The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's first quarter 2021 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 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 first quarter 2021 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'll 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 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 an after-tax special item charge of $101 million, or 29 cents per share, related to debt extinguishment costs incurred during the period, as well as an after-tax special item charge of $22 million, or 6 cents per share, for integration and transaction-related costs. We also recorded an after-tax special item benefit of $21 million, or 6 cents per share, related to charges associated with litigation matters. 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. As previously noted, as a result of the sale of the group disability and life business, in our first quarter earnings release and quarterly financial supplement, corporate and other operations combines the results previously reported as corporate and the segment previously reported as group disability and other. In our securities filings, the segment previously reported as group disability and other is now reported as other operations. 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, and excludes the impact of any business combinations or divestitures that may occur after today, such as our recently announced planned divestiture of the Texas Medicaid business, which we expect to close in the second half of 2021. With that, I will turn the call over to David.

Thanks, Alexis. Good morning, everyone, and thank you for joining us on our call today. Today as we meet, our environment remains highly dynamic, with COVID-19 continuing to affect the world, our industry, and our economy. At Cigna, this rapidly changing landscape has only reinforced the tremendous responsibility we have to improve the health, well-being, and peace of mind of those we serve. This remains the primary focus that drives our 70,000 coworkers each and every day, and it's the reason we work to continue to deliver for our customers, clients, patients, partners, and our communities, all while delivering strong financial results for you, our shareholders. During the first quarter, we delivered adjusted revenue of $41 billion and adjusted EPS of $4.73 per share. We also deployed significant capital to our investors through share repurchase and the payment of a meaningful quarterly dividend, reinforcing the strength of our Capital Light framework. Building on a conversation from several weeks ago at our Investor Day, today I'm going to talk more about how we are continuing to navigate through the current environment to balance and meet the needs of all of our stakeholders, our ability to consistently deliver strong results by executing on a growth framework, and the confidence we have in achieving our increased outlook by delivering differentiated and sustained growth for the long term. Then Brian will share more details about our first quarter results and our 2021 outlook. And after that, we'll take your questions. Since we last met at our investor day in March, the macro landscape remains fluid. In the U.S., proposed legislation as well as regulation and executive actions seek to expand, extend, and further support both public and private programs. Globally, social and political tensions remain high as COVID-19, with its multiple variants, continues to take a toll on a number of countries, such as India, where cases have again dramatically spiked. All of these forces are shaping healthcare and influencing the political and economic landscape around the world. At Cigna, we are navigating through this environment by continuing to innovate for and support our stakeholders with COVID-19 services while also executing on our strategy to make healthcare more affordable, predictable, and simple. For U.S. commercial customers, we are ensuring they get the preventative care they need, including mammographies, colonoscopies, cervical cancer screenings, and childhood immunizations. which today are consistent with pre-pandemic levels, reflecting the continued strength of our clinical programs and proven engagement capabilities. Within Evernorth, for those customers served by Express Scripts Home Delivery, we delivered further improvements in medication adherence for people with diabetes, high cholesterol, and high blood pressure. At the same time, we're also supporting the mental well-being of our customers. We're doing this through our own best-in-class capabilities where, for example, We engage with oncology patients with comorbidities. By spending an average of $2,000 on their behavioral health care, we can save an average of $20,000 in avoidable costs. And we continue to innovate and leverage our strategic partnerships, including, for example, with Ginger through Cigna Ventures, which provides industry-leading, on-demand, 24-7 behavioral health coaching, further extending our behavioral health access for the benefit of our customers. We're also leveraging data and actionable intelligence to understand the most common long-term complications of COVID-19 infection, then building predictive models to determine who is at greatest risk of becoming a COVID long hauler, so we can quickly provide targeted case management and behavioral health services, as well as other resources to help our customers regain their health. For our clients, we're serving as a trusted partner by supplying additional physical and behavioral health assistance to aid in the recovery for employees who are infected by COVID-19. We're helping employers build their own communities of immunity by assisting them in launching vaccination clinics. And we're leveraging our data and analytics to help employers determine when and how it is safe for employees to return to work. For our provider partners, we're working to guide people to the most effective sites of care and further closing gaps in care with our clinical teams and our virtual capabilities. For our coworkers, we're supporting them in this highly-disrupted environment by, for example, providing a $200 incentive for coworkers who choose to become vaccinated for COVID-19 and continuing to offer expanded leave capabilities with our emergency time off program to provide flexibility necessitated by the current conditions. And finally, for our communities, we're taking steps to address social determinants of health. For example, we all know the alarming statistics on the disproportionate impact that COVID-19 has had on communities of color. As part of our SAFE initiative, we brought additional on-the-ground resources to target communities by launching COVID-19 awareness campaigns, distributing PP&E kits, dispatching our health improvement mobile resources to help to administer free flu shots and provide healthy meals, as well as other support. Similarly, we're leaning in to fight breast cancer where disparities, for example, amongst black women remain startling. To help to address this disparity gap, we again went directly into communities Starting in Tennessee, for example, where we collaborated with local partners to offer mobile mammography vans at churches and at other local neighborhood locations. At Cigna, balancing the needs of our stakeholders is deeply rooted in our corporate purpose. We constantly challenge ourselves by asking the basic question, what more could we do to help us stay focused on delivering each and every day for the benefit of our customers, our clients, patients, and our partners. Against this backdrop, the strength of our foundation propels us forward and guides our growth. As we shared with you at our Investor Day, through our three growth platforms, Evernorth, U.S. Medical, and International Markets, we are well-positioned to leverage the three trends we see shaping healthcare into the future, specifically pharmacological innovations, the rising demand for coordinated mental and physical health services, and the changing preferences as it relates to access to care models. And through our proven framework, we're able to drive attractive, sustained growth by delivering differentiated value within our portfolio of integrated, coordinated, and point solutions, continuing to work to partner and innovate, and working to expand our addressable markets. As a result, we're off to a strong start in 2021 with strong fundamental execution and the strategic and capital flexibility to further our momentum into the future. During the first quarter, Evernorth continued to build on its differentiated and steady performance it has had delivered throughout the pandemic by evolving the healthcare experience for our customers and clients through continuous innovation and by building, investing, and strengthening our strategic partnerships. For example, in January, we further expanded our partnership with Prime Therapeutics by leveraging our home delivery and a Credo specialty pharmacy to drive greater value and deliver on our promise to make healthcare more affordable. We're also advancing our strategic capabilities with our MDLive acquisition, which closed last month. This acquisition will expand Evernorth Care's ability to further broaden access, lower cost of care, and strategically position us to grow in the rapidly changing access to care environment. At the same time, Evernorth Pharmacy is also driving affordability improvement. One example is our patient assurance program, which caps the cost of prescriptions for patients with diabetes. During the quarter, the number of patients in this program increased by 64%, and the value of patients delivered from this program is on track to more than double what we achieved last year. Turning to our U.S. medical platform, we see bright spots in growth in our U.S. commercial portfolio. For example, we continue to take share in the select segment, which includes employers with 51 to 500 employees. As clients continue to value our integrated, aligned, self-funded, medical, pharmacy, behavioral, and stop-loss programs. And more broadly, we're driving value by bringing differentiated offerings to market. Fueled by innovations and advancements, we are accessing from our Evernote capabilities, particularly in areas of pharmacy services and behavioral health. Through our willingness to strategically partner with innovative companies like Oscar, we're also well-positioned to take advantage of market growth opportunities in the small employer market, a market we view as currently being underserved. As a result, we expect to see an uptick in growth in our U.S. commercial platform during the residual part of this year. Additionally, one important impact of the pandemic is that businesses have expanded access to support services for their employees by acting as a trusted source of information and providing an extended range of benefits to support whole person health as more and more employers recognize the critical link between mental and physical health. In the wake of COVID-19, more employers are also recognizing the connection between healthy workers, higher productivity, and a growing economy. In fact, the National Bureau of Economic Research found that in the U.S., we benefited by $1.5 trillion of value by having employers play a major role in healthcare. This reinforces the critical role our U.S. healthcare business plays as an important partner to employers in providing access to quality, affordable care for the benefit of their employees. Turning to our U.S. government business, we are driving strong year-over-year customer growth by continuing to expand our addressable markets. The number of Medicare Advantage customers increased by 11% year-over-year, reflecting the ongoing execution of our strategy, as well as our sustained strong star performance. And the number of customers in our individual and family plan business grew by 17% year-over-year, driven by our geographic expansion and the introduction of new plans that provide expanded coverage for maintenance drugs, to further improve affordability for customers with certain chronic conditions. And in our international markets business, we are focused on actively supporting our coworkers, customers, and partners around the world who continue to be impacted by COVID-19. For example, in India, our foundation is providing financial support through UNICEF to meet the critical needs on the ground, including additional rapid testing capabilities and expanded access to vaccines. and we're providing matching gifts from the Cigna Foundation to our coworkers who donate to charities in India. Staying true to our mission is not only the right thing to do, it reinforces to our clients, our customers, and our patients our commitment to make a difference in the moments that matter most. Our purpose-driven orientation, together with our strategic flexibility created by our service-based model and our capital framework that generates significant cash flow from operations, as well as our track record of strong financial performance, where we delivered a 15% adjusted EPS compounded growth rate over the last decade, all give us confidence we will continue to sustainably grow in both the short-term and the long-term in this dynamic environment. And now taking into account the strength of our first quarter results, we expect our full year adjusted EPS to be at least $20.20 in 2021. And we remain confident in our ability to deliver our long-term targets of average annual adjusted revenue growth of 6% to 8% average annual adjusted EPS growth of 10% to 13%, and continue to play an attractive dividend while delivering cumulative operating cash flow growth of $50 billion through 2025. Now, to briefly summarize, we delivered strong first quarter results by executing our growth framework while harnessing our capital strength to deploy meaningful capital for the benefit of our shareholders, reinvesting in our business, and leveraging our strategic flexibility to continue to innovate and adapt all of which sets us up for sustained long-term success. We remain confident in our ability to continue to grow as we focus our efforts to make healthcare more affordable, predictable, and simple each and every day. Now with that, I'll turn the call over to Brian.