, our focus on whole person health is more than just words. It's a clear strategic intent, a focused guide to action, and a catalyst for the development of products, programs, and services. Additionally, our approach, along with our technology and innovation capabilities, has helped us create personalized, high impact, life changing solutions that truly matter to our customers and clients. These are just a few tangible examples of how Cigna is shaping and defining the future of health and wellness, one person, one provider, one client at a time. Now to wrap up, Cigna delivered strong second quarter financial results, reflecting continued momentum across our businesses. including consolidated adjusted revenue of $34.4 billion and earnings of $1.6 billion. Collectively, our second quarter performance results gives us confidence, again, to raise our revenue and earnings outlook for 2019, representing a 17% to 19% EPS growth rate over Cigna's 2018 performance. Our strong results and our confidence in continued long-term sustainable growth are fueled by a portfolio of leading assets that we connect to provide more complete whole person care for those we serve. And as a result, improving affordability and predictability, as well as personalized quality and sustainability as we drive for medical cost growth no greater than CPI by 2021. Our four growth businesses give us a path for sustained attractive growth in a dynamic marketplace and regulatory environment. including through ongoing innovation and expansion of our health services, commercial, government, and international markets businesses. We remain on track to deliver $20 to $21 of EPS in 2021, and we'll deliver 10 to 13% average annual EPS growth over the long term. We're also making very good progress against each of our integration priorities and are on track to achieve our integration goals. With that, I'll turn the call over to Eric.