The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's second 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 touch-tone 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 Ms. Alexis Jones. Please go ahead, Ms. Jones.

Good morning, everyone, and thank you for joining today's call. I'm 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 second 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 second quarter, we recorded an after-tax special item charge of $9 million, or 3 cents per share, related to debt extinguishment costs incurred during the period. We also recorded an after-tax special item charge of $14 million, or 4 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. 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. With that, I will turn the call over to David.

Thanks, Alexis, and thank you to everyone for joining us on today's call. Today I'm going to spend a few minutes talking about the current environment and the forces that are shaping it, the strength and durable nature of our model that enables us to capitalize on opportunities and continue to grow, even in the most disruptive conditions, and how the strength and durability is fueling our short- and long-term success. Then Brian will share more details about our second quarter results, as well as our outlook for the rest of the year, and we'll take your questions. So let's jump in. During the quarter, we delivered adjusted revenue of $43 billion and adjusted EPS of $5.24 per share, all while we continue to drive balanced capital deployment as we execute on M&A, share repurchase, and our quarterly dividend plan. We achieved these results in a fluid and challenging environment. As we continue to execute our strategy, we are confident in our ability to navigate these dynamic conditions Our portfolio with three growth platforms enables us to create value for our clients and customers and drive sustained business growth. During the quarter, the strength of our Evernorth business was clearly a standout. We are seeing high demand for health services programs, and we continue to invest in broadening our service offerings as well as our reach. Our sustained success validates our ability to be a trusted partner of choice for customers and clients, as they manage many of the most challenging aspects of healthcare today. We do this by leveraging our portfolio that includes pharmacy solutions, benefit management solutions, care solutions, and intelligence solutions. Evernorth is helping to improve access to care, keep costs down, and deliver better outcomes as we serve our clients, patients, and customers. And another quarter of Evernorth's strong revenue and earnings growth reinforces that our customers and clients value these capabilities. In Cigna Medical, we did see elevated medical cost pressure in the quarter, as costs associated with direct COVID-19 care and the broader ramp-up of utilization levels exceeded our projections. Within this challenging environment, we continue to take proactive steps to ensure our customers have access to the care they need. This includes the elevated mental health services needed during these unprecedented times, as well as continuing to work with our customers and patients to help navigate them to optimal sites of care. During the quarter, we achieved customer growth in Cigna Medical in both our U.S. commercial and government business, and we continue to be on track for medical customer growth of at least 350,000 customers in 2021. Brian will share additional perspective on our results and outlook in his comments. Overall, our performance, which is strong through the first half of the year, reflects the resiliency of our business and the balanced profile within our organization. With our focus on driving performance during the remainder of the year, it's imperative that we understand and account for the challenges our customers and clients will face, as well as the continued evolution of the healthcare landscape. At a macro level, the environment is marked by ongoing uncertainty for business, governments, communities around the world. For example, COVID vaccination levels have brought welcome relief to millions, yet only about half of the U.S. is fully vaccinated, and that percentage is much lower for the world's population. With the spread of the more contagious Delta variant, COVID infections and hospitalizations are on the rise in some regions, bringing renewed attention to travel restrictions and mask mandates. We see the economic recovery, while positive, has been uneven and varied amongst industries as companies continue to cope with supply chain disruption, emerging inflationary pressure, and various issues impacting their workforce. More broadly, from a health perspective, federal and state policymakers continue to be actively engaged. And as we've previously discussed, we continue to see three primary forces of change shaping the healthcare landscape today and into the future. Specifically, pharmacological innovation, including specialty pharmaceuticals, gene therapies, evolved oncology medications, vaccines, and acceleration in biosimilars. Second, the recognition of the link between mental health and physical health continues to grow, especially accelerated in this COVID environment. And third, the rise of virtual care and other alternative access to care models are rapidly changing. Together, these macro dynamics are profoundly influencing buying behaviors and service innovation in healthcare. Now, with respect to clients, we are seeing a renewed commitment of employer clients to providing healthcare benefits vital to helping them to both attract and retain talent, as well as increase productivity by maintaining a healthy workforce. This includes, for example, adopting alternative side of care programs and access programs. We see an intensified need for affordability across all of our clients, including pharmacy services, as demand surges for high-price breakthrough drug therapies. We see a desire for more consultative solution-based services, as many clients are confronting the convergence of social, physical, and mental health issues in ways they have not experienced before. With respect to the individual customers and patients utilizing our service, we see that they are increasingly valuing their employee-based service models, They're benefiting from support services that help them tend to their emotional well-being, and they have growing demand for coordination of care, both in COVID and non-COVID events. Against this backdrop, we are delivering differentiated value for the benefit of our customers and clients with our capabilities that address their emerging and evolving needs. For example, we have had a strong focus on providing virtual services, broadening networks, as well as coordinated clinical programs. In our pharmacy solutions, we've been answering the call for greater affordability as we continue to see the emergence of new and expensive pharmacological advancements. Evernorth's recent expansion of our industry-first comprehensive weight management program illustrates the benefit of a more coordinated approach. Patients can now receive treatment with Wegovy, a promising new therapy for obesity and other weight management medications. And now with MDLive fully operational within our Evernorth business, and the live physicians, along with other Evernorth clinicians, are available to help patients. This program expansion also includes personalized support services from health coaches, peer support groups, and curated digital apps. This weight management effort is the latest addition to our Evernorth suite of SafeguardRx programs. As for impact in 2020, patients enrolled in SafeguardRx have saved more than $6 billion in aggregates. In Evernote Care Solutions, we've experienced an increase in demand for our behavioral health solutions from customers and clients as well. In the past year and a half, it has brought heightened stress and other personal challenges, and we see many more people reaching out for help and services. Clients now more broadly understand that someone with a chronic condition is more likely to have a mental health or substance abuse-related illness, and individuals are feeling the additional mental and physical challenges associated with the pandemic. With our market-leading behavioral health capabilities, we are driving more value to our Evernorth and Cigna medical clients and customers by providing the tools and services they need to address their mental well-being and deliver better, sustained long-term outcomes. Within our Cigna medical platform, in U.S. commercial, we are working closely with our employer clients to provide our integrated suite of solutions designed to make their workforce healthier and more productive. We know that employees receiving health and well-being benefits through their employers are less likely to miss work because of poor health. A recent study shows a significant impact, up to 70 fewer percent days missed over a year. With our integrated approach, we strive to bring the right mix of solutions that reduce the workforce challenges many of our clients are facing and helping to support them to engage and retain their employees. And affordability is and remains a primary focus across our entire portfolio, as it is in Cigna Medical. Our clients continue to manage through an incredibly dynamic environment for their business, and it's becoming even more important that they can count on us with greater affordability for the healthcare programs. New and expensive pharmacological advancements are a predominant contributor to this challenge, and we have been a leader here putting these treatments in the hands of those who need them at a more affordable price. For example, Remicade, a treatment for chronic conditions such as Crohn's disease and rheumatoid arthritis, while life-changing, can also impose significant financial burdens. One year of Remicade infusion costs about $30,000 on average and as much as $70,000 depending on site of care. We recently launched a Cigna pharmacy program that shares prescription drug savings directly with patients who switch from Remicade to one of the approved biosimilars. more than 20% of eligible patients in consultation with their provider have already switched to lower-cost preferred alternative medications. This program has an immediate benefit to clients who save at least 10% on the cost of the drug, and we've taken a leadership position here by supporting our patients with a $500 incentive. This is a great example of aligning interests. Over the longer term, we can drive even greater impact as biosimilars become a more prevalent part in the United States as helping us further improve affordability. And at Cigna Medical, we're actively working toward improving affordability by ensuring that our customers continue to have access to the care they need and optimize their long-term health. For example, in Arizona, we conducted a highly targeted outreach program to our customers who are at high risk due to chronic condition, yet who have not been vaccinated. The initial results are encouraging, and we're seeing positive increase in vaccination rates amongst these targeted individuals. We are now taking the learnings from that pilot into other locations across the United States with a particular focus on increasing vaccination rates amongst those in most need. This broad range of examples illustrates how our comprehensive and strategic approach to helping our clients and customers address their most oppressing health needs help us going forward. And in this dynamic environment, we will continue to expand the services we offer our clients and customers. And therefore, we see many more opportunities to create value for both our clients and customers, and as a result, for your shareholders. It is clear that the strength of our medical and pharmacy offerings, combined with our strategic agility, has enabled us to continue to capture growth, even in the most dynamic environment, by delivering differentiated value, by partnering and relentlessly innovating, and by expanding our addressable markets as we broaden our reach to new geographies and through the introduction of a broader suite of solutions. When you combine this compelling growth potential along with our significant operating cash flow generated by our service-based capital-light model, we have confidence in our ability to meet our long-term targets by achieving differentiated results, which include average annual revenue growth of 6% to 8%, average annual EPS growth of 10% to 13%, and continuing to pay an attractive dividend, all while producing cumulative operating cash flow of approximately $50 billion through 2025. Relative to 2021, we remain committed to delivering full-year EPS of at least $20.20. Now, to briefly summarize, first, we recognize in an environment like this that's so challenging, we know that growth doesn't come easily. It has to be earned each and every day. Second, we have a proven track record of delivering differentiated value, innovating and partnering, and smartly expanding our addressable market to fuel sustained long-term growth, even in disrupted environments. And our company has attractive, sustainable growth opportunities across our three well-positioned growth platforms, and importantly, the strategic and capital flexibility to take advantage of opportunities. With that, I'll turn the call over to Brian.