The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's second quarter 2020 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 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 second 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 second quarter, we recorded an after-tax special item charge of $99 million, or 27 cents per share, for integration and transaction-related costs. We also recorded a special item charge of $11 million after-tax, or 3 cents per share, for costs associated with the early extinguishment of debt. As described in today's earnings relief, special items are excluded from adjusted income from operations in our discussion of financial results. Also, as we previously noted, prior year development is now disclosed on a gross basis consistent with industry practice. Our financial supplement now includes a roll forward of year-to-date unpaid medical claims liability for the six months ended June 30th, 2020 and 2019, as well as for full year 2019. Additionally, Please note that 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. Finally, 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. With that, I will turn the call over to David.

Thanks, Will, and good morning, everyone. Thank you for joining our call today. The current environment that we all live in and work in is more dynamic, more unsettled, and more complex than any time in recent history. And Cigna's mission to improve the health, well-being, and peace of mind of those we serve has never been more important, and it continues to guide the actions as we move forward. In recent weeks and months, we have taken decisive steps to support employers who are the driving force of a thriving economy. to withstand and emerge from the COVID-19 pandemic, and to support our communities, customers, and patients, including our efforts to combat systemic racism, which we view as a critical health issue as well. Today, I'll offer several recent examples of how we continue to differentiate ourselves in the marketplace and with our key stakeholders. By delivering on our promises and working to make healthcare more affordable, predictable, and simple, by creating innovative solutions to solve for healthcare's most complex challenges, and by partnering with our clients, some of whom are viewed as competitors, but who we see as strategic partners capable of extending our reach to make an even greater impact for customers around the globe. We do all of this with the goal of maintaining and improving the health and vibrancy of our clients, communities, and customers. I'll also give you an update on our financial results that we delivered for the quarter, and how these results provide a further testament to the strength of our businesses and the value we create for our customers and clients, as well as a few comments on our growth path forward. And then I'll conclude with a brief update on our outlook before turning the call over to Eric. Cigna's longstanding commitment to our clients, communities, and customers is fundamental to who we are as a global health service company and has been critical in shaping our ongoing response to the COVID-19 crisis. This response begins with our more than 70,000 colleagues around the globe who have worked tirelessly and with great empathy throughout this pandemic. They wake up each and every day with the sole focus to serve the needs of our customers, patients, and clients around the globe. And I am proud to be teamed up with such a talented group of coworkers. And I thank them for what they do to positively impact millions of lives each and every day. Nowhere is their commitment more evident than in our deep support of our employer clients, large, small, public, private. These businesses have always been critical to a robust economy, and today more than ever, companies will play an essential role in serving individuals, re-energizing our communities, and returning economies around the world to economic vibrancy. From the outset of the COVID-19 crisis, Cigna has leveraged our breadth of solutions, strength of our team, and our consultative approach and our broad data and analytical capabilities to support our employer clients and their employees in numerous ways, from taking rapid and decisive steps to eliminate cost as a barrier to testing and treatment, to expanding access to care, to helping them safely work to return their employees to work sites, most recently, for example, with the launch of our COVID-19 high-risk dashboard. This new suite of innovative analytical tools combines the power of data predictive models, and clinical expertise to help clients project how COVID-19 might impact the health and safety of their employee populations and to model forward impacts of different pandemic scenarios going forward. For example, the dashboard compiles and analyzes COVID-19 case data on the health of that client's specific employees at national, state, and county levels, giving them essential insights to guide their decision-making for bringing employees back to work safely. In cases where employers see concerning trends in their reports, Cigna is prepared to help them take action. For instance, through on-site COVID-19 testing and triage services delivered from our Cigna on-site health solutions. Our COVID-19 hybrid dashboard represents just one powerful example of how Cigna is helping employers navigate the complexities of the pandemic and serves as a reinforcement of why employers rank Cigna highest amongst its competitors for driving healthcare quality and value as reported in a recent study conducted by the LEAP Pride Group, an independent national organization representing employers. Turning to our supportive communities where we live, work, and play each and every day, our commitment is reflected in our efforts to increase understanding of the impacts of and to drive positive changes to combat systemic racism. Not only is systemic racism an issue of human rights, we also view it as a critical health issue. contributing to well-documented disparities in health treatment and outcomes that disproportionately impact communities of color. Two weeks ago, we launched our new five-year initiative, our Building Equity and Equality program, which commits a mix of local community grants, scholarship funds, and employee volunteer hours to continue to drive Cigna's efforts to eliminate racism, bias, and health and economic disparities for people of color. This new initiative is another important part of Cigna's ongoing commitment to partner with our communities and government leaders to affect positive, sustainable change, and we will continue to expand and evolve our engagement programs going forward. All of Cigna's efforts to partner with our clients and communities is ultimately rooted in our mission to improve the health, well-being, and peace of mind of those we serve, specifically focused on customers and patients. Today, more than ever, they are looking for us to make healthcare more affordable, predictable, and simple. We continue to introduce new innovative programs and solutions designed to deliver on this promise. For example, our customer protection program, which safeguards our customers from unexpected costs from COVID-19 through surprise or balanced bills from out-of-network providers. In addition, our pharmacy solutions leverage existing and newly created tools to put resources and medicines and treatments in the hands of those who need them most. For example, we help Americans who lose their prescription coverage from recent job loss to secure their medications at affordable, predictable prices through our Express Scripts Parachute Pharmacy program. Further, as demonstrated by our most recent drug trend report, we also deliver affordability and predictability to our health service customers and clients who in 2019 experienced an overall rate of increase of drug spending of just 2.3%, a result that is in line with the Consumer Price Index. And important to note, more than one-third of our commercial plans experienced a decrease in overall spending in 2019. Taken all together, these examples I've shared with you today are reflective of how Cigna is and will continue to deliver on our promises, create innovative solutions, and partner effectively to further reach and drive impact. Now turning briefly to our results, we once again delivered strong financial performance in this quarter, and we remain on track to complete our integration and reach our deleveraging objectives by year end. Our consolidated revenue of $39.2 billion and after-tax earnings of $2.2 billion reflect continued strong execution of our strategy and the fundamental strength of our four well-positioned diversified growth platforms. In particular, The continued strong performance of our health service segment demonstrates the range of services and value we provide to diverse health plan, employer, federal, and state government clients. Our integrated medical segment results reflect lower consumption of medical services as individuals have deferred some services during the COVID-19 pandemic. Additionally, integrated medical customers continue to track much better than the national unemployment figures as many employers have maintained benefits through this disrupted time, and importantly, because our client mix is less weighted to industries that have been most impacted by COVID-19. As our employer clients have continued to support their employees' health and wellness needs, we have provided hundreds of millions of dollars in assistance to our employer clients, both through direct financial support and by leveraging our flexibility of our full suite of funding alternatives. all of which are already reflected in our second quarter results. I would also note that our self-funded medical clients have directly benefited from well in excess of $2 billion of reduced spending this year. Overall, I am pleased that by maintaining the strength and health of our franchise, we have effectively balanced and responded to the needs of our stakeholders in this challenging environment. Now, to bring my comments to a close, The current environment we live in and work in is highly dynamic, unsettled, and complex, and as I noted, more than any time in recent history. Cigna's strong second quarter results reflect the continued strong execution of our strategy and the underlying strength of our four well-positioned, diverse growth platforms. We have confidence that we will continue to effectively support our clients, communities, customers, and patients, all while working to deliver on our EPS and revenue outlook for 2020 and as well as our 2021 EPS target of $20 to $21 per share. This is driven by our sustained culture of innovation in our organization, the value we deliver to the marketplace each and every day, and aided by the financial strength and flexibility of our franchise. And with that, I'll turn the call over to Eric.