The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's third 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 third 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 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 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 third quarter, we recorded an after-tax special item benefit of $35 million, or 10 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 on 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 purchases and anticipated 2021 dividends, and does not assume any impact from any business combinations or divestitures that may occur after today, such as our recently announced planned divestiture of life accident and supplemental benefits businesses outside of the US, which we expect to close in 2022. With that, I will turn the call over to David.

Thanks, Alexis. And thank you to everyone for joining us on our call today. This morning, I'm going to spend a few minutes talking about our strong results for the quarter, how we are advancing our growth strategy, and I'll provide some additional perspective on our 2022 outlook. And then Brian will share some more details about our third quarter results and our outlook for the remainder of the year. And then we'll take your questions. So let's jump in. During the quarter, we delivered adjusted revenue of $44 billion and adjusted EPS of $5.73 per share. all while continuing to reinvest back in our business to fund growth, expansion, and ongoing innovation. And we continue to return significant value to our shareholders. These results reinforce we are delivering for our customers, our patients, clients, provider partners, as well as for you, our shareholders. With our high-performing health service portfolio and sharp focus on executing our strategy, we are confident in our ability to continue driving growth, and are again raising our full year 2001 guidance for adjusted EPS and revenue. Our performance is strong considering the ongoing impact of the pandemic on medical costs, as well as the higher claims we've experienced amongst the special enrollment period or SEP customers within our individual business. As it relates to our MCR in the quarter, our commercial business did improve from the second quarter to the third quarter, and our Medicare Advantage business also improved sequentially. We continue to execute a series of actions in 2021 and 2022 to further improve our MCR, and Brian will walk through this in more detail in a few moments. Separately, in early October, we also announced an agreement with Chubb to sell our life, accident, and supplemental benefits business in our international markets platform in seven countries for $5.75 billion. We expect to realize about $5.4 billion in net after-tax proceeds and to complete the transaction in 2022 following regulatory approvals. Guided by our strategy and similar to our 2020 divestiture of our group insurance business, this transaction unlocks the value of a best-in-class leading asset while also enabling us to even more sharply focus our business on health and well-being services. So overall, our performance for the quarter reflects our clear strategy and strong execution in delivering attractive results, and importantly, our ongoing commitment to prioritize and support the evolving health and well-being needs of those we serve. Now I'll walk through some additional detail for our Evernorth and U.S. medical businesses. A year ago, we launched Evernorth to the marketplace as our health service platform focused on servicing health plans, employers, government organizations, and healthcare providers. Since that time, Evernorth has established itself with unique partnerships and innovative services that are resonating with multiple buyer groups. Our Evernorth pharmacy and our medical offerings through our U.S. medical platform are the two primary gateways through which most of our clients and customers form their base relationship with us. Wrapping around these two exceptionally strong platforms are our additional suites of innovative health services through Evernorth, including benefits management, care solutions, and intelligence solutions. These help us to expand and deepen existing relationships. In the third quarter, Evernorth retained and expanded our relationship with the Department of Defense TRICARE Pharmacy Program and renewed a seven-year contract. It's our privilege to serve almost 10 million active duty service members, retirees, and their families. Evernorth will continue supporting TRICARE Pharmacy operations, including specialty pharmacy services, military pharmacy claims, and retail network pharmacies. The new contract also allows for expansion of specialty and care coordination services through 2029. As we look to the balance of the year and into 2022, Evernorth will continue to grow revenue and earnings. Turning to our US medical platform, in US commercial, our teams are leveraging and deploying the innovative solutions from Evernorth to expand our service offerings and address the evolving needs of our clients and customers. For example, in our U.S. commercial platform, we are leveraging Evernote's MDLive capabilities to expand virtual care options for our customers through their employers with primary, urgent, behavioral, and dermatology care. As part of these value-based arrangements during virtual visits, MDLive physicians are leveraging our Evernote intelligence capabilities, enabling them to provide more connected and coordinated experience. and we continue to expand our capabilities with MDLive as we recently launched a virtual-first health plan for employers. Another great example of Evernorth and U.S. commercial partnering to bring more value to our health plan clients is a new arrangement we have with University of Pittsburgh Medical Center Health Plan. We will make in-network care available to UPMC customers who live, work, or travel outside their network service area. UPMC has been an Evernorth pharmacy client for 16 years And this agreement illustrates how we are collaborating across our enterprise to deliver greater affordability and differentiated value for health plan clients. We are pleased how the market continues to recognize the value we are delivering through our broad suite of solutions. And as such, we continue to grow through both our U.S. commercial and Evernorth platforms. Within Medicare Advantage, consistent with our strategy, we continue to grow in our existing markets and are expanding into new geographies. Our progress is further supported by our overall value of our offerings. For 2022 calendar year, 89% of our Medicare Advantage customers will be in four-star or greater plans nationally. This is the highest level we've ever achieved, and it marks the fifth year in a row we've improved our STARS performance. And in our individual and family plan business, we've driven strong growth in this year, increasing customers by 47% through the third quarter. A substantial portion of this growth did come from the extended special enrollment period. And as I previously noted, some of the MCR impact in the third quarter was driven by the medical costs amongst those we added during the outpaced SEP growth. We do expect this will moderate in 2022. We are positioning ourselves to build on this momentum in the individual and family plan business by expanding our addressable markets again as we enter in three new states and 93 new counties in 2022. These new markets offer the potential to reach an additional 1.5 million customers. The continued strength of our results and the growth we are generating through the execution of our strategy gives us confidence we will deliver against our commitments in 2021. We will deliver EPS in line with our long-term targets and revenue growth well above our long-term targets for yet another year. We will also deliver EPS within our long-term target range in 2022. Specifically for 2021, we are committed to delivering our increased guidance for full-year adjusted EPS of at least $20.35. For full-year 2021, we remain on track for generating at least $7.5 billion of cash flow from operations, and we expect to return more than $7 billion to shareholders in 2021 through dividends and share repurchase. Looking to 2022, we expect to grow EPS by at least 10% off of our increased 2021 guidance of at least $20.35 per share. We anticipate a number of tailwinds, including core growth in our business and additional contributions from March and expansion in our U.S. medical business as we drive pricing actions, execute affordability and efficiency initiatives, and benefit from the return of Medicare risk adjustment revenue to more normalized levels. We're also expecting year-over-year headwinds as we plan for net investment income to be more in line with historical levels. And of course, the rate and pace of ongoing strategic investments will vary from year to year. In short, 2022 will be another strong year for Cigna. Now, to briefly summarize, as we've demonstrated through the quarter and throughout 2021, we are delivering for our customers, patients, clients, and provider partners as they experience the ongoing challenges of the pandemic. We're also taking significant value-enhancing actions, such as divesting a portion of our international business, returning substantial amounts of capital to our shareholders, and continuing to strategically invest in our capabilities and strategic partnerships, all of which position us to continue to advance our long-term growth agenda and continue to deliver shareholder value. With that, I'll turn the call over to Brian.