The Cigna Group

Good morning. Ladies and gentlemen, thank you for standing by for Cigna's fourth 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 the 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 full year 2019 financial results, as well as our financial outlook for 2020. 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. In our remarks today, we will be making some forward-looking statements, including statements regarding our outlook for 2020 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectation. 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 fourth quarter, we recorded an after-tax special item charge of $116 million, or 31 cents per share, for integration and transaction-related costs. We also recorded a special item charge of $162 million, or 43 cents per share for severance costs associated with a series of actions we are taking to improve our organizational efficiency. 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 2020 outlook, we will do so on a basis that excludes the impact of any future share of purchases or prior development of medical costs. Additionally, our outlook for 2020 assumes a full year of earnings from Cigna's group disability and life business. We continue to expect our divestiture of that business to be completed by the third quarter of 2020. I will remind you that, as previously disclosed, beginning in 2020, we will no longer exclude contributions from transitioning clients from our performance measures as the transition for those clients was substantially complete as of December 31st, 2019. And finally, I would note that this morning, we posted an investor presentation to the investor relations section of Cigna.com that outlines our strategy and track record, the strength of our four growth platforms, 2020 operating and capital guidance, and details of our longer-term outlook. We hope that you will find this a helpful resource. With that, I will turn the call over to David.

Thanks, Will, and good morning, everyone. Thank you for joining our call today. In 2019, we delivered consolidated adjusted revenue of $140 billion and grew earnings per share by 20% to $17.05. As a result, we exceeded the guidance that we had already raised each quarter during 2019 for revenue, earnings, and EPS, as well as cash flow from operations. Today I'll comment on how we delivered these exceptionally strong results and on the contributions made by each of our four growth platforms led by health services and integrated medical segments. I'll also discuss how we are positioned to drive attractive growth in 2020 and achieve our 2021 EPS target of $20 to $21 per share. Finally, I'll highlight a key point of differentiation and a driver of future growth, our focus on being the undisputed partner of choice in healthcare. Following my comments, Eric will share more details about our full year 2019 financial results and 2020 outlook, and then we'll take your questions. Let's dive in. At our investor day last year, we committed to building on our decade-long track record of delivering industry-leading cost trends, consistent growth, and effective capital stewardship. In 2019, we delivered on each of these commitments. By remaining focused on our customers and patients, we executed well across each of our businesses, deepened our customer relationships, and achieved our integration priorities. Together, this fueled our outstanding performance. In health services, we delivered market-leading customer and client retention, including 97% retention for the 2020 selling season, and continued strong organic growth in prescriptions. In commercial, we again delivered industry-leading medical cost trend and grew our commercial medical customers for the 10th consecutive year, led by another year of double-digit growth in the select segment. And in our government business, CMS's most recent STARS ratings position us to have 87% of our Medicare Advantage customers in four-star or higher plans for 2021, a reinforcement of our strong customer satisfaction and high levels of clinical quality. Additionally, we made significant progress in advancing our five key integration priorities. First and foremost, we kept our promises in the marketplace. by ensuring our more than 170 million customer relationships around the world experienced ongoing high service quality throughout the year. Second, we delivered medical and pharmacy cost savings for the benefit of our customers and clients, effectively completing their transition to industry-leading pharmacy solutions, including Accredo's specialty pharmacy and Express Script's customer-friendly home delivery pharmacy. Additionally, more than 95% of our customers have access to Safeguard Rx, an innovative suite of value-based programs that improve care and value for customers with challenging medical conditions. Third was our focus on talent. As a health service company, our talent and their engagement is key to our performance and ongoing growth. Our retention and engagement levels today, one year into our combination, are above our already strong pre-transaction levels. Fourth, we made significant progress towards securing base operating expense synergies. The organizational efficiency plan we announced earlier today is another important step toward achieving these targets. And finally, we kept our vision top of mind by accelerating marketplace innovations that improve affordability, predictability, and simplicity, including our Embark benefit protection program, which improves customer access to life-changing gene therapies while shielding clients from the price shock of multi-million dollar treatments. Our digital health formulary to better curate and generate value from the 300,000 digital health apps in the marketplace today. And our patient assurance program where insulin dependent patients with diabetes pay a maximum of $25 for a 30-day supply of insulin. As a result of this program, our customers are already realizing significant out-of-pocket savings. Overall, 2019 was an exceptionally strong year for Cigna and gives us considerable momentum for ongoing attractive growth in 2020 and beyond. Our achievements were and continue to be driven by the focus, commitment, and passion of our employees who wake up every day to fulfill our mission to improve the health, well-being, and peace of mind of those we serve. In 2020, we will continue to drive significant growth in customer relationships, revenue, earnings, and EPS, as well as strong cash flows. In health services, we expect adjusted script growth in a range of 20% to 23% over our year-end 2019 levels. In integrated medical, we are on track for continued medical customer growth, highlighted by our government business, where we expect 13% to 16% customer growth in Medicare Advantage. And we remain positioned for very attractive growth over the next five years. Additionally, after a very successful first year as a combined company, we remain on track to complete our integration activities over the next year. We also expect to close the sale of our group disability and life business to New York Life by the third quarter of this year. And we are on track to return a balance sheet to normalize levels of debt by year end 2020. In short, we are on pace to meet the commitments we made when we announced the combination nearly two years ago and meet the commitments we made at our investor day in May of 2019. Looking forward, a key point of differentiation and growth driver for Cigna in 2020 and beyond is our orientation toward partnering in order to achieve accelerated innovation, improved affordability, predictability, and simplicity, and to further expand our distribution reach. Several recent examples demonstrate our proven differentiation. First is our new arrangement with Prime Therapeutics, Starting in April 2020, together we will make pharmacy care more affordable by enhancing pharmacy networks and pharmaceutical manufacturer value for Prime's 28 million members, who are covered by 23 health plans, including employer programs, Medicare, and Medicaid. Together, Express Scripts and Prime will help each other to continue to grow in the market across the country by innovating new solutions to improve affordability, increase access to medicine, and further improve individual health. This agreement shows our ability to work across healthcare and partner with those who seek to deliver innovative, high-quality health services and solutions to employers, health plans, and governmental agencies for the benefit of customers and patients. A second example of our partnership orientation is our work with emerging and highly innovative companies. A great recent example of this is our partnership with Oscar Health. With Oscar, we will deliver new, innovative solutions for small businesses. which all too often are left with limited options that are highly priced. We will offer small businesses access to affordable, fully-insured health plans that broaden choice and prioritize whole-person health. We will focus in four geographies with OSCAR later this year, and we'll take our proven test and learn framework to accelerate growth over time. A third example is our trusted relationships with healthcare professionals. We have a long history of innovative value-based arrangements with healthcare professionals in both our U.S. commercial and government businesses, including more than 650 collaborative accountable care relationships. Today, more than 65% of Cigna's medical payments are in value-based arrangements across our top 40 commercial markets and all our Medicare markets. Importantly, 92% of healthcare providers in our programs are delivering differentiated levels of quality, and 90% of healthcare providers believe Cigna is the industry leader in this area. These deep partnerships drive our growth, particularly in Medicare Advantage, where we focus on geographies where a commercial business already has aligned, high-performing collaborative accountable care relationships in place. Approximately 25% of medical eligible seniors live in geographies where a commercial business has deep ties to delivery systems, but where we have no Medicare Advantage presence today. That provides a meaningful growth opportunity for our Medicare Advantage business, that we have begun to capitalize in 2020 by accelerating our geographic expansion and bringing new PPO solutions to market. This combined with the fact that 87% of our Medicare Advantage customers are in four-star or greater plans in 2021, and our high customer MPS levels, which approximate 70 across all of our markets, make us excited about our future customer growth, which we project to be in the range of 10 to 15% on an annualized basis over the next five years. Each of these examples gives a clear view of how diverse healthcare stakeholders view Cigna as their best partner for future success and how being the partner of choice in healthcare marketplace will contribute to our sustained, differentiated growth over time. Now briefly to summarize. At Cigna, we delivered exceptional full-year 2019 financial results across our four growth platforms, led by health services and our integrated medical segments. These results drove strong financial performance in 2019 and provide us with considerable momentum as we step into 2020 with outstanding strategic and financial flexibility, and we remain on track to deliver our EPS goal of $20 to $21 per share in 2021. With that, I'll turn the call over to Eric.