The Cigna Group

Ladies and gentlemen, thank you for standing by for Cigna's fourth 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 question and answer session, is being recorded. We'll begin by turning the conference over to Mr. Ralph Jacoby. Please go ahead, Mr. Jacoby.

Great, thanks. Good morning, everyone, and thank you for joining today's call. I'm Ralph Jacoby, Senior Vice President of Investor Relations. With me on the line this morning are David Cordani, Cigna's Chairman and Chief Executive Officer, and Brian Evenko, Cigna's Chief Financial Officer. In our remarks today, David and Brian will cover a number of topics, including Cigna's fourth quarter and full year 2021 financial results, as well as our financial outlook for 2022. 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 2022 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 of 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. First, as previously disclosed with our form AK filing and investor call on January 24th, we announced changes in our segment reporting effective for the fourth quarter of 2021. These changes were made to align with the company's organizational structure as a result of the pending divestiture of Cigna's international life accident and supplemental benefits businesses in seven Asia Pacific markets. Effective in the fourth quarter, Cigna's results will be reported through the following three groups, Evernorth, Cigna Healthcare, and Corporate and Other Operations. The international businesses that will be divested pending the close of the transaction will now be reported in other operations, which is included within corporate and other operations in our earnings release and quarterly financial supplement. The international health business to be retained by Cigna will join our U.S. commercial and U.S. government offerings in a new segment called Cigna Healthcare. This segment replaces the prior U.S. medical segment. Second, regarding our results, In the fourth quarter, we recorded an after-tax special item charge of $119 million, or $0.36 per share, related to a strategic plan to further leverage the company's ongoing growth to drive operational efficiency through enhancements to organizational structure and increased use of automation and shared services. We also recorded an after-tax special item charge of $70 million, or $0.21 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 perspective comments regarding financial performance, including our full year 2022 outlook, we will do so on a basis that includes the potential impact of future share purchases and anticipated 2022 dividends. Also, Our full year 2022 outlook assumes that the pending divestiture of Cigna's international life accident and supplemental benefits businesses will close in the second quarter of 2022, but does not assume any impact from other business combinations or divestitures that may occur after today. Finally, I would like to announce our intention to host an investor day in June, where we will discuss our long-term strategic growth and value creation story. We look forward to sharing more details in the coming weeks. With that, I will turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call today. As we step into 2022, our clients, customers, and patients continue to face a rapidly changing landscape with new COVID variants, changing testing and treatment protocols, and pressures on the global economy. Throughout these challenges, we've remained focused on addressing and balancing the evolving needs of all of our stakeholders. As a result, our 70,000-plus colleagues around the world continue to deliver differentiated value for those we serve and also continue to grow our businesses. Today, I'll share perspective around our 2021 performance and the sustained growth opportunities we see for our organization in the year ahead. And Brian will provide additional details about our 2021 financial results and our 2022 outlook. Then we'll take your questions. With that, let's get started. In 2021, we grew full-year adjusted revenues to $174 billion, a second consecutive year of growth above our long-term target. We delivered full-year adjusted earnings per share growth of 11% to $20.47, and we returned over $9 billion to shareholders in dividends and share repurchases. Additionally, we continue to invest in our capabilities to ensure we are positioned or sustained growth in 2022 and beyond. Our growth is and will continue to be fueled by our two high-performing platforms, Evernorth, our health services business, including pharmacy, care, benefits, and intelligence services, and Cigna Healthcare, which includes our portfolio of U.S. commercial, U.S. government, and international health businesses. Our Evernorth and Cigna Healthcare platforms complement each other through the breadth of their capabilities and the ability to serve multiple buyer groups. Here we typically lead with either a medical or pharmacy solution, and then we build on those relationships by innovating and delivering new services. We have a proven track record with this approach, a diverse, high-performing portfolio of solutions, and a sustained commitment to continued innovation to expand that portfolio. Additionally, we are positioned so that accelerated growth in one area can compensate for temporary pressure in another business within our portfolio. We see this as extremely valuable in a dynamic environment. Relative to our 2021 performance, it was a very strong year for Evernorth. We grew adjusted revenues by 14% in 2021, as Evernorth's corporate clients, health plans, governmental agencies, and healthcare delivery system partners increasingly recognized the value of our health services. including in our specialty pharmacy business, which I'll discuss in more detail in just a moment, in our virtual health capabilities, which have been expanded through MDLive to include urgent and dermatology care, as well as behavioral health services, in our core pharmacy services portfolio, which continues to generate outstanding results for our clients, and we are further broadening our reach through deeper and new partnerships. For Cigna Healthcare, we have sustained growth leveraging the strength of our U.S. commercial, U.S. government, and international health businesses. As we previously discussed, we also experienced elevated medical costs. We had higher claims costs in our commercial insured and stop-loss businesses, and continued higher claims from our special enrollment period customers within the individual business. These included the impact of elevated COVID costs for testing, treatment, and vaccines. The elevated trend continued throughout the year. As a result, our medical care ratio for Cigna Healthcare was 84% for full year 2021. As Brian will discuss in further detail, we took targeted pricing and affordability actions earlier in 2021 for 2022 impact as we continue to prioritize margin expansion for 2022. As I highlighted earlier, the breadth and complementary nature of our portfolio enabled us to exceed our revenue and EPS outlook and return over $9 billion of capital to our shareholders. Looking forward to 2022, we expect to continue to capitalize on emerging growth opportunities and achieve sustained attractive performance. We see additional opportunities to drive growth by leveraging Evernorth's capabilities to respond to three forces that we believe are fundamentally reshaping the future of healthcare. They are pharmacological innovation, the increased recognition of the link between mental and physical health, And third, the growing trend toward alternative sites of care. I'll start by highlighting how Evernorth will lead the way to capitalize on the first trend, pharmacological innovation. New drugs represent one of the most promising areas for medical innovation in the coming years. And we're seeing a dramatic growth in specialty pharmaceuticals, gene therapies, and vaccines. These potentially life-saving and life-changing advances also bring intensifying pressures on affordability. This creates significant opportunity for Evernorth to provide customers, patients, and clients with the most innovative new therapies in ways that are accessible, affordable, and predictable. By 2025, for example, 66 biologic drugs currently in the market will have their patents expire, opening the door for increased biosimilar competition and an increasing opportunity to decrease healthcare spending by an estimated $100 billion. Importantly, this trend is already unfolding in 2022 and will accelerate further in 2023. We are positioned to lead and fully intend to capture a large portion of those savings for the benefit of our customers, patients, and clients by combining and coordinating capabilities that include our Credo capability, which provides differentiated specialty pharmacy care for a number of specific conditions. I'd also highlight that today, specialty pharmacy already drives fully one-third of Evernote's revenue, and Accredo is one of the fastest growing parts of our health service portfolio. Additionally, leveraging Express Scripts, which draws upon its expertise in delivering improved affordability, leveraging a broad network, supply chain expertise, as well as clinical and service capabilities. Managing biologics and specialty drugs is also a priority focus for our Cigna healthcare business. Last year, we launched an innovative program to leverage biosimilars in the medical benefit. that included incentives that improve access for integrated clients and customers. This illustrates just one way we will continue to leverage Evernote's capabilities to drive greater affordability and value for our Cigna Healthcare clients and customers. Evernote will also continue to grow from the significant demand for more mental health services, as well as the rapidly changing access to care models. For example, Evernote is continuing to expand our virtual care services by leveraging our MD Life platform as well as expanding our behavioral care network. We know how important this is for both patients as well as clients. Our Evanorth research reinforces that total healthcare costs decrease when people who are diagnosed with behavioral health conditions receive coordinated, sustained treatment. For Cigna Healthcare in 2022, we expect to drive customer growth in each of our U.S. commercial market segments. and grow earnings as we continue executing on our affordability and pricing actions throughout 2022. Additionally, Cigna Healthcare will continue to partner and leverage our Evernorth innovations. For example, we're continuing to expand digital experiences that help our customers connect with the highest performing and most affordable medical care. Our recent approach we developed for patients diagnosed with orthopedic and musculoskeletal conditions provide highly personalized and actionable information to guide their choices and support improved healthcare outcomes and affordability. In our U.S. government business, as we've noted previously, we're operating in a more competitive environment stepping into 2022. For Cigna, aided by the strength of our broad portfolio, we've prioritized pricing discipline for U.S. government business for 2022. For Medicare Advantage, we will start the year with flat membership. Looking forward to 2023, we are confident in our position to accelerate growth further as our customer satisfaction metrics are high, our STARS ratings are very strong, and we've steadily expanded our addressable market by entering new geographies. In our individual and family plan business, as noted previously, 2021 customers grew meaningfully in part due to the extended special enrollment period. We expect a decline in customers in 2022 in part driven by our product and price positioning that will adjust for the special enrollment surge we saw in 2021. We do continue to view this as an attractive long-term opportunity, and to support that growth, we continue to enter new markets. For 2022, we entered three new states and 93 new counties. With these markets, for example, we have the ability to reach an additional 1.5 million additional customers. In international health, we are sharpening our focus and will continue developing our services for the globally mobile, as well as go deeper into domestic health and health services. One of the key ways we will do this is with innovative partnerships, such as Honeysuckle Health, an analytics-driven health service company established in our joint venture with the Nib Group in Australia. Now, taken as a whole, 2022 will be another year of attractive growth for our company. Our EPS outlook of at least $22.40 and the increase of our quarterly dividend by 12% reinforces the sustained growth and strength of our businesses. Now, before I wrap up, I want to reinforce a key aspect of our sustained performance is our positioning strategically to further expand our reach and addressable markets over time. Here, we will leverage organic partnerships and targeted inorganic opportunities to further strengthen our proven growth platforms. We see three areas of continued focus here. First, in U.S. government, we will seek additional growth opportunities. And our ability to win in these markets is further enhanced by our current and expanding Evernote service capabilities. Second, we will further expand our Evernote service portfolio. This includes, for example, our Evernote care capabilities, including virtual, home, and behavioral services. And third, in international health, Our decision to divest our life accident supplemental benefits business in seven markets reinforces our discipline to focus on the health portion of our portfolio. Now to wrap up, looking back on 2021, our business performed in a dynamic environment. We delivered adjusted EPS of $20.47 and returned over $9 billion of capital to our shareholders in dividends and share repurchase. 2022 will be another year of growth across our business, and we will continue to invest in innovation to position us for sustained long-term growth. With that, I'll turn the call over to Brian.