The Cigna Group

Ladies and gentlemen, thank you for standing by for seeing this fourth 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 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 Ms. Alexis Jones. Please go ahead, Ms. Jones.

Good morning, everyone, and thank you for joining today's call. I am Alexis Jones, lead principal for Investor Relations. With me on the line this morning are David Cordani, our president and chief executive officer, and Brian Ivanko, Cigna's chief financial officer. In our remarks today, David and Brian will cover a number of topics, including Cigna's full year 2020 financial results, as well as an update on our financial outlook for 2021. 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 2021 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 notes 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've recorded an after-tax special item benefit of $3.2 billion, or $8.91 per share, for the sale of Cigna's Group Disability and Life Business that was completed on December 31, 2020. We also recorded an after-tax special item charge of $148 million, or 41 cents per share, for 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. Beginning next quarter in our earnings release and quarterly financial supplement, the group disability and other segment will be combined with corporate and called corporate and other operations. This change to simplify our reporting was enabled by the aforementioned sale of the group's disability and life business. Additionally, please note that when we make prospective comments regarding financial performance, including our full year 2021 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2021 dividends. With that, I will turn the call over to David.

Thank you, Alexis. Good morning, everyone. And thank you for joining us on a call today. When we met a year ago, the challenges from COVID-19 were just beginning to fully emerge around the globe. With the arrival of vaccines, 2021 is likely to be a year of transition as communities and businesses seek to turn the page. I am very proud of the ways in which our 70,000 plus colleagues led and continue to lead through this difficult time. For our customers, our clients, our providers, our partners, and our communities. Starting last spring, we were amongst the first to waive out-of-pocket costs for COVID-19 testing as well as treatment. Our Evernorth business quickly leveraged our supply chain expertise to ensure consistent prescription drug supply and delivery during the uncertain times. In our U.S. medical business, we ramped up to meet the significant increased demand for behavioral health services by growing our network, adding virtual provider partners, creating demand webcasts, treating first responders, and adding search capabilities for provider ethnicity, all while we were deploying hundreds of millions of dollars to support our clients and partners who were hit hardest by the pandemic. In partnership with New York Life, we launched the Brave of Heart Fund to provide charitable grants for families, frontline workers, and volunteers who lost loved ones to COVID-19. Then last month, our Cigna Medical Group was amongst the first non-hospital organizations in the nation to administer antibody therapy for high-risk COVID-19 patients, bringing up much-needed hospital space. And just a few weeks ago, we partnered with industry leaders from across the public and private sectors to ensure that people who receive the vaccine have digital access to the vaccination records so they can safely return to their jobs and daily activities. As we continue to work to serve our clients, our customers, and our patients during the We also balanced our responsibility to deliver for our shareholders as well. For 2020 full year, we grew our adjusted revenue by 14% to $160 billion. We also delivered adjusted earnings per share of $18.45, consistent with our overall expectations, which included the ongoing elevated cost of COVID-19 related services. Today, I'm going to talk about how our strategic actions we took in 2020 position each of our businesses to navigate what we expect will be another very dynamic year. One that will require us again to balance the varying needs of all of our stakeholders. I'll also tell you about our growth framework and how our execution of it will drive our success throughout this challenging environment and beyond. Following my comments, Brian Ivanko will share more details about our 2020 financial results and our 2021 outlook. And then we'll take your questions. At Cigna, we've been on a journey. an important one over the past two years to significantly accelerate our strategic path. During 2020, we completed the integration of our combination with Express Scripts and delivered on our integration priorities, including revenue growth, cash flow generation, deleveraging targets, strong client retention, high levels of coworker retention, and working to keep our vision top of mind with innovations and improved affordability, predictability, and simplicity delivered to the market. In addition, we delivered another important milestone of our strategic journey by launching Evernorth, our health services platform, which has meaningfully grown our strategic partnerships and is bringing innovative solutions to the market already. We also recently made a series of leadership changes to align our capabilities and further operationalize our strategy, reinforcing our talent depth and our commitment to continue to grow and develop our team. And based on the capital and cash flow strength of our company, we are demonstrating the ability to have an and orientation to our capital deployment strategy. This means we're able to reinvest in our business for ongoing growth and pay a meaningful quarterly dividend and deploy substantial capital to share repurchase and target and pursue strategic M&A. At the same time, we continue to execute effectively across each of our businesses by delivering value to our clients and customers and patients. In Evernorth, our 2020 adjusted revenue increased 20%, driven by ongoing strong retention, the completion of insourcing Cigna volumes, and organic growth, including our partnership with Prime Therapeutics. In U.S. commercial, our relentless support of our customers and our employer clients and partners throughout the pandemic led to strong client retention levels again in 2020, along with better-than-expected in-group strength building a solid foundation that we will carry into 2021. In U.S. government, we grow our Medicare Advantage customer base by 18%, exceeding our average annual growth target of 10 to 15%. And we expanded our geographic and product footprint to now be making market offerings in 28% of all available Medicare Advantage buyer markets. In addition, 88% of Medicare Advantage and prescription drug plan customers in 2021 are in four-star plus rated plans with our national weighted average of four and a half stars, the highest amongst our national competitors. And in our international business, despite navigating the challenges of the ongoing pandemic in multiple countries, we delivered full-year adjusted earnings growth of 18% fueled by our strong partnerships. Related to Group Disability and Life, which we sold to New York Life on December 31st, I am proud of the way in which our team worked to deliver in a very challenging environment fueled by the pandemic for the benefit of our clients and customers. As a result of the pandemic, it created a significant reduction in our earnings contribution for our business last year. However, we remained focused on serving our clients and customers. Throughout 2021, we expect the macro environment to remain dynamic, which presents both challenges and opportunities for us. Among the challenges, we expect COVID-19 and the rollout of the vaccine to continue to tax an already overburdened healthcare system. And we expect an intensified and much needed focus on health disparities to continue as well. At the same time, we also see opportunities. They include greater recognition of the importance of the employer-sponsored market, with companies playing an even more critical role in ensuring the well-being of their employees by offering comprehensive medical, pharmacy, and behavioral services. There are also a number of accelerating trends that will further drive fundamental changes in healthcare. For example, pharmacological innovations are quickly becoming the future of healthcare, driven in part by the continued rise in specialty pharmaceuticals, gene therapies, and the evolution of biosimilars. There's also greater recognition and acceptance of the link between mental health and physical health. And we see care access rapidly changing as a result of consumer behavior, and technology and data innovation, leading to growing use of virtual visits and coordinated home-based care, all aided by advancements in remote monitoring as well. Against this backdrop, the progress we achieved in 2020, along with the strength of our capabilities, that gives us confidence that we will deliver at least $20 of adjusted earnings per share in 2021, even in the face of the COVID-19 headwinds, primarily in the form of elevated medical costs. Our ability to achieve this level of continued long-term success starts with our growth framework, which is three fundamental building blocks. First, we deliver differentiated value in the form of affordable, predictable, simple solutions for our clients, customers, and patients. This drives our ability to retain, further deepen, and grow our business platforms. Second, we work to partner and innovate. This enables us to rapidly bring new solutions to the market that create even more value for our clients and customers. And it also fuels our third priority, the expansion of our addressable markets, which we'll achieve by growing our geographic footprint further, by moving into under-penetrated markets through service coordination, and through addition of new solutions that gives us the opportunity to sell to new buyer groups. Taken together, these building blocks provide us with multiple levers to continue to achieve differentiated and sustained growth, not only in 2021, but over the long term. In Evernorth, this means bringing an expanded set of solutions to our existing health plan, commercial, and government clients by leveraging the strength of our pharmacy, care management, health intelligence, and benefit management capabilities. In U.S. healthcare, this means continued outstanding retention along with further deepening relationships and target new business ads. In U.S. government, it means delivering on our goal of accelerated customer growth of 10% to 15% in Medicare Advantage. It also means continuing to expand our geographic footprint in the individual exchange market, where, for example, in 2021, we'll be offered in 220 counties. This is a more than 50% year-over-year increase. And in international, it means continuing to grow as we deliver differentiated value for our globally mobile customers, as well as our supplemental health solution customers. We look forward to delving more deeply into our growth strategy with you at our investor day, which is slated for March 8th. So now to summarize, I am very proud of our colleagues and our company for delivering for our customers, patients, clients, partners, and shareholders in an extraordinary year by maintaining a relentless focus on delivering on our commitments and leading through a rapidly changing landscape. Our performance is a testament to the resilience of our organization and our ability to thrive and deliver differentiated results in the most challenging of environments. We delivered strong revenue, earnings, and cash flow results in 2020. In 2021, we expect to deliver at least $20 of adjusted earnings per share, and we will continue to drive attractive operating cash flow, which fuels our ability to return value to our shareholders through a meaningful quarterly dividend and through ongoing share repurchase, as well as targeted M&A. Overall, we have confidence that we will achieve our 2021 outlook and our long-term growth objectives. With that, I'll turn the call over to Brian.