The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's first quarter 2020 results review. At this time, all listeners 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 touch-tone 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. William McDowell. Please go ahead, Mr. McDowell.

William McDowell Good morning, everyone, and thank you for joining today's call. I am Will McDowell, Vice President of Investor Relations. As we begin our call, I would note that we are practicing appropriate social distancing and as such are dialed into today's call from separate locations. I would ask for your patience should we, as a result, encounter any technical difficulties. With me on the line 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 2020 financial results, as well as an update on 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 adjusted 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 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 after-tax special items netting to a charge of $191 million, or 51 cents per share. As detailed in our financial supplement, special items in the first quarter included expenses associated with the previously disclosed early extinguishment of debt, as well as integration and transaction-related costs and other matters. As described in today's earnings release, special items are excluded from adjusted income 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 or purchases or additional prior year development of medical costs. We disclosed prior year development on both a gross and net basis in our release this morning. Going forward, we will only report this measure on a gross basis consistent with industry practice. 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 in the third quarter of 2020. And with that, I will turn the call over to David.

Thanks, Will, and good morning, everyone. Thanks for joining our call today. I'd like to begin by acknowledging the unique and unprecedented challenge of COVID-19's global pandemic and the tireless effort of those on the front line caring for patients in need. At Cigna, we have worked to ensure the health and safety of our customers, patients, and colleagues, and we will continue to partner across the system to lead through this crisis. While the COVID-19 emergency understandably and rightfully dominates much of our focus, We do want to take advantage of our time together today to provide you with an update on our first quarter results and our outlook for the balance of 2020. Following my comments, Eric will share more detail about our first quarter financial results and expectations for the balance of 2020. Then we'll take your questions. Let's begin by discussing the rapid and decisive steps we have taken to respond to the COVID-19 crisis. From the beginning of this health emergency, we established three primary goals for response efforts. First and foremost, to attend to the needs of our stakeholders across the globe. For our customers and patients, we have taken steps to remove costs and barriers for testing and treatment, ensure they have access to the medications, and expand access to care, including through additional telehealth services for medical, behavioral, and recently for dental health. For our clients, we have leveraged our consultative approach and proactively provided them with support and services they need. This includes serving as trusted advisors for those seeking guidance on how to navigate this dynamic and challenging environment and providing relief for those in financial distress. For our healthcare provider partners, we have given them administrative as well as targeted financial support. Additionally, in partnership with New York Life, we have created the Brave of Heart Fund for the true heroes of the COVID-19 crisis. This fund, with contributions from our respective foundation, aims to provide $100 million or more in monetary and other assistance to frontline healthcare workers, their support teams, and their families. We're proud to have taken this action, which reinforces the service orientation of both Cigna and New York Life, as we work together on an accelerated basis to bring peace of mind to the brave men and women who are so valiantly serving our communities. Additionally, for 70,000 colleagues around the globe, We've also taken appropriate steps to protect their health and wellbeing. For example, we are providing premium pay for those essential workers whose jobs continue to be stigma site dependent. And we're providing 10 additional days of emergency time off to cover absences related to the virus and allow our coworkers to care for themselves and their loved ones during this challenging time. Our second goal in responding to the COVID-19 crisis is to ensure that we maintain a healthy organization. that is well positioned to deliver significant value for all of our stakeholders today and into the future. We know and appreciate the fact that many are depending on us now more than ever, and we need to be there for them in this time of crisis and beyond. We're focused on balancing all of these needs and ensuring we maintain strength of our franchise by continuing to invest in growth, our capabilities, ongoing innovation, and in our talent. Finally, another key goal of our response to the COVID-19 crisis is to ensure we are a proactive part of the solution, partnering both at national as well as local levels. We have played an active role in driving a high level of collaboration across government, not-for-profit, and private sector organizations in response to this pandemic. While we are proud of our response to date, we will continue to drive our entire organization to give voice to and work for the benefit of our key stakeholders. Now turning briefly to our results. Our first quarter results were strong. Consolidated adjusted revenue grew to $38.4 billion and after tax earnings grew to $1.76 billion, including high single digit earnings growth in our health service business, which was somewhat ahead of our expectations. Our team achieved these results through focused execution of our business strategies and by continuing to expand key relationships and partnerships and working to make healthcare more affordable, predictable, and simple. Now, the strength of our first quarter results, driven by the performance of our underlying fundamentals, reinforces our confidence that our well-positioned, diverse health service portfolio will again deliver attractive top-line and bottom-line growth in 2020, including strong cash flows. As such, we are reaffirming our full-year EPS outlook of $18 to $18.60. While the impact of COVID-19 is still developing, we clearly see headwinds driven by the recession it's causing, including, for example, disenrollment within our commercial customers, both in our integrated medical business as well as our health service business, as well as some pressure in our group disability business. As for medical costs, we expect somewhat offsetting impacts from elevated COVID-19 claims costs and lower medical costs from deferred procedures. We fully recognize this is a dynamic environment, However, we expect the strength of our first quarter to drive us to another strong year for revenue, earnings, and free cash flow. All while we continue to invest in and support the needs of our key stakeholders. As we look forward, there is no doubt the COVID-19 pandemic has highlighted opportunities for improvement in the healthcare system, which we believe will accelerate change in our industry. This evolution is likely to usher in a new call for an embrace of innovative and disruptive solutions a new wave of broadened partnerships, and a need for even greater levels of differentiated value in the marketplace. At Cigna, we have both the capabilities and orientation to further differentiate ourselves in this rapidly evolving industry. The work we have done to harness the full capabilities following our combination with Express Scripts has positioned us to deliver exceptional value for the benefit of our customers, patients, and clients. in an environment that is demanding solutions to healthcare's most pressing problems. To achieve this, we have deep and broad clinical strength from our medical, behavioral, and pharmacy services, and broad data and insight capabilities. In addition, we have substantial financial strength in capital health, aided by our capital life framework, as we have positioned our company not to be tied to capital-intensive investments in bricks-and-mortar assets or care delivery ownership. This gives us tremendous strategic flexibility and positions us to drive forward with solutions that make healthcare more affordable, predictable, and simple for those we serve. Our approach is further fueled by our partnership orientation. Recent examples include MDLive and Bowie Health, each of which make it more simple for individuals to access care. With MDLive, for example, earlier this year, Cigna became the first partner to offer virtual care for annual checkups. And as the COVID-19 crisis evolved, we temporarily transferred hundreds of our nurses and physicians to MDLive to further expand their capacity. With Buoy Health, in January, we harnessed Buoy's capabilities to quickly launch an early intervention tool, which is now available to assess COVID-19 risk for individuals in the US. With this innovative technology, customers can assess their symptoms and make informed decisions about their next steps for care, all within the comfort and safety of their homes. MDLive and Bowie Health are just two recent examples of our broad portfolio of partnerships around the world. Now to summarize, Cigna's strategic framework provides us with the foundation to respond quickly and effectively to the COVID-19 health emergency, all while we deliver strong first quarter results. We have expanded our services and support for our customers, patients, clients, healthcare partners, colleagues, and communities, all while continuing to ensure that our company remains well positioned to deliver value whenever and however it is needed, both today and into the future. This fuels our expectations of delivering sustained attractive top line and bottom line growth in 2020 and continuing in 2021. Now, none of this would be possible without the hard work and dedication of our colleagues around the globe. Every day, their commitment and passion embodies our mission to improve the health, well-being, and peace of mind of those we serve. This has never been more clear and defining than over the last several months, as they have stepped up in countless ways to support the needs of our key stakeholders around the globe at a time when they most need us. Now, with that, I'll turn the call over to Eric.